9278 COMMUNICATIONS INC, 424B2, 2000-06-26

9278 COMMUNICATIONS INC
424B2, 2000-06-26
MISCELLANEOUS RETAIL

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<PAGE>

Pursuant to Rule 424B2
File No. 333-37654

PROSPECTUS

3,528,372 SHARES

9278 COMMUNICATIONS, INC.

COMMON STOCK

This is an offering of a total of 3,528,372 shares of our common stock, by
the individuals who are named under the caption "Selling Stockholders." Of the
shares of common stock being offered by the selling stockholders, 1,433,333
shares may be acquired by them upon conversion of shares of our series B
convertible preferred stock held by them. We will not receive any proceeds from
the sale of shares of common stock by the selling stockholders.

The selling stockholders may offer and sell the shares of common stock from
time to time directly, or through underwriters, in the over-the-counter market,
in negotiated transactions or otherwise, at market prices prevailing at the time
of sale, at prices related to prevailing market prices or at negotiated prices.
See "Plan of Distribution" for a discussion of the methods of sale, which the
selling stockholders or their pledgees, donees or transferees may use to offer
and sell the shares.

We have indemnified the selling stockholders against certain liabilities,
including liabilities under the Securities Act of 1933. We will bear all
expenses in connection with the registration and sales of the shares of common
stock being offered by the selling stockholders, other than any underwriting
discounts and selling commissions.

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

INVESTING IN OUR STOCK INVOLVES A HIGH DEGREE OF RISK.
SEE "RISK FACTORS" BEGINNING ON PAGE 6.

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

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

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

The shares of our common stock being offered by the selling stockholders
have not been registered for sale under the securities laws of any state or
jurisdiction as of the date of this prospectus.

Our common stock trades on the over-the-counter electronic bulletin board
under the symbol "NTSE." On June 13, 2000, the closing bid price of the common
stock was $1.84 per share.

We have retained no underwriters in connection with this offering.

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

The date of this Prospectus is June 23, 2000.

<PAGE>

TABLE OF CONTENTS

PAGE
----

<S> <C>
Prospectus Summary................................................................................. 3
Risk Factors....................................................................................... 6
Forward-Looking Statements......................................................................... 11
Use of Proceeds.................................................................................... 11
Dividend Policy.................................................................................... 11
Market Information................................................................................. 12
Selected Financial Data............................................................................ 13
Management's Discussion and Analysis of Financial Condition and Results of Operations.............. 14
Business........................................................................................... 17
Management......................................................................................... 24
Certain Transactions............................................................................... 29
Principal Stockholders............................................................................. 31
Selling Stockholders............................................................................... 32
Plan of Distribution............................................................................... 34
Description of Securities.......................................................................... 36
Shares Available for Future Sale................................................................... 37
Legal Matters...................................................................................... 37
Experts............................................................................................ 37
Changes in and Disagreements with Accountants on Accounting and Financial Disclosure............... 37
Where You Can Obtain Additional Information About the Company...................................... 38
Index to Financial Statements...................................................................... F-1

</TABLE>

2
<PAGE>

PROSPECTUS SUMMARY

This summary highlights selected information contained elsewhere in this
prospectus. This summary may not contain all of the information that you should
consider before investing in our common stock. You should read the entire
prospectus carefully, including "Risk Factors" and the financial statements,
before making a decision to invest in our common stock.

OUR COMPANY

We are a value-added integrator of telecommunications services and
technologies, specializing in the distribution of prepaid phone cards. We have a
network of over 300 private distributors, retailing over 100 different prepaid
card products, including 13 private label cards, primarily in the New York, New
Jersey and Connecticut markets, through approximately 10,000 retail outlets.

Although still relatively new to the North American market, prepaid phone
cards have been widely used throughout Europe and Asia for more than fifteen
years. Originally introduced to meet very specific telephony applications,
prepaid services have evolved into a widely accepted solution by both businesses
and consumers. Currently being issued in 140 countries, the prepaid phone card
market has grown to an estimated $20 billion dollar worldwide industry.

Our prepaid phone cards are distributed through a vast network of retail
outlets, including convenience stores, newsstands, grocery stores and discount
stores. Typically, we purchase large quantities of prepaid phone cards from a
long distance carrier or reseller, and sell the cards in smaller quantities,
together with cards from other carriers, to these independent distributors for
ultimate distribution to the retail outlets. We believe that many of our
customers use prepaid cards as their primary means of making long distance calls
due to:

o Attractive rates;

o Reliable service;

o Ease of monitoring and budgeting their long distance spending; and

o The appealing variety of calling cards offered to different market
segments.

Over the next twelve months, we plan to introduce several new
telecommunications related products into our growing distribution channels,
including:

o Prepaid wireless phones;

o Prepaid paging;

o Prepaid local dial tone;

o Prepaid internet services; and

o Prepaid consumer products.

We also plan to expand upon our existing business relationships with the
United States telecommunications companies and the large national prepaid card
providers we work with. Further, with the coming launch of our e-commerce
services website, we will provide sales, access and support for our existing
distributors and develop a mechanism for establishing new markets for our
products.

We are the successor consolidated entity formed by the merger, on December
10, 1999, between iLink Telecom, Inc., a Nevada corporation originally
incorporated in Colorado on December 10, 1997

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under the name Aquasol, Inc., and 9278 Distributor Inc., a New York corporation
involved in the distribution of prepaid phone cards. On December 22, 1999, we
changed our name to 9278 Communications, Inc. and on May 2, 2000 we changed our
domicile to Delaware. Our principal executive offices are located at 1942
Williamsbridge Road, Bronx, New York 10461, our telephone number is (718)
887-9278 and our Internet website is www.9278.com. The information contained on
our Internet website is not part of this prospectus.

THE OFFERING

The selling stockholders are registering for resale 3,528,372 shares of our
common stock, which they currently own or may acquire upon conversion of shares
of our series B convertible preferred stock.

<S> <C>
Securities offered by selling stockholders................ 3,528,372 shares(1)

Common stock outstanding before the offering.............. 20,554,772 shares(2)

Common stock to be outstanding after the offering......... 21,988,105 shares(1)(2)

Use of proceeds........................................... We will not receive any proceeds from this offering.

Risk factors.............................................. The securities offered hereby involved a high
degree of risk and immediate substantial dilution
to new investors and should not be purchased by
investors who cannot afford the loss of their
entire investment. See "Risk Factors."

Symbol for common stock................................... "NTSE"

Market for common stock................................... Our shares are currently listed for trading on the
over-the-counter electronic bulletin board. We
intend to file an application to have our stock
traded on the Nasdaq SmallCap Market. There is no
assurance our shares will be accepted for trading
by that market.

</TABLE>

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

(1) Assumes the conversion of the 1,075 shares of our series B convertible
preferred stock, which are currently outstanding, into 1,433,333 shares of
our common stock.

(2) The number of shares of our common stock outstanding as of June 13, 2000
excludes (i) options outstanding to purchase 35,000 shares of our common
stock at an exercise price of $4.00 per share, and (b) 465,000 shares of
common stock reserved as for issuance upon exercise of options that may be
granted in the future under our stock option plan. See "Management--2000
Stock Option Plan."

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SUMMARY FINANCIAL INFORMATION

The following table summarizes the consolidated financial data for our
business. You should read the following summary financial data together with
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and our Consolidated Financial Statements and the corresponding
notes, beginning on page F-1 of this prospectus.

STATEMENT OF OPERATIONS:
<S> <C> <C> <C> <C>
Consolidated revenues........... $78,090 $22,169 $16,883 $10,533
Cost of sales................... $75,473 $21,487 $16,182 $10,159
Expenses........................ $ 2,605 $ 602 $ 1,193 $ 139
Pre-tax income.................. $ 12 $ 80 --- ---
Net income (loss)(1)............ $ 7 $ 40 ($ 492) $ 234
Income (loss) per share(2)...... ($ .02) $ 0 ($ .02) $ .01
Shares used in computing net income
(loss) per share ............. 19,660 14,900 20,003 14,900

AS OF DECEMBER 31, 1999 AS OF MARCH 31, 2000
----------------------- --------------------
(In thousands) (In thousands)
BALANCE SHEET DATA:
<S> <C> <C>
Current assets.................. $5,180 $5,416
Total assets.................... 6,139 6,277
Total long-term debt............ 1,108 1,168
Total liabilities............... 5,618 4,841
Total stockholders' equity...... 520 1,436
</TABLE>

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

(1) Gives pro forma effect to C corporation income tax adjustments in 1998.

(2) For purposes of earnings per share, net income attributable to common stock
reflects a net loss of $368,000. This gives effect to the recognition of a
beneficial conversion feature of $375,000 attributable to the outstanding
series B convertible preferred stock we issued in December 1999.

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RISK FACTORS

Before you invest in our common stock, you should be aware that such an
investment involves various risks, including those described below. You should
carefully consider these risks as well as all of the other information contained
in this prospectus and in the documents incorporated in this prospectus by
reference, before making a decision to invest in our common stock. As a
consequence of any of the following risks, our business, financial condition and
operating results could be adversely affected. As a result, the trading price of
our common stock could decline, and you could lose all or part of your
investment.

WE FACE RISKS RELATING TO OUR BUSINESS

WE NEED TO OBTAIN FINANCING IN ORDER TO CONTINUE OUR OPERATIONS

As of March 31, 2000, we had an accumulated deficit of $3,852,826 and our
cash balance was $327,792. It was necessary for us to raise capital on several
occasions since January 1, 2000 to satisfy our obligations as they became due.
To that end, we have completed two private placements, which generated aggregate
net proceeds of approximately $1,408,000. We believe that the proceeds from
these private placements will enable us to meet our current obligations. Our
plan of operations includes the acquisition of several significant competitors.
To consummate such acquisitions we will need to obtain additional financing. We
currently do not have any arrangements with respect to, or sources of,
additional financing. We cannot assure you that additional financing will be
available, or if available, that we will be able to obtain it on acceptable
terms.

WE FACE RISKS INHERENT IN OUR RAPID EXPANSION

We are pursuing a strategy of growth and seek to expand our distribution
capabilities to achieve greater penetration into new and emerging markets. The
success of our growth strategy is dependent on, among other factors, our ability
to:

o Establish additional distribution arrangements targeting various market
segments, including retail, promotional and business markets;

o Hire and retain skilled management, financial, marketing, technical,
creative and other personnel;

o Successfully manage growth, including monitoring operations,
controlling costs and maintaining effective quality, inventory and
service controls; and

o Implement and/or improve our technical, administrative, financial
control and reporting systems.

Our financial controls and reporting systems will require enhancement and
substantial investment in the future to accommodate our anticipated growth.
There can be no assurance that we will be able to successfully enhance our
financial controls and reporting systems to meet our future needs. We also plan
to expand our operations by acquiring companies or assets to achieve our
strategic goals. We intend to target companies that sell and market prepaid
phone cards, as well as those that operate alternative technologies marketed
within distribution channels similar to those in which our products are
marketed, including prepaid wireless services and prepaid home telephone
service. There can be no assurance that we will be able to implement our
business strategy successfully or otherwise expand our operations, or that we
ultimately will effect any acquisition or successfully integrate into our
operations any business or assets that we may acquire.

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<PAGE>

WE OPERATE OUR BUSINESS IN A HIGHLY COMPETITIVE INDUSTRY. MANY OF OUR
COMPETITORS ARE MORE ESTABLISHED AND HAVE SIGNIFICANTLY GREATER RESOURCES

The prepaid phone card segment of the telecommunications services industry
is intensely competitive, rapidly evolving and subject to constant technological
change. Our prepaid phone cards compete with any medium by which a consumer
places a telephone call, including credit calling cards, collect calling
services, cellular phones, Internet telephones, hotel telephones, public pay
telephones and other long distance services. Many of these products and services
are marketed by well-established, successful companies that possess greater
financial, marketing, distribution, personnel and other resources than us. Using
these resources, these companies can implement extensive advertising and
promotional campaigns, both generally and in response to specific marketing
efforts by competitors, to enter into new markets rapidly and to introduce new
products and services. Competitors with greater financial resources also may be
able to provide more attractive incentive packages to retailers to encourage
them to carry products that compete with our products, or present cost or
convenience features which consumers may find attractive. We cannot assure you
that we will be able to compete effectively in our markets.

WE MUST RESPOND TO THE RAPID CHANGES IN TECHNOLOGY, SERVICES AND STANDARDS WHICH
CHARACTERIZE OUR INDUSTRY

The telecommunication services industry is subject to rapid technological
change, frequent new product and service introductions and evolving industry
standards. We believe that our future success will depend largely on our ability
to anticipate or adapt to such changes and to offer, on a timely basis, services
and products that meet these evolving standards. We expect our competitors to
develop and introduce new products and services, and enhancements to existing
products and services. New telecommunications technology, including personal
communication services and voice communication over the Internet, may reduce
demand for long distance services, including prepaid phone cards. We cannot
assure you that we will respond successfully to these or other technological
changes, evolving industry standards or to new products and services offered by
our current and future competitors.

WE NEED TO HIRE AND RETAIN QUALIFIED PERSONNEL TO OPERATE OUR GROWING BUSINESS

Our success is largely dependent on the personal efforts of Sajid Kapadia,
our Chairman and Chief Executive Officer and other key personnel. The loss of
Mr. Kapadia's services could have a material adverse effect on our business and
prospects. We do not currently maintain "key-man" life insurance with respect to
Mr. Kapadia. Also, to implement and manage our growth successfully, we are
dependent upon, among other things, recruiting and retaining qualified
management, marketing, sales, technical and creative personnel with experience
in our business. We cannot assure you that we will be able to hire or retain
necessary personnel.

WE RELY IN LARGE PART ON LONG DISTANCE CARRIERS WITH WHOM WE HAVE BUSINESS
ARRANGEMENTS. OUR SUCCESS DEPENDS ON THE ABILITIES OF THESE PARTIES TO PROVIDE
RELIABLE SERVICES TO US

We depend on a small number of domestic and international long distance
carriers to provide our card users access to cost-effective long distance
service. Failure to maintain continuous access to transmission facilities and
long distance networks would materially adversely affect our business, including
possibly requiring us to significantly curtail or cease our operations. Carriers
frequently experience equipment failures and service interruptions, which could
adversely affect customer confidence, our business operations and our
reputation.

7
<PAGE>

In November 1999, Cominex, LLC ceased providing telecommunications services
for the prepaid phone cards that it had sold through us, despite receiving
payment for substantially all of these services. To offset the loss of service
for these phone cards, we purchased telecommunications services from other
providers. Although we are pursuing recovery of all of our losses from Cominex,
LLC, due to Cominex's financial condition, it is unlikely that we will be
successful in recovering all of these losses.

WE RELY ON VENDORS AND INDEPENDENT DISTRIBUTORS WHO ARE NOT UNDER OUR CONTROL

We have relied on and will continue to rely on vendors and independent
distributors who are not employees of ours, to distribute, market and sell our
products. Other than as disclosed in this prospectus, we have no long-term
contractual relationship with these vendors and distributors. While we believe
that vendors and distributors will continue to provide their services, there can
be no assurance that the vendors and distributors will be available in the
future, and if available, will be available on terms deemed acceptable to us.
Any such delay or increased costs could have a material adverse effect on our
business.

