TELTRAN INTERNATIONAL GROUP LTD, SB-2/A, 1999-09-29

TELTRAN INTERNATIONAL GROUP LTD
SB-2/A, 1999-09-29
TELEPHONE COMMUNICATIONS (NO RADIOTELEPHONE)

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AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON SEPTEMBER 29, 1999

REGISTRATION NO. 333-75885

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U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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PRE-EFFECTIVE AMENDMENT NO. 2 TO
FORM SB-2

REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
TELTRAN INTERNATIONAL GROUP, LTD.
(NAME OF SMALL BUSINESS ISSUER IN ITS CHARTER)

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<S> <C> <C>
DELAWARE (4813) 11-3172507
(STATE OR OTHER JURISDICTION OF (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) IDENTIFICATION NUMBER)
</TABLE>

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ONE PENN PLAZA, SUITE 4632
NEW YORK, NEW YORK 10119
(212) 643-1600

(ADDRESS AND TELEPHONE NUMBER OF PRINCIPAL EXECUTIVE
OFFICES AND PLACE OF BUSINESS)
------------------------

BYRON R. LERNER, PRESIDENT
ONE PENN PLAZA, SUITE 4632
NEW YORK, NEW YORK 10119

(212) 643-1600

(NAME, ADDRESS AND TELEPHONE NUMBER OF AGENT FOR SERVICE)
------------------------

Copies to:
MICHAEL D. DIGIOVANNA, ESQ.
PARKER DURYEE ROSOFF & HAFT
529 FIFTH AVENUE
NEW YORK, NEW YORK 10017
(212) 599-0500
------------------------

APPROXIMATE DATE OF PROPOSED SALE TO THE PUBLIC: As soon as practicable
after the effective date of this Registration Statement.

If this Form is filed to register additional securities for an Offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same Offering. [ ]

If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same Offering. [ ]

If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]

If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act,
check the following box. [X]
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CALCULATION OF REGISTRATION FEE

<TABLE>
<CAPTION>
PROPOSED
MAXIMUM OFFERING PROPOSED
TITLE OF EACH CLASS AMOUNT TO BE PRICE PER MAXIMUM AGGREGATE AMOUNT OF
OF SECURITIES REGISTERED SECURITY(2) OFFERING PRICE REGISTRATION FEE
<S> <C> <C> <C> <C>
Common Stock, par value $.001 per share..... 8,690,000(1) $1.97(1) $17,119,300(1) $4,759.17(1)
Common Stock, par value $.001 per
share(2).................................... 1,948,206(2) $12.75(2) $24,839,626.50(2) $6,905.42(2)
Common Stock, par value $.001 per
share(3).................................... 531,910 $9.5625(3) $5,086,389.40(3) $1,414.02(3)
Totals............................. 11,170,116 -- $47,078,560.20 $13,078.61
</TABLE>

(1) Included in original SB-2 filing on April 8, 1999 at which time the fee was
paid.

(2) Additional shares included in Amendment 1 to this registration statement on
Form SB-2.

(3) Fee for additional shares. Such additional fee was calculated using a
proposed maximum offering price of $9.5625 per share which was the average
of the bid and asked prices of the Common Stock on the OTC Bulletin Board
on September 27, 1999.

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

THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
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PROSPECTUS

11,170,116 SHARES

TELTRAN INTERNATIONAL GROUP, LTD.
COMMON STOCK

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

This is an offering of up to 11,170,116 shares of our common stock made by
certain of our shareholders who are named under the caption "Selling Security
Holders."

INVESTING IN TELTRAN'S COMMON STOCK IS RISKY. SEE "RISK FACTORS P. 5"

NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR PASSED UPON THE
ADEQUACY OR ACCURACY OF THE DISCLOSURES IN THIS PROSPECTUS. ANY REPRESENTATION
TO THE CONTRARY IS A CRIMINAL OFFENSE.

Our common stock is quoted on the OTC Electronic Bulletin Board. On
September 27, 1999 the average bid and asked price of the common stock was
$9.5625 per share.

We have retained no underwriters in connection with this offering.

, 1999

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TABLE OF CONTENTS

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PAGE
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Prospectus Summary......................................................................................... 3
Risk Factors............................................................................................... 5
Where You Can Find More Information........................................................................ 8
Use of Proceeds............................................................................................ 9
Capitalization............................................................................................. 9
Selected Financial Data.................................................................................... 10
Management's Discussion and Analysis of Financial Condition and Results of Operations...................... 11
Market Information......................................................................................... 13
Business................................................................................................... 14
Management................................................................................................. 20
Executive Compensation..................................................................................... 21
Certain Transactions....................................................................................... 23
Principal and Selling Stockholders......................................................................... 23
Plan of Distribution....................................................................................... 26
Description of Securities.................................................................................. 27
Legal Matters.............................................................................................. 28
Experts.................................................................................................... 28
Offering Information....................................................................................... 28
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PROSPECTUS SUMMARY

TELTRAN INTERNATIONAL GROUP, INC.

We are primarily engaged in the international telecommunications business
through our wholly owned subsidiary Teltran International, Inc. We currently
provide international long distance telephone services to customers in the
United States as an affiliate in the OzEmail System and are in the process of
obtaining the right within the OzEmail system to provide such services for
customers in other countries as well. We also operate an Internet portal website
at http://www.Teltran.com and, through a joint venture, intend to operate an
additional website for the sale of music and related paraphernalia. Information
contained on our websites is not part of this prospectus.

Our executive offices are located at One Penn Plaza, Suite 4632, New York,
NY 10119 and our telephone number is (212) 643-1600.

Unless otherwise indicated or set forth in the financial statements share
and per share information has been retroactively adjusted to reflect a 5 percent
stock dividend to holders of record of our common stock as at September 1, 1999.

SUMMARY OF THE OFFERING

The numbers indicated below representing the number of shares offered by
the selling stockholders and the number of shares of common stock to be
outstanding after the offering include:

o shares subject to outstanding options and warrants including options and
warrants which are not presently exercisable

o The maximum number of shares that we may require to be purchased by
investors pursuant to existing agreements

o The maximum number of shares which should be issued as an adjustment to
certain investors if the price of our stock should fall.

The number indicated below representing shares outstanding before the
offering excludes all of the above.

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<S> <C>
Securities offered by the selling
stockholders............................ 11,170,116 shares of common stock

Common stock outstanding before the
offering................................ 13,378,383

Common stock to be outstanding after the
offering................................ 17,167,426 shares

Use of proceeds........................... Except upon exercise of options, we will not receive proceeds. Any
such proceeds will be used for working capital purposes.

Symbol for common stock................... TLTG. Our shares are currently listed for trading on the Electronic
Bulletin Board. Application has been made on our behalf to have our
stock listed on the American Stock Exchange. We cannot guarantee that
this may be accomplished, however.
</TABLE>

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SUMMARY FINANCIAL INFORMATION

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<CAPTION>
SIX MONTHS
YEAR ENDED DECEMBER 31, ENDED JUNE 30
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1997 1998 1998 1999
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<S> <C> <C> <C> <C>
STATEMENT OF OPERATIONS:
Consolidated revenues..................................... $ -0- $ 535,197 $ 128,855 $ 541,636
Cost of sales............................................. -0- 244,832 79,179 377,142
Expenses.................................................. 827,780 709,357 209,684 572,859
Income (loss) from operations............................. (827,780) (418,992) (160,008) (408,365)
Net income (loss)......................................... (828,244) (449,339) (160,396) (445,898)
Income (loss) per share................................... $ (.90) $ (.06) $ (.17) $ (.04)
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Shares used in computing net income (loss) per share...... 915,637 7,697,295 915,637 11,378,377
</TABLE>

<TABLE>
<CAPTION>
DECEMBER 31, 1997 DECEMBER 31, 1998 JUNE 30, 1998 JUNE 30, 1999
----------------- ----------------- ------------- -------------
<S> <C> <C> <C> <C>
BALANCE SHEET DATA:
Working capital (deficit).................... $ (81,923) $(280,880) $ (91,998) $ 7,177,795
Total assets................................. 44,137 157,168 116,517 7,787,066
Total long-term debt......................... 260,880 1,245 411,141 1,245
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Total stockholders' equity (deficit)......... $(302,312) $(244,439) $(462,708) $ 7,428,388
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RISK FACTORS

An investment in our common stock involves a high degree of risk. Before
investing in our common stock you should carefully consider the following risk
factors and the other information in this prospectus.

WE HAVE A HISTORY OF LOSSES AND MAY NOT BE ABLE TO ACHIEVE PROFITABILITY.
Until April 1998 we were a development stage company and derived no revenues. We
sustained net losses of $828,244 during 1997 and $449,339 during 1998 and
$445,898 for the six-month period ended June 30, 1999. We have an accumulated
deficit of $8,440,224 as at June 30, 1999. There is no assurance that we will be
profitable.

OUR BUSINESS IS PRESENTLY VERY DEPENDENT ON OzEMAIL. Commencing in June
1999 we began selling international communication time through Internet
telephony provided by OzEmail. We believe our immediate future success will
depend upon this business. We have entered into an Interconnectivity and Support
Agreement with OzEmail which permits us to sell communication time over
OzEmail's Internet networks. Our agreement with OzEmail expires in May 2002. We
believe that revenues from that arrangement will comprise a substantial portion
of total revenues. Although alternative Internet telephone providers are
available, any termination of, reduction or interruption of these services could
have a material adverse affect on our business, financial condition or results
of operations.

SINCE WE DEPEND IN PART ON SERVICES AND COOPERATION FROM OTHER PARTIES TO
PROVIDE OUR TELEPHONY SERVICES, OUR REVENUE UNDER NEW ARRANGEMENTS FOR WHOLESALE
INTERNET TELEPHONY MAY BE POSTPONED DUE TO FACTORS BEYOND OUR CONTROL. To
provide Internet voice telephony we must obtain equipment so that our delivery
system satisfies each of the parties on a call. We must also make arrangements
with the local telephone carriers in each country into which our calls are sent
to receive and terminate the calls. We have recently experienced delays in
commencing our first two Internet voice telephony service contracts due to
inadequate equipment in various terminating countries, the incompatibility of
third party equipment that forced us to modify our equipment, and failure on the
part of certain terminating countries' local telephone companies to act in a
timely fashion or to give us their cooperation. All of these problems were
resolved but we believe that in the future we may, in circumstances such as
these, experience delays in timely commencing any arrangements entered into. In
addition, the inability of affiliates in receiving countries to handle call
volume at high levels, through lack of equipment or otherwise, may reduce the
volume we may send into such countries. Finally, clients may postpone or
interrupt services, as has recently occurred with a new client.

THERE IS A CHANCE TECHNOLOGICAL CHANGES IN THE TELECOMMUNICATIONS INDUSTRY
WILL MAKE OUR BUSINESS OBSOLETE. We cannot guarantee that research and
developments by others will not render our operations noncompetitive or
obsolete. Our business strategy is subject to the risks inherent in the
development of new products using new technologies and approaches in a rapidly
evolving commercial environment. We cannot assure that unforeseen problems will
not develop with these technologies or applications, or that we will be able to

5
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successfully address the technological challenges we encounter by entering into
alternative arrangements for generating revenues.

WE FACE STRONG COMPETITION FOR CUSTOMERS OF TELECOMMUNICATIONS SERVICES
FROM LONG DISTANCE CARRIERS AND INTERNET SERVICE COMPANIES WHO MAY BE BETTER
POSITIONED THAN US TO WITHSTAND A COMPETITIVE MARKET AND INCREASE THEIR MARKET
SHARE AS A RESULT. Currently, we compete with numerous other long distance
resellers and providers. We believe our significant competition will be from
other independent resellers and providers of competing voice telephony systems.
Many of our competitors are significantly larger and have substantially greater
market presence, as well as greater financial, technical, operational, marketing
and other resources and experience than we do which could enable them to
withstand market pressures better than we might. Some of these competitors may
include large international telephone carriers such as AT&T, MCI/WorldCom and
Sprint. Still more competition may come from providers of international long
distance services such as STAR Telecommunications, Inc., or from corporate
alliances that provide wholesale carrier services, such as "Global One". In
addition, our affiliate arrangement with OzEmail is non-exclusive. Therefore,
OzEmail is free to appoint other affiliates and this may result in our facing
substantial competition, and potentially losing business.

WE MUST RETAIN AND RECRUIT KEY PERSONNEL TO ACHIEVE OUR BUSINESS OBJECTIVES
IN A VERY COMPETITIVE AND RAPIDLY CHANGING ENVIRONMENT. Our operations are
dependent upon the services of Byron Lerner and James Tubbs. The loss of these
individuals would have a material adverse effect on our business as they are an
integral part of our business plan. Our success also depends upon our ability to
attract and retain highly skilled management and other personnel. Competition
for such personnel is intense, and the inability to attract and retain
additional qualified employees, or the loss of current key employees, could
prevent or seriously impair our achievement of our intended business goals,
projected operating results and, as a result, our financial condition.

THE MARKET PRICE OF OUR SHARES, LIKE THOSE OF OTHER TELECOMMUNICATIONS
COMPANIES, IS UNPREDICTABLE AND OUR BEING LISTED ON THE ELECTRONIC BULLETIN
BOARD INCREASES THAT UNPREDICTABILITY DUE TO THE LACK OF AN ACTIVE MARKET IN OUR
STOCK. Telecom stocks have been very volatile. Future announcements concerning
Teltran or our competitors, including variations in financial results, changes
in general market conditions, governmental regulations or other developments may
significantly impact the market price of our common stock and could cause the
market price of our common stock to fluctuate significantly. In addition, broad
market fluctuations and general economic or political conditions may adversely
affect the market price of each of our securities, regardless of our actual
performance. To compound the unpredictability, our common stock is quoted on the
OTC Bulletin Board. There can be no assurance that a stable or even an active
market in the common stock will develop. In the absence of an active public
trading market, you may be unable to liquidate your investment.

OUR SUCCESS IN THE INTERNATIONAL TELECOMMUNICATIONS BUSINESS MAY DEPEND ON
FACTORS BEYOND OUR CONTROL INCLUDING THE INFLUENCE OF DOMESTIC AND FOREIGN
GOVERNMENTS ON OUR INDUSTRY. We believe we will generate a substantial portion
of our

6
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revenues by providing international telecommunications services to our customers
on a wholesale basis. The international nature of our operations involves
certain risks, such as changes in foreign government regulations and
telecommunications standards, dependence on foreign partners, tariffs, taxes and
other trade barriers, economic downturns and political instability in foreign
countries. Our business could also be adversely affected by a reversal in the
current trend toward deregulation, or upon a change in the business affairs of
OzEmail Interline. In addition, our business is subject to various U.S. and
foreign laws, regulations, agency actions and court decisions. Our U.S.
international telecommunications services are subject to regulation by the FCC.
The FCC requires international carriers to obtain authorizations under
Section 214 of the Communications Act of 1934, as amended, prior to purchasing
or leasing international facilities, or providing international service to the
public. We have obtained the necessary licensure to conduct our business. We may
be adversely affected by regulations of foreign governments as we seek to
establish OzEmail affiliates outside of the United States. Foreign regulations
may also affect affiliates which complete calls on behalf of our clients.

THERE ARE SEVERAL FACTORS UNIQUE TO THE TELECOMMUNICATIONS INDUSTRY THAT
MAY NEGATIVELY INFLUENCE OUR OPERATING RESULTS, INCLUDING REVENUES, COSTS AND
MARGINS. Our revenues, costs and expenses may fluctuate in the future as a
result of numerous factors. Our revenues in any given period can vary due to
factors such as call volume fluctuations, particularly in regions with
relatively high per minute rates; the addition or loss of major customers,
whether through competition, merger, consolidation or otherwise; and financial
difficulties of major customers; pricing pressure resulting from increased
competition. Technical difficulties or failures of portions of the OzEmail
system or other provider may impact our ability to provide service to our
customers by preventing us from delivering call traffic. Additionally, technical
difficulties with the network may cause loss.