WE MAY FACE CASH FLOW SHORTAGES DUE TO THE BENEFICIAL CREDIT TERMS WE MAKE
AVAILABLE TO OUR CUSTOMERS

Due to the shorter credit terms made available to us from the
telecommunications companies from whom we buy branded cards, as compared to the
credit terms made available by us to our customers, we, from time-to-time,
require infusions of cash in order to maintain our preferential
buying/purchasing terms with our carriers. Such cash flow needs are also
affected by the timing of large purchases by us, which we make from time-to-time
to take advantage of favorable pricing opportunities. To date, we have satisfied
these cash requirements by loans from our principals and/or private sales of our
equity securities. We continue to seek financing to provide us with liquidity to
meet our future needs. There is no assurance that we will be able to obtain such
financing on commercially reasonable terms, or otherwise, or that we will be
able to otherwise satisfy our short-term cash flow needs from other sources in
the future.

WE MAY BE INVOLVED IN LITIGATION INCIDENTAL TO OUR BUSINESS

From time to time, we are involved in litigation incidental to our
business. Such litigation can be expensive and time consuming to prosecute or
defend and could cause our customers to delay or cancel purchase orders until
such lawsuits are resolved. We believe that our pending litigation matters, in
the aggregate, could have a material adverse effect on our operating results and
financial condition if resolved against us.

INVESTORS FACE RISKS RELATING TO THIS OFFERING

ABSENCE OF DIVIDENDS

We do not intend to pay dividends in the foreseeable future. The payment of
dividends in the future will be at the discretion of our Board of Directors.

THE MARKET PRICE OF OUR COMMON STOCK CAN BE HIGHLY VOLATILE

The average daily trading volume of our common stock has generally been
low, which we believe has had a significant effect on the historical market
price of our common stock. As a result, the market price has been highly
volatile and may not be indicative of the market price in a more liquid market.
The market price of our common stock could be subject to significant
fluctuations in response to a number of factors, including the depth and
liquidity of the market for our common stock, public announcements by

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us, our clients and our competitors, investor perception of us and general
economic and other conditions, which may or may not relate to our performance.

CERTAIN OFFICERS AND DIRECTORS OWN A SUBSTANTIAL PORTION OF OUR COMMON STOCK

As of June 13, 2000, one of our executive officers, Sajid Kapadia,
beneficially owned 13,455,125 shares of our common stock, which is approximately
65.5% of our outstanding common stock. In addition, in December 1999, he was
granted proxies to vote an aggregate of 2,150,000 additional shares of our
common stock. As a result of such shareholdings and proxies, Mr. Kapadia
currently has the right to vote approximately 75.9% of our outstanding common
stock outstanding prior to this offering. Consequently, Mr. Kapadia will be able
to determine the outcome of any matters submitted to our stockholders for
approval, including the election of directors. Such concentration of ownership
may also have the effect of preventing a change in control. In addition, the
interests of management may not always be identical to the interests of the
non-management stockholders.

POTENTIAL DILUTIVE EFFECT OF SHARES ELIGIBLE FOR FUTURE SALE

As of June 13, 2000, we had outstanding 20,554,772 shares of common stock.
An aggregate of 1,468,333 additional shares of common stock will become
outstanding upon the exercise or conversion, as the case may be, of all of our
stock options and other convertible securities outstanding at June 13, 2000. The
actual number of shares will depend upon the market price of the common stock at
the time of conversion. No prediction can be made as to the effect, if any, that
sales of shares of our common stock, or the issuance of shares upon the
conversion of convertible securities at a discount to the market price will have
on the market price of our securities prevailing from time to time. Further,
there is a possibility that substantial amounts of common stock may be sold
under Rule 144 into the public market and may adversely affect the prevailing
market price for the common stock and impair our ability to raise capital in the
future through the sale of equity securities.

OUR COMMON STOCK PRICE MAY BE ADVERSELY AFFECTED BY OUR OUTSTANDING SHARES OF
SERIES B CONVERTIBLE PREFERRED STOCK

In December 2000, we issued 1,500 shares of series B convertible preferred
stock in a private placement, which when converted into common stock may result
in substantial dilution. Each share of series B convertible preferred stock is
convertible by the holder into a number of shares of our common stock equal to
$1,000 divided by 75% of the average market price of our common stock for the
ten trading days preceding the conversion date. Because the number of shares
underlying the shares of series B convertible preferred stock are dependent upon
our market price, the lower the market price, the greater the number of shares
which may be issued. The conversion of a significant number of the preferred
shares may depress the price of our common stock. This in turn would result in a
lower conversion price and a greater number of shares issued upon a subsequent
conversion leading to possible further declines. As of the date of this
prospectus, the holders of shares of our series B convertible preferred stock
have converted an aggregate of 425 shares into 191,143 shares of our common
stock. 1,075 shares of our series B convertible preferred stock remain
outstanding. We have set forth the number of our shares issuable upon conversion
at prices of $3.50 and at lower market prices, assuming in each case, all of the
shares of preferred stock are converted:

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Shares Issuable
Average Market Price* Conversion Price Upon Conversion
--------------------- ---------------- ---------------
$3.50 $2.625 409,523
$2.50 $1.875 573,333
$1.50 $1.125 955,555
$1.00 $0.750 1,433,333

---------------------
* For the ten trading days prior to conversion

RISKS RELATING TO PENNY STOCKS

Our common stock trades on the over-the-counter electronic bulletin board
and, therefore, is subject to the requirements of certain rules promulgated
under the Securities Exchange Act of 1934, which require additional disclosure
by broker-dealers in connection with any trades involving a stock defined as a
"penny stock". A penny stock is generally defined as any non-Nasdaq equity
security that has a market price of less than $5.00 per share, subject to
certain exceptions. Such rules require the delivery, prior to any penny stock
transaction, of a disclosure schedule explaining the penny stock market and the
risks associated therewith and impose various sales requirements on
broker-dealers who sell penny stocks to persons other than established customers
and "accredited investors". An accredited investor is generally defined as an
investor with a net worth in excess of $1,000,000, or annual income exceeding
$200,000 individually or $300,000 together with a spouse. For these types of
transactions, the broker-dealer must make a special suitability determination
for the purchaser and have received the purchaser's written consent to the
transaction prior to the sale. The broker-dealer also must disclose the
commissions payable to the broker-dealer, current bid and offer quotation for
the penny stock and, if the broker-dealer is the sole market-maker, the
broker-dealer must disclose this fact and the broker-dealer's presumed control
over the market. This information must be provided to the customer orally or in
writing before or with the written confirmation of trade sent to the customer.
Monthly statements must be sent disclosing recent price information for the
penny stock held in the account and information on the limited market in penny
stocks. The additional burdens imposed upon broker-dealers by such requirements
could, in the event the common stock were deemed to be a penny stock, discourage
broker-dealers from effecting transactions in our common stock which could
severely limit the market liquidity of the common stock.

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FORWARD-LOOKING STATEMENTS

In this prospectus, we include some forward-looking statements that involve
substantial risks and uncertainties and other factors which may cause our
operational and financial activity and results to differ from those expressed or
implied by these forward-looking statements. In many cases, you can identify
these statements by forward-looking words such as "may," "will," "expect,"
"anticipate," "believe," "estimate," "plan," "intend" and "continue," or similar
words. You should read statements that contain these words carefully because
they discuss our future expectations, contain projections of our future results
of operations or of our financial condition, or state other "forward-looking"
information.

You should not place undue reliance on these forward-looking statements.
The sections captioned "Risk Factors" and "Management's Discussion and Analysis
of Financial Condition and Results of Operations," as well as any cautionary
language in this prospectus, provide examples of risks, uncertainties and events
that may cause our actual results to differ materially from the expectations.

Although we believe that the expectations reflected in the forward-looking
statements are reasonable, we cannot guarantee future results, levels of
activity, performance or achievements.

USE OF PROCEEDS

The shares of common stock being offered hereby are for the account of the
selling stockholders. Accordingly, we will not receive any of the proceeds from
the resale of shares of common stock by the selling stockholders. We are
registering these shares of common stock under contractual arrangements. See
"Selling Stockholders."

DIVIDEND POLICY

Immediately prior to the closing of the merger of 9278 Distributor Inc., a
New York corporation, with and into a nominee subsidiary of iLink Telecom, Inc.,
a publicly held Nevada corporation, iLink Telecom, Inc. declared a $3.0 million
dividend, of which $1.0 million was paid in cash and the balance of $2.0 million
in the form of a two-year promissory note. In addition, $375,000 was reflected
as an imputed dividend based upon a beneficial conversion feature of preferred
stock issued by us. We do not intend to pay future dividends and intend to
reinvest any earnings into our business to finance future growth. Accordingly,
our Board of Directors does not anticipate declaring any cash dividends in the
foreseeable future.

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MARKET INFORMATION

Our common stock is quoted on the over-the-counter bulletin board ("OTCBB")
of the Nasdaq Stock Market under the symbol "NTSE", since January 4, 2000. Prior
to this, beginning February 16, 1999, our common stock was traded under the
symbol "ILTE". Prior to this, our common stock was traded under the symbol
"AQUS". The following table sets forth the range of the high and low quotations
for our common stock for the periods indicated. Such market quotations reflect
inter-dealer prices, without mark-up, mark-down or commission and may not
necessarily represent actual transactions.

HIGH LOW
---- ---
2000
----
First quarter $4.81 $2.63

1999
----
First quarter(1) $5.63 $0.95
Second quarter 6.00 3.87
Third quarter(2) 1.75 1.75
Fourth quarter(2) 6.50 0.63

1998
----
First quarter $1.25 $1.25
Second quarter 2.50 1.13
Third quarter 10.63 5.00
Fourth quarter 5.63 0.95

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

(1) On February 14, 1999, we consolidated our share capital by way of a
reverse stock split on the basis of one new share of our common stock
for each five old shares of our common stock. The prices listed have
been adjusted to reflect the effect of this one-for-five reverse stock
split.

(2) Amounts were derived from our listing in the NASD "pink sheets."

At June 13, 2000, there were approximately 360 holders of record of our
common stock and the closing bid quotation of our common stock on the OTCBB was
$1.84 per share.

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SELECTED FINANCIAL DATA

The following selected financial data should be read in conjunction with
our financial statements and corresponding notes and "Management's Discussion
and Analysis of Financial Condition and Results of Operations" included
elsewhere in this prospectus. The balance sheet data as of December 31, 1999 and
the statement of operations data for the years ended December 31, 1999 and 1998
has been derived from our financial statements, which have been audited by
Friedman Alpren & Green LLP, independent auditors. The balance sheet data as of
March 31, 2000 and 1999 and the statement of operations data for the three-month
period ended March 31, 2000 are derived from our unaudited condensed
consolidated financial statements, which management believes includes all
adjustments consisting only of normal recurring adjustments necessary for a fair
presentation.

THREE MONTHS ENDED
------------------
YEAR ENDED DECEMBER 31, MARCH 31,
----------------------- ---------
1999 1998 2000 1999
---- ---- ---- ----
(In thousands, except per share data) (In thousands, except per share data)
<S> <C> <C> <C> <C>
STATEMENT OF OPERATIONS:
Consolidated revenues........... $78,090 $22,169 $16,883 $10,533
Cost of sales................... $75,473 $21,487 $16,182 $10,159
Expenses........................ $ 2,605 $ 602 $ 1,193 $ 139
Pre-tax income.................. $ 12 $ 80 --- ---
Net income (loss)(1)............ $ 7 $ 40 ($ 492) $ 234
Income (loss) per share(2)...... ($ .02) $ 0 ($ .02) $ .01
Shares used in computing net income
(loss) per share.............. 19,660 14,900 20,003 14,900

AS OF DECEMBER 31, 1999 AS OF MARCH 31, 2000
----------------------- --------------------
(In thousands) (In thousands)

<S> <C> <C>
BALANCE SHEET DATA:
Current assets.................. $5,180 $5,416
Total assets.................... 6,139 6,277
Total long-term debt............ 1,108 1,168
Total liabilities............... 5,618 4,841
Total stockholders' equity...... 520 1,436

</TABLE>

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(1) Net income for 1999 was $7,000, as compared to $40,000 in 1998, giving pro
forma effect to C corporation income tax adjustments in 1998.

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MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATION

The following discussion should be read in conjunction with the
consolidated financial statements and notes thereto set forth elsewhere in this
prospectus. In addition to historical information, this discussion and analysis
contains forward-looking statements that involve risks, uncertainties and
assumptions, which could cause actual results to differ materially from
management's expectations. Factors that could cause differences include, but are
not limited to, expected market demand for our products, fluctuations in pricing
for products distributed by us and products offered by competitors, as well as
general conditions of the telecommunications marketplace.

OVERVIEW

To date, our principal source of revenue has been the marketing and
distribution of prepaid phone cards. We market and distribute branded prepaid
phone cards produced by a variety of telecommunications long distance carriers
and resellers, as well as private label proprietary prepaid phone cards produced
exclusively for us by various long distance carriers and/or resellers.

Prepaid phone cards are distributed through a vast network of retail
outlets, including convenience stores, newsstands, grocery stores and discounts
stores. The retail outlets are serviced by independent distributors, which often
distribute newspapers or other items to the retail outlets. We purchase large
volumes of branded prepaid phone cards from the long distance carrier or
reseller and sell the cards in smaller quantities, together with cards from
other carriers and/or private label cards distributed by us, to the independent
distributor, for ultimate distribution to retail outlets.

We purchase branded cards at a discount from the face value of the card,
and resell to the distributor at a slightly lower discount. The difference
between the two discount rates, typically from 1% to 3%, represents the gross
margin we retain. Our purchases of branded cards are made on varying terms, from
C.O.D. to a net 30 basis, although the majority of our purchases are made on
credit terms of 10 days or less. Sales of our products are generally made by us
on a net 30 basis.

Private label cards we distribute are generally designed and produced by
us, utilizing card numbers and PINs provided by the telecommunications carrier
or reseller providing the long distance service for the card. We incur the
upfront expense of printing the phone cards. However, we do not pay the long
distance carrier until it activates the cards, which occurs upon our sale to the
distributor. Accordingly, through the use of private label cards, our cost of
inventory is significantly reduced, as purchases are effectively made on an
as-needed basis. In addition, private label cards generally provide us with the
ability to achieve a greater gross margin percentage, typically ranging from 3%
to 6%.

We are seeking to develop and acquire rights to additional prepaid
telecommunications services and other prepaid products or services to diversify
our product offerings and increase our overall gross margin.

We are the successor consolidated entity formed by the merger, on December
10, 1999, of 9278 Distributor, Inc. and its subsidiary, iLink Telecom, Inc.
Concurrent with the merger, iLink, a publicly held company and the legally
surviving parent company, changed its name to 9278 Communications, Inc. For
accounting purposes, the merger has been treated as a reverse acquisition, with
9278 Distributor as the acquiror, and is accounted for as a purchase. The
financial statements provided in this prospectus are the financial statements of
9278 Distributor Inc.

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RESULTS OF OPERATIONS

Three Month Period Ended March 31, 2000 Compared to Three Months Ended
March 31, 1999

Net sales for the three months ended March 31, 2000 rose 60.2% to
$16,882,918, from net sales of $10,532,611 during the three months ended March
31, 1999. Gross profit increased 87.8% during the 2000 period to $700,927 from
$373,292 for the 1999 period. The increase in gross profit was due to higher
gross profit margins achieved by the sale of private label phone cards, which
increased during the current period. Total expenses increased 758% to $1,193,188
in the 2000 period, as compared to $139,101 for the 1999 period. Included in the
current period expenses are $363,367 of expense attributable to the sale of the
assets of iLink Telecom, Inc., a company with which we merged in December 1999.
Also included in total expenses was a $263,474 provision for doubtful accounts,
which are due from a distributor of ours with whom we are in litigation. In
addition, general and administrative expenses for the three months ended March
31, 2000 increased to $481,650, as compared to $105,493 for the period ended
March 31, 1999 as a result of the addition of new management personnel and
increased legal and accounting costs resulting from our becoming a publicly
traded company. As a result of the foregoing, we generated a net loss of
$492,261 during the three months ended March 31, 2000, as compared to net income
of $234,191 for the period ended March 31, 1999. Absent the expenses for the
provision for doubtful accounts and the expenses attributable to the sale of the
iLink assets, we would have generated net income for the three months ended
March 31, 2000 of $134,580.

Year Ended December 31, 1999 Compared to Year Ended December 31, 1998

Net sales increased $56 million to $78 million for the year ended December
31, 1999, up 252% from net sales of $22 million for the year-ended December 31,
1998. The increase in net sales was due to the addition of distributors during
the 1999 calendar year, as well as an increase in the number of brands of
prepaid phone cards we distributed. During 1999, we began actively marketing and
distributing private label phone cards.

Gross profit increased to $2,617,000 in 1999, as compared to $682,000 in
1998, as a result of increased volume. As a percentage of sales, gross profit
for 1999 increased to 3.35%, from 3.08% for the year ended December 31, 1998.
This increase in gross profit was attributable to the addition of higher margin
private label cards, slightly offset by the decrease in margins attributable to
branded products and increasing competition from additional cards entering the
marketplace.

Operating expenses for the year ended December 31, 1999 increased
$2,003,000 to $2,605,000, an increase of 333% over operating expenses of
$602,000 for the year ended December 31, 1998. Included in operating expenses
for 1999 was a loss of $554,000, attributable to the cancellation of private
label phone cards resulting from the closing of a long distance reseller
providing telecommunications services for private label cards, rendering some of
our private label cards worthless. In addition, general and administrative
expenses increased to $1,202,000 for 1999, as compared to $87,000 for 1998. This
increase was primarily due to the increase in salaries, constituting $184,000 in
1999, as compared to $27,000 in 1998, the addition of $125,000 of advertising
costs in 1999, as a result of our introduction of private label cards, and an
increase in professional fees to $442,000 in 1999 as compared to $4,000 in 1998.
The increase in professional fees was due to legal, accounting and consulting
fees incurred primarily in connection with the merger with iLink.

We generated pre-tax income of $12,000 for 1999 as compared to $80,000 for
the year ended December 31, 1998. The decrease in pre-tax income was primarily
due to the loss of $554,000 described above and the significant non-recurring
professional fees we incurred in connection with the merger referred to above.
Net income for 1999 was $7,000, as compared to $40,000 in 1998, giving pro forma

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effect to C corporation income tax adjustments in 1998. For purposes of earnings
per share, net income (loss) attributable to common stock reflects a net loss of
$368,000. This gives effect to the recognition of a beneficial conversion
feature of $375,000 attributable to the outstanding series B convertible
preferred stock we issued in December 1999.

LIQUIDITY AND CAPITAL RESOURCES

At March 31, 2000 and December 31, 1999, we had total current assets of
approximately $5,416,000 and $5,180,000, respectively. At March 31, 2000, this
included $328,000 in cash, $927,000 of inventory and $4,087,000 of accounts
receivable. At December 31, 1999, cash, inventory and accounts receivable were
$26,000, $1,302,000 and $3,821,000, respectively. Our cash balances vary
significantly from day-to-day due to the large volume of purchases and sales we
make from the various prepaid phone card companies and the numerous distributors
to whom we sell cards. Due to the shorter credit terms made available to us from
the telecommunications companies from whom we buy branded cards, as compared to
the credit terms made available by us to our customers, we, from time-to-time,
require infusions of cash in order to maintain our preferential
buying/purchasing terms with our carriers. Such cash flow needs are also
affected by the timing of large purchases which we make from time-to-time to
take advantage of favorable pricing opportunities. To date, we have satisfied
such cash requirements by loans from our principals and/or private sales of our
equity securities. We are seeking to secure financing to provide us with
liquidity to meet our future needs. There can be no assurance that we will be
able to obtain such financing on commercially reasonable terms, or otherwise, or
that we will be able to otherwise satisfy our short-term cash flow needs from
other sources in the future.

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BUSINESS

GENERAL

We plan to introduce several new telecommunications related products into
our growing distribution channels, including prepaid wireless products and
prepaid internet services, and to expand upon our existing business
relationships with the United States telecommunications companies and the large
national prepaid card providers we work with. Further, with the coming launch of
our e-commerce services website, we will provide sales, access and support for
our existing distributors and develop a mechanism for establishing new markets
for our products.

CORPORATE BACKGROUND

Aquasol Technologies, Inc.

We were originally incorporated in Colorado on December 10, 1997, under the
name Aquasol, Inc. ("Aquasol"). On January 9, 1998, we changed our corporate
domicile to Delaware and our name to Aquasol Technologies, Inc. On July 14,
1998, Aquasol Technologies, Inc., a Nevada corporation originally incorporated
as AFD Capital Group, Inc., merged with Aquasol Technologies, Inc., a Delaware
corporation, in a one-for-one stock exchange, and the surviving entity continued
under the laws of the state of Nevada.

Acquisition of iLink B.C.

On February 14, 1999, we consolidated our share capital by way of a reverse
stock split on the basis of one new share of our common stock for each five old
shares of our common stock and changed our name to iLink Telecom, Inc.

Under a share purchase agreement, dated February 26, 1999, with ABDE
Holdings Ltd., a British Columbia company, we acquired all of the issued and
outstanding common shares of 579782 B.C. Ltd. in exchange for the 145 shares of
our series A convertible preferred stock. On March 11, 1999, 579782 B.C. Ltd.
changed its name to iLink Telecom (B.C.), Inc. The assets of iLink B.C.
consisted of an IVR Agreement with BCT.Telus as well as miscellaneous
telecommunications and computer equipment and office furniture.

Merger with 9278 Distributor, Inc. and Name Change

On December 10, 1999, 9278 Distributor Inc., a New York corporation
involved in the distribution of prepaid phone cards, was merged with and into a
nominee subsidiary of iLink Telecom, Inc., a publicly held Nevada corporation.
For accounting purposes, this merger has been treated as a reverse acquisition.
The shareholders of 9278 Distributor Inc. were issued an aggregate of 14,900,000
shares of iLink's common stock, constituting 74.8% of the outstanding shares of
iLink, as well as a dividend of $3.0 million, of which $1.0 million was paid in
December 1999 and the balance of $2.0 million was in the form of a two-year
promissory note. On December 22, 1999, we changed our name to 9278
Communications, Inc.

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Sale of iLink B.C.

On February 28, 2000, we sold all of the assets of our subsidiary iLink
Telecom (B.C.), Inc. for gross consideration of $37,000.

Merger with 9278 Communications, Inc., a Delaware corporation

On April 24, 2000 we entered into an Agreement and Plan of Merger with our
wholly-owned subsidiary, 9278 Communications, Inc., a Delaware corporation,
providing for us to merge with an into it. The merger became effective upon
filing of a certificate of merger on May 2, 2000. Upon effectiveness of the
merger, among other things, (i) our state of incorporation was changed from
Nevada to Delaware, (ii) all of our authorized shares were converted into an
equal number of similar shares of the Delaware company, and (iii) certain
changes in our Certificate of Incorporation took effect, including an increase
in the number of authorized shares of our common stock from 25,000,000 to
40,000,000.

INDUSTRY OVERVIEW

Prepaid phone cards have been widely used throughout Europe and Asia for
more than fifteen years. Currently being issued in over 140 countries, the
prepaid phone card market has grown to an estimated $20 billion dollar worldwide
industry.

Prepaid phone cards were introduced into the North American marketplace by
small long distance consolidators and resellers, who purchase a high volume of
long distance minutes from major carriers at rates significantly lower than
those that could be obtained by individuals and small businesses and resell
those minutes to their established customer base. Originally introduced to meet
very specific telephony applications, prepaid services have evolved into a
widely accepted solution by both businesses and consumers. More recently, major
long distance carriers such as AT&T, MCI/Worldcom and Sprint have committed
considerable resources to the prepaid phone card market.

Prepaid phone cards are a reliable, convenient and cost-effective
alternative to coin-operated calling, collect calling, operator assisted calls
and standard credit calling cards. Unlike credit calling cards, which provide
virtually unlimited credit and impose surcharges on long distance services,
prepaid phone cards are paid for in advance and provide finite amounts of
calling time. Shaped like a credit card, the prepaid phone card easily fits into
a standard wallet. Generally, the front face denotes the denomination of the
card. The back of the cards contains a scratch-off surface covering the card
number and personal identification number (a "PIN").

Most domestic prepaid cards utilize remote memory technology, which permits
users to place local, long distance and international calls from any touch-tone
phone by dialing a toll-free or local access number to connect to a prepaid
phone card switching platform. After being prompted to enter a PIN, the caller
is advised of the value remaining on the card and is prompted to enter the
telephone number to be called. The call is then routed to its destination. The
per-minute charges for the call are automatically deducted from the prepaid
account corresponding to the PIN as the call progresses.

Prepaid phone cards are distributed through a vast network of retail
outlets, including convenience stores, newsstands, grocery stores and discount
stores. While prepaid phone card products are also sold through vending machines
and, more recently, over Internet websites, the vast majority of phone card
sales are still made through retail outlets. In the New York metropolitan area,
where the majority of the Company's distribution occurs, the Company estimates
that prepaid phone cards are sold at tens of thousands of retail outlets.

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The retail outlets are serviced by independent distributors, which often
distribute newspapers or other items to the retail outlets. Typically, a
wholesale distributor, like us, purchases large quantities of prepaid phone
cards from a long distance carrier or reseller, and sells the cards in smaller
quantities, together with cards from other carriers, to the independent
distributor for ultimate distribution to the retail outlet. The discount from
face value at which cards are bought and sold by the participants in the
distribution chain varies depending upon the carrier and the features of the
card, such as local versus toll free dial-up access, or the rates and geographic
regions for which the card can be used.

PRODUCTS AND SERVICES

Prepaid Phone Cards

We are primarily a wholesale distributor of prepaid phone cards,
distributing over 100 different types of prepaid phone cards issued from over 60
telecommunications carriers, including 13 private label cards. The long distance
rates available to users of these cards are between 10% and 50% less than the
rates for international calls placed by traditional methods. Generally, each
type of prepaid phone card is available in $5, $10 and $20 denominations. With
the exception of the private label phone cards, which we print and activate
ourselves, we purchase pre-printed, pre-activated phone cards from each of the
applicable telecommunications carriers and distribute the cards through our
network of over 300 independent distributors, predominantly in the New York
metropolitan area.

We distribute prepaid phone cards for most of the major telecommunications
carriers, including PT-1 Communications, MCI/Worldcom, Qwest Communications and
AT&T. We are a major distributor for PT-1 Communications, responsible for over
80% of PT-1's prepaid phone card sales in the Bronx, New York area. Sales of
phone cards supplied by Cominex, LLC constituted approximately 55% of our sales
in 1999. In September 1999, we stopped purchasing products from Cominex and have
subsequently increased our purchases from other carriers to offset these
quantities. Other than Cominex, there was no company whose products accounted
for in excess of 10% of our sales in 1998 or 1999.

Included in our offering of over 100 prepaid phone cards, are 13 private
label cards, serviced by 10 different long distance carriers, including, "New
York Call," which is serviced by PT-1, "9278 Number 1," which is serviced by
MCI/Worldcom and "Bollywood," which is serviced by Telstar. We develop each of
these private label cards in conjunction with the applicable carrier. Generally,
we determine the design, rates and target market of the cards based upon our
perception of market demand. Private label cards serve as lucrative promotional
items and can also be used to help generate brand name awareness. These private
label cards are exclusive to us and, unlike the other types of prepaid phone
cards which we distribute, we control the discounts for these products, leading
to higher margins. Private label cards constituted over 60% of our sales in
1999.

Our retail customers can use the prepaid phone cards we distribute at any
touch tone telephone by dialing an access number, followed by a PIN assigned to
each card and the telephone number the customer seeks to reach. The carrier's
switch completes the call, and its debit card platform reduces the outstanding
balance of the card during the call. We believe that many of our customers use
prepaid cards as their primary means of making long distance calls due to:

o Attractive rates;

o Reliable service;

o Ease of monitoring and budgeting long distance spending; and

o The appealing variety of calling cards offered to different market
segments.

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One of our focuses has been on distribution in certain ethnic markets in
the U.S. that generate high levels of international traffic to specific
countries. As a result, we have become one of the premiere phone card
distribution channels in the New York City area, which has many such ethnic
markets. Recent immigrants and members of ethnic communities are heavy users of
international long distance, given their desire to keep in touch with family
members and friends back home. In addition, recent immigrants often do not have
established credit histories necessary to establish accounts with traditional
long distance carriers. One example of a 9278 product marketed to a specific
ethnic group is the Bollywood Phone Card, from which we generated over
$15,000,000 in revenues in 1999. There are approximately 465,000 Indians,
Pakistanis, and Bengalis residing in the vicinity of New York City. The
Bollywood Phone Card is designed for and has become a household name for peoples
from the sub-continent of India, who, by using the card to place long distance
calls to that region, receive deep discounts on rates.

We have over 300 independent wholesalers and retailers throughout the New
York, New Jersey and Connecticut area and are continually seeking to add
distributors in other areas. These customers serve as a network, purchasing
cards from us and further distributing them to approximately 10,000 retail
outlets. Generally, each customer operates on a net 30 payment cycle. In 1999,
one of our customers, Sohel Distributor, Inc., accounted for over 10% of our
revenues. None of our customers accounted for over 10% of our revenues in 1998.
In February 2000, we entered into a Letter of Intent to acquire Sohel
Distributor Inc., a company owned by the brother of the Company's Chief
Executive Officer and controlling stockholder.

Wireless Services in Trinidad and Tobago

In 1999, we submitted a proposal, which, if accepted, would allow us to
offer a digital mobile phone service and wireless infrastructure to the people
of Trinidad and Tobago. The Government of Trinidad and Tobago plans on
deregulating the telecommunications industry that is currently comprised of a
sole national wireless phone provider, the Telephone Service of Trinidad and
Tobago. The Trinidad Government will select providers for their new services
based on submissions which were provided prior to June 30, 1999. It is unclear
when the government of Trinidad and Tobago will be making a final decision. The
government has hired a European consultant to assist in the application review
process. If awarded this license, we intend to offer this service through a
joint venture with a third party, or to sell the license.

STRATEGY

Our goal is to become a broad-based, value added telecommunications
services corporation, providing the customer with a full range of services. We
plan to extend our distribution and add a host of telecom related products into
our growing distribution channels, including:

o Prepaid wireless phones;

o Prepaid paging;

o Prepaid local dialtone;

o Prepaid internet services; and

o Prepaid consumer products.