FORWARD LOOKING STATEMENTS AND PROJECTIONS MADE IN THIS PROSPECTUS SHOULD
NOT BE READ AS FACTUAL STATEMENTS REGARDING FUTURE PERFORMANCE. To the extent
that the information presented in this prospectus discusses financial
projections, information or expectations about our products or markets, or
otherwise makes statements about future events, such statements are
forward-looking. Although we believe that the expectations reflected in these
forward-looking statements are based on reasonable assumptions, there are a
number of risks and uncertainties that could cause actual results to differ
materially from such forward-looking statements. These include, among others:

o The acceptance of our telephonic products and services by consumers;

o price pressures and other competitive factors leading to a decrease in
anticipated revenues and gross profit margins;

o the establishment and continuation of relationships with local telephone
carriers Internet service providers and other third parties upon whom our
business depends;

o a downturn in general economic conditions; and

o a change in regulations.

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WHERE YOU CAN FIND MORE INFORMATION

We recently became obligated to file annual, quarterly and special reports,
proxy statements, and other information with the SEC. We have filed quarterly
reports for the fiscal quarters ended March 31, 1999 and June 30, 1999. Our SEC
filings are available to the public over the Internet at the SEC's web site at
http://www.sec.gov. You may also read and copy any document we file at the SEC's
public reference rooms in Washington, D.C., New York, New York and Chicago,
Illinois. Please call the SEC at 1-800-SEC-0330 for further information on the
public reference rooms. Our periodic reports, proxy statements, and other
information can be inspected at the offices of Nasdaq at 1735 K Street, NW,
Washington, DC 20006.

You may obtain a copy of any of our future filings, without charge, by
writing or calling us at:

Teltran International Group, Ltd.
One Penn Plaza, Suite 4632
New York, NY 10019
(212) 643-1600

If you would like to request these filings from us, please do so at least
five business days before you have to make an investment decision.

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USE OF PROCEEDS

We will not receive proceeds from the sale of the shares offered hereby. We
will use any proceeds we receive from the exercise by holders of warrants or
options as working capital.

CAPITALIZATION

The following table sets forth our actual capitalization at June 30, 1999.
You should read this section in conjunction with our financial statements and
related notes appearing elsewhere in this prospectus.

<TABLE>
<S> <C>
Preferred stock, $.001 par value; 5,000,000 shares authorized; none issued
and outstanding..................................................................... --
Common stock, $.001 par value; 50,000,000 shares, authorized; 12,695,827 shares issued
and outstanding..................................................................... $ 12,696
Additional paid-in capital............................................................. 15,855,916
Accumulated deficit.................................................................... (8,440,224)
-----------
Total stockholders' equity............................................................. $ 7,428,388
-----------
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</TABLE>

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The above information does not reflect

o the issuance of shares upon exercise of options or warrants

o the five percent stock dividend to be issued to stockholders of record as of
June 3, 1999

o shares which were issued subsequent to June 30, 1999

o additional shares which may be issued to private placement purchasers after
the effective date of this prospectus or as a result of any adjustment to the
purchase price paid by these investors.

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SELECTED FINANCIAL DATA

The following selected financial is derived from our audited financial
statements.

You should also read our "Management's Discussion and Analysis of Financial
Condition and Results of Operations" and our Financial Statements which are
included elsewhere herein.

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<CAPTION>
SIX MONTHS
YEAR ENDED DECEMBER 31, ENDED JUNE 30,
----------------------- ------------------------------------
1997 1998 1998 1999
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<S> <C> <C> <C> <C>
STATEMENT OF OPERATIONS:
Consolidated revenues....................................... $ -- $ 535,197 $ 128,855 $ 541,636
Cost of sales............................................... -- 244,832 79,179 377,142
Expenses.................................................... 827,780 709,357 209,684 572,859
Income (loss) from operations............................... (827,780) (418,992) (160,008) (408,365)
Net income (loss)........................................... (828,244) (449,339) (160,396) (445,898)
Income (loss) per share(1).................................. $ (0.90) $ (0.06) $ (.17) $ (.04)
--------- ---------- ---------- ----------
Shares used in computing net income (loss) per share........ 915,637 7,697,295 915,637 11,378,377
</TABLE>

10
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MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

You should read the following discussion and analysis in conjunction with
the financial statements and related notes contained elsewhere in this
prospectus.

GENERAL

Prior to April 1998 we were essentially a start-up venture. During 1998
most of our revenues were derived from acting as an OzEmail refile hub in the
United States. During 1999 these revenues diminished and we devoted our efforts
to promoting our affiliate arrangements with OzEmail as well as establishing
businesses for our web portal. Therefore comparisons between 1998 and 1999 will
be of limited value.

During the balance of 1999 and early 2000 our Plan of Operation is to:

o enter into and implement arrangements to provide wholesale customers
in the United States with Internet telephony over the OzEmail system. We
have already entered into three agreements to receive and deliver calls in
the United States for termination in the Netherlands Antilles and South
Africa. Two of these agreements commenced in June. In part due to delays of
our client, we have not yet begun services under the third agreement. We
are currently negotiating additional similar arrangements. Each of these
arrangements requires us to expend money for equipment purchases and the
payment of various fees.

o become an affiliate of OzEmail in additional countries. We have
received OzEmail's permission to establish affiliates in the United
Kingdom, Bangladesh, Pakistan and Israel, subject to finalizing written
contracts. We are seeking to finalize our arrangement in Pakistan. We have
also acquired an entity in England which will enable us to become an
affiliate in the United Kingdom, Ireland and certain other countries.

o develop our Internet portal and provide related business services
through the Internet. We contemplate using the portal as an informational
resource and intend to develop sales affiliations using the portal and to
provide revenue-generating advertising space. We also plan to operate a
separate website for the sale of music through a proposed joint venture.

o augment other aspects of our telecommunications business as well.

We cannot assure you that we will be able to successfully implement our
plan.

SIX MONTHS ENDED JUNE 30, 1999 COMPARED TO SIX MONTHS ENDED JUNE 30, 1998
(UNAUDITED)

Our revenues were approximately $541,636 for the first six months of 1999
while we had revenues of approximately $128,855 in the comparable period in
1998. This increase was due to the generation of sales of our services as an
affiliate in the OzEmail system and the revenues of Channelnet, our recent
United Kingdom acquisition.

In spite of increased sales, we incurred net losses of $445,898 in the
first six months of 1999 which was an increase from the net loss of $160,396 for
the comparable period of 1998. The increase was primarily due to an increase in
salaries, professional and other expenses which were associated with the OzEmail
affiliate business and the expenses of our United Kingdom subsidiary.

YEAR ENDED 1998 COMPARED TO YEAR ENDED 1997

Our revenues were approximately $535,000 for 1998 while we received no
revenues in 1997. Over 70% of our revenues in 1998, or $374,500, were derived
from OzEmail for acting as a refile hub. Revenues to be derived from this
activity have declined in 1999.

Our operating expenses during 1998 were approximately $709,400 compared to
approximately $827,800 during the prior year. The reduced expenses were
primarily attributable to a decline in salary expense in 1998 resulting from a
reduction in staff.

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Since we did not commence income producing operations until 1998, we do not
believe that either 1997 or 1998 are any indication of our future operations. We
anticipate that the year 1999 will be the first full year of operations and that
going forward our revenues will be derived from businesses not conducted in
1998.

LIQUIDITY

We had a working capital of approximately $7,177,795 as at June 30, 1999
compared to a negative working capital of approximately $280,880 as at
December 31, 1998. The increase in capital resulted from receipt of proceeds
from our placements totalling $1,890,000 and an increase in receivables and
prepaid expenses in 1999. Since December 31, 1998 we received gross proceeds of
$650,000 from the sale of convertible notes and exercise of warrants. All the
notes have been converted into equity and we have been able to repay and
terminate our factoring arrangement. In June 1999 we completed a private
placement of shares of common stock and received approximately $1,240,000. Upon
effectiveness of this registration statement and in the absence of adverse
changes these purchasers are obligated to pay us another $400,000 for additional
shares.

In most instances capital requirements of our core business are not
significant. To commence any new service, we will be required to purchase voice
interface nodes (VINs), presently costing $9,000 per VIN. Additional VINs may be
required based on call volume after commencement of service, but these will only
be purchased if revenues justify the purchase. There are additional start-up
costs for each new contract. In most instances we believe that costs associated
with these capital expenditures may be obtained from funds available and from
cash flow. There may be instances, however, where a new contract or service
because of its size may require significant capital expenditures. In such
instances we may have to seek debt or equity funding. There is no assurance that
we will be able to obtain funding on terms favorable to us. We also may have to
contribute up to $300,000 as our contribution to the proposed joint venture with
Antra Music Group. We have to make minimum cash payments of approximately
$185,000 to our two principal executive officers.

We may have to pay additional costs when we form joint ventures to
establish foreign OzEmail affiliations and to pay for the salaries of executives
to manage and operate such ventures.

We believe funds obtained and to be obtained from the sale of shares under
present arrangements and cash flow from operations will be sufficient for
working capital purposes until September 30, 2000.

YEAR 2000 DISCLOSURE

With the new millennium approaching, many businesses and institutions are
reviewing and modifying their computer systems to ensure they accurately process
transactions relating to the Year 2000 and beyond, This effort is necessary
because many existing computer systems and microprocessors with date functions,
including those in non-information technology equipment and systems, use only
two digits to identify a year in the date field and assume that the first two
digits of the year are always "19." Consequently, on January 1, 2000, computers
that are not Year 2000 compliant may read the year 1900. Computer systems that
calculate, compare or sort using the incorrect data may malfunction causing
disruption of operations, including a temporary inability to process
transactions, send invoices or engage in other normal business activities. Our
failure to address potential Year 2000 malfunctions in our computer and
non-information technology equipment and systems could have resulted in our
suffering business interruptions, financial loss, reputational harm and legal
liability.

We have completed a thorough audit of our Year 2000 state of readiness
including seeking and receiving representations from OzEmail and our Internet
Service Providers. As a result we have determined that our business is fully
Year 2000 compliant. Although we cannot predict with complete accuracy, we
nevertheless anticipate no potential liabilities or stoppages in our business as
a result of the new millennium.

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MARKET INFORMATION

Our common stock is currently quoted on the OTC Bulletin Board under the
symbol "TLTG."

Set forth below are the high and low closing bid quotations for our common
stock for the periods indicated as reflected on the electronic bulletin board.
Such quotations reflect interdealer prices without retail mark-up, mark-down or
commissions, and may not reflect actual transactions.

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<CAPTION>
PERIOD HIGH LOW
- ------------------------------------------------------------------------ ------ ------
<S> <C> <C>
June 30, 1999........................................................... $9.687 $ 1.75
March 31, 1999.......................................................... 2.597 .597
December 31, 1998....................................................... 1.19 .4325
September 30, 1998...................................................... 1.00 .75
June 30, 1998........................................................... 2.94 1.88
March 31, 1998.......................................................... 3.13 .4325
December 31, 1997....................................................... .125 .125
September 30, 1997...................................................... .18 .11
June 30, 1997........................................................... .33 .22
March 31, 1997.......................................................... .65 .40
</TABLE>

As of August 23, 1999, there were approximately 246 recordholders of our
common stock, although we believe that there are more than five hundred
beneficial owners of our common stock.

DIVIDEND POLICY

We plan to retain most future earnings for use in our business.
Nevertheless we have adopted a semiannual dividend policy commencing in 2000 to
make a cash or stock distribution to holders of record as of March 31 and
September 30. We have declared a 5% stock dividend to holders of record on
September 1, 1999 to be distributed October 15. Payment of dividends is within
the discretion of our board of directors and cash dividends will depend, among
other factors, upon our earnings, financial condition and capital requirements.

<PAGE>
BUSINESS

INTRODUCTION GENERAL

In July 1983, we were incorporated in Utah as Spectratek Incorporated and
we subsequently incorporated as Teltran International Group Ltd in Delaware on
October 6, 1997. In 1993 we formed a wholly owned subsidiary, Teltran
International, Inc. and we use Teltran International to engage in our
international telecommunications business. Since 1998 our primary business is
acting as a seller of telecommunications time. In 1999 we began operating an
Internet portal. Prior to 1998 we were engaged in attempts to develop our
business and did not receive any significant revenues. References to "we", "us",
or "our" include Teltran International as well.

INDUSTRY BACKGROUND

During the last fifteen years, international telecommunications have
changed dramatically. Deregulation has resulted in the end of monopolies and a
proliferation of competitors. In addition, international agreements among most
industrial nations have opened telecommunication markets to competition and
foreign ownership. At the same time technology has changed adding to the overall
efficiency of telecommunication services and increasing both call volume
capacity and the quality of sound. These factors have also combined to reduce
costs significantly. With the advent of new technology came the development of
new methods of completing calls and reducing costs. One of the most prominent
methods to achieve this is called refiling, which is the routing of calls from
country A to country B for termination in country C. Because of the above
mentioned changes, the rates charged callers using re-filed calls among the
three countries is less than the rate they would otherwise pay for a connection
directly between country A and country C.

Re-filing is typically achieved through a series of resale arrangements
among carriers often involving the wholesale purchase of services on a
per-minute basis by one long distance provider from another. A single
international call may pass through the facilities of several long distance
carriers and resellers before being terminated to a local telephone user by a
carrier in the country of termination. Re-filing has caused the emergence of
alternative international providers that rely on transmission services acquired
on a wholesale basis from other long distance providers. These international
providers include entities whose business is purely to act as a reseller.

The advent and proliferation of Internet Protocol, the computer language
protocol used to transmit data over the Internet and managed networks, has added
to the options available for the delivery of international telephone service.
Internet telephony uses Internet Protocol and voice messaging equipment, or
gateways, to receive voice messages, convert them into digital data packets,
transmit them over the Internet at high speeds and retranslate them back into
voice messages with digital clarity at the call receiver's end. The Internet
telephony industry began in 1995, when experienced Internet users began to
transfer voice messages from one PC to another. Subsequently, software was
introduced which allowed PC users to place international calls via the Internet
to other PC users for the price of a local call. Initially, the growth of
Internet Telephony was constrained due to the poor sound quality of the calls
and because calls were mainly limited to those placed from one PC to another.
However, as the industry has grown, substantial improvements have been made. New
software has substantially reduced delays and improved voice quality. The use of
private networks or Intranets to transmit calls as an alternative to the public
Internet also helped to alleviate capacity problems. Developments in hardware,
software and networks are expected to continue to improve the quality and
viability of Internet telephony.

Internet telephony provides customers with substantial savings compared to
conventional long distance calls. The total cost of an Internet telephone call
is based only on the local calls to and from the gateways of the respective
Internet providers. As a result the call bypasses the international settlements
process which requires using the more expensive transoceanic fiber networks of
traditional carriers.

14
<PAGE>

BUSINESS HISTORY

Initially we intended to concentrate our efforts on establishing and
operating a global messaging business. Pursuant to that strategy we intended to
provide our customers with a universal mailbox and a platform that was capable
of generating multimedia broadcasts of messages and documents received by the
client. In other words, the messages could be faxed or otherwise delivered to
various locations within an enterprise. As an adjunct to our global messaging
service we also intended to provide enhanced fax services including fax
broadcasting. We postponed our efforts to provide global messaging services
because of our inability at the time to obtain financing for equipment and due
to the new telecommunications opportunities presented by Internet telephony. We
derived insignificant revenues from the provision of global messaging services
for clients through April 1998. After April 1998, we focused our efforts on
exploiting opportunities in Internet telephony and derived revenues providing
services as a refile hub for OzEmail Interline Pty, Limited ("OzEmail"). OzEmail
is a subsidiary of OzEmail Limited, an Internet provider in Australia.

THE OzEMAIL SYSTEM

OzEmail has assembled a consortium of companies in various countries as
affiliates to establish an Internet network for the transmission and receipt of
its service worldwide. "Voice Over Internet Protocol" is the name of OzEmail's
version of Internet telephony. It is comprised of the proprietary hardware and
software technology developed by OzEmail for the transmission, routing and
connection of communications, including voice telephony, fax and other
transmissions, through the Internet and other conventional systems such as
public switched networks. The proprietary hardware consists of equipment known
as a voice interface node or VIN. The VIN contains OzEmail's proprietary
software and is installed for the receipt of voice transmissions, the conversion
of such transmissions to digital data and the routing of such transmissions over
the Internet. The VIN is also used to reconnect the digital data to voice
transmission on receipt. VINs are also called gateways.

OzEmail licenses the proprietary software, VINs and other trade secrets to
affiliates to provide or establish a network in the country in which an
affiliate is located. OzEmail joins affiliates in various countries to provide
international service. Each affiliate primarily furnishes origination services
in its area of affiliation but also furnishes termination service in its
territory enabling affiliates in other countries to route calls into its
territory for termination through the local affiliate over conventional public
switched telephone networks. The local affiliate receives a termination fee for
this. Each affiliate is required to market the OzEmail service in its territory
offering origination calling services through OzEmail systems. Each local
affiliate is required to pay a fee to OzEmail for all international services of
the affiliate's customers routed through the OzEmail network. The heart of the
system is the VIN, each of which is capable of handling up to twenty-four
simultaneous calls. Each affiliate is required to purchase sufficient VINs from
OzEmail to service its customers. As a VIN can only handle a finite number of
calls, several VINs may be required for each customer. Generally, the customer
of an affiliate is a telecom wholesaler or a pre-paid calling card service
calling center or other entity seeking to provide international calling to its
customers.

The typical structure of a call placed through the OzEmail system is as
follows:

o the client of an affiliate's customers originates a local call to
our facility;

o the call is digitized into Internet Protocol and delivered to the
Internet through our VIN;

o on the Internet, the call connects to a VIN of an affiliate located
in a foreign country where it is converted to analog in the foreign
domestic local telephone network; and

o the call is received by the individual in the foreign country.

All the calls are processed by the control node of OzEmail which is also
used for billing, rating and verification purposes. If no affiliate has been
appointed in the country of destination, the call will be routed through a
refile provider in a third country for the least expensive routing.

15
<PAGE>

OzEMAIL/TELTRAN

In 1998 we were appointed as a refile hub for OzEmail in the United States
for calls terminating in countries without OzEmail affiliates. As a refile hub,
we received calls for the OzEmail system and directed them through the least
expensive routing to countries which have no OzEmail Internet termination. We
derived approximately $535,200 in revenues from this activity in 1998 but this
source has declined to $93,600 through the first six months of 1999. The decline
resulted from the utilization by OzEmail of a related party as a refile hub.

In October 1998 we were appointed a non-exclusive OzEmail affiliate in the
United States. This designation enables us to sell international voice telephone
availability through the OzEmail Internet system utilizing OzEmail technology
and protocols to clients in the United States. In such capacity, our main focus
has been the wholesaling of Internet telephony capacity from North America to
other locations around the world within the OzEmail network.

In the first quarter of 1999, we entered agreements to serve as a United
States affiliate to provide call connection services from the United States to
the Netherlands Antilles and South Africa. Prior to June 1999, we did not derive
significant revenues from our affiliate operations. It took us, or our clients,
a substantial period of time to complete testing, obtain compatible equipment
and software and to complete arrangements with local telephone companies. In
June 1999 the Company began service to Netherlands Antilles and South Africa for
two clients. The provision of affiliate services to an additional customer in
the United States to the Netherlands Antilles and South Africa have already been
contracted for although we have yet to provide service under that contract. We
have also, subject to final approval of written contracts, received permission
from OzEmail to act as an affiliate in Pakistan, Israel, Bangladesh and the
United Kingdom. If such contracts are finalized, we will be able, subject to
local legislation, to originate outgoing, and terminate incoming, calls through
the OzEmail system in such countries. If we become an affiliate to any such
country, because we are also an affiliate in the United States, it is possible
that we will be able to both originate and terminate calls over the OzEmail
system among these countries. This would provide us with the ability to receive
revenues from both ends of a call. In most instances we contemplate entering
into arrangements with a local partner to implement foreign affiliate
arrangements.

OzEmail requires its affiliates to purchase a sufficient number of VINs to
provide their services and to test them over a period of several weeks to
determine the quality of service to the particular destination. We have
purchased twelve VINs for an aggregate cost of $108,000 to service our existing
United States clients at present levels. We believe our twelve VINs will be
sufficient to handle the call volumes we currently handle. If, however the
volume of calls we handle from our contracts grows to projected levels, or we
initiate call services under additional contracts, we will need to purchase
additional VINs. New VINs presently cost approximately $9,000 per unit. We house
all of our VINs at a technical facility operated by an unaffiliated party
located close to our office in New York City.

OzEMAIL AGREEMENTS

Our affiliate arrangements consist of two three-year agreements, each
expiring May 19, 2002. The first agreement is the Interconnectivity and Support
Agreement which enlists us as a non-exclusive United States affiliate into
OzEmail's international consortium of companies. As a United States affiliate,
we are authorized to operate the OzEmail system in the United States and to
transmit calls over the Internet worldwide through OzEmail's interconnected
systems. As an affiliate we must purchase the necessary VINs from OzEmail to
provide that service. OzEmail collects a service fee equal to 9% of the call
origination fee charged by an originating affiliate to its customer. Affiliates
in the OzEmail system are also obligated to provide termination services to
other OzEmail affiliates in other countries. Affiliates providing such
termination services charge originating affiliates a fee based on the rate the
terminating affiliate has negotiated with the local carrier to terminate the
call in the jurisdiction of its affiliation. OzEmail collects the fees from the
originating affiliate and, after deducting a service charge, remits the fee to
the terminating affiliate. The second agreement is the USA Intellectual Property
License Agreement which grants us a non-exclusive license for three years to use
OzEmail's software, hardware, intellectual property, advertising/promotional
material, etc. to perform services

16
<PAGE>

under the Interconnectivity and Support Agreement. This Agreement requires us to
pay a 1% royalty to OzEmail for use of its software. We also entered into a
Telecommunications Service Agreement permitting us to act as an OzEmail refile
hub.

OTHER POSSIBLE ARRANGEMENTS

The Company regards itself as a telecommunications reseller and may enter
into arrangements for the resale of telecommunications time not involving
OzEmail network. Future arrangments may involve entirely different providers or
a combination of OzEmail and other providers.

GOVERNMENT REGULATION

We are licensed as an international reseller pursuant to Section 214 of the
Federal Communication Act. This regulation does not impose significant
restrictions on our daily operations. We however are also affected by foreign
regulators or foreign government owned telephone systems. We or our affiliates
may be required to obtain permission in connection with our client contracts. We
will also be subject to foreign regulation if we are able to establish
affiliates in foreign countries. For example, some foreign countries may limit
the orgination or termination of calls to and from their jurisdictions. The
United Kingdom regulates the award of premium-rate telephone services.

MARKETING/CUSTOMERS

We will market our resale service as part of the OzEmail network to other
carriers, wholesalers, call centers, international phone card providers and
others. During 1998 our principal customer was OzEmail pursuant to the refile
arrangement. During 1998 we received approximately 79.3% of our revenues from
OzEmail. We do not anticipate that we will derive significant refile revenues
from OzEmail in the future. As a result of resale arrangements entered into by
us, we do not believe we are dependent upon OzEmail as a refile customer. We
derived 17.1% of our revenues in 1998 from Telecom 2000 for providing it with
domestic long distance capacity. This arrangement has terminated.

We market our service through our executive officers, one of whom is the
vice president of sales and marketing. We have also entered into non-exclusive
arrangements with agents who will receive a commission from the revenues
generated by any of our customers introduced by an agent.

COMPETITION

Currently, we compete with numerous other long distance resellers and
providers. We believe our significant competition will be independent resellers
and providers including providers of competing voice telephony systems. Other
competitors may include large telephone carriers such as AT&T, MCI/WorldCom and
Sprint, as well as other providers of international long distance services such
as STAR Telecommunications, Inc., and corporate alliances that provide wholesale
carrier services, such as "Global One". In addition, we have a non-exclusive
affiliate arrangement with OzEmail, therefore OzEmail is free to appoint other
affiliates which may result in our facing substantial competition from within
the OzEmail system. Many of our competitors are likely to be significantly
larger and have substantially greater market presence, as well as greater
financial, technical, operational, marketing and other resources and experience
than we do.

We compete for customers in the telecommunications markets primarily based
on price and, to a lesser extent, the type and quality of service offered.
Increased competition could force us to reduce our prices and profit margins if
our competitors are able to procure rates or enter into service agreements that
are comparable to or better than those we obtain, or are able to offer other
incentives to existing and potential customers.

17
<PAGE>

EMPLOYEES

We have seven full-time employees in New York, six of whom are engaged in
executive and technical functions and one of whom is a clerical employee. We
also have five full time employees in the United Kingdom as a result of our
Channelnet acquisition. We also utilize consultants.

TECHNICAL FACILITY

We have an oral arrangement with an unaffiliated party pursuant to which
our technical equipment is housed and maintained at this party's colocation
facility in New York City located on the same block as our headquarters. All
equipment, connections and telephone lines between us and our customers and
overseas providers are located at this facility. We utilize the owner's
equipment to effect these connections.

OMNICOM

In May 1999 we acquired all the shares of Omni Communications, Inc. Since
it was formed in May 1994, "Omnicom" has been an authorized agent of UniDial
Communications located in New York City. UniDial is one of the nation's largest
and fastest growing telecommunications resellers. Resellers buy wholesale
services from major carriers like IXC, Sprint, Internet Service Networks and
local Bell companies to provide a spectrum of services to customers. We believe
that the acquisition of OmniCom, in consideration for 126,788 shares of our
common stock, will complement our line of telecomunications products and
accelerate our entry into the area of switched and dedicated phone services
including 1+ outbound and toll free inbound calls, networking, frame relay,
wireless phones and service, Internet access, debit cards, billing software,
multi-media conferencing and network marketing services. We also plan to feature
UniDial services on our website, http://www.teltran.com in order to attract more
small to mid-size businesses to our retail marketplace.

CHANNELNET

We acquired all of the outstanding shares of Channelnet Ltd. common stock
on August 16, 1999, effective as of June 1, 1999. Channelnet was incorporated in
May 1999 under the laws of England and Wales and is located in Manchester in the
United Kingdom. Channelnet provides premium rate telecommunications services to
customers in the United Kingdom. Premium rate services are the United Kingdom
equivalent of "900" number services in the United States. The dominant services
are or will be provided primarily for Tarot card readings, voice messages,
charitable solicitations and other non-adult services. In addition, Channelnet
is an affiliate of OzEmail in the United Kingdom and Ireland. It has also
received indication that upon presentation of a proper plan, it will be
appointed an affiliate in Turkey, Greece, Cyprus, Turkish Republic of North
Cyprus, and India. At the closing of the acquisition, we also agreed to
purchase, subject to the completion of our due diligence, an entity owned by the
former stockholder of Channelnet. We also entered into an agreement with such
former stockholder to purchase certain equipment owned by that entity that are
necessary for the operation of the Channelnet business. Pursuant to that
arrangement we will use the equipment in our operation of the Channelnet
business but will not acquire title to it until we complete making payments of
pounds 370,000 in the aggregate by February 2001.

In consideration of our acquisition of the Channelnet stock, we issued to
the former shareholder of Channelnet 94,500 shares of our common stock and we
will be obligated to issue additional shares based upon earnings generated by
the acquired Channelnet business operations during the period of September 1999
through February 2001. In addition, we entered into an employment agreement with
the key employee of Channelnet for the operation of the Channelnet business.
This agreement provides in part that we will issue such individual a number of
shares of our common stock based on the future actual earnings of the Channelnet
business.

18
<PAGE>

INTERNET PORTAL

Because it presented an opportunity that could be accomplished
inexpensively, in February 1999 we instituted a web portal. A portal is a
website which enables the user to access various other web sites without
multiple steps thereby saving the user time. We believe that maintaining an
Internet portal will assist us in establishing a presence as an Internet service
provider. While maintaining a website is not related to our Internet telephony
business, we believe creating an Internet environment will enhance the brand
recognition of the "Teltran" name and could potentially establish us as a
well-regarded Internet brand. Our Internet portal contains direct links to many
commercial sites. Recently, we provided access to brokerage firms through the
portal and anticipate receiving payment from brokerage firms utilizing this
service based on customers' business introduced to the brokerage firm through
the portal. We have affiliate arrangements with retailers pursuant to which we
will receive a percentage of revenues generated by consumers accessing the site
through our portal. We propose to sell advertising on our website if the "hits"
or number of times the website is visited exceeds 1,000,000 hits per month.
Based on current level of hits, we believe we will achieve the proposed number
of "hits" by early fall and, therefore, that we will be able to offer
advertisements on our portal commencing in the fourth quarter.

We are also engaged in additional activity through its web portal. We are
finalizing an arrangement with Antra Music Group Ltd., a subsidiary of a
principal shareholder, to establish a website, http:// www.recordstogo.com, for
the sale of music. Initially this website will be utilized as a vehicle to sell
records belonging to an unaffiliated third party. We expect www.recordstogo.com,
to increase our revenues through the sale of records, advertisements and music
merchandise and to also attract more traffic to our web portal through cross
linking.

SEASONALITY

Our Internet telephony business is not subject to seasonal variations in
volume of calls. However, our Internet portal experienced a decline in traffic
during the summer of 1999, as compared to the preceding months. Management
believes that the decline is due largely to the increased amount of time many
Internet users spend outdoors during the warmer weather.

DESCRIPTION OF PROPERTY

Our executive offices are located at One Penn Plaza, New York, New York
10119, where we lease approximately 2,400 square feet through February 28, 2003.
The annual base rental for this space is approximately $90,000. Channelnet,
together with a related company, occupies an office at Enterprise House, 15
Whitworth Street West, in Manchester, U.K. The facility is leased by the former
stockholder of Channelnet, which is obtaining an assignment of the lease for the
premises to Channelnet.

LEGAL PROCEEDINGS

In June 1999 an action was commenced against us in the United States
District Court for the Southern District of New York. The plaintiffs claim that
they suffered damages as a result of alleged fraudulent and negligent
misrepresentations made in 1996 concerning our prospects. We do not believe we
have any liability to the plaintiffs and will vigorously defend this action. We
have made a motion to dismiss this action.

We are not aware of any other legal proceedings, or pending legal
proceedings, to which we are party or to which our property is subject. However,
in an unrelated matter, a claim has been made by a corporation for $304,000
representing amounts advanced on our behalf to a potential reseller of
telecommunications time to us. Such amount was to be held in escrow until
commencement of the contract between ourselves and the reseller by an agent
appointed by the potential reseller. The contract was aborted and the escrow
agent failed to return the escrow funds. The claimant has requested the payment
of the amount advanced with interest and alternately a participation in revenues
which it believed arose from the relationship with the reseller. The claimant
has failed to respond to our communications for the past several months.

19
<PAGE>
MANAGEMENT

DIRECTORS AND EXECUTIVE OFFICERS

Our directors and executive officers are:

<TABLE>
<CAPTION>
NAME AGE POSITION
- ------------------------------ --- ---------------------------------------------------------------------------
<S> <C> <C>
Byron R. Lerner............... 55 President, Chief Executive Officer and Director
James E. Tubbs................ 39 Executive Vice President, Chief Operating Officer and Director
Peter Biagioli................ 39 Vice President of Sales and Marketing
Martin Miller................. 58 Director
</TABLE>

Byron R. Lerner has been chief executive officer and president of Teltran
since June 1997 and one of our directors since May 1996. Mr. Lerner was
Teltran's chief financial officer between May 1996 and June 1997. Between 1993
and 1995, Mr. Lerner was president of International GlobalCom, a firm he founded
which engaged in the resale of domestic and international long distance phone
time. From 1990 to 1993 Mr. Lerner was president of L&S Communications, a
reseller of domestic and international long distance telephone time.