We are implementing both a business-to-business and retail e-commerce
strategy that will expand the geographic reach of our distribution, create
operational efficiencies and ultimately increase margins. Use of this service
will enable the various participants in our distribution chain to access us
through a

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dynamic, internet-based supply chain management interface, permitting the user
to interact with all aspects of our purchasing, manufacturing, inventory and
payment processing functions. We intend to launch this service in the third
quarter of 2000.

We anticipate substantial growth in our client base and market share of the
prepaid card industry through internal expansion and by strategic acquisition of
other distributors. The competition's fragmented approach has improved market
accessibility without truly creating stable brand awareness and distribution
chain efficiency. We believe that this presents the opportunity for us to secure
a significant share of the North American market.

We plan to introduce several new telecommunications related products,
including prepaid wireless services, Internet, and paging, and expand upon
existing business relationships with the U.S. telecommunications companies and
the large national prepaid card providers we work with. We will offer assistance
in developing these companies' consumer product/value-added service offerings.
These products will be distributed through our existing distribution network. We
also plan to create private label prepaid card systems for select customers.
These prepaid private label cards are geared towards large corporations and
business travelers. We are focusing on reaching clients with existing sales and
marketing forces.

One such prepaid telecommunications product is the EZ2Phone, for which we
have exclusive distribution rights in the New York area. The EZ2Phone is a fully
functional telephone, which operates virtually the same as a standard
residential telephone. The telephone is sold with an established prepaid long
distance account, to allow the purchaser to make long distance calls at reduced
rates with a preset spending limit. With the prepaid funds credited, the user
places a call as they would for a traditionally placed long distance or
international call from a home phone. No dial access code or PIN is needed. Upon
entering the phone number, a computerized message tells the caller the amount of
time they can talk to the destination called, based upon the prevailing rates
and the credit balance of the phone, and the call is then connected. The phone's
account balance can be supplemented through the purchase of "re-load" cards,
which we also distribute.

We are developing promotional/marketing applications of our prepaid cards
to provide the marketer of consumer products or services with an interactive
medium to further enhance product loyalty through placing advertising and
information directly on the prepaid service card. The card users hear a short
promotional message each time a long distance call is placed or the service is
used. If the card has been customized to a promotion, a prepaid card can provide
both a specific, coordinated visual and audio memory impressions. In addition,
companies may include a prepaid card with their products, that provides customer
service access and/or free calling services as an added benefit to purchasing
their products.

To date, the ultimate consumer of mass market prepaid phone cards have been
travelers, niche market card collectors and new immigrants needing access to the
North American and/or international telecommunications systems servicing these
customers. To remain competitive, we will be conducting a targeted marketing
program to distributors, retailers and corporations. In addition, we will seek
out strategic partners who currently provide distribution and marketing of
prepaid cards to different customers or regions as a means of increasing overall
market share.

COMPETITION

The telecommunications services industry generally, and the prepaid phone
card industry specifically, is intensely competitive, rapidly evolving and
subject to constant technological change. There are several large and numerous
small competitors in the industry, and we expect to face continuing

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competition based on price and service offerings from existing competitors and
new market entrants. In addition, the increasing prevalence of the Internet and
emerging technologies seeking to establish Internet telephony pose potential
competitive threats to the market for long distance telephone services. The
principal competitive factors in the market include:

o Price;

o Quality of service;

o Breadth of geographic presence;

o Customer service;

o Reliability;

o Network capacity; and

o Availability of enhanced communications services.

Our competitors include:

o Other distributors of prepaid products, such as Union Telecard
Alliance;

o Telecommunications companies that produce their own prepaid products,
such as IDT and PT-1 Communications; and

o Other telecommunications companies, such as AT&T, MCI/Worldcom and
Total-Tel USA.

Many of our competitors have substantially greater financial, technical and
marketing resources, larger customer bases, longer operating histories, greater
name recognition and more established relationships in the industry than we
have. As a result, certain of these competitors may be able to adopt more
aggressive pricing policies, which could hinder our growth.

GOVERNMENT REGULATION

The provision of telecommunications services is regulated by the federal
and state governments of the United States. Federal laws and regulations
promulgated by the Federal Communications Commission ("FCC") apply to interstate
and international telecommunications, while state regulatory authorities have
jurisdiction over telecommunications services that originate and terminate
within the same state. Various other international authorities also may seek to
regulate telecommunications services originating in their respective countries.
However, as of the date of this report, we are not aware of any requirement for
government approval to manufacture, distribute and/or market prepaid phone
cards.

EMPLOYEES

As of June 13, 2000, we had 16 full-time employees. Of these, three were
sales and marketing personnel, four were management and finance personnel and
nine were general and administrative personnel. None of our personnel are
covered by a collective bargaining agreement. We have never experienced an
employment-related work stoppage and consider our employee relations to be
satisfactory.

FACILITIES

Our executive offices are located at 1942 Williamsbridge Road, Bronx, New
York, where we lease approximately 3,500 square feet, pursuant to a sublease
agreement that expires on November 30, 2008. The aggregate annual base rental
for this space is $63,000. We sublet these premises from an

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officer and director of ours, on terms substantially the same as those under
which the officer leases the space.

We also lease approximately 1,100 square feet, located at 1938
Williamsbridge Road, Bronx, New York, as a warehouse location for the off-site
storage of our products, on a month-to-month basis. The monthly rent for such
space is $2,100.

LEGAL PROCEEDINGS

On November 12, 1999, we commenced an action against Cominex, LLC in New
York Supreme Court, Bronx County, alleging claims for breach of contract and
promissory estoppel arising out of Cominex's disabling of over $5.2 million of
its prepaid telephone cards and asserting damages of approximately $1.5 million
as a direct result thereof. This action has been removed to Federal Court and
will be consolidated with the matter entitled "Cominex, LLC and Atlas
Communications, Inc. v. 9278 Distributors, Inc., Sajid Kapadia and Sohel
Kapadia," described below, in the event that action does not settle.

In addition to the foregoing, on November 15, 1999 Cominex, LLC and Atlas
Communications Inc. commenced an action against 9278 Distributors, Inc., Sajid
Kapadia and Sohel Kapadia in the Federal Court for the Southern District of New
York, alleging various claims against the defendants arising out of the
defendants' purported failure to make timely payments for certain Cominex
prepaid telephone cards and asserting damages of approximately $6.6 million as a
direct result thereof. We filed an Answer and Counterclaims alleging various
claims seeking approximately $2.4 million in damages. The parties subsequently
agreed to stay all discovery pending on-going settlement negotiations and hope
to resolve this matter without further proceedings. We believe we have
meritorious defenses against the claims asserted against us and plan to
vigorously defend against these claims in the event the parties do not reach a
settlement.

In November 1999, a distributor of our prepaid phone cards commenced an
action claiming approximately $600,000 of damages, based on a purported breach
of an oral contract. We filed an answer and counterclaimed against the
distributor for approximately $600,000 of unpaid invoices due and owing from
such distributor. We believe we have meritorious defenses to the claims of the
distributor and plan to pursue our claim for unpaid invoices.

We are subject to certain legal proceedings and claims which have arisen in
the ordinary course of our business. These actions when ultimately concluded
will not, in the opinion of management, have a material adverse effect on our
financial position, results of operations or liquidity.

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MANAGEMENT

EXECUTIVE OFFICERS AND DIRECTORS

The following persons are our executive officers and directors:

NAME AGE OFFICES HELD
---- --- ------------

Sajid Kapadia 25 Chairman, Chief Executive Officer and
Director

Haris Syed 25 Chief Operating Officer, Secretary and
Director

Paul Sarcinella 32 Chief Financial Officer

Amar Bahadoorsingh 29 Vice President and Director

Raymond Akwule 44 Director

SAJID KAPADIA. Mr. Kapadia has been our Chairman, Chief Executive Officer and a
director of ours since December 1999. In April 1997, Mr. Kapadia founded 9278
Distributor Inc. and served as its President from inception through its merger
with iLink Telecom, Inc. Prior to this, Mr. Kapadia was involved in several
short-term telemarketing positions. Mr. Kapadia has a degree in mechanical
engineering from Gandhi Engineering College in Gujarat, India.

HARIS SYED. Mr. Syed has been our Chief Operating Officer since June 2000 and
has been our Secretary and a director of ours since December 1999. Before being
appointed as our Chief Operating Officer, he was a Vice President of ours,
beginning December 1999. Prior to this, from November 1996 through December
1999, he was the Vice President of TCI Telecom of NY, a telecom switching and
voice over internet protocol integrator. Prior to this, he was a student,
enrolled in the Business Administration and Marketing program at Columbus
University in Los Angeles.

PAUL SARCINELLA, CPA. Mr. Sarcinella has been our Chief Financial Officer since
June 2000. He has over ten years of public accounting experience, the last six
and a half years of which have been with Friedman Alpren & Green LLP, our
independent auditors, where he has been a manager for the last three years.
Mr. Sarcinella graduated from Pace University with a BBA in public accounting.

AMAR BAHADOORSINGH. Mr. Bahadoorsingh has been a Vice President of ours since
June 2000 and a director of ours since December 1999. He was our President from
December 1999 through June 2000. Prior to the merger between iLink Telecom, Inc.
and 9278 Distributor, Inc., he was Chief Executive Officer, President, Secretary
and a director of iLink, beginning February 1999. Prior to this, Mr.
Bahadoorsingh was the Corporate Finance Director for Insync Securities Ltd.,
from August 1997 through December 1998. Before this, Mr. Bahadoorsingh was
President of ABDE Holdings Ltd. from April 1992 through July 1997. Mr.
Bahadoorsingh holds a Masters of Business Administration degree from Queen's
University, in Ontario, Canada, with a focus on management and marketing
strategy.

RAYMOND AKWULE, PH.D. Dr. Akwule has been a director of ours since March 2000.
Dr. Akwule is a tenured professor at George Mason University, with more than 18
years of teaching, research and project implementation experience in the fields
of telecommunications policy, information technology implementation and mass
communication. He is the author of Global Telecommunications: The Technology,
Administration and Policies (Butterworth-Heinemann, 1992), used as a text in
several major universities in the United States and abroad. Dr. Akwule holds a
Doctor of Philosophy degree from Howard University and a Masters of Arts degree
and Bachelor of Arts degree from the University of Iowa.

24
<PAGE>

BOARD OF DIRECTORS

All of our directors hold office until the next annual meeting of
stockholders and the election and qualification of their successors. Our
executive officers are elected annually by the Board of Directors 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.

DIRECTORS' COMPENSATION

We reimburse our directors for expenses incurred in connection with
attending Board meetings but we do not pay director's fees or other cash
compensation for services rendered as a director.

EXECUTIVE COMPENSATION

Set forth below is the aggregate compensation for services rendered in all
capacities to us during our fiscal years ended December 31, 1999 and 1998 by our
Chief Executive Officer. No executive officer of ours had compensation in excess
of $100,000 during the fiscal years ended December 31, 1999 or 1998.

SUMMARY COMPENSATION TABLE

LONG-TERM
---------
ANNUAL COMPENSATION TABLE COMPENSATION AWARDS
------------------------- -------------------

NAME AND PRINCIPAL SECURITIES UNDERLYING
POSITION YEAR SALARY BONUS OTHER OPTIONS/SARS
-------- ---- ------ ----- ----- ------------
<S> <C> <C> <C> <C> <C>
Sajid Kapadia, 1999 $80,815 $- $- -
Chairman and Chief 1998 $24,000 $- $- -
Executive Officer

</TABLE>

We have not granted any stock options to the named executive officer in
1999 or 1998.

EMPLOYMENT AGREEMENTS

Contract with Sajid Kapadia

On December 10, 1999, we entered into an Employment Agreement with Sajid
Kapadia. Under the terms of this agreement, Mr. Kapadia will serve as our
Chairman of the Board and Chief Executive Officer for an initial term of three
years, which term will be automatically extended for additional one year periods
unless either party submits a notice of non-extension to the other not less than
four months prior to the end of the existing term.

Pursuant to the agreement, Mr. Kapadia receives a base salary of $200,000,
$225,000 and $250,000 during his first, second and third years of employment,
respectively. In addition, during each year of employment Mr. Kapadia shall
receive cash bonuses and stock option grants in amounts to be determined by our
Board of Directors. We shall also lease an automobile for Mr. Kapadia's
exclusive use. Mr. Kapadia is also entitled to participate in all plans adopted
for the general benefit of our employees and executive employees.

25
<PAGE>

The agreement with Mr. Kapadia automatically terminates upon his death. In
addition, we can terminate the agreement based on Mr. Kapadia's continued
disability, for due cause or without due cause. Mr. Kapadia can terminate his
employment for good reason. If the agreement is terminated for death,
disability, or due cause, we will pay Mr. Kapadia any unpaid base salary and
bonus through the date of termination. If we terminate Mr. Kapadia's employment
for any other reason, or if he terminates it for good reason, we will pay him
his base salary for the remaining term of the agreement, but in no event less
than 24, nor more than 35 months.

Mr. Kapadia's agreement contains standard provisions regarding
confidentiality and non-competition during the term of his employment.

Contract with Paul Sarcinella

On June 1, 2000, we entered into an Employment Agreement with Paul
Sarcinella, commencing June 5, 2000. Under the terms of the agreement, Mr.
Sarcinella will serve as our Chief Financial Officer for an initial term of
three years, which may be renewed for an additional term of two years if we give
notice of our intention to renew at least 90 days prior to the end of the
initial term.

Pursuant to the agreement, Mr. Sarcinella receives a base salary of
$150,000, $157,500 and $165,000 during his first, second and third years of
employment, respectively. Upon completion of his first year of employment we
shall pay Mr. Sarcinella a cash bonus of $12,000. In addition, we granted Mr.
Sarcinella non-qualified options to purchase up to 10,000 shares of our common
stock at an exercise price of $4.00 per share, exercisable until June 5, 2003.
Additional cash bonuses and stock options grants shall be given to Mr.
Sarcinella at the sole discretion of our board of directors. Mr. Sarcinella is
also entitled to additional benefits, including participation in all plans
adopted for the general benefit of our employees and executive employees, three
weeks of paid vacation and reimbursal for expenses related to the renewal of his
professional license.

The agreement with Mr. Sarcinella automatically terminates upon his death.
In addition, we may terminate the agreement based on Mr. Sarcinella's continued
disability, for due cause or without due cause. If the agreement is terminated
for death, disability or due cause, we will pay Mr. Sarcinella any unpaid base
salary through the date of termination. If we terminate Mr. Sarcinella's
employment for any other reason we will pay him his base salary for the shorter
of six months or the remainder of the term of the agreement.

Mr. Sarcinella's agreement contains standard provision regarding
confidentiality and non-competition during and after the term of employment.

STOCK OPTION PLAN

Effective June 1, 1999, iLink Telecom adopted a non-qualified stock option
plan. Options granted under the option plan are not intended to be incentive
stock options as defined in Section 422 of the Internal Revenue Code of 1954, as
amended. The option plan authorizes the issuance of non-qualified options to
purchase up to 500,000 shares of our common stock. Our employees, directors,
officers, consultants and advisors are eligible to be granted options pursuant
to the option plan. The exercise price of the options is determined by our Board
of Directors.

Options granted pursuant to the option plan terminate on the date
established by the Board of Directors when the options are granted.

26
<PAGE>

The option plan is administered by our Board of Directors. The Board of
Directors has the authority to interpret the provisions of the option plan and
supervise the administration of the option plan. In addition, our Board of
Directors is empowered to select those persons to whom options are to be
granted, to determine the number of shares subject to each grant of an option
and to determine when, and upon what conditions or options granted under the
option plan will vest or otherwise be subject to forfeiture and cancellation.

In the discretion of our Board of Directors, any option granted pursuant to
the option plan may include installment exercise terms so that the option
becomes fully exercisable in a series of cumulating portions. The Board of
Directors may also accelerate the date upon which any options, or any part of
any options, are first exercisable. In the discretion of the Board of Directors
payment for shares of common stock underlying options may be paid through the
delivery of shares of our common stock having an aggregate fair market value
equal to the option price, provided that such shares have been owned by the
option holder for at least one year prior to the exercise. A combination of cash
and shares of common stock may also be permitted at the discretion of the Board
of Directors. Options are generally non-transferable except upon death of the
option holder.

Our Board of Directors may at any time, and from time to time, amend,
terminate, or suspend the option plan in any manner it deems appropriate,
provided that the amendment, termination or suspension cannot adversely affect
rights or obligations with respect to shares or options previously granted.

The option plan is not qualified under Section 401(a) of the Internal
Revenue Code, and is not subject to any provisions of the Employee Retirement
Income Security Act of 1974. As of the date of this prospectus, no directors or
officers have been granted options under the option plan.

On March 15, 2000, we granted non-qualified options to purchase up to
25,000 shares of our common stock, at an exercise price of $4.00 per share, to
Raymond Akwule, our newly appointed director. The options vest 50% on September
15, 2000 and 50% on March 15, 2001 and are exercisable for a period of ten years
from the date of grant.

On June 5, 2000, we granted non-qualified options to purchase up to 10,000
shares of our common stock, at an exercise price of $4.00 per share, to Paul
Sarcinella, an officer of ours. The options vested immediately upon grant and
are exercisable for a period of three years from the date of grant.

COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

Each member of our Board of Directors participates in the determination of
the level of compensation of our executive officers. Three of such directors,
Sajid Kapadia, Amar Bahadoorsingh and Haris Syed, are officers of ours.

LIMITATION OF LIABILITY AND INDEMNIFICATION MATTERS

Article nine of our certificate of incorporation provides that the personal
liability of our directors will be eliminated to the fullest extent permitted by
the provisions of paragraph (7) of subsection (b) of (Section) 102 of the
General Corporation Law of the State of Delaware, as the same may bE amended and
supplemented. Article tenth of our certificate of incorporation provides that we
will, to the fullest extent permitted by the provisions of the General
Corporation Law of the State of Delaware, as now or hereafter in effect,
indemnify all persons whom we may indemnify under such provisions. The
indemnification provided by this section shall not limit or exclude any rights,
indemnities or limitations of liability to which any person may be entitled,
whether as a matter of law, under our bylaws, by agreement, vote of our
stockholders or disinterested directors, or otherwise. Except as specifically
required by the General

27
<PAGE>

Corporation Law of the State of Delaware, as the same exists or may be amended,
none of our directors of will be liable to us or our stockholders for monetary
damages for breach of his or her fiduciary duty as a director. No amendment to
or repeal of this provision of our certificate of incorporation will apply to or
have any effect on the liability or alleged liability of any director for or
with respect to any acts or omissions of that director occurring prior to the
amendment or repeal.

Under Section 145 of the Delaware General Corporation Law, we have the
power, under certain circumstances, to indemnify any person who was or is a
party or is threatened to be made a party to any threatened, pending or
contemplated action, suit or proceeding, whether civil, criminal, administrative
or investigative, by reason of the fact that he is or was a director, officer,
employee or agent of ours, or is or was serving at our request as a director,
officer, employee or agent of another corporation, partnership, joint venture,
trust or other enterprise against expenses, including attorneys' fees, and
judgments against, fines and amounts paid in settlement actually and reasonably
incurred by him in connection with the action, suit or proceeding.

Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers, or persons controlling us
pursuant to the foregoing provisions, we have been informed that, in the opinion
of the SEC, that type of indemnification is against public policy as expressed
in the Act and is therefore unenforceable.

28
<PAGE>

CERTAIN TRANSACTIONS

In March 2000, we sold an aggregate of 154,000 shares of our common stock
to six different investors at a price of $2.00 per share and exchanged 250,000
shares of our common stock for $500,000 of advances from Sajid Kapadia, our
Chairman and Chief Executive Officer and a director of ours. Haris Syed, our
Vice President and Secretary and a director of ours, purchased 37,500 shares in
this offering. Sohel Kapadia, the brother of Mr. Kapadia, purchased 32,500
shares in this offering.

In December 1999, iLink Telecom, Inc. agreed to purchase 9278 Distributor
Inc., a company controlled by Sajid Kapadia. Mr. Kapadia was not an officer or
director of iLink. In connection with that merger, the shareholders of 9278
Distributor were issued an aggregate of 14,900,000 shares of our common stock,
as well as a dividend of $3.0 million, of which $1.0 million was paid in
December 1999 and the balance of $2.0 million was in the form of a two-year
promissory note. Of these shares, 13,205,125 were issued to Mr. Kapadia. In
addition to such shares, Mr. Kapadia was granted proxies to vote an aggregate of
2,150,000 additional shares of our common stock. As a result of these
shareholdings and proxies, Mr. Kapadia currently has the right to vote
approximately 78% of the our outstanding common stock.

In December 1999, Sajid Kapadia made a loan to us of $2.0 million. In March
2000, $500,000 of this loan was exchanged by Mr. Kapadia for 250,000 shares of
our common stock, as described above.

In December 1999, we entered into a sublease agreement with Sajid Kapadia,
pursuant to which we sublease the entire premises at 1942 Williamsbridge Road,
Bronx, New York as our corporate offices, at an annual rent of $63,000. The
rental terms of the sublease agreement are substantially the same as the terms
under which Mr. Kapadia leases the space.

In February 1999, iLink agreed to purchase all of the shares of iLink B.C.
from ABDE Holdings Ltd., a company controlled by Amar Bahadoorsingh, our
President and a director of ours, in exchange for 145 shares of our series A
convertible preferred stock. At the time of this agreement Mr. Bahadoorsingh was
not a director or officer of iLink. Subsequent to the agreement, Mr.
Bahadoorsingh and Peter Schriber were appointed as directors of iLink and the
prior director resigned. Upon consummation of the merger among iLink, 9278
Distributor Acquisition Corp. and 9278 Distributor, Inc., Mr. Schriber resigned
as a director of iLink. ABDE was entitled to convert each share of series A
convertible preferred stock into $1,000 worth of our common stock at a 25%
discount to the average market price of our common stock for the five trading
days immediately preceding the conversion. On September 30, 1999, our Board of
Directors (with Mr. Bahadoorsingh abstaining) and ABDE agreed to exchange the
145 shares of series A preferred stock for 96,666 shares of our common stock.
The acquisition of iLink B.C. was valued at $145,000, which was based upon arm's
length negotiations between iLink and ABDE, however, no independent appraisal
was obtained. ABDE acquired these assets from Revere Communications, Inc. on
January 13, 1999 for $123,165.

iLink entered into a five-year consulting agreement, dated February 27,
1999, with Devmar Holdings, Ltd., which is controlled by Mr. Bahadoorsingh. The
agreement provided for payments of $5,000 per month for the consulting services
of Mr. Bahadoorsingh. On March 25, 1999, iLink issued 1,500,000 of its
restricted common stock to Mr. Bahadoorsingh as compensation for services
rendered and to induce Mr. Bahadoorsingh to remain in iLink's employ, which was
deemed essential for the company's future business developments. These
transactions were approved by iLink's Board of Directors with Mr. Bahadoorsingh
abstaining. Subsequently, the consulting agreement with Devmar Holdings was
terminated.

29
<PAGE>

In March 1999, iLink issued 25,000 shares of its common stock to Peter
Schriber, a former officer and director of iLink, and in May 1999, iLink issued
250,000 shares of its common stock to Marketsource Direct Holdings, Ltd., a
company controlled by Mr. Schriber, as compensation for services rendered to
iLink. The number of shares issued was based upon Mr. Schriber's past services
to iLink and to induce his continued employment with iLink, which was deemed to
be vital to the company's future business development. This transaction was
approved by iLinks's Board of Directors with Mr. Schriber abstaining.

The 1,500,000 shares issued to Mr. Bahadoorsingh and the 275,000 shares
issued to Mr. Schriber referred to above were subject to a Vesting Agreement,
dated May 25, 1999. The Vesting Agreement provided for vesting of the shares,
if:

(a) the Holder remained an officer, director or employee of iLink; and

(b) (i) certain operating milestones were achieved, or (ii) if iLink was
granted a PCS License in Trinidad and Tobago, or (iii) if iLink became
subject to a takeover bid. Pursuant to the Vesting Agreement, shares
not vested by May 25, 2000 would be forfeited and returned to iLink for
cancellation.

On December 10, 1999, 1,750,000 of such shares were surrendered to the
Company by the holders for cancellation and the remaining 25,000 shares, held by
Mr. Schriber, vested.

In March 1999, iLink issued 300,000 shares of the its common stock to
Century Capital Management Ltd., a company controlled by Andrew Hromyk, a former
director of Aquasol, as compensation for services rendered. The agreement with
Century Capital also provided for an initial payment of $12,500 and monthly
consulting fees of $5,000 for the term of agreement, which was for 12 months.
This agreement terminated on March 31, 2000.

In May 1999, Century Capital assigned its interest in a lease covering
certain office space to iLink. The lease was assigned to iLink on the same terms
and conditions that existed for Century Capital except that iLink agreed to
indemnify Century Capital for any liabilities which may arise under the lease
after the assignment and Century Capital was issued 22,259 shares of iLink's
Common Stock as consideration for certain leasehold improvements, furniture and
telephone equipment. In December 1999, Century Capital agreed to the
cancellation of the assignment.

In March 1999, iLink entered into indemnification agreements with Mr.
Bahadoorsingh and Mr. Schriber, two of iLink's directors. In these agreements
the iLink agreed to indemnify the directors from and against any and all costs,
charges and expenses, however arising, or incurred by either of them in relation
to iLink's affairs by reason of them being directors. As required by Nevada
corporate law, the indemnification must be determined to be proper, on a
case-by-case basis, by either a company's stockholders, a quorum of its Board of
Directors, excluding any directors named in the action, or by the written
opinion of a company's legal counsel.

30
<PAGE>

PRINCIPAL STOCKHOLDERS

The following table sets forth information as of June 13, 2000 based on
information obtained from the persons named below, with respect to the
beneficial ownership of shares of our common stock by (i) each of our directors,
(ii) certain of our executive officers, (iii) each person known by us to be the
owner of more than 5% of our outstanding shares of common stock and (iv) all
executive officers and directors as a group.

Unless otherwise indicated, we believe that all persons named in the table
have sole voting and investment power with respect to all shares of common stock
beneficially owned by them. A person is deemed to be the beneficial owner or
securities that can be acquired by such person within 60 days from the date of
this prospectus upon exercise of options, warrants or convertible securities.
Each beneficial owner's percentage ownership is determined by assuming that all
options, warrants or convertible securities that are held by that person, but
not those held by any other person, and which are exercisable within 60 days of
the date of this prospectus have been exercised and converted. This table
assumes a base of 20,554,772 shares of common stock outstanding immediately
prior to this offering, before any consideration is given to outstanding
options, warrants or convertible securities.

Unless otherwise noted, the address for each of the persons listed below
is: c/o 9278 Communications, Inc., 1942 Williamsbridge Road, Bronx, New York
10461.

<TABLE>

APPROXIMATE
NAME AND ADDRESS OF BENEFICIAL HOLDER NUMBER OF SHARES PERCENTAGE OF CLASS
------------------------------------- ---------------- -------------------
<S> <C> <C>
Sajid Kapadia(1).......................................... 13,455,125 65.5%

Haris Syed................................................ 37,500 *

Paul Sarcinella(2)........................................ 10,000 *

Amar Bahadoorsingh........................................ 0 *

Raymond Akwule(3)......................................... 0 *

All executive officers and directors as a group (5 persons) 13,502,625 65.7%

</TABLE>

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

* Less than 1%

(1) Does not include 2,150,000 shares of common stock to which Mr. Kapadia was
granted proxies at the time of the merger between iLink Telecom, Inc. and
9278 Distributor Inc.

(2) Includes options to purchase 10,000 shares of our common stock, which
expire on June 5, 2003.

(3) Does not include options to purchase 25,000 shares of our common stock,
which have been granted to Mr. Akwule, but have not vested.

31
<PAGE>

SELLING STOCKHOLDERS

Holders of Series B Convertible Preferred Stock

On December 10, 1999, 9278 Distributor Inc., a New York corporation engaged
in the distribution of prepaid phone cards, was merged with and into a nominee
subsidiary of iLink Telecom, Inc., a publicly held Nevada corporation. For
accounting purposes, this merger has been treated as a reverse acquisition. The
shareholders of 9278 Distributor Inc. were issued an aggregate of 14,900,000
shares of iLink's common stock, constituting 74.8% of the outstanding shares of
iLink, as well as a dividend of $3.0 million, of which $1.0 million was paid in
December 1999 and the balance of $2.0 million was in the form of a two-year
promissory note.

The cash portion of the merger consideration was obtained through a private
placement of 500,000 shares of our common stock and a private placement of 1,500
shares of our series B convertible preferred stock. Each share of our series B
convertible preferred stock is convertible into shares of our common stock based
on a conversion rate equal to $1,000 divided by 75% of the prevailing market
price of the common stock for the ten trading days prior to conversion. Provided
that a registration statement in respect of the shares of common stock issuable
upon conversion of the shares of series B convertible preferred stock has been
filed with and declared effective by the Securities and Exchange Commission on
or before December 10, 2000, all of the shares of series B convertible preferred
stock will convert into shares of common stock on that date, at the conversion
rate discussed above. However, in the event that this conversion would result in
a particular holder owning more than 9.9% of our issued and outstanding common
stock, the conversion will be postponed until the holder's shares of common
stock, after the conversion, would constitute less than 9.9%. Some of the
individuals identified in this prospectus as selling stockholders are the
holders of our outstanding series B convertible preferred stock.

Not less than 50 shares of series B convertible preferred stock may be
converted at any one time by a particular holder, unless the holder then holds
less than 50 shares and converts all such shares held by it at that time. As of
the date of this prospectus the holders of our series B convertible preferred
stock have converted an aggregate of 425 shares into an aggregate of 191,143
shares of our common stock. These shares of common stock are being registered
for resale through this prospectus. There are still 1,075 shares of series B
convertible preferred stock issued and outstanding.

Our series B convertible preferred stock may be converted at a price
related to the market price of our common stock. Therefore, the lower the market
price the greater the number of shares which may be issued. This in turn may
depress the price of stock significantly, leading to a lower conversion price
and the introduction of short selling, all of which further depress the stock
price and may lead to significant dilution. Our outstanding shares of series B
convertible preferred stock may be converted at a floating rate based on a
discount to the market price of our common stock. As a result, the lower the
stock price at the time of conversion, the more shares the selling stockholder
receive and the greater the dilution to the interests of other holders of shares
of our common stock.