James E. Tubbs has been our executive vice president and a director since
May 1996. Between 1994 and 1995, Mr. Tubbs was president of OmniCom, a reseller
subsidiary of UniDial. From 1984 through May 1996 he was employed as an
executive in various entities controlled by Brent Musburger, the sports
broadcaster. Simultaneously Mr. Tubbs was employed in various capacities as an
executive in sports and entertainment matters by the networks which engaged
Mr. Musburger.

Peter Biagioli has been our vice president of sales and marketing since
1997. From February 1988 to January 1997 Mr. Biagioli was vice president of
worldwide commercial development for the Manifest Division TNT Express
Worldwide. During the period November 1982 to January 1988 he was employed by
Avis Rent A Car System Inc. and was a regional sales manager for the New York
Metropolitan market.

Martin Miller has been a Teltran director since November 1995. Mr. Miller,
for the past five years, has been a manager of corporate finance for Millport
Ltd., presently a Bahamian based advisor of foreign investors.

<PAGE>
EXECUTIVE COMPENSATION

We have retroactively adjusted the information in this section to reflect
the five percent stock dividends to holders of record on June 3, 1999 and
September 1, 1999.

Our chief executive officer received the below listed compensation during
the fiscal year ended December 31, 1998. No other executive officer's
compensation exceeded $100,000 during such year.

Summary Compensation Table

<TABLE>
<CAPTION>
LONG TERM
COMPENSATION AWARDS
-------------------
SECURITIES
NAME AND PRINCIPAL POSITION YEAR SALARY UNDERLYING OPTIONS
- ------------------------------------------------------------------------- ---- ------- -------------------
<S> <C> <C> <C>
Byron E. Lerner 1998 $88,000 496,127 shares
President and Chief Executive Officer.................................. 1997 37,500 --
</TABLE>

All of our directors hold office until the next annual meeting of
stockholders and the election and qualification of their successors. The board
of directors annually elects executive officers to hold office until the first
meeting of the board following the next annual meeting of stockholders and until
their successors are chosen and qualified.

Option Plan

We have adopted a 1998 Stock Option Plan for our officers, employees and
consultants and for those of any of our subsidiaries. The option plan authorizes
the grant of options to purchase 3,307,500 shares of our common stock all of
which have been issued.

The 1998 option plan is administered by the board of directors. In general,
the board, or a committee thereof, is empowered to select the persons to whom
options would be granted and to determine, subject to the terms of the option
plan, the number, the exercise period and other provisions of such options. The
options granted under the option plan are exercisable in such installments as
may be provided in the grant.

Options granted to employees may be either incentive stock options or ISOs
under the Internal Revenue Code or non ISOs. The board may determine the
exercise price provided that, in the case of ISOs, such price may not be less
than 100% or 110% in the case of ISOs granted to holders of 10% of the voting
power of our stock) of the fair market value of our common stock at the date of
grant. The aggregate fair market value determined at time of option grant of
stock with respect to which ISOs become exercisable for the first time in any
year cannot exceed $100,000.

The options are evidenced by a written agreement containing the above terms
and such other terms and conditions consistent with the option plan as the Board
of Directors may impose. Each option, unless sooner terminated, shall expire no
later than ten years or, in the case of ISOs granted to holders of 10% of the
voting power of our stock, five years from the date of the grant, as the board
of directors may determine. The Board of Directors has the right to amend,
suspend or terminate the option plan at any time, provided, however, that unless
ratified by our stockholders no amendment or change in the option plan will be
effective for limited matters including increase in the total number of shares
which may be issued under the option plan or extending the term of the option
plan.

21
<PAGE>
OPTIONS GRANTED IN LAST FISCAL YEAR

<TABLE>
<CAPTION>
NUMBER OF SHARES
UNDERLYING OPTION GRANT EXERCISE PRICE EXPIRATION DATE
----------------------- -------------- ----------------
<S> <C> <C> <C>
Byron Lerner........................................ 220,500 $ .33 December 8, 2008
91,877 1.51 December 8, 2008
91,875 2.59 December 8, 2008
91,875 4.31 December 8, 2008

James Tubbs......................................... 220,500 $ .33 December 8, 2008
91,877 1.51 December 8, 2008
91,875 2.59 December 8, 2008
91,875 4.31 December 8, 2008
</TABLE>

AGGREGATE OPTION EXERCISES IN
LAST FISCAL YEAR AND FISCAL YEAR
END OPTION VALUES

The table below provides information concerning stock option exercises
during the fiscal year ended December 31, 1998 and the value of unexercised
options at the end of that fiscal year.

AGGREGATED OPTION EXERCISES IN
LAST FISCAL YEAR AND FISCAL YEAR
END OPTION VALUES

<TABLE>
<CAPTION>
VALUE OF UNEXERCISED IN
NUMBER OF SHARES UNDERLYING
UNEXERCISED OPTIONS AT THE MONEY OPTIONS
SHARES FISCAL YEAR END --------------------------
ACQUIRED ON VALUE ---------------------------- NON
NAME EXERCISE REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE EXERCISABLE
- ------------------------------------- ----------- -------- ----------- ------------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Byron Lerner......................... None None None 496,125 None $29,000
</TABLE>

The value of the in-the-money options is based on the market price of our
common stock on December 31, 1998.

On January 31, 1999 we issued options to purchase an additional 876,488
shares of common stock at $.51 per share exercisable immediately. Of these
options 275,625 were issued to each of Messrs. Lerner and Tubbs and Martin
Miller, one of our directors. In May 1999 we granted options to purchase an
additional 1,102,500 shares of our common stock at $3.49 per share. Of these,
options to purchase 275,625 shares were issued to each of Byron Lerner, James
Tubbs and Martin Miller. All the options granted in 1999 vested immediately.

EMPLOYMENT AGREEMENTS

We have entered into an employment agreement with Byron Lerner to serve as
our president and chief executive officer. The agreement is for a term of
37 months commencing March 1, 1999 and unless notice of non-renewal is given at
the end of first thirteen months or any year thereafter, the term of the
agreement is extended for an additional year period. Mr. Lerner is to receive a
base annual salary of $150,000 until August 1999 when the salary increases to
$180,000. Starting in the second year of the agreement on April 1, 2000 the
salary increases to $189,000 or $200,000 if the net income as defined in the
agreement is at least $200,000. The salary increases thereafter at the rate of
ten percent per annum. The agreement provides for a bonus pool which shall be
equal to 15% of net income as defined in the agreement of which Mr. Lerner will
receive a maximum of six percent (6%) of such pool. Mr. James Tubbs, a vice
president and chief operating officer, has entered into an identical agreement
with us.

22
<PAGE>

CERTAIN TRANSACTIONS

Information in this section is retroactively adjusted to reflect the five
percent stock dividend to holders of record on June 3, 1999 and September 1,
1999.

During and prior to 1998 an affiliate of Byron Lerner and James Tubbs each
advanced $50,000 to us. In 1998 all these advances were converted into 551,250
shares of our common stock. All these advances were interest free. Mr. Lerner
has advanced approximately an additional $13,000 to us in 1998 and received an
additional 71,662 shares of common stock.

In April 1999, we and Antra Holding Group Inc. exchanged shares of our
respective company's shares. We own 2,000,000 shares of Antra's common stock and
Antra owns 2,205,000 shares of our common stock. Antra is a public company
engaged through subsidiaries in the music business. As a result of the
transaction Antra may be deemed a principal stockholder of Teltran.

We have entered into an agreement with Antra which requires an adjustment
in the shares delivered in connection with the above described exchange. If on
the first business day of the year 2000 either Antra's shares or our shares are
trading less than 20% below the market price of the other party's shares, the
party whose shares are trading lower must issue additional shares to the other
party.

We are also completing arrangements to form a joint venture corporation
with a subsidiary of Antra to market records with Antra through a website to be
established on the Internet using our portal. This new corporation will be owned
equally by Antra and ourselves. We each will be equally responsible for funding
and share equally in losses and profits. This venture initially will market
records owned by an independent third party.

As of May 1999 we acquired all the shares of Omni Communications Inc. This
company is an authorized agent of UniDial Communications. UniDial is one of the
nation's fastest growing telecommunications resellers. We issued 126,788 shares
of our common stock to the sellers, of which James Tubbs received 110,250
shares. Mr. Tubbs is an officer and director of our company. We did not obtain a
fairness opinion.

RECENT SECURITIES TRANSACTIONS

On August 16, 1999, in exchange for 94,500 shares of our common stock, we
acquired all of the outstanding shares of Channelnet Ltd. common stock,
effective June 1, 1999. Channelnet has been providing premium rate
telecommunications services to customers in the United Kingdom as well as being
an OzEmail affiliate in the United Kingdom and Ireland. It has also received
indication that upon presentation of a proper plan, it will be appointed an
affiliate in Turkey, Greece, Cyprus, Turkish Republic of North Cyprus, and
India.

In June 1999 we issued a total of 332,324 shares of common stock in
connection with a private placement of our securities. Five investors acquired
326,024 shares at $3.81 per share. If the price of our common stock is selling
below certain levels after the offering, we may have to issue additional shares
to these investors. The purchasers of 286,650 of the shares are required to
purchase an additional number of shares after this registration statement is
declared effective provided that there is no material change in our company. An
additional 6,300 shares were issued to a finder and an additional 815,355
warrants to purchase our common stock at $5.71 per share were issued to finders.

In April, 1999 we agreed to issue options to purchase shares of our common
stock to certain entities if their assistance proved successful in obtaining
international communication arrangements. These options, if issued, may entitle
the holder or holders to purchase an aggregate maximum of 551,250 shares of
common stock. While the conditions for these options have not occurred, we
believe there is a strong possibility that these options will be issued.

PRINCIPAL AND SELLING STOCKHOLDERS

The following table sets forth, as of August 8, 1999, information
concerning the beneficial ownership of our common stock and as adjusted by any
sale by

o each person who beneficially owns more than five percent of our
outstanding common stock,

23
<PAGE>

o each of our directors,

o each of the executive officers named in the summary compensation table,

o all our directors and executive officers as a group and

o each selling stockholder

Information in the table reflects our recent 5% dividends to stockholders
of record on June 3, 1999 and September 1, 1999. Share ownership includes both
shares beneficially owned and shares a person has the right to acquire pursuant
to any option or warrant which is presently exercisable or which may be
exercised within sixty days. In the case of the ownership of holders who are not
officers or directors or 5% owners, the table may not include free trading
shares which the holders may acquire.

In the following table:

o the number reported in the column headed "shares offered" credited to
each of Byron Lerner, James Tubbs, Peter Biagioli, Mitchell Hershkowitz
and Michael Neville includes shares subject to options not exercisable
within sixty days which is why these shares are not included in the
column reporting "shares beneficially owned."

o the number of shares reported as "beneficially owned" by each of Autostat
Anstalt Schaan, Balmore Funds, Nesher, Inc. and Berkeley Group Ltd.
includes the number of shares set forth in column A, below, which were
purchased by each of them at $4.00 per share. The "beneficially owned"
numbers also include additional shares we may require each of these
people to purchase at a price to be determined after this date. The
shares listed below in column B represent the maximum number of shares
that we could issue to each person. In addition, the table includes
shares that may be issued to each of these persons subsequent to this
date as an adjustment if the price of our common stock falls below a
specified price. These shares are indicated in column C below.

<TABLE>
<CAPTION>
A B C
---------- --------- ----------
<S> <C> <C> <C>
Autostat Anstalt Schaan............................................ 115,808.7 96,507.6 115,913.7
Balmore Funds S.A.................................................. 115,808.7 96,507.6 115,913.7
Nesher, Inc........................................................ 18,529.35 15,441.3 18,529.3
Berkeley Group Ltd................................................. 37,058.7 30,882.6 37,058
</TABLE>

If additional shares are not purchased, however, or the number of shares
sold is less than the number of shares listed in column B, the balance of the
shares will be returned to us. Likewise, if there is no adjustment or an
adjustment for a fewer number of shares is made, the shares listed in column C,
or the balance thereof will be returned to us.

o with regard to the shares reported as "beneficially owned" by each of
Balmore Funds S.A., J. Hayut, Hyett Capital Ltd, Talbiya B. Investments
Ltd. and Libra Finance S.A. such numbers include shares of common stock
we may issue pursuant to warrants and shares issued as fees in connection
with the transaction described above. The numbers of shares included are
set forth in column A below. The values in the "beneficially owned"
column also include the shares of common stock listed in column B, below,
which are subject to warrants to be granted if we sell more shares to the
investor in the transaction described in the previous bullet point. The
shares listed in column C below, represent additional shares that will be
issued if we sell more shares to these investors. If we do not sell
additional shares, none of the shares referred to in columns B and C will
be issued.

<TABLE>
<CAPTION>
A B C
----------- ----------- -----------
<S> <C> <C> <C>
Balmore Funds S.A............................................. 567,744 249,060 --
J. Hayut...................................................... 18,529.35 7,720.65 1,197
Hyett Capital Ltd............................................. 95,621.4 39,842.25 675
Talbiya B. Investments Ltd.................................... 89,810.7 19,921.65 --
Libra Finance S.A............................................. 21,000 -- 420
</TABLE>

Notwithstanding its potential ownership of over eight percent (8%) of the
Company's common stock Balmore Funds S.A. has entered into an agreement which
limits the number of it may own or acquire at one time to 4.99% of the Company's
outstanding shares.

24
<PAGE>

<TABLE>
<CAPTION>
BEFORE THE OFFERING AFTER THE OFFERING
--------------------------- ---------------------------
SHARES PERCENT OF SHARES PERCENT OF
IDENTITY OF STOCKHOLDER BENEFICIALLY SHARES SHARES BENEFICIALLY SHARES
OR GROUP OWNED OUTSTANDING OFFERED OWNED OUTSTANDING
- ---------------------------------------- ------------ ----------- ----------- ------------ -----------
<S> <C> <C> <C> <C> <C>
Byron Lerner............................ 1,148,805 8.6% 1,148,805 262,500 1.6%
James Tubbs............................. 1,201,726 8.9 1,201,726 380,625 2.2
Martin Miller........................... 538,650 4.0 538,650 262,500 1.6
Peter Biagioli.......................... 264,600 2.0 264,600 110,250 .64
Mitchell Hershkowitz.................... 176,400 1.3 176,400 110,250 .64
Michael Neville......................... 110,250 0.82 110,250 -- --
Darrell Lerner.......................... 110,250 0.82 110,250 82,687.50 0.47
Broadford Limited....................... 230,422.5 1.7 230,422.5 -- --
Staffin Limited......................... 230,422.5 1.7 230,422.5 -- --
Southern Provinces, Ltd. ............... 230,422.5 1.7 230,422.5 -- --
Fir Enterprises Limited................. 358,312.5 2.7 358,312.5 -- --
Percival Investments Ltd. .............. 358,312.5 2.7 358,312.5 -- --
Birch Enterprises Limited............... 358,312.5 2.7 358,312.5 -- --
World Telecom Ltd. ..................... 358,312.5 2.7 358,312.5 -- --
Calgary Limited......................... 330,750 2.5 330,750 -- --
Montaque Securities International
Ltd. ................................. 280,862.4 2.1 280,862.4 -- --
Sumburgh Limited........................ 230,422.5 1.7 230,422.5 -- --
Salen Limited........................... 330,187.5 2.3 330,187.5 -- --
Coastal Provinces Ltd. ................. 275,625 2.1 275,625 -- --
Aran Limited............................ 175,297.5 1.3 175,297.5 -- --
Callanish Limited....................... 330,750 2.5 330,750 -- --
Carbost Limited......................... 358,312.5 2.7 358,312.5 -- --
Carlowey Limited........................ 358,312.5 2.7 358,312.5 -- --
Craignure Limited....................... 220,500 1.6 220,500 -- --
Sleat Limited........................... 214,987 1.6 214,987 -- --
Newco Management Services Ltd. ......... 220,500 1.6 220,500 -- --
Brodick Limited......................... 358,312.5 2.7 358,312.5 -- --
Austost Anstalt Schaan.................. 328,125 2.4 328,125 -- --
Balmore Funds S.A. ..................... 1,174,929 8.1 1,174,929 -- --
Nesher, Inc. ........................... 52,500 0.40 52,500 -- --
United Securities....................... 56,250 0.30 56,250 -- --
Berkeley Group Ltd. .................... 105,000 0.80 105,000 -- --
Libra Finance S.A. ..................... 22,638 .16 22,638 -- --
J. Hayut................................ 30,318.75 .23 30,318.75 -- --
Hyett Capital Ltd. ..................... 137,758.95 1.0 137,758.95 -- --
Talbiya B. Investments Ltd. ............ 109,863.6 0.8 109,863.6 -- --
Antra Holding Group Inc. ............... 2,205,000 16.3 2,205,000 2,205,000 13
All Officers and Directors
(4 persons)........................... 3,238,306 20.4% 3,238,306 992,500 5.7%
</TABLE>

The above assumes all of the shares being offered will be sold. Because the
selling stockholders may sell all, some or none of the shares that he, she or it
holds, the actual number of shares that will be held by the selling stockholders
upon or prior to termination of this offering may vary. The selling stockholders
may have sold, transferred or otherwise disposed of all or a portion of their
shares since the date on which they provided the information regarding their
common stock in transactions exempt from the registration requirements of the
Securities Act. Additional information concerning the selling stockholders may
be set forth from time to time in prospectus supplements to this prospectus.