The per share conversion feature of our series B convertible preferred
stock is illustrated by the following table:

32
<PAGE>

Shares Issuable
Average Market Price* Conversion Price Upon Conversion
--------------------- ---------------- ---------------
$3.50 $2.625 380
$2.50 $1.875 533
$1.50 $1.125 888
$1.00 $0.750 1,33

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

* For the ten trading days prior to conversion

The following table sets forth certain information with respect to the
selling stockholders, which include, among others, (i) the holders of series B
convertible preferred stock discussed above, and (ii) individuals who purchased
shares of our common stock in private placements which closed on December 10,
1999, March 15, 2000 and March 21, 2000. With respect to the shares of our
series B convertible preferred stock, the number of shares of common stock
listed assumes conversion of each share of our series B convertible preferred
stock at a rate equal to $1,000 divided by $0.75. This would be the conversion
rate if the average market price of our shares of common stock for the ten
trading days prior to the conversion date was $1.00 per share. The actual number
of shares of our common stock issued upon conversion of our 1,075 outstanding
shares of series B convertible preferred stock would be less than 1,433,333 if
the average market price of our shares of common stock for the ten trading days
prior to the conversion date was greater than $1.00 per share. In addition, the
number of shares of common stock that may actually be sold by the selling
stockholders will be determined by the selling stockholders, and may depend upon
a number of factors, including, among other things, the market price of our
common stock.

The table below sets forth information as of the date of this prospectus,
concerning the beneficial ownership of common stock of the selling stockholders.
All information concerning beneficial ownership has been furnished by the
selling stockholders.

<TABLE>
<CAPTION>
SHARES OF
AMOUNT OF COMMON STOCK
SERIES B SHARES OF OWNED
CONVERTIBLE COMMON STOCK SHARES OF AFTER OFFERING
PREFERRED OWNED BEFORE COMMON STOCK ------------------
STOCK HELD OFFERING OFFERED NUMBER PERCENT
---------- -------- ------- ------ -------
<S> <C> <C> <C> <C> <C>
Augustine Fund, LP 800 134,604 1,201,270 0 *

Current Investments Ltd. 0 500,000 500,000 0 *

Sajid Kapadia 0 13,455,125 450,000 13,005,125 55.7%

KAPH Groups Inc. 0 596,000 150,000 446,000 2.0%

Abbott & Co. 0 502,875 100,000 402,875 1.8%

Seajay Capital Corporation 0 100,000 100,000 0 *

Century Capital Management Ltd. 0 350,000 100,000 250,000 *

Curt E. Burwell Living Trust 50 21,248 87,914 0 *

Susan C. Buescher Revocable Trust 50 10,624 77,290 0 *

Karron L. Heathman 50 0 66,666 0 *

Angelo Lancia 50 0 66,666 0 *

P.T.N. Limited 0 596,000 50,000 546,000 2.5%

Stephen Guarino 0 50,000 50,000 0 *

33
<PAGE>

Data Square LLC 0 50,000 50,000 0 *

Select Media, Inc. 0 45,000 45,000 0 *

Anthony James Stavros 25 11,204 44,437 0 *

Mark Deschaine 25 10,710 44,043 0 *

South County Investors 25 10,624 43,957 0 *

Haris Syed 0 37,500 37,500 0 *

S.L. Land Holdings Inc. 0 35,000 35,000 0 *

Ronnie L. Williams 0 35,000 35,000 0 *

Frederick A. Lenz 0 35,000 35,000 0 *

Sohel Kapadia 0 32,500 32,500 0 *

I.S. Investments, Inc. 0 32,129 32,129 0 *

Anthony Advisors 0 30,000 30,000 0 *

588786 B.C. Ltd. 0 30,000 30,000 0 *

Walid Ahmad 0 22,500 22,500 0 *

Samir Kapadia 0 9,000 9,000 0 *

Sunita Sadhnani 0 2,500 2,500 0 *

</TABLE>

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

* Less than 1%.

(1) Assumes all shares offered by the selling stockholders are sold.

We have agreements with the selling stockholders in which we agreed (i) to
file the registration statement of which this prospectus forms a part for the
purpose of registering the potential resale of the shares, (ii) to bear all
expenses of the registration and sale of the shares (other than any underwriting
discounts and conversions) and (iii) to indemnify the selling stockholders
against certain liabilities.

PLAN OF DISTRIBUTION

Sales of the shares may be made from time to time by the selling
stockholders, or, subject to applicable law, by pledges, donees, distributees,
transferees or other successors in interest. These sales may be made on the
Nasdaq SmallCap Market, in another over-the-counter market, on a national
securities exchange, any of which may involve crosses and block transactions, in
privately negotiated transactions or in a combination of these transactions, at
prices and at terms which prevail at that time, or at prices related to the
market price at that time, 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 of 1933, or Rule 144 promulgated thereunder, may be
sold under those 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: (a) 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; (b) purchases by a broker or dealer as principal; (c) an exchange
distribution in accordance with the rules of such exchange; (d) ordinary
brokerage transactions and transactions in which the broker solicits purchasers;
and (e) face-to-face transactions between sellers and purchasers without a
broker-dealer. In effecting sales, brokers or dealers engaged by the selling
stockholder may arrange for other brokers or dealers to participate in the
resales.

34
<PAGE>

In connection with distributions of the shares or otherwise, the selling
stockholders may enter into hedging transactions. In connection with hedging
transactions, participants may engage in short sales of the shares registered
hereby 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 short positions. The selling stockholders may also enter
into option or other transactions. The selling stockholders may also pledge the
shares registered hereunder to a broker or dealer and upon a default, the
pledgor 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 selling stockholder in amounts to be
negotiated in connection with the sale. These brokers or dealers and any other
participating brokers or dealers may be deemed to be "underwriters" within the
meaning of the Securities Act of 1933 in connection with sales and any
commission, discount or concession may be deemed to be underwriting discounts or
commissions under the Securities Act of 1933.

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 stockholder, 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 the prospectus supplement, if any,
to any person who purchases any of the shares from or through such dealer or
broker.

We have advised the selling stockholders that during the time that they may
be engaged in a distribution of the shares included herein they are required to
comply with Regulation M promulgated under the Exchange Act of 1934. In general,
Regulation M precludes the selling shareholders, any affiliated purchasers and
any broker-dealer or other person who participates in 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 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, any sales, or the possibility
thereof, may depress the market price of our common stock.

35
<PAGE>

DESCRIPTION OF SECURITIES

Our authorized capital stock consists of 40,000,000 shares of common stock,
$.001 par value, and 5,000,000 shares of preferred stock, $.001 par value. As of
June 13, 2000, there were 20,554,772 shares of common stock outstanding and
1,075 shares of series B convertible preferred stock outstanding.

Common Stock

Each stockholder is entitled to one vote for each share of common stock
held on all matters submitted to a vote of stockholders. Cumulative voting for
the election of directors is not provided for in our certificate of
incorporation.

Holders of common stock are entitled to receive dividends as may be
declared by our Board of Directors out of funds legally available for dividends
and, in the event of liquidation, to share pro-rata in any distribution of our
assets after payment of liabilities. Our Board of Directors is not obligated to
declare a dividend. It is not anticipated that dividends will be paid in the
foreseeable future.

Holders of our common stock do not have preemptive rights to subscribe to
additional shares if issued by us. There are no conversion, redemption, sinking
fund or similar provisions regarding the common stock. All of the outstanding
shares of common stock are fully paid and nonassessable and all of the shares of
common stock issued upon the conversion of the series B convertible preferred
stock will be, upon issuance, fully paid and non-assessable.

Preferred Stock

We are authorized to issue up to 5,000,000 shares of preferred stock. Our
articles of incorporation provide that the Board of Directors has the authority
to issue the preferred stock into series and, within the limitations provided by
Nevada statutes, to fix by resolution the powers, rights, preferences,
qualifications, limitations and restrictions of the shares of any series so
established. As our Board of Directors has authority to establish the terms of,
and to issue, the preferred stock without shareholder approval, the preferred
stock could be issued to defend against any attempted takeover of our company.

In March 1999, our Board of Directors established a series of preferred
stock designated as series A convertible preferred stock and authorized the
issuance of up to 145 shares of series A convertible preferred stock as part of
that series. Upon any liquidation or dissolution of our company, each
outstanding share of series A convertible preferred stock was entitled to
distribution of $1,000 per share prior to any distribution to the holders of our
common stock. The shares of series A convertible preferred stock are not
entitled to any dividends or voting rights. On March 31, 1999, we issued 145
shares of our series A convertible preferred stock to ABDE Holdings Ltd. at a
deemed price of $1,000 per share in recognition of the exchange for all of the
shares of iLink Telecom (B.C.), Inc., which occurred on February 26, 1999. Each
share of series A convertible preferred stock automatically converts into shares
of our common stock in an amount equal to the series A preferred stock's stated
value at a rate of $1,000 divided by 75% of the average closing bid price of our
common stock for the five trading days preceding the conversion date. On
September 30, 1999, the outstanding 145 shares of series A preferred stock were
replaced with 96,666 shares of our common stock at an exchange rate of $1.50 per
common share. There are currently no shares of series A convertible preferred
stock outstanding.

In December 1999, our Board of Directors established a series of preferred
stock designated as series B convertible preferred stock and authorized the
issuance of 1,500 shares of series B convertible preferred stock as part of that
series. Each share of series B convertible preferred stock is convertible by

36
<PAGE>

the holder into such number of shares of common stock equal to $1,000 divided by
75% of the average market price of our common stock for the ten trading days
preceding the conversion date. The shares of common stock underlying the shares
of series B convertible preferred stock are being offered for resale to the
public by means of this prospectus. See "Selling Stockholders."

TRANSFER AGENT AND REGISTRAR

The transfer agent for the common stock is American Stock Transfer & Trust
Company, located at 40 Wall Street, New York, New York 10005.

SHARES AVAILABLE FOR FUTURE SALE

Upon completion of this offering, we will have 21,988,105 shares of common
stock outstanding, not including shares of common stock issuable upon exercise
of outstanding stock options and assuming the conversion of all 1,075 shares of
our series B convertible preferred stock, which are currently outstanding, into
1,433,333 of our common stock. All 3,528,372 shares of common stock being
offered hereby will be immediately tradeable without restriction or further
registration under the Securities Act. In addition, many of our currently
outstanding shares of common stock have been or will be registered for sale
under the Securities Act or are eligible for sale under an exemption from the
Act. Additionally, as of the date of this prospectus, we have reserved an
aggregate of 500,000 shares of common stock for issuance upon exercise of
options issuable under our stock option plan.

LEGAL MATTERS

Certain legal matters in connection with the shares of common stock being
offered hereby will be passed upon for us by Baer Marks & Upham LLP, 805 Third
Avenue, New York, New York 10022.

EXPERTS

Our consolidated financial statements as of December 31, 1999 and for each
of the two years then ended, which are included herein, have been audited by
Friedman Alpren & Green LLP, independent certified public accountants, as
indicated in their report with respect to thereto, and are incorporated herein
in reliance upon the report of said firm given upon their authority as experts
in accounting and auditing.

CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
ON ACCOUNTING AND FINANCIAL DISCLOSURE

On December 28, 1999, we dismissed Ernst & Young LLP as our independent
certified public accountant. The reports of Ernst & Young on our financial
statements for the fiscal years ended December 31, 1998 and 1997 did not contain
an adverse opinion, or disclaimer of opinion and were not qualified or modified
as to uncertainty, audit scope or accounting principle. Our Board of Directors
approved the decision to change accountants. During our two most recent fiscal
years and subsequent interim periods, there were no disagreements with Ernst &
Young on any matter of accounting principles or practices, financial statement
disclosure or auditing scope or procedures, which disagreements, if not resolved
to the satisfaction of Ernst & Young would have caused it to make reference to
such disagreement in its reports.

37
<PAGE>

We engaged Friedman Alpern & Green LLP to act as our independent certified
public accountant, effective December 28, 1999. During the two most recent
fiscal years and subsequent interim periods, we have not consulted Friedman
regarding the application of accounting principles to a specified transaction,
either completed or proposed, or the type of audit opinion that might be
rendered on our financial statements, or any matter that was the subject of a
disagreement or a reportable event.

WHERE YOU CAN FIND MORE INFORMATION

We recently became obligated to file annual, quarterly and special reports
and other information with the SEC. 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 9278 Communications, Inc, 1942 Williamsbridge Road,
Bronx, New York 10461, (718) 887-9278.

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.

38
<PAGE>

9278 COMMUNICATIONS, INC. AND SUBSIDIARY
(FORMERLY 9278 DISTRIBUTOR INC.)

CONSOLIDATED FINANCIAL STATEMENTS

YEARS ENDED DECEMBER 31, 1999 AND 1998

TABLE OF CONTENTS

Independent Auditors' Report F-2

Consolidated Financial Statements
Years Ended December 31, 1999 and 1998

Balance Sheet at December 31, 1999 F-3

Statement of Income
Years Ended December 31, 1999 and 1998 F-4

Statement of Changes in Stockholders' Equity
Years Ended December 31, 1999 and 1998 F-5

Statement of Cash Flows
Years Ended December 31, 1999 and 1998 F-6

Notes to Consolidated Financial Statements
Years Ended December 31, 1999 and 1998 F-7 - F-14

Condensed Consolidated Financial Statement
Three Months Ended March 31, 2000 and 1999 (unaudited)
Balance Sheet at March 31, 2000 (unaudited) F-15

Statement of Operations
Three Months Ended March 31, 2000 and 1999 (unaudited) F-16

Statement of Cash Flows
Three Months Ended March 31, 2000 and 1999 (unaudited) F-17

Notes to Condensed Consolidated Financial Statements
Three Months Ended March 31, 2000 and 1999 (unaudited) F-18 - F-21

F-1
<PAGE>

FRIEDMAN 1700 BROADWAY
ALPREN & NEW YORK, NY 10019
GREEN LLP 212-582-1600
CERTIFIED PUBLIC ACCOUNTANTS AND CONSULTANTS FAX 212-265-4761
www.nyccpas.com

INDEPENDENT AUDITORS' REPORT

TO THE BOARD OF DIRECTORS OF 9278 COMMUNICATIONS, INC.

We have audited the accompanying consolidated balance sheet of 9278
COMMUNICATIONS, INC. AND SUBSIDIARY (formerly 9278 Distributor Inc.) as of
December 31, 1999, and the related consolidated statements of income, changes in
stockholders' equity and cash flows for each of the years in the two-year period
ended December 31, 1999. These financial statements are the responsibility of
the Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.

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

In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of 9278
COMMUNICATIONS, INC. AND SUBSIDIARY as of December 31, 1999, and the results of
their operations and their cash flows for each of the years in the two-year
period ended December 31, 1999 in conformity with generally accepted accounting
principles.

FRIEDMAN ALPREN & GREEN LLP

New York, New York
January 24, 2000, except for
Note 9, as to which the
date is March 2, 2000

F-2
<PAGE>

9278 COMMUNICATIONS, INC. AND SUBSIDIARY
(FORMERLY 9278 DISTRIBUTOR INC.)

CONSOLIDATED BALANCE SHEET

DECEMBER 31, 1999

ASSETS

<S> <C>
Current assets
Cash $26,192
Accounts receivable, less allowance for doubtful accounts
of $125,000 3,820,503
Inventories 1,302,171
Prepaid expenses and other current assets 30,749
----------
Total current assets 5,179,615

Property and equipment - at cost, less accumulated
depreciation and amortization 349,869
Goodwill, less accumulated amortization of $11,205 593,857

Other assets 15,339
----------
$6,138,680

LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities
Accounts payable and accrued expenses $2,805,579
Current maturities of note and advances payable, shareholders 1,633,521
Current maturities of debt obligations 69,102
Income taxes payable 2,000
----------
Total current liabilities 4,510,202

Note payable, stockholders, less current maturities 1,000,000

Debt obligations, less current maturities 108,002
----------
5,618,204
Commitments and contingencies -

Stockholders' equity
Convertible preferred stock
Class B, $.001 par value; 5,000,000 shares authorized,
1,500 shares issued and outstanding 1,500,000
Common stock, $.001 par value; 25,000,000 shares
authorized, 19,659,629 shares issued and outstanding 19,659
Additional paid-in capital 2,361,382
Accumulated deficit (3,360,565)
----------
520,476
----------
$6,138,680
==========

</TABLE>

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

F-3
<PAGE>

9278 COMMUNICATIONS, INC. AND SUBSIDIARY
(FORMERLY 9278 DISTRIBUTOR INC.)

CONSOLIDATED STATEMENT OF INCOME

YEARS ENDED DECEMBER 31, 1999 AND 1998

1999 1998
----------- -----------
<S> <C> <C>
Net sales $78,089,670 $22,169,108

Cost of sales 75,472,736 21,486,747
----------- -----------
Gross profit 2,616,934 682,361
----------- -----------
Operating expenses
Selling 240,255 -
General and administrative 1,201,585 87,382
Depreciation and amortization 66,296 22,139
Loss attributable to contractual non-performance by a
major supplier 553,547 -
Provision for doubtful accounts 519,962 489,087
Interest expense 23,454 3,469
----------- -----------
2,605,099 602,077
----------- -----------
Income before income taxes 11,835 80,284

Income taxes 5,000 8,551
----------- -----------
Net income $ 6,835 $ 71,733
=========== ===========

Pro forma income data (unaudited) - 1998
Income before income taxes as reported $ 80,284
Pro forma income taxes 40,000
-----------
Pro forma net income $ 40,284
===========
Net income (loss) applicable to common stockholders $ (368,165) $ 40,284
----------- -----------

Basic and diluted earnings (loss) per share $ (.02) $ -0-
=========== ===========

Shares used in the calculation of earnings per share 19,659,629 14,900,000
=========== ===========

</TABLE>

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

F-4

<PAGE>

9278 COMMUNICATIONS, INC. AND SUBSIDIARY
(FORMERLY 9278 DISTRIBUTOR INC.)

CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY

YEARS ENDED DECEMBER 31, 1999 AND 1998

Common Stock Additional Retained
-------------------------- Paid-in Preferred Treasury Earnings
Shares Amount Capital Stock Stock (Deficit)
------ ------ ------- ----- ----- ---------
<S> <C> <C> <C> <C> <C> <C>
Balance, January 1, 1998 200 $1,000 $199,000 $ -- $ -- $ 867

Net income for the year ended
December 31, 1998 -- -- -- -- -- 71,733
---------- ----------- ----------- ----------- ----------- -----------

Balance, December 31, 1998 200 1,000 199,000 -- -- 72,600

Contribution of common shares by
founding shareholder 22.75 -- 350,721 -- (350,721) --

Reissuance of treasury shares (22.75) -- -- -- 350,721 --

Effective stock split of 74,500
shares to 1 at merger 14,899,800 13,900 (13,900) -- -- --

Effective acquisition of iLink
excluding contemporaneous private
placements 4,259,629 4,259 451,061 -- -- --

Issuance of common stock through
private placement 500,000 500 999,500 -- -- --

Issuance of preferred stock through
private placement -- -- -- 1,500,000 -- --

Dividends paid and declared -- -- -- -- -- (3,065,000)

Imputed preferred stock dividend
attributable to the beneficial
conversion feature -- -- 375,000 -- -- (375,000)

Net income for the year ended
December 31, 1999 -- -- -- -- -- 6,835
---------- ----------- ----------- ----------- ------------ -----------
Balance, December 31, 1999 19,659,629 $ 19,659 $ 2,361,382 $ 1,500,000 $ -0- $(3,360,565)
========== =========== =========== =========== ============ ===========

</TABLE>

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

F-5
<PAGE>

9278 COMMUNICATIONS, INC. AND SUBSIDIARY
(FORMERLY 9278 DISTRIBUTOR INC.)

CONSOLIDATED STATEMENT OF CASH FLOWS

YEARS ENDED DECEMBER 31, 1999 AND 1998

1999 1998
----------- -----------
<S> <C> <C>
Cash flows from operating activities
Net income $ 6,835 $ 71,733
Adjustments to reconcile net income to net cash
provided by (used in) operating activities
Depreciation and amortization 66,296 22,139
Provision for doubtful accounts 519,962 489,087
Changes in assets and liabilities
Accounts receivable (1,689,999) (3,084,553)
Inventories (917,787) (334,384)
Prepaid expenses and other current assets (30,749) --
Other assets (5,339) (10,000)
Accounts payable and accrued expenses (132,023) 3,079,234
Income taxes payable (6,551) 8,551
----------- -----------
Net cash provided by (used in) operating

Activities (2,189,355) 241,807
----------- -----------
Cash flows from investing activities
Cash received in merger 5,410 --
Acquisition of property and equipment (122,104) (14,000)
Merger transaction costs (55,681) --
----------- -----------
Net cash used in investing activities (172,375) (14,000)
----------- -----------
Cash flows from financing activities
Advances payable, shareholder 633,521 (29,300)
Principal payments on debt obligations (45,567) (39,539)
Issuance of common stock 1,000,000 199,000
Issuance of preferred stock 1,500,000 --
Dividends paid (1,065,000) --
-----------
Net cash provided by financing activities 2,022,954 130,161
----------- -----------
Net increase (decrease) in cash (338,776) 357,968

Cash, beginning of year 364,968 7,000
----------- -----------
Cash, end of year $ 26,192 $ 364,968
=========== ===========
Supplemental cash flow disclosures
Interest paid 16,787 $ 3,469
Income taxes paid 11,551 --
Noncash investing and financing activities
Note issued for accrued dividends 2,000,000 --
Issuance of common stock for net noncash assets
received in merger 455,320 --
Additional paid-in capital arising from contribution
of treasury shares 350,721 --
Transportation and other equipment acquired under
debt obligations 121,240 140,970

</TABLE>

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

F-6
<PAGE>

9278 COMMUNICATIONS, INC. AND SUBSIDIARY
(FORMERLY 9278 DISTRIBUTOR INC.)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Organization

9278 Communications Inc. is the successor consolidated entity formed by
the merger, on December 10, 1999, of 9278 Distributor Inc. (the "Company")
and its subsidiary, iLink Telecom, Inc. ("iLink"). iLink was originally
incorporated in Colorado on December 10, 1997 and was reincorporated in
Nevada on July 14, 1998. The Company was incorporated in New York on April
17, 1997.

Concurrent with the merger, iLink, a publicly held company and the
legally surviving parent company, changed its name to 9278 Communications
Inc. For accounting purposes, the merger has been treated as a reverse
acquisition, with the Company as the acquiror, and is accounted for as a
purchase.

The Company sells telephone cards to small retail establishments and
distributors, primarily in the New York, New Jersey and Connecticut areas.

Acquisition

The Company consummated the reverse acquisition of iLink on December
10, 1999. The Company's stockholders were issued 14,900,000 iLink shares in
exchange for the 200 shares of the Company. For accounting purposes, the
shares retained by the original stockholders of iLink, subject to certain
adjustments, are treated as being issued by the Company to effect the
merger, hence the term "reverse acquisition". These shares were valued at
$155,000 based upon an independent valuation of iLink. In addition to the
value of these shares, the Company's acquisition cost includes the eight
shares (post split equivalent of 596,000 shares) issued to a creditor of
iLink valued at $123,330, legal fees of $42,455, and investment banker fees
of $13,226, for total acquisition costs of $334,011.

Concurrent with the closing of the merger, iLink completed two private
placements pursuant to which it sold 500,000 new common shares for
$1,000,000 and 1,500 convertible preferred shares for $1,500,000.

Immediately prior to the closing of the merger, the Company declared a
$3,000,000 dividend ($15,000 per share), of which $1,000,000 was paid in
cash and the balance of $2,000,000 in the form of a two-year promissory
note. The payment of $1,000,000 was funded by the private placements
consummated as of that date.

(Continued)
F-7
<PAGE>

9278 COMMUNICATIONS, INC. AND SUBSIDIARY
(FORMERLY 9278 DISTRIBUTOR INC.)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

Also prior to the merger, iLink issued 300,000 shares in satisfaction
of $300,000 in debt; issued 190,000 shares for services upon the
achievement of certain vesting provisions and also issued 200,000 common
shares for advisory and related services in connection with the private
placement and merger.

The following unaudited pro forma information presents the results of
operations of the Company as if the acquisition had taken place on January
1, 1999 and 1998, respectively:

Year Ended December 31,
1999 1998
---- ----
Net sales $78,121,200 $22,169,108
Net earnings (loss) (1,497,438) 48,019
Earnings (loss) per share (.10) -0-

These unaudited pro forma results of operations have been
prepared for comparative purposes only and do not purport to be indicative
of the results of operations which actually would have resulted had the
acquisition occurred on the date indicated, or which may result in the
future.

Use of Estimates

Management uses estimates and assumptions in preparing financial
statements. Those estimates and assumptions affect the reported amounts of
assets and liabilities, the disclosure of contingent assets and
liabilities, and the reported revenues and expenses. Actual results could
differ from those estimates.

Fair value of financial instruments

The fair value of the notes payable and debt obligations approximate
carrying values.

Basis of Presentation

The accompanying consolidated balance sheet as of December 31, 1999
includes the accounts of the Company and iLink. The related accompanying
consolidated statements of income, changes in shareholders' equity and cash
flows include the results of operations and cash flows of the Company for
both years presented and of iLink for the period beginning December 11,
1999. All significant intercompany transactions and balances have been
eliminated.

(Continued)
F-8
<PAGE>

9278 COMMUNICATIONS, INC. AND SUBSIDIARY
(FORMERLY 9278 DISTRIBUTOR INC.)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

Inventories

Inventories, which consist of telephone cards, are stated at the lower
of cost (first-in, first-out) or market.

Property and Equipment

Property and equipment are stated at cost. Depreciation, including
depreciation on assets held under capital leases, is computed on
accelerated methods over the estimated useful lives of five to seven years.
Leasehold improvements are amortized primarily over 39 years.

Goodwill

Goodwill represents cost in excess of the fair value of net assets
acquired in the merger transaction, and is being amortized over 3 years.
The Company periodically re-evaluates its recoverability. In management's
opinion, there has been no impairment of goodwill at December 31, 1999.

Revenue Recognition

Revenue is recognized at the time of sale.

Income Taxes

Prior to the merger with iLink, the Company had elected S Corporation
status for federal and New York State income tax purposes. Under these
elections, the Company's taxable income or loss was reportable by the
shareholders on their individual income tax returns, and the Company made
no provision for Federal income tax. Provisions were recorded for New York
State S Corporation tax and New York City General Corporation tax.

Concurrent with the merger with iLink on December 10, 1999, the S
Corporation elections terminated and the Company became subject to all
federal, state and city corporation income taxes.

(Continued)
F-9
<PAGE>

9278 COMMUNICATIONS, INC. AND SUBSIDIARY
(FORMERLY 9278 DISTRIBUTOR INC.)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

Concentrations of Credit Risk

At December 31, 1999, the Company maintained cash balances in two
banks. Balances are insured for up to $100,000 by the Federal Deposit
Insurance Corporation.

Earnings Per Share

Basic earnings per common share for 1999 is calculated by dividing net
income (loss) available to common stockholders by the average number of
common shares outstanding during the year. Diluted earnings per common
share is calculated by adjusting outstanding shares, assuming conversion of
any potentially dilutive securities, such as stock options or warrants. The
Company has no material potentially dilutive securities outstanding.

The numerator in calculating basic and diluted earnings (loss) per
share is reported net income less the beneficial conversion feature of
preferred stock. In 1999, reported net income of $6,835 was reduced by the
beneficial conversion feature of $375,000 to arrive at net loss
attributable to common stockholders totaling $368,165. In 1998, there was
no beneficial conversion feature and all of reported net income of $71,733
was available for common stockholders.

Basic earnings per common share for 1998, which gives retroactive
effect to the stock split, has been computed on a pro forma basis to give
effect to (C) corporation income taxes by dividing pro forma net income by
14,900,000 shares, which represents the number of shares of iLink issued to
the stockholders of the Company.

2 - PROPERTY AND EQUIPMENT

Property and equipment consist of the following:
Transportation and other equipment $185,970
under capital leases
Furniture and equipment 39,410
Automobiles 154,566
Computer equipment 48,799
Leasehold improvements 15,000
---------
443,745

Less - Accumulated depreciation and amortization 93,876
---------
$349,869

Accumulated depreciation on equipment held under capital leases was
$63,653 at December 31, 1999.

(Continued)
F-10
<PAGE>

9278 COMMUNICATIONS, INC. AND SUBSIDIARY
(FORMERLY 9278 DISTRIBUTOR INC.)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

3 - NOTE AND ADVANCES PAYABLE, STOCKHOLDERS

On December 10, 1999, the Company declared $3,000,000 in dividends, of
which $1,000,000 was paid at that time. On December 13, 1999, the Company
executed a promissory note for the benefit of the stockholders in the
amount of $2,000,000, payable to the Company's chief executive officer, who
is also a stockholder. A principal payment of $1,000,000 is due on June 13,
2000, and the second payment is payable on December 13, 2001. However, the
final payment is accelerated if the Company's gross revenues exceed $10
million in each of any six consecutive calendar months or exceed $60
million in any six-month period. Management does not anticipate this
occurring prior to January 10, 2001. Interest is payable at the time of
each principal payment at a rate of 10%. Interest expense accrued at
December 31, 1999 was $6,667.

In addition, the Company's chief executive officer made advances which
are noninterest-bearing and due on demand.

4 - DEBT OBLIGATIONS

In 1999, the Company entered into two automobile loans for $76,240. The
loans require total monthly payments of $2,277, including interest at 10%.

In addition, the Company leases transportation and other equipment
under capital leases. Future loan principal and minimum lease payments at
December 31, 1999 are as follows:

Year Ending Capital Automobile
December 31, Leases Loans
------------ ------ -----

2000 $58,563 $21,423
2001 38,963 12,346
2002 11,522 12,842
2003 11,522 12,521
2004 6,721 9,507
--------
Total minimum loan and lease payments 127,291 68,639
Less - Amount representing interest 18,826 -
-------- -------
Present value of minimum loan and lease
Payments 108,465 68,639

Less - Current maturities 47,679 21,423
-------- -------
Long-term debt obligations $60,786 $47,216
======== =======

Interest expense on the automobile loans and capital lease obligations
for the years ended December 31, 1999 and 1998 was $16,787 and $3,469,
respectively.