25
<PAGE>
PLAN OF DISTRIBUTION

The selling stockholders, or, subject to applicable law, their pledgees,
donees, distributees, transferees or other successors in interest may sell the
shares from time to time. These sales may be made on the over-the-counter market
or foreign securities exchange, in privately negotiated transactions or
otherwise or in a combination of transactions at prices and at terms then
prevailing or at prices related to the then current market price, or at
privately negotiated prices. In addition, any shares covered by this prospectus
which qualify for sale pursuant to Section 4(1) of the Securities Act or
Rule 144 promulgated thereunder may be sold under such provisions rather than
pursuant to this prospectus. Without limiting the generality of the foregoing,
the shares may be sold in one or more of the following types of transactions:

o a block trade in which the broker-dealer so engaged will attempt to sell
the shares as agent but may position and resell a portion of the block as
principal to facilitate the transaction;

o purchases by a broker or dealer as principal and resale by such broker or
dealer for its account pursuant to this prospectus;

o an exchange distribution in accordance with the rules of such exchange;

o ordinary brokerage transactions and transactions in which the broker
solicits purchasers; and

o face-to-face transactions between sellers and purchasers without a
broker-dealer. In effecting sales, brokers or dealers engaged by the
selling stockholders may arrange for other brokers or dealers to
participate in the resales.

In connection with distributions of the shares or otherwise, the selling
stockholders may enter into hedging transactions with broker-dealers. In
connection with such transactions, broker-dealers may engage in short sales of
the shares registered hereunder in the course of hedging the positions they
assume with the selling stockholders. The selling stockholders may also sell
shares short and deliver the shares to close out such short positions. The
selling stockholders may also enter into option or other transactions with
broker-dealers which require the delivery to the broker-dealer of the shares
registered hereunder, which the broker-dealer may resell pursuant to this
prospectus. The selling stockholders may also pledge the shares registered
hereunder to a broker or dealer and upon a default, the broker or dealer may
effect sales of the pledged shares pursuant to this prospectus.

Brokers, dealers or agents may receive compensation in the form of
commissions, discounts or concessions from the selling stockholders in amounts
to be negotiated in connection with the sale. Such brokers or dealers and any
other participating brokers or dealers may be deemed to be "underwriters" within
the meaning of the Securities Act in connection with such sales and any such
commission, discount or concession may be deemed to be underwriting discounts or
commissions under the Securities Act.

Information as to whether underwriters who may be selected by the selling
stockholders, or any other broker-dealer, is acting as principal or agent for
the selling stockholders, the compensation to be received by underwriters who
may be selected by the selling stockholders, or any broker-dealer, acting as
principal or agent for the selling stockholders and the compensation to be
received by other broker-dealers, in the event the compensation of such other
broker-dealers is in excess of usual and customary commissions, will, to the
extent required, be set forth in a supplement to this prospectus. Any dealer or
broker participating in any distribution of the shares may be required to
deliver a copy of this prospectus, including a prospectus supplement, if any, to
any person who purchases any of the shares from or through such dealer or
broker.

Each of the selling shareholders has executed an agreement pursuant to
which they confirm the method of distribution set forth herein, agree not to
sell the shares if the registration statement is not current.

We have advised the selling stockholders that during if at any time they
may be engaged in a distribution of the shares they are required to comply with
Regulation M promulgated under the Exchange Act. The selling shareholders have
acknowledged such advice by separate agreement and agree therein to comply with
such regulation. In general, Regulation M precludes the selling stockholders,
any affiliated purchasers and any broker-dealer or other person who participates
in such distribution from bidding for or purchasing, or attempting to induce any
person to bid for or purchase any security which is the subject of the

26
<PAGE>

distribution until the entire distribution is complete. A "distribution" is
defined in the rules as an offering of securities that is distinguished from
ordinary trading activities and depends on the "magnitude of the offering and
the presence of special selling efforts and selling methods." Regulation M also
prohibits any bids or purchases made in order to stabilize the price of a
security in connection with the distribution of that security.

It is anticipated that the selling stockholders will offer all of the
shares for sale. Further, because it is possible that a significant number of
Shares could be sold at the same time hereunder, such sales, or the possibility
thereof, may have a depressive effect on the market price of the common stock.

DESCRIPTION OF SECURITIES

GENERAL

We are authorized to issue 50,000,000 shares of our common stock, par value
$0.001 per share, and 5,000,000 shares of preferred stock, par value $0.001 per
share. As of September 20, 1999, 13,378,383 shares of common stock were
outstanding (after giving effect to our five percent (5%) stock dividends.) No
shares of preferred stock are currently outstanding.

COMMON STOCK

The holders of common stock are entitled to one vote for each share held of
record on all matters to be voted on by stockholders. There is no cumulative
voting with respect to the election of directors, with the result that the
holders of more than 50% of the shares voted for the election of directors can
elect all of the directors. The holders of common stock are entitled to receive
dividends when, as and if declared by the board of directors out of funds
legally available therefor.

In the event of our liquidation, dissolution or the winding up of our
business, the holders of common stock are entitled to share ratably in all
assets remaining available for distribution to them after payment of liabilities
and after provision has been made for each class of stock, if any, having
preference over the common stock. Holders of shares of common stock, as such,
have no conversion, preemptive or other subscription rights. There are no
redemption provisions applicable to the common stock. All of the outstanding
shares of common stock are fully paid and nonassessable.

PREFERRED STOCK

Our certificate of incorporation authorizes the issuance of "blank check"
preferred stock with such designation, rights and preferences as may be
determined from time to time by our board of directors. Accordingly, the board
is empowered, without stockholder approval, to issue preferred stock with
dividend, liquidation, conversion, voting or other rights which could adversely
affect the voting power or other rights of the holders of common stock. The
preferred stock could be utilized, under certain circumstances, as a method of
discouraging, delaying or preventing a change in control. Although we currently
do not intend to issue any shares of preferred stock, there can be no assurance
that we will not do so.

TRANSFER AGENT

The transfer agent for the common stock is North American Transfer Co., 147
Merrick Road, Freeport, New York 11520.

27
<PAGE>
LEGAL MATTERS

The validity of the securities being offered hereby will be passed upon for
us by Parker Duryee Rosoff & Haft, A Professional Corporation, New York, New
York. Michael D. DiGiovanna, a shareholder in Parker Duryee Rosoff & Haft, has
been elected to serve as a member of our Board of Directors subject to our
qualifying for listing on the American Stock Exchange. There can be no assurance
that we will be listed on such exchange.

EXPERTS

Our financial statements as at December 31, 1997 and December 31, 1998
included in this prospectus, have been audited by Liebman Goldberg & Drogin LLP,
independent certified public accountants as set forth in their report thereon
appearing elsewhere herein. Such financial statements are included herein and in
the registration statement in reliance upon such report and upon the authority
of that firm as experts in auditing and accounting.

The financial statements of our subsidiaries, Channelnet, Ltd., included in
this prospectus, have been audited by David Nugent & Co., independent certified
chartered accountants, as set forth in their report appearing elsewhere in this
prospectus. These financial statements are included in this prospectus and
registration statement in reliance upon that report and upon the authority of
that firm as experts in auditing and accounting.

OFFERING INFORMATION

You should rely only on the information contained in this prospectus. To
understand this offering fully, you should read this entire prospectus
carefully, including the financial statements and notes. We have included a
brief overview of the most significant aspects of the offering itself in the
Prospectus Summary. However, individual sections of the prospectus are not
complete and do not contain all of the information that you should consider
before investing in our common stock. We have not authorized anyone to provide
you with information different from that contained in this prospectus. We are
offering to sell, and seeking offers to buy, shares of common stock only in
jurisdictions where offers and sales are permitted. The information contained in
this prospectus is accurate only as of the date of this prospectus, regardless
of the time of delivery of this prospectus or of any sale of the common stock.

<PAGE>

TELTRAN INTERNATIONAL GROUP, LTD. AND SUBSIDIARIES
FINANCIAL STATEMENTS

CONTENTS

<TABLE>
<CAPTION>
PAGE NO.
---------

<S> <C>
PART I FINANCIAL INFORMATION

Report of Independent Auditors.................................................................... F-1

Consolidated Balance Sheets at December 31, 1998 and 1997......................................... F-2

Consolidated Statements of Operations for the years
ended December 31, 1998 and 1997............................................................... F-3

Consolidated Statements of Stockholders' Deficit for the years
ended December 31, 1998 and 1997............................................................... F-4

Consolidated Statements of Cash Flows for the years
ended December 31, 1998 and 1997............................................................... F-5

Notes to Consolidated Financial Statements........................................................ F-6--F-9

Consolidated Balance Sheets at June 30, 1999 and 1998............................................. F-10

Consolidated Statements of Operations for the six months
ended June 30, 1999 and 1998................................................................... F-11

Consolidated Statements of Cash Flows for the six months
ended June 30, 1999 and 1998................................................................... F-12

Notes to Consolidated Financial Statements........................................................ F-13

Unaudited Pro Forma Consolidated Statement of Operations.......................................... F-14

Notes to Unaudited Pro Forma Consolidated Statement of Operations................................. F-15
</TABLE>

CHANNELNET LIMITED
FINANCIAL STATEMENTS
FOR THE PERIOD 13TH MAY 1999 TO 31ST MAY 1999

CONTENTS

<TABLE>
<S> <C>
Company information................................................................................. F-16
Directors' report................................................................................... F-17
Director's Responsibilities......................................................................... F-18
Auditors' Report.................................................................................... F-19
Profit and loss account............................................................................. F-20
Balance sheet....................................................................................... F-21
Notes............................................................................................... F-22--F-23
</TABLE>

The following page does not form part of the statutory accounts

<TABLE>
<S> <C>
Detailed trading and profit and loss account....................................................... Appendix 1
</TABLE>

<PAGE>

LIEBMAN GOLDBERG & DROGIN LLP
Certified Public Accountants
591 Stewart Avenue, Suite 450
Garden City, New York 11530
-------------
Tel (516) 228-6600
Fax (516) 228-6664

REPORT OF INDEPENDENT AUDITORS

The Board of Directors
Teltran International Group, Ltd. and Subsidiaries

We have audited the consolidated balance sheets of Teltran International
Group, Ltd. and Subsidiaries as of December 31, 1998 and 1997 and the related
consolidated statements of operations, stockholders' deficit and cash flows for
the years then ended, in accordance with Statements on Standards for Accounting
and Review Services issued by the American Institute of Certified Public
Accountants. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these consolidated
financial statements based on our audit.

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

In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Teltran
International Group, Ltd. and Subsidiaries as of December 31, 1998 and 1997 and
the results of its operations and its cash flows for the year then ended in
conformity with generally accepted accounting principles.

February 22, 1999
Garden City, New York

F-1

<PAGE>

TELTRAN INTERNATIONAL GROUP, LTD. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
DECEMBER 31,

<TABLE>
<CAPTION>
1998 1997
------------ ------------
<S> <C> <C>
ASSETS
Current Assets:
Cash............................................................................ $ 5,389 $ 3,646
Accounts receivable............................................................. 94,296 --
Deferred financing costs--net of amortization................................... 19,797 --
------------ ------------
Total current assets......................................................... 119,482 3,646
------------ ------------
Other Assets:
Goodwill--net of amortization................................................... 37,588 40,273
Organization expense--net of amortization....................................... 98 218
------------ ------------
Total other assets........................................................... 37,686 40,491
------------ ------------
Total assets................................................................. $ 157,168 $ 44,137
------------ ------------
------------ ------------

LIABILITIES AND STOCKHOLDERS' DEFICIT
Current Liabilities:
Convertible debentures payable.................................................. $ 180,488 $ --
Loan payable.................................................................... 50,000 50,000
Due to factor................................................................... 65,193 --
Accounts payable, accrued expenses and taxes payable............................ 104,581 35,081
Corporation taxes payable....................................................... 100 488
------------ ------------
Total current liabilities.................................................... 400,362 85,569
------------ ------------
Long-Term Liabilities:
Notes payable................................................................... -- 250,000
Loans payable--stockholders'.................................................... 1,245 10,880
------------ ------------
Total long-term liabilities.................................................. 1,245 260,880
------------ ------------
Total liabilities............................................................ 401,607 346,449
------------ ------------
Commitments and Contingencies
Stockholders' Deficit:
Preferred stock, $.001 par value per share, 5,000,000 shares authorized and -0-
shares issued and outstanding................................................
Common stock, $.001 par value per share, 50,000,000 shares authorized and
7,697,295 and 915,637 shares issued and outstanding in 1998 and 1997
respectively................................................................. 7,697 916
Additional paid in capital in excess of par value............................... 2,002,359 1,501,928
Deficit......................................................................... (2,254,495) (1,805,156)
------------ ------------
Total stockholders' deficit.................................................. (244,439) (302,312)
------------ ------------
Total liabilities and stockholders' deficit.................................. $ 157,168 $ 44,137
------------ ------------
------------ ------------
</TABLE>

See notes to financial statements.

F-2

<PAGE>

TELTRAN INTERNATIONAL GROUP, LTD. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31,

<TABLE>
<CAPTION>
1998 1997
--------- ---------
<S> <C> <C>
Revenues:
Sales....................................................................... $ 535,197 $ --
Cost of Sales:
Purchases................................................................... 244,832 --
--------- ---------
Gross profit.................................................................. 290,365 --
--------- ---------

Expenses:
Salaries.................................................................... 143,356 371,379
Outside services............................................................ 271,850 112,032
Professional fees........................................................... 49,531 21,274
Fees--other................................................................. 9,384 1,003
Payroll taxes............................................................... 14,878 28,386
Leasing expense............................................................. 11,446 --
Travel...................................................................... 93,701 21,219
Insurance................................................................... 28,863 33,573
Rent........................................................................ 48,834 36,532
Office expense.............................................................. 3,435 170,618
Miscellaneous............................................................... 3,908 4,275
Telephone................................................................... 6,088 27,369
Amortization expense........................................................ 24,083 120
--------- ---------
Total expenses........................................................... 709,357 827,780
--------- ---------
Loss from operations.......................................................... (418,992) (827,780)
Interest expense.............................................................. 29,959 --
--------- ---------
Loss before provision for income taxes........................................ (448,951) (827,780)
Provision for income taxes.................................................... 388 464
--------- ---------
Net loss...................................................................... $(449,339) $(828,244)
--------- ---------
--------- ---------
Net loss per share of common stock based upon 7,697,295 and 915,637 (weighted
average) shares issued, respectively........................................ $ (0.06) $ (0.90)
--------- ---------
--------- ---------
</TABLE>

See notes to financial statements.

F-3

<PAGE>

TELTRAN INTERNATIONAL GROUP, LTD. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' DEFICIT
FOR THE YEARS ENDED DECEMBER 31, 1998 AND 1997

<TABLE>
<CAPTION>
COMMON STOCK CAPITAL
----------------------- IN EXCESS OF
SHARES AMOUNT PAR VALUE DEFICIT
----------- -------- ------------- -----------
<S> <C> <C> <C> <C>
Balance--March 1, 1996.................................... 5,145,491 $ 5,145 $ 588,550 $ (550,478)
March, 1996 Teltran Merger.............................. 10,000,000 10,000
July, 1996 issuance of 3,166,667 shares................. 3,166,667 3,167 946,833
Adjustment re: merger elimination entries............... 31,273
Net loss for the year................................... (457,707)
----------- -------- ----------- -----------
Balance--January 1, 1997.................................. 18,312,158 18,312 1,535,383 (976,912)
Adjustment re: promissory note.......................... (50,851)
Reverse stock split 1:20 - December 1, 1997............. (17,396,521) (17,396) 17,396
Net loss for the year................................... (828,244)
----------- -------- ----------- -----------
Balance--December 31, 1997................................ 915,637 916 1,501,928 (1,805,156)
Issuance of shares in consideration of joint venture
termination.......................................... 6,000,000 6,000 284,000 --
Issuance of shares re: conversion of debt............... 281,658 281 116,931 --
Issuance of shares re: payment of stockholder's loans... 500,000 500 99,500 --
Net loss for the year................................... -- -- -- (449,339)
----------- -------- ----------- -----------
Balance--December 31, 1998................................ 7,697,295 $ 7,697 $ 2,002,359 $(2,254,495)
----------- -------- ----------- -----------
----------- -------- ----------- -----------
</TABLE>

See notes to financial statements.

F-4

<PAGE>

TELTRAN INTERNATIONAL GROUP, LTD. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31,

<TABLE>
<CAPTION>
1998 1997
--------- ---------
<S> <C> <C>
Cash Flows from Operating Activities:
Net loss................................................................................ $(449,339) $(828,244)
Adjustment to reconcile net loss to net cash (used in) operating activities:
Amortization expense.................................................................. 24,083 120
(Increase) in accounts receivable..................................................... (94,296) --
(Increase) in deferred financing costs................................................ (55,875) --
Cash advances from factor (net of repayments)......................................... 65,193 --
Increase in accounts payable and accrued expenses..................................... 69,112 5,613
--------- ---------
Net cash (used in) operating activities............................................ (441,122) (822,511)
--------- ---------
Cash Flows from Financing Activities:
Issuance of convertible debentures.................................................... 180,488 --
Cash received from issuance of common stock........................................... -- 602,300
Conversion of convertible debenture--stock issued..................................... 119,512 --
(Decrease) in loan payable............................................................ (50,000) --
Proceeds from loan payable............................................................ 50,000 --
(Decrease) in notes payable........................................................... (250,000) --
Decrease in loans payable--stockholders'.............................................. 102,865 --
Issuance of stock for notes payable................................................... 290,000 --
Cash received as advances from investors.............................................. -- 199,149
--------- ---------
Net cash provided by financing activities.......................................... 442,865 801,449
--------- ---------
Net increase (decrease) in cash......................................................... 1,743 (21,062)
Cash--January 1,........................................................................ 3,646 24,708
--------- ---------
Cash--December 31,...................................................................... $ 5,389 $ 3,646
--------- ---------
--------- ---------
Supplemental Disclosures:
Income tax............................................................................ $ 625 $ 464
--------- ---------
--------- ---------
Interest paid......................................................................... $ 29,959 $ --
--------- ---------
--------- ---------
</TABLE>

See notes to financial statements.

F-5

<PAGE>

TELTRAN INTERNATIONAL GROUP, LTD. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 1998

NOTE 1--OPERATIONS:

Nature of Business:

Teltran International Group, Ltd. through its wholly owned Subsidiary
Teltran International, Inc. (the "Company") provides services for state of the
art telecommunications.

Effective March 1, 1996, the shareholders of Teltran International Inc.
("the Subsidiary"), a Delaware corporation, completed a stock exchange with
Spectratek Inc., a Utah corporation, whereby all the common shares of the
subsidiary, were exchanged for 10,000,000 common shares of Spectratek, par value
$.001. The 10,000,000 shares represented approximately 67% of the then total
issued and outstanding 15,145,491 shares of Spectratek Inc.

On October 6, 1997, Spectratek merged with Teltran International Group,
Ltd., a newly formed Delaware corporation with the surviving entity.

Except as otherwise indicated by the context, references to "the Company"
refer to Teltran International Group, Ltd. and the subsidiary.

NOTE 2--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:

Principles of Consolidation:

The consolidated financial statements include the accounts of the company
and its wholly-owned subsidiary. Intercompany balances and transactions have
been eliminated.

Development Stage Activities and Operations:

Prior to April 1998, the Company was a development stage activity. Since
the Company now has continuing business revenues, comparative financial
information does not include losses accumulated during the development stage
period not part of the financial statement period.

At December 31, 1998, the Company has a net operating loss carryforward of
approximately $2,254,000 after limitations based on changes in ownership.

Basic loss per share was computed by dividing the Company's net loss by the
weighted average number of common shares outstanding during the period. There is
no presentation of diluted loss per share as the effect of common stock options,
warrants and convertible debt amounts are antidilutive. The weighted average
number of common shares used to calculate loss per common share during 1998 and
1997 was 7,697,295 and 915,637 respectively.

The Company adopted Financial Accounting Standards Board (FASB) Statement
No. 128, "Earnings per Share". The Statement established standards for computing
and presenting earnings per share (EPS). It replaced the presentation of primary
EPS with a presentation of basic EPS and also requires dual presentation of
basic and diluted EPS on the face of the income statement. The Statement was
retroactively applied to the 1997 loss per share but did not have any effect.

F-6
<PAGE>
TELTRAN INTERNATIONAL GROUP, LTD. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

DECEMBER 31, 1998

NOTE 2--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:--(CONTINUED)
Use of Estimates:

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

Fair Value of Financial Instruments:

SFAS No. 107, "Disclosures About Fair Value of Financial Instruments",
requires disclosure of the fair value information, whether or not recognized in
the balance sheet, where it is practicable to estimate that value. The carrying
value of cash, cash equivalents, accounts receivable and notes payable
approximates fair value.

Impairment of Long-Lived Assets:

The Company has not completed it's evaluation of the adoption of SFAS 121,
"Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to
be Disposed of." However, management believes any such effect will not be
material.

Revenue Recognition:

Telecommunication revenues from services provided are recognized and billed
as services are performed.

Major Customer:

During the year ended December 31, 1998, approximately 70% of the company's
revenue was from one customer. Also, 65% of accounts receivable are from this
customer who also was factored.

Goodwill:

Goodwill is stated at cost and is amortized on a straight line basis over a
life of 15 years. Amortization expense is $2,685, for the year ended
December 31, 1998.

Stock Options:

The Company recognizes compensation for stock options granted to employees
in accordance with Accounting Principles Board Opinion No. 25.

NOTE 3--NOTES RECEIVABLE:

In July 1996, the Company issued 3,166,667 shares of common stock to investors
for the sum of $950,000. During the year ended December 31, 1996, the Company
received $347,700 and the balance of $602,300 was received during the year ended
December 31, 1997.

F-7
<PAGE>
TELTRAN INTERNATIONAL GROUP, LTD. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

DECEMBER 31, 1998

NOTE 4--DUE TO FACTOR:

In May 1998, the Company entered into a factoring agreement; financing the
accounts receivable of their major customers. At December 31, 1998, the
outstanding balance due to the factor, represents approximately 70% of the
customers' open balance. Advances from the factor totaled $509,036 (before
customer repayments) from May, 1998 to December, 1998 and were used to pay
operating expenses as well as vendor purchases. In February 1999, the Company
terminated the factoring agreement and paid the outstanding balance in full.

NOTE 5--NOTES PAYABLE:

In August 1998, the Company issued $300,000 of convertible debentures due
August 14, 1999 to non-related parties. The debentures accrued interest at 10%.
The debentures are convertible into the Company's stock at $1.25 or 70% of the
lowest closing bid price of the common stock, 30 trading days preceding the
conversion date. During the period August through December 1998, $119,512 of
debentures were converted to 269,158 shares of common stock. In connection with
the transaction, the Company issued 30,000 warrants to purchase 30,000 shares of
common stock at $1.25 per share. Financing costs of this transaction were
deferred, and are being amortized to the convertible debentures maturity date.

Prior to 1998, the Company received a loan in the amount of $50,000. The
loan was from a non-related party (Fiscal Concepts, Inc.) and the note stated
that no interest was to be paid. During 1998, the repayment due date was
extended. The loan is due upon notification from the maker or upon the
anniversary date of the renegotiation. Since it is anticipated that this loan
will be repaid within one year and there is not interest due; imputed interest
in accordance with APB#21 has not been calculated.

In November 1997, the Company entered into a joint venture agreement with a
group of unrelated foreign investors which provided for their participation of
future profits of the Company in return for cancellation of indebtedness. In
June 1998, the Company issued on aggregate of 6,000,000 shares to these
investors in consideration of the termination of the joint venture.

NOTE 6--STOCKHOLDERS' DEFICIT:

During the period August 1998 to December 31, 1998, the Company issued
269,158 shares of its common stock upon the conversion of $119,512 of the
debentures referred to in Note 5.

The Company also issued 500,000 shares of its common stock to related
parties of an officer and an officer as repayment of $100,000 advanced to the
Company during the year.

Upon completion of the reincorporation on October 6, 1997, the Company's
capitalization consisted of 50,000,000 shares of common stock and 5,000,000
shares of preferred stock. On December 1, 1997, the shareholders approved a
reverse one for twenty common stock split.

NOTE 7--COMMITMENTS AND CONTINGENCIES:

The Company was a development stage company and had no significant revenues
and limited financing during the first three months of 1998. Additionally, the
Company, as shown in the accompanying consolidated financial statements, has an
accumulated deficit of $2,254,495 at December 31, 1998 and incurred a net loss
of $449,339 during the year ended December 31, 1998. Subsequent to June 30,
1998, the Company is no longer a development stage company since revenues are
continuing.

The Company rents its facility under a lease agreement through August 31,
2003.

F-8
<PAGE>

TELTRAN INTERNATIONAL GROUP, LTD. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

DECEMBER 31, 1998

NOTE 7--COMMITMENTS AND CONTINGENCIES:--(CONTINUED)

Future minimum lease payments under these agreements for the years ended
December 31, are as follows:

Rent expense for the years ended December 31, 1998 and 1997 was $48,834 and
$36,532, respectively.

NOTE 8--STOCK COMPENSATION PLAN:

During the year ended December 31, 1998, the company granted 1,180,000
stock options, with a life of 10 years, to certain officers/directors, employees
and non-employees that may be exercised at prices ranging from $.375 to $5.00
per share. Subsequent to December 31, 1998, the Company pursuant to the plan,
granted 795,000 additional stock options, also with a 10 year life, to certain
employees and non-employees that may be exercised at a price of $.59 per share.
These options vested immediately upon the date of issuance.

The following table summarizes certain information relative to stock
options:

<TABLE>
<CAPTION>
WEIGHTED AVERAGE
INCENTIVE STOCK OPTIONS SHARES EXERCISE PRICE
- ------------------------------------------------------------------------ --------- ----------------
<S> <C> <C>
Granted................................................................. 1,180,000 $ 1.69
Exercised............................................................... 0 --
---------
Outstanding--December 31, 1997.......................................... 0 --
Expired/cancelled....................................................... 0 --
Granted................................................................. 0 --
---------
Outstanding--December 31, 1998.......................................... 1,180,000 1.69
---------
---------
Exercisable--December 31, 1998.......................................... 497,500 1.69
---------
---------
</TABLE>

The Company recognizes compensation for stock options granted to employees
in accordance with APB#25. The Intrinsic value method does not recognize
compensation cost in the financial statements when options are granted. Had the
Company determined compensation based on the fair value at the grant date for
its stock options, the Company's net loss would have been increased to the
pro-forma amounts indicated below:

<TABLE>
<CAPTION>
Net Loss:
<S> <C>
As reported................................................ $ (449,339)
-----------
Pro-forma.................................................. $ (553,514)
-----------
Net loss per share:
As reported................................................ $ (0.06)
-----------
Pro-forma.................................................. $ (0.07)
-----------
</TABLE>

NOTE 9--SUBSEQUENT EVENT:

In January 1999, the Company issued $550,000 principal amount of
convertible debentures due to non-related parties. The debentures accrue
interest at 10%, and are convertible into the Company's common stock at prices
related to market. Subsequent to the issuance of the debentures, all the
debentures were converted into shares.

F-9

<PAGE>

TELTRAN INTERNATIONAL GROUP, LTD. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
JUNE 30,

<TABLE>
<CAPTION>
1999 1998
----------- -----------
<S> <C> <C>
ASSETS
Current Assets:
Cash.............................................................................. $ 958,354 $ 11,443
Accounts receivable............................................................... 466,311 54,665
Investment........................................................................ 6,000,000 --
Prepaid expenses.................................................................. 110,563 9,978
----------- -----------
Total current assets........................................................... 7,535,228 76,086
----------- -----------
Fixed Assets:
Machinery & equipment, net of accumulated depreciation............................ 29,138 --
----------- -----------
Other Assets:
Goodwill--net of amortization..................................................... 222,662 40,273
Organization expense--net of amortization......................................... 38 158
----------- -----------
Total other assets............................................................. 222,700 40,431
----------- -----------
Total assets................................................................... $ 7,787,066 $ 116,517
----------- -----------
----------- -----------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Loan payable...................................................................... $ 50,000 $ 50,000
Accounts payable, accrued expenses and taxes payable.............................. 307,433 67,276
Due to factor..................................................................... -- 35,000
Corporation taxes payable......................................................... -- 876
Customer deposits................................................................. -- 14,932
----------- -----------
Total current liabilities...................................................... 357,433 168,084
----------- -----------
Long-Term Liabilities:
Loan payable...................................................................... -- 318,500
Loans payable--stockholders'...................................................... 1,245 92,641
----------- -----------
Total long-term liabilities.................................................... 1,245 411,141
----------- -----------
Total liabilities.............................................................. 358,678 579,225
----------- -----------
Commitments and Contingencies
Stockholders' Equity:
Preferred stock, $.001 par value per share, 5,000,000 shares
authorized and -0- issued and outstanding
Common stock, $.001 par value per share, 50,000,000 shares authorized and
12,695,827 and 915,637 issued and outstanding, respectively.................... 12,696 916
Additional paid in capital in excess of par value................................. 15,855,916 1,501,928
Deficit........................................................................... (8,440,224) (1,965,552)
----------- -----------
Total stockholders' equity (deficit)........................................... 7,428,388 (462,708)
----------- -----------
Total liabilities and stockholders' equity..................................... $ 7,787,066 $ 116,517
----------- -----------
----------- -----------
</TABLE>