(Continued)
F-11
<PAGE>

9278 COMMUNICATIONS, INC. AND SUBSIDIARY
(FORMERLY 9278 DISTRIBUTOR INC.)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

5 - CAPITAL STOCK TRANSACTIONS

On November 17, 1999, the Company's sole stockholder sold 22.75 of his
common shares in the Company to three new stockholders. Of these, 14.75
shares were issued to affiliates of two providers of advisory services.
Such services were in large part related to the Company's general merger
and business development activities, but had no specific connection to the
merger with iLink. The remaining eight shares were issued to a creditor of
iLink as consideration for services directly related to the merger. (This
creditor subsequently converted $300,000 of loans payable to 300,000 shares
of iLink). The issuance of all of these shares furthered the Company's
interest to varying degrees; accordingly, their issuance has been
attributed directly to the Company, as if they had first been contributed
to the Company by the sole stockholder. These shares were recorded as
treasury stock at their fair value and reissued to the three new
stockholders. The Company recognized $227,391 of advisory fee expense for
the 14.75 shares. The remaining eight shares with a fair value of $123,330
have been added to the Company's acquisition cost for the merger.

6 - RELATED PARTY TRANSACTIONS

Sales to a customer who is related to an officer were approximately
$9,500,000 and $2,208,000 for the years ended December 31, 1999 and 1998,
respectively. The amount receivable from this related party at December 31,
1999 was approximately $215,000, all of which had been subsequently
collected as of January 24, 2000. On March 2, 2000, the Company entered
into a letter of intent to acquire this related customer's business (see
Note 9).

7 - LITIGATION WITH MAJOR SUPPLIER

For the year ended December 31, 1999, purchases from one telephone card
supplier were approximately 55% of total purchases. In November 1999, the
Company commenced an action against this supplier to recover damages
resulting from cancellation of telephone cards purchased by the Company.
The supplier subsequently countersued. In the Company's opinion, with which
its legal counsel concurs, no material liability will result from the
countersuit. The Company incurred a loss of $553,547, which was reflected
in the fourth quarter of 1999. The Company is doubtful as to the prospects
for recovery against such loss. The Company subsequently mitigated, in
substantial part, its reliance on this supplier by increasing its purchases
from other vendors.

(Continued)
F-12
<PAGE>

9278 COMMUNICATIONS, INC. AND SUBSIDIARY
(FORMERLY 9278 DISTRIBUTOR INC.)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

8 - COMMITMENTS AND CONTINGENCIES

Lease Commitments

The Company was assigned a noncancelable operating lease for warehouse
and office space by its chief executive officer. The assignment was
structured as a sublease. Approximate future minimum rentals at December
31, 1999 are as follows:

Year Ending
December 31,

2000 $ 63,000
2001 66,000
2002 70,000
2003 73,000
2004 77,000
Thereafter 340,000
-------
$ 689,000
=========

Rent expense for the years ended December 31, 1999 and 1998 was $68,910
and $16,708, respectively.

Employment Agreement

On December 10, 1999, the Company entered into a three-year employment
agreement with its chief executive officer. Base salary for each of the
three years is $200,000, $225,000 and $250,000, respectively. At the end of
the three-year period, the employment agreement will automatically be
extended for an additional year without any action by the Company or the
chief executive officer, unless there is a submitted written notice four
months prior to expiration of the agreement by either party. In addition to
the base salary, the Company will compensate the chief executive officer
with cash bonuses and stock option grants based on the Company's economic
performance. The agreement contains provisions requiring termination pay
for between 24 and 35 months under certain conditions.

Contracts

The Company has various commitments with certain vendors requiring
minimum periodic purchases. Such contracts are common in the Company's
industry.

(Continued)
F-13
<PAGE>

9278 COMMUNICATIONS, INC. AND SUBSIDIARY
(FORMERLY 9278 DISTRIBUTOR INC.)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

8 - COMMITMENTS AND CONTINGENCIES (Continued)

Stock Options

Prior to the acquisition, iLink had established a non-qualified stock
option plan pursuant to which options to acquire a maximum of 500,000
common shares would be granted. On June 9, 1999, iLink granted options to
individuals, who were employees at that time, to acquire 23,000 common
shares at an exercise price of $5.25. These options were immediately
exercisable and expire on June 9, 2000.

9 - SUBSEQUENT EVENTS

Between January 18, 2000 and February 7, 2000, certain holders of
preferred stock converted 225 preferred shares into 96,539 common shares.

On February 28, 2000, the Company sold the assets acquired in the
acquisition of iLink and will recognize a loss on the sale of approximately
$400,000, primarily attributable to the write-off of the related goodwill.

On March 2, 2000, the Company entered into a letter of intent to
acquire a company which is owned by a family member of an officer of the
Company (see Note 6).

(Continued)
F-14
<PAGE>

9278 COMMUNICATIONS, INC. AND SUBSIDIARY
(FORMERLY 9278 DISTRIBUTOR INC.)

CONDENSED CONSOLIDATED BALANCE SHEET
(UNAUDITED)

ASSETS

March 31, December 31,
2000 1999
---- ----
(Unaudited)

Current assets
<S> <C> <C>
Cash $ 327,792 $ 26,192
Accounts receivable, less allowance for doubtful accounts of
$340,000 and $125,000 4,087,170 3,820,503
Inventories 927,302 1,302,171
Prepaid expenses and other current assets 74,201 30,749
---------- ----------
Total current assets 5,416,465 5,179,615

Property and equipment - at cost, less accumulated depreciation and
amortization 629,255 349,869
Goodwill, less accumulated amortization of $30,724 and $11,205 203,501 593,857

Other assets 28,099 15,339
---------- ----------
$6,277,320 $6,138,680
========== ==========

LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities
Accounts payable and accrued expenses $2,467,213 $2,805,579
Current maturities of note and advances payable, stockholder 1,136,328 1,633,521
Current maturities of debt obligations 67,766 69,102
Income taxes payable 2,000 2,000
----------- -----------
Total current liabilities 3,673,307 4,510,202

Note payable, stockholder, less current maturities 1,000,000 1,000,000

Debt obligations, less current maturities 167,798 108,002
---------- ----------
4,841,105 5,618,204
---------- ----------
Commitments and contingencies - -

Stockholders' equity
Convertible preferred stock
Class B, $.001 par value; 5,000,000 shares authorized, 1,075
and 1,500 shares issued and outstanding 1,075,000 1,500,000
Common stock, $.001 par value; 25,000,000 shares authorized, 20,554,772
and 19,659,629 shares issued and outstanding 20,554 19,659
Additional paid-in capital 4,193,487 2,361,382
Accumulated deficit (3,852,826) (3,360,565)
------------ ------------
1,436,215 520,476
----------- -----------
$ 6,277,320 $ 6,138,680
=========== ===========

</TABLE>

See accompanying notes to Condensed Consolidated Financial Statements

F-15
<PAGE>

9278 COMMUNICATIONS, INC. AND SUBSIDIARY

CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS

THREE MONTHS ENDED MARCH 31, 2000 AND 1999

(UNAUDITED)

2000 1999
------------ ------------
<S> <C> <C>
Net sales $ 16,882,918 $ 10,532,611

Cost of sales 16,181,991 10,159,319
------------ ------------

Gross profit 700,927 373,292
------------ ------------

Operating expenses
Selling 7,967 21,570
General and administrative 481,650 105,493
Depreciation and amortization 31,703 8,574
Provision for doubtful accounts 263,474 --
Loss attributable to sale of equipment 363,367 --
Interest expense 45,027 3,464
------------ ------------
1,193,188 139,101
------------ ------------
Net income (loss) $ (492,261) 234,191
============ ============
Basic and diluted earnings (loss) per share $ (.02) $ .01
============ ============

Shares used in the calculation of earnings per share 20,003,337 14,900,000
============ ============

</TABLE>

See accompanying notes to Condensed Consolidated Financial Statements

F-16
<PAGE>

9278 COMMUNICATIONS, INC. AND SUBSIDIARY

CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS

THREE MONTHS ENDED MARCH 31, 2000 AND 1999

2000 1999
--------- ---------
<S> <C> <C>
Cash flows used in operating activities $(546,097) $ (19,425)

Cash flows used in investing activities (76,843) (6,800)

Cash flows provided by (used in) financing activities 924,540 (8,294)
--------- ---------

Net increase (decrease) in cash 301,600 (34,519)

Cash, beginning of period 26,192 364,968
--------- ---------

Cash, end of period $ 327,792 $ 330,449
========= =========

Supplemental cash flow disclosures Interest paid $ 5,027 $ 3,464

Noncash investing and financing activities Equipment acquired under capital 75,000 --
leases

Common stock issued in exchange for advances payable, stockholder 500,000 --

</TABLE>

See accompanying notes to Condensed Consolidated Financial Statements

F-17
<PAGE>

9278 COMMUNICATIONS, INC. AND SUBSIDIARY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

1 - BASIS OF PRESENTATION

The condensed consolidated financial statements included herein have
been prepared by the Company, without audit, pursuant to the rules and
regulations of the Securities and Exchange Commission. Certain information
and footnote disclosures normally included in accordance with generally
accepted accounting principles have been condensed or omitted pursuant to
such rules and regulations. However, the Company believes that the
disclosures are adequate to make the information presented not misleading.
The condensed consolidated financial statements should be read in
conjunction with the financial statements and notes thereto included in the
Company's annual report on Form 10-KSB for the year ended December 31,
1999.

The unaudited condensed consolidated financial statements included
herein reflect, in the opinion of management, all adjustments (consisting
primarily only of normal recurring adjustments) necessary to present fairly
the results for the interim periods. The results of operations for the
three months ended March 31, 2000 are not necessarily indicative of results
to be expected for the entire year ending December 31, 2000.

2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Organization

9278 Communications, Inc. is the successor consolidated entity formed
by the merger, on December 10, 1999, of 9278 Distributor Inc. (the
"Company") and iLink Telecom, Inc. ("iLink"). iLink was originally
incorporated in Colorado on December 10, 1997 and was reincorporated in
Nevada on July 14, 1998. The Company was incorporated in New York on April
17, 1997, and reincorporated in Delaware on May 2, 2000.

Concurrent with the merger, iLink, a publicly held company and the
legally surviving parent company, changed its name to 9278 Communications,
Inc. For accounting purposes, the merger has been treated as a reverse
acquisition, with the Company as the acquiror, and is accounted for as a
purchase.

The Company consummated the reverse acquisition of iLink on December
10, 1999. The Company's stockholders were issued 14,900,000 iLink shares in
exchange for the 200 shares of the Company. These shares were valued at
$155,000 based upon an independent valuation of iLink. In addition to the
value of these shares, the Company's acquisition cost includes the eight
shares (post split equivalent of 596,000 shares) issued to a creditor of
iLink valued at $123,330, legal fees of $42,455, and investment banker fees
of $13,226, for total acquisition costs of $334,011.

F-18
<PAGE>

9278 COMMUNICATIONS, INC. AND SUBSIDIARY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

The accompanying consolidated balance sheet as of March 31, 2000
includes the accounts of the Company and iLink. The related accompanying
consolidated statements of operations and cash flows include the results of
operations and cash flows of the Company for the entire year and of iLink
for the periods beginning December 11, 1999. All significant intercompany
transactions and balances have been eliminated.

The Company sells prepaid telephone cards to distributors and small
retail establishments, primarily in the New York, New Jersey and
Connecticut areas.

Goodwill

Goodwill represents cost in excess of fair value of net assets acquired
in the merger transaction, and is being amortized over 3 years. The Company
periodically re-evaluates its recoverability.

On February 28, 2000, the Company sold the assets acquired in the
acquisition of iLink and recognized a loss on the sale of $363,367,
primarily attributable to the write-off of the related goodwill.

Income Taxes

Prior to the merger with iLink, the Company had elected S Corporation
status for Federal and New York State income tax purposes. Under these
elections, the Company's taxable income or loss was reportable by the
shareholders on their individual income tax returns, and the Company made
no provision for Federal income tax. Provisions were recorded for New York
State S Corporation tax and New York City general corporation tax.

Concurrent with the merger with iLink on December 10, 1999, the S
Corporation elections terminated and the Company became subject to all
Federal, state and city corporation income taxes.

F-19
<PAGE>
9278 COMMUNICATIONS, INC. AND SUBSIDIARY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

Earnings Per Share

Basic earnings per common share is calculated by dividing net income
(loss) available to common stockholders by the average number of common
shares outstanding during the year. Diluted earnings per common share is
calculated by adjusting outstanding shares, assuming conversion of any
potentially dilutive securities, such as stock options or warrants.
Potentially dilutive securities have been excluded from the calculation of
diluted loss per share for the three months ended March 31, 2000, as their
effect would have been antidilutive.

3 - CAPITAL STOCK TRANSACTIONS

Between January 7, 2000 and February 7, 2000, certain holders of the
Company's Series B convertible preferred stock converted 425 shares into
191,143 shares of common stock.

During March 2000, the Company issued an aggregate of 154,000 shares of
its common stock to seven different investors at a price of $2.00 per
share, for gross proceeds to the Company of $308,000.

During March 2000, the Company exchanged 250,000 shares of common stock
for $500,000 of advances from a stockholder.

On March 15, 2000, the Company issued an aggregate of 300,000 shares of
its common stock to six different investors at a price of $2.00 per share,
for gross proceeds to the Company of $600,000.

4 - RELATED PARTY TRANSACTIONS

Sales to a customer who is related to an officer were approximately
$1,200,000 and $1,300,000 for the three months ended March 31, 2000 and
1999, respectively. On March 2, 2000, the Company entered into a letter of
intent to acquire this customer's business. The acquisition is contingent
upon execution of a definitive agreement, obtaining financing and
completing due diligence review.

F-20
<PAGE>

9278 COMMUNICATIONS, INC. AND SUBSIDIARY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

5 - LITIGATION WITH TELEPHONE CARD SUPPLIERS AND DISTRIBUTORS

In November 1999, the Company commenced an action against a former
major supplier to recover damages resulting from cancellation of telephone
cards purchased by the Company. The loss totaled $553,547, which was
reflected in the fourth quarter of 1999. The Company is doubtful as to the
prospects for recovery against such loss. The supplier subsequently
countersued. In the Company's opinion, with which its legal counsel
concurs, no material liability will result from the countersuit. The
Company subsequently mitigated, in substantial part, its reliance on this
supplier by increasing its purchases from other vendors.

In November 1999, a distributor of the Company's prepaid phone cards
commenced an action claiming approximately $600,000 based on a purported
breach of oral contract by the Company. The Company filed an answer and
counterclaimed against the distributor for approximately $600,000 of unpaid
invoices due and owing from such distributor to the Company. The Company
believes it has meritorious defenses to the claims of the distributor and
plans to pursue its claim for unpaid invoices.

F-21
<PAGE>

9278 COMMUNICATIONS, INC.

3,528,372 SHARES OF COMMON STOCK

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

PROSPECTUS

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

We have not authorized any dealer, salesperson or other person to give you
written information other than this prospectus or to make any representation as
to matters not stated in this prospectus. You must not rely on unauthorized
information. This prospectus is not an offer to sell these securities in any
jurisdiction wherein that would not be permitted or legal.