F-10

<PAGE>

TELTRAN INTERNATIONAL GROUP, LTD. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
FOR THE SIX MONTHS ENDED JUNE 30,

<TABLE>
<CAPTION>
1999 1998
--------- ---------
<S> <C> <C>
Revenues:
Sales................................................................................. $ 540,179 $ 128,855
Miscellaneous......................................................................... 1,457 --
--------- ---------
541,636 128,855
Cost of Sales:
Purchases............................................................................. 377,142 79,179
--------- ---------
Gross profit............................................................................ 164,494 49,676
--------- ---------
Expenses:
Salaries.............................................................................. 240,587 --
Outside services...................................................................... 40,170 118,858
Professional fees..................................................................... 72,789 7,000
Fees--other........................................................................... 70,039 --
Payroll taxes......................................................................... 10,213 --
Leasing expense....................................................................... 4,277 6,110
Travel................................................................................ 24,379 54,234
Insurance............................................................................. 19,131 12,004
Rent.................................................................................. 61,495 3,398
Office expense........................................................................ 4,206 4,780
Miscellaneous......................................................................... 10,798 --
Telephone............................................................................. 11,724 2,673
Contributions......................................................................... 1,200 --
Advertising........................................................................... -- 567
Amortization expense.................................................................. 1,851 60
--------- ---------
Total expenses..................................................................... 572,859 209,684
--------- ---------
Loss from operations.................................................................... (408,365) (160,008)
Interest expense...................................................................... 36,753 --
--------- ---------
Loss before provision for income taxes.................................................. (445,118) (160,008)
Provision for income taxes.............................................................. 780 388
--------- ---------
Net loss................................................................................ $(445,898) $(160,396)
--------- ---------
--------- ---------
Net loss per share of common stock based upon 11,378,377 and 915,637 (weighted average)
shares issued, respectively........................................................... $ (0.04) $ (0.17)
--------- ---------
--------- ---------
</TABLE>

F-11
<PAGE>

TELTRAN INTERNATIONAL GROUP, LTD. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
FOR THE SIX MONTHS ENDED JUNE 30,

<TABLE>
<CAPTION>
1999 1998
----------- ---------
<S> <C> <C>
Cash Flows from Operating Activities:
Net loss.............................................................................. $ (445,898) $(160,396)
Adjustment to reconcile net loss to net cash (used in) operating activities:
Amortization expense................................................................ 1,851 60
(Increase) in accounts receivable................................................... (363,220) (54,665)
(Increase) in prepaid expenses...................................................... (110,623) (9,978)
Decrease in deferred financing costs................................................ 19,797 --
Cash repayments to factor........................................................... (65,193) --
Increase in customer deposits....................................................... -- 14,932
(Increase) in investment............................................................ (6,000,000) --
Increase in accounts payable, accrued expenses and taxes payable.................... 196,152 32,583
----------- ---------
Net cash (used in) operating activities............................................... (6,767,134) (177,464)
----------- ---------
Cash Flows from Investing Activities:
Purchase of fixed assets............................................................ (29,138) --
----------- ---------
Cash Flows from Financing Activities:
(Decrease) of convertible debentures payable........................................ (180,488) --
Cash advances from factor........................................................... -- 35,000
Loans from stockholders and others.................................................. -- 81,761
Conversion of convertible debenture--stock issued................................... 676,319 --
Exercise of warrants................................................................ 244,937 --
Private placement................................................................... 1,008,469 --
Investment.......................................................................... 6,000,000 --
Cash received as advances from investors............................................ -- 68,500
----------- ---------
Net cash provided by financing activities........................................... 7,749,237 185,261
----------- ---------
Net increase in cash................................................................ 952,965 7,797
Cash--January 1..................................................................... 5,389 3,646
----------- ---------
Cash--June 30....................................................................... $ 958,354 $ 11,443
----------- ---------
----------- ---------
Supplemental Disclosures:
Income tax.......................................................................... -- --
----------- ---------
----------- ---------
Interest paid....................................................................... $ 36,753 $ --
----------- ---------
----------- ---------
</TABLE>

F-12

<PAGE>

TELTRAN INTERNATIONAL GROUP, LTD. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)

JUNE 30, 1999

NOTE 1--BASIS OF PRESENTATION

The financial information included herein is unaudited; however, such
information reflects all adjustments (consisting solely of normal recurring
adjustments) which are, in the opinion of management, necessary for a fair
statement of results for the interim periods.

The results of operations for the six month period ended June
30, 1999 are not necessarily indicative of the results to be expected for the
full year.

NOTE 2--MATERIAL EVENTS

During the quarter ended June 30, 1999, the following events occurred:

a. The Company exchanged 2,000,000 shares of its common stock for 2,000,000
shares of common stock of another public corporation. The Companies are
in the process of forming a joint venture in which each will own 50%.

b. The Company received $1,154,969 representing the issuance of 311,029
shares of common stock in a private placement. An additional 5,470
shares were issued in connection with the private placement.

c. 585,000 common shares representing a previously declared stock dividend
were issued during the quarter ended June 30, 1999.

d. In a transaction effective June 1, 1999, the Company issued 94,500
common shares to acquire 100% of Channel Net, Ltd.

F-13

<PAGE>

TELTRAN INTERNATIONAL GROUP, LTD. AND SUBSIDIARIES
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30, 1999

<TABLE>
<CAPTION>
HISTORICAL PRO FORMA
------------------------ -----------------------
TELTRAN CHANNEL NET ADJUSTMENT COMBINED
--------- ----------- ---------- ---------
<S> <C> <C> <C> <C>
Revenues:
Sales...................................................... $ 182,280 $ 357,899 $ -- $ 540,179
Miscellaneous.............................................. 1,457 1,457
--------- --------- ------ ---------
183,737 357,899 -- 541,636
Cost of Sales:
Purchases.................................................. 146,968 230,174 377,142
--------- --------- ------ ---------
Gross profit................................................. 36,769 127,725 -- 164,494
--------- --------- ------ ---------
Expenses:
Salaries................................................... 240,587 -- -- 240,587
Outside services........................................... 40,170 -- -- 40,170
Professional fees.......................................... 72,789 -- -- 72,789
Fees--other................................................ 70,039 -- -- 70,039
Payroll taxes.............................................. 10,213 -- -- 10,213
Leasing expense............................................ 4,277 -- -- 4,277
Travel..................................................... 24,379 -- -- 24,379
Insurance.................................................. 19,131 -- -- 19,131
Rent....................................................... 61,495 -- -- 61,495
Office expense............................................. 4,206 -- -- 4,206
Miscellaneous.............................................. 6,150 4,648 -- 10,798
Telephone.................................................. 11,724 -- -- 11,724
Contributions.............................................. 1,200 -- -- 1,200
Amortization expense....................................... 1,851 -- (389)(a) 1,462
--------- --------- ------ ---------
Total expenses.......................................... 568,211 4,648 (389) 572,470
--------- --------- ------ ---------
Income (loss) from operations................................ (531,442) 123,077 389 (407,976)
Interest expense........................................ 36,753 -- -- 36,753
--------- --------- ------ ---------
Income (loss) before provision for income taxes.............. (568,195) 123,077 389 (444,729)
Provision for income taxes................................... 780 -- -- 780
--------- --------- ------ ---------
Net income (loss)............................................ $(568,975) $ 123,077 $ 389 $(445,509)
--------- --------- ------ ---------
--------- --------- ------ ---------
</TABLE>

F-14
<PAGE>

TELTRAN INTERNATIONAL GROUP, LTD. AND SUBSIDIARIES
NOTES TO UNAUDITED PRO FORMA
CONSOLIDATED FINANCIAL STATEMENT OF OPERATIONS

The unaudited pro forma consolidated financial statement of operations reflects
historical information which includes the operations of Teltran and Channel Net,
Ltd. In a transaction effective June 1, 1999, Teltran issued 94,500 shares of
its common stock to acquire 100% of Channel Net, Ltd. Since the transaction was
effected within the quarter ended June 30, 1999, the balance sheet of Teltran
includes actual historical financial information of Channel Net, Ltd. and only a
pro forma statement of operations is required.

(a) The pro forma adjustment which gives effect to the acquisition in
the unaudited pro forma consolidated statement of operations is the
amortization of the excess of purchase consideration over net tangible
assets acquired on a straight-line basis over 40 years.

F-15

<PAGE>

CHANNELNET LIMITED
COMPANY INFORMATION
31.5.1999

Incorporated in England on 13th May 1999

Number 3772561

<TABLE>
<S> <C>
DIRECTORS B. Lerner Esq. (appointed 16.08.99)
J. Tubbs Esq. (appointed 16.08.99)
M. Thompson Esq. (appointed 09.08.99)

REGISTERED OFFICE Enterprise House
15 Whitworth Street West
MANCHESTER
M1 5GS

BANKERS Whiteway Laidlaw

ACCOUNTANTS Darent Business Services
Accountants
51 Leigh Road
Boothstown Worsley
MANCHESTER
M28 1HP

AUDITORS David Nugent & Co.
Chartered Certified Accountants
& Registered Auditors
51 Leigh Road
Boothstown Worsley
MANCHESTER
M28 1HP
</TABLE>

F-16

<PAGE>

CHANNELNET LIMITED
DIRECTORS' REPORT

31.5.1999

The directors present their report and the financial statements for the
period ended 31.5.1999.

PRINCIPAL ACTIVITY

The principal activity of the company is the supply of telecommunications
services.

YEAR 2000

Our business depends on a computerised accounting system to record the
transactions. We can confirm that our system has been guaranteed as being year
2000 compliant. However we could be at risk if other parties do not adequately
deal with the issue.

We have assessed the possibility of related failures in our significant
suppliers and customers all of whom inform us that they are dealing with the
problem. It is impossible to guarantee that no year 2000 problems will remain.
However the directors feel that they will be able to deal promptly with any
failures that may occur.

DIRECTORS

The directors of the company during the period 13th May 1999 to 31st May
1999 and their interests in the shares of the company as recorded in the
register of directors interests were as follows

<TABLE>
<CAPTION>
31.5.1999
ORDINARY
SHARES
----------
<S> <C>
B. Lerner Esq. (appointed 16.08.99)............................... --
J. Tubbs Esq. (appointed 16.08.99)................................ --
M. Thompson Esq. (appointed 09.08.99)............................. --
</TABLE>

AUDITORS

David Nugent & Co were appointed as Auditors of the company of 7th August
1999 and have agreed to offer themselves for re-appointment as auditors of the
company.

SMALL COMPANY EXEMPTIONS

This report has been prepared in accordance with the special provisions of
Part VII of the Companies Act 1985 relating to small companies.
applicable to small companies.

On behalf of the board

Director

Enterprise House
15 Whitworth Street West
MANCHESTER
11 5GS
9th August 1999

F-17

<PAGE>

CHANNELNET LIMITED
STATEMENT OF DIRECTORS' RESPONSIBILITIES

We are required under company law to prepare financial statements for each
financial period which give a true and fair view of the state of affairs of the
company and of the profit or loss of the company for that period. In preparing
those financial statements we are required to:

o select suitable accounting policies and apply them consistently;

o make reasonable and prudent judgements and estimates;

o prepare the financial statements on the going concern basis unless
it is inappropriate to presume that the company will continue in
business.

We are also responsible for:

o keeping proper accounting records;

o safeguarding the company's assets;

o taking reasonable steps for the prevention and detection of fraud.

On behalf of the board

Director

19th August 1999

F-18

<PAGE>

CHANNELNET LIMITED
AUDITORS' REPORT
AUDITORS' REPORT TO THE MEMBERS OF
CHANNELNET LIMITED

We have audited the financial statements on pages 5-8 which have been
prepared under the accounting policies set out on page 7.

RESPECTIVE RESPONSIBLITIES OF DIRECTORS AND AUDITORS

As described on page 3, the company's directors are responsible for the
preparation of financial statements. It is our responsibility to form an
independent opinion, based on our audit, on those statements and to report our
opinion to you.

BASIS OF OPINION

We conducted our audit in accordance with Auditing Standards issued by the
Auditing Practices Board. An audit includes examination, on a test basis, of
evidence relevant to the amounts and disclosures in the financial statements. It
also includes an assessment of the significant estimates and judgements made by
the directors in the preparation of the financial statements, and of whether the
accounting policies are appropriate to the company's circumstances consistently
applied and adequately disclosed.

We planned and performed our audit so as to obtain all the information and
explanations which we considered necessary in order to provide us with
sufficient evidence to give reasonable assurance that the financial statements
are free from material missatatement, whether caused by fraud or error or other
irregularity. In forming our opinion we also evaluated the overall adequacy of
the presentation of information in the financial statements.

OPINION

In our opinion the financial statements give a true and fair view of the
state of the company's affairs as at 31.5.1999 and of its profit for the period
13th May 1999 to 31st May 1999 and have been properly prepared in accordance
with the provisions of the Companies Act 1985 applicable to small companies.

David Nugent & Co.
Chartered Certified Accountants
& Registered Auditors

MANCHESTER
19th August 1999

F-19

<PAGE>

CHANNELNET LIMITED
PROFIT AND LOSS ACCOUNT
FOR THE PERIOD 13TH MAY 1999 TO 31ST MAY 1999

<TABLE>
<CAPTION>
1999
NOTE pounds
---- ---------
<S> <C> <C>
Turnover 2 4,678
Net operating expenses
Administrative expenses (3,155)
---------
Profit on ordinary activities
before taxation 1,523
Taxation 4 (152)
---------
Profit on ordinary activities
after taxation 1,371
retained for the 13th May 1999 to 31st May 1999 9
---------
---------
</TABLE>

Movements in reserves are shown in note 9.

None of the company's activities were acquired or discontinued during the above
financial period.

There are no recognised gains and losses in 1999 other than the profit for the
period 13th May 1999 to 31st May 1999.

F-20

<PAGE>

CHANNELNET LIMITED
BALANCE SHEET
AT 31.5.1999

<TABLE>
<CAPTION>
1999
------------------
NOTE pounds pounds
---- ------- -------
<S> <C> <C> <C>
Current assets
Debtors 5 5,497
-------
5,497
Creditors: amounts falling due
within one year 6 (4,125)
-------
Net current assets 1,372
-------
Total assets less current liabilities 1,372
-------
-------
Capital and reserves
Called up share capital 8 1
Profit and loss account 9 1,371
-------
Total shareholders' funds 7 1,372
-------
-------
</TABLE>

These accounts have been prepared in accordance with:

(a) The special provisions of Part VII of the Companies Act 1985: and

(b) The Financial Reporting Standard for Smaller Entities.

The accounts were approved by the board of Directors on 19th August 1999.

Director

F-21

<PAGE>

CHANNELNET LIMITED
NOTES ON FINANCIAL STATEMENTS

31.5.1999

1. ACCOUNTING POLICIES

Basis of accounting

The financial statements have been prepared under the historical cost
accounting rules.

The company has taken advantage of the exemption from preparing a cash flow
statement conferred by Financial Reporting Standard No. 1 on the grounds that it
is entitled to the exemptions available in Section 246 to 247 of the Companies
Act 1985 for small companies.

Deferred taxation

Deferred taxation is provided on the liability method in respect of the
taxation effect of all timing differences to the extent that tax liabilities are
likely to crystallise in the foreseeable future.

2. TURNOVER

Turnover represents the amount derived from the provision of goods and
services which fall within the company's ordinary activities stated net of value
added tax.

In the opinion of the directors, none of the turnover of the company is
attributable to geographical markets outside the UK. (1999 nil)

3. OPERATING PROFIT

<TABLE>
<CAPTION>
1999
POUNDS
-----
<S> <C>
Operating profit is stated after charging
Auditors' remuneration............................................................ 250
-----
-----
</TABLE>

4. TAXATION

<TABLE>
<CAPTION>
1999
POUNDS
-----
<S> <C>
Corporation tax on profit on ordinary activities at 10%........................... 152
-----
-----
</TABLE>

5. DEBTORS

<TABLE>
<CAPTION>
1999
POUNDS
-----
<S> <C>
Amounts falling due within one year
Other debtors..................................................................... 5,497
-----
5,497
-----
-----
</TABLE>

6. CREDITORS: amounts falling due within one year

<TABLE>
<CAPTION>
1999
POUNDS
-----
<S> <C>
Other creditors................................................................... 4,125
-----
4,125
-----
-----
</TABLE>

F-22
<PAGE>

7. RECONCILIATION OF MOVEMENTS IN SHAREHOLDERS' FUNDS

<TABLE>
<CAPTION>
1999
POUNDS
-----
<S> <C>
Profit for the financial period 13th May 1999 to 31st May 1999.................... 1,371
New share capital subscribed...................................................... 1
-----
Net addition to shareholders' funds............................................... 1,372
Opening shareholders' funds....................................................... --
-----
Closing shareholders' funds....................................................... 1,372
-----
-----
</TABLE>

8. CALLED UP SHARE CAPITAL

<TABLE>
<CAPTION>
1999
-------------------
NUMBER OF
SHARES POUNDS
--------- -----
<S> <C> <C>
Authorised.......................................................... 1,000 1,000
----- -----
----- -----
Allotted called up and fully paid
Ordinary Shares of pounds 1 each.................................... 1 1
----- -----
----- -----
</TABLE>

9. PROFIT AND LOSS ACCOUNT

<TABLE>
<CAPTION>
1999
POUNDS
-----
<S> <C>
Retained profit for the period 13th May 1999 to 31st May 1999..................... 1,371
-----
-----
</TABLE>

F-23

<PAGE>

APPENDIX 1

CHANNELNET LIMITED
TRADING AND PROFIT AND LOSS ACCOUNT
FOR THE PERIOD 13TH MAY 1999 TO 31ST MAY 1999.

<TABLE>
<CAPTION>
1999
--------------
pounds pounds
----- -----
<S> <C> <C>
Turnover
Sales.......................................................................................... 4,678

Less overheads
Salaries and wages............................................................................. 2,805
Auditors' remuneration......................................................................... 250
Accountants' fees.............................................................................. 100
-----
3,155
-----

Net profit for the year 1,523
-----
-----
</TABLE>

A-1

<PAGE>

PART II
INFORMATION NOT REQUIRED IN PROSPECTUS

INDEMNIFICATION OF DIRECTORS AND OFFICERS

Article Sixth of the Certificate of Incorporation of the Company provides
with respect to the indemnification of directors and officers that the Company
shall indemnify to the fullest extent permitted by Sections 102(b)(7) and 145 of
the Delaware General Corporation Law, as amended from time to time, each person
that such Sections grant the Company the power to indemnify. Article Sixth of
the Certificate of Incorporation of the Company also provides that no director
shall be liable to the corporation or any of its stockholders for monetary
damages for breach of fiduciary duty as a director, except with respect to
(1) a breach of the director's duty of loyalty to the corporation or its
stockholders, (2) acts or omissions not in good faith or which involve
intentional misconduct or a knowing violation of law, (3) liability under
Section 174 of the Delaware General Corporation Law or (4) a transaction from
which the director derived an improper personal benefit, it being the intention
of the foregoing provision to eliminate the liability of the corporation's
directors to the corporation or its stockholders to the fullest extent permitted
by Section 102(b)(7) of Delaware General Corporation Law, as amended from time
to time.

ITEM 25. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION

The following table sets forth various expenses, other than underwriting
discounts, which will be incurred in connection with this offering. Other than
the SEC registration fee amounts set forth below are estimates:

<TABLE>
<S> <C>
SEC registration fee........................................ $13,079
Printing and engraving expenses............................. 7,500
Legal fees.................................................. 35,000
Accounting fees............................................. 10,000
Miscellaneous expenses...................................... 2,000
-------
$67,579
-------
-------
</TABLE>

ITEM 26. RECENT SALES OF UNREGISTERED SECURITIES

The following sets forth information relating to all of our unregistered
securities sold by us since December 31, 1995. All share numbers have been
adjusted retroactively to reflect a 1 for 20 reverse stock split on
December 31, 1997.

On May 1, 1996, we issued an aggregate of 500,000 shares of common stock to
the stockholders of International in exchange for all of the outstanding capital
stock of International.

In June 1996 we issued 158,333 shares of our common stock in accordance
with Regulation 504 of the Securities Act of 1933 for approximately $950,000.

In September, 1998 we issued 250,000 shares each to an affiliate of Byron
Lerner and to another officer and director in satisfaction of indebtedness of
$100,000. We believe the issuance of such shares is exempt from the registration
requirements pursuant to Section 4(2) of the Securities Act.

In May 1998 we issued 6,000,000 shares of our common stock to twenty
unaffiliated entities which collectively had the right to participate in our
future earnings pursuant to agreement. These investors acquired the shares for
investment. We believe the issuance of such shares is exempt from the
registration requirements pursuant to Section 4(2) of the Securities Act.

In August 1998 and February 1999 we issued convertible notes in the
aggregate principal amount of $850,000 to several foreign investors in a
transaction exempt pursuant to Rule 504. We obtained proceeds of $300,000 in the
August 1998 offering and $550,000 in February 1999 offering. In connection with
the transaction we issued warrants exercisable to $1.25 per share in August to
various individuals to purchase shares of common stock and warrants exercisable
at $.625 per share to purchase an aggregate of 137,500 shares of common stock in
February to various individuals. All of the notes have been converted and all
shares issued.

II-1
<PAGE>

Warrants were also issued pursuant to Rule 504 to acquire 137,500 shares of our
common stock. All such Warrants have been exercised.

In April 1999 we issued 2,000,000 shares of common stock to Antra Holding
Group Inc. in exchange for 2,000,000 shares of that corporation's shares. The
Company believes that the transaction was exempt from the registration
requirements of the Securities Act pursuant to Section 4(2).

As of May 1999 we acquired all the shares of Omni Communications Inc. This
company is an authorized agent of UniDial Communications, which operates as an
independent network of telecommunications resellers. We issued 115,000 shares of
our common stock to the sellers, of which James Tubbs received 100,000
shares. Mr. Tubb is an officer and director of our company.

In August 1999 the Company issued 94,500 shares of common stock to the sole
stockholder of ChannelNet,Ltd. The Company believes the issuance of these shares
is exempt from the registration requirements of the Securities Act pursuant to
Section 4(2) thereof.

The Company issued an aggregate of 3,000,000 options between December 1998
and May 1999, all pursuant to the Company's stock plans. All of these options
were issued to officers, directors, employees and consultants to the Company all
of whom were finally familiar with the Company's operation. Of the options
issued 1,180,000 options in December 1998 with the balance issued between
January and May 1999.

In June 1999 the Company issued a total of 316,499 shares of its common
stock in connection with a private placement of its securities. An additional
6,000 shares were issued to a finder and an additional 776,529 warrants to
purchase our common stock at $6.00 per share were issued to finders. The
purchasers of the shares were accredited investors and the Company believes this
transactions is exempt from the registration requirements of the Securities Act
pursuant to Section 4(2) thereof.

ITEM 27. EXHIBITS

<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION*
- ------- --------------------------------------------------------------------------------------------------------
<C> <C> <S>
3.1 -- Certificate of Incorporation*
3.2 -- Certificate of Ownership and Merger of Spectratek Incorporation by Teltran International Group,
Ltd.*
3.3 -- Amendment to Certificate of Incorporation*
4. -- By-Laws(a)
5.1 -- Opinion of Parker Duryee Rosoff & Haft(e)
10.1 -- 1998 Stock Option Plan*
10.2 -- Employment Agreement between Byron Lerner and Registrant*
10.2(a) -- Employment Agreement between James Tubbs and Registrant(a)
10.3 -- USA Interconnectivity and Support Agreement dated October 12, 1999*
10.4 -- USA Intellectual Property License Agreement dated October 12, 1999 between OzEmail and Registrant*
10.5 -- Telecommunication Services Agreement dated October 15, 1998 between OzEmail and Registrant*
10.6 -- Extension and Modification of OzEmail Agreement(d)
10.7 -- Subscription Agreement dated June 10, 1999(b)
10.8 -- Memorandum Agreement between Registrant and Antra Holdings Group Inc.
10.9 -- (i) Exchange Agreement dated as of July 15, 1999 between Barclay Brydon Limited and Teltran
International Group, Ltd., as amended by the Closing Memorandum dated August 16, 1999(c)
(ii) Memorandum of Closing between and among Barclay Brydon Limited and Teltran International
Group, Ltd., dated August 16, 1999(c)
21.1 -- Subsidiary List
</TABLE>

II-2
<PAGE>

<TABLE>
<C> <C> <S>
23.1 -- Consent of Liebman Goldberg & Drogin LLP(d)
23.2 -- Consent of David Nugent & Co.(d)
23.3 -- Consent of Parker Duryee Rosoff & Haft (included as part of Exhibit 5.1)
27 -- Financial Data Schedule*
</TABLE>

* Previously filed with the Company's Form 10-SB on March 24, 1999

(a) Filed with the Company's amendment to the Company's Form 10-SB

(b) Filed with the Company's Amendment 1 to its Form SB-2

(d) Filed herewith.

(e) To be filed.

ITEM 28. UNDERTAKINGS

Registrant hereby undertakes:

(1) That for purposes of determining any liability under the Securities
Act, the information omitted from the form of Prospectus filed as part of this
Registration Statement in reliance upon Rule 430A and contained in a form of
Prospectus filed by Registrant pursuant to Rule 424(b)(1) or (4) or
497(h) under the Securities Act shall be deemed to be part of this Registration
Statement as of the time it was declared effective.

(2) That for the purpose of determining any liability under the Securities
Act, each post-effective amendment that contains a form of prospectus shall be
deemed to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.

(3) To file, during any period in which offers or sales are being made, a
post-effective amendment to this Registration Statement:

(a) To include any Prospectus required by Section 10(a)(3) of the
Securities Act;

(b) To reflect in the Prospectus any facts or events arising after the
effective date of the Registration Statement (or the most recent
post-effective amendment thereof) which, individually or in the aggregate,
represent a fundamental change in the information set forth in the
Registration Statement;

(c) To include any material information with respect to the plan of
distribution not previously disclosed in the Registration Statement or any
material change to such information in the Registration Statement.

(4) To remove from registration by means of a post-effective amendment any
of the securities being registered which remain unsold at the termination of the
offering.

(5) Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers and controlling persons of
Registrant pursuant to Item 24 of this Part II to the Registration Statement, or
otherwise, Registrant has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as expressed
in the Securities Act, and is, therefore, unenforceable. In the event that a
claim for indemnification against such liabilities (other than the payment by
Registrant of expenses incurred or paid by a director, officer or controlling
person of Registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, Registrant will, unless in the
opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against the public policy as expressed in the
Securities Act and will be governed by the final adjudication of such issue.

II-3
<PAGE>

SIGNATURES

IN ACCORDANCE WITH THE REQUIREMENTS OF THE SECURITIES ACT OF 1933,
REGISTRANT CERTIFIES THAT IT HAS REASONABLE GROUNDS TO BELIEVE THAT IT MEETS ALL
OF THE REQUIREMENTS OF FILING ON FORM SB-2 AND AUTHORIZED THIS REGISTRATION
STATEMENT TO BE SIGNED ON ITS BEHALF BY THE UNDERSIGNED, IN THE CITY OF NEW
YORK, STATE OF NEW YORK, ON SEPTEMBER , 1999

TELTRAN INTERNATIONAL GROUP, INC.

By: s/ BYRON LERNER
----------------------------
Byron Lerner
Chief Executive Officer

IN ACCORDANCE WITH THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS
REGISTRATION STATEMENT WAS SIGNED BY THE FOLLOWING PERSONS IN THE CAPACITIES AND
ON THE DATES STATED:

<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ----------------------------------------- ----------------------------------------------- ------------------

<S> <C> <C>
/s/ BYRON LERNER Chairman of the Board, Chief Executive Officer, September , 1999
- ---------------------------------------- Director (Principal Executive, Financial and
Byron Lerner Accounting Officer)

/s/ JAMES TUBBS Director September , 1999
- ----------------------------------------
James Tubbs

/s/ MARTIN MILLER Director September , 1999
- ----------------------------------------
Martin Miller
</TABLE>

II-4

<PAGE>

EXHIBIT 10.6

[TELTRAN INTERNATIONAL LETTERHEAD]

April 20, 1999
Mr. JB Rousselot
CEO
OzEmail Interline Pty Ltd.
OzEmail Centre
39 Herbert Street
St. Leonard's NSW 2065
Australia

Dear JB:

It was a pleasure meeting with you last week. Per our conversation, this letter
is designed to set forth the understanding we reached at our meeting.

1. The USA Interconnectivity and Support Agreement and the USA Intellectual
Property License Agreement between our companies dated and signed
October 19, 1998 ("the Affiliate Agreements"), are hereby amended such that
the effective date of the Affiliate Agreements is the date when the first
commercial minutes originated by Teltran International flows through the
System (as defined in the Affiliate Agreements), or the 19 May 1999,
whichever is the earlier. The Affiliate Agreements shall commence on this
date and shall continue in effect for a period of three (3) years unless
otherwise terminated pursuant to their terms.

2. Teltran International shall explore strategic partners in various countries
with particular emphasis on Pakistan, Bangladesh and Israel. When Teltran
International has identified an appropriate partner or has made other
appropriate arrangements with regard to capacity, it shall formally submit
to OzEmail Interline a request, containing an abbreviated business plan, to
obtain affiliate rights in that country. It shall be within OzEmail
Interline's discretion to grant or refuse such rights. Teltran International
will not pursue affilate status in any country in which OzEmail Interline
has an existing affiliate as of the date of this letter.

Best regards,

The foregoing sets forth our
understanding of our discussions on
April 14, 1999 and shall be deemed to
be in full force and effect.

/s/ Byron R. Lerner
Byron R. Lerner
President & CEO

/s/ JB Rousselot
JB Rousselot, CEO, OzEmail Interline
Pty Limited

cc: Marty Miller

II-5
<PAGE>

EXHIBIT 10.6--(CONTINUED)

SUBJECT: TELTRAN'S AFFILIATION IN NEW AND EXCITING AREAS
DATE: Fri, 21 May 1999 21:03:07 +0100
FROM: "Michael Smith" <[email protected]>
TO: "Peter E. Biagioli" <[email protected]>

Peter,

Thank you for your email and the information contained within. As you are
aware I am the Business Development Manager for the areas in which you have
shown great interest, namely, Israel, Pakistan & Bangladesh.

Part of my responsibility is to ensure that OzEmail Interline continues to
grow the Affiliate network and with this in mind I am happy to tell you that
based on the information supplied to me and subject to final contracts, Teltran
is approved for OzEmail Interline Affiliate status in Israel, Pakistan and
Bangladesh.

I look forward to working with you in these new areas, meanwhile,

Kind Regards
Michael J. Smith
Business Development Manager
OzEmail Interline Pty, Ltd.
London
Tele: +44 (0) 181 402 2127
Fax: +44 (0) 181 402 2120
Mobile: +44 (0) 468 721 872
Email: [email protected]

II-6

<PAGE>

EXHIBIT 21.1

SUBSIDIARIES

<TABLE>
<CAPTION>
OWNERSHIP JURISDICTION WHERE
NAME OF SUBSIDIARY PERCENTAGE ORGANIZED
- --------------------------------------------------------------- ---------- -----------------------
<S> <C> <C>
Teltran International, Inc..................................... 100% Delaware
Channelnet, Ltd................................................ 100% England & Wales (U.K.)
OmniCom of New York, Inc....................................... 100% New York
Recordstogo.com................................................ 50% Delaware
</TABLE>

II-7

<PAGE>
EXHIBIT 23.1

CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS

Teltran International Group, Ltd.

We hereby consent to the use in the Registration Statement on Form SB-2 of our
report dated February 22, 1999, relating to the audited financial statements of
Teltran International Group, Ltd. and any reference to our firm under the
caption "Experts" in the Registration Statement.

LIEBMAN GOLDBERG & DROGIN LLP

SEPTEMBER 27, 1999
GARDEN CITY, NY

II-8

<PAGE>
EXHIBIT 23.2

[DAVID NUGENT & CO. LETTERHEAD]

CONSENT OF INDEPENDENT CERTIFIED CHARTERED ACCOUNTANT
CHANNELNET LIMITED

We hereby consent to the use of our Certified Financial Statements dated August
19th 1999 and to all references to our firm included in or made part of this
form SB-2.

/s/ DAVID NUGENT & CO.
-----------------------------------------------------------------------------
David Nugent & Co.
Chartered Certified Accountants
& Registered Auditors

September 1st 1999
Manchester
England

II-9