AMERICAN NORTEL COMMUNICATIONS INC, 10KSB, 1996-11-18

AMERICAN NORTEL COMMUNICATIONS INC
10KSB, 1996-11-18
TELEPHONE & TELEGRAPH APPARATUS

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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-KSB

[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES ACT OF
1934 (Fee Required)
For the fiscal year ended JUNE 30, 1994
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934

For the transition period from N/A to N/A
--- ---

Commission File Number: 1-13134
-------

AMERICAN NORTEL COMMUNICATIONS INC.
-----------------------------------------------------------
(Name of small business issuer as specified in its charter)

WYOMING 87-0507851
- --------------------------------- -------------------------------------------
State of incorporation I.R.S. Employer Identification Number

7201 EAST CAMELBACK ROAD, SUITE 320, SCOTTSDALE, AZ 858251
(Address of principal executive offices) (Zip code)

(Issuer's telephone number) (602) 945-1266
--------------

Securities registered pursuant to Section 12(b) of the Act

Title of each class Name of each exchange on which registered
- ----------------------------------- -----------------------------------------
Securities registered pursuant to section 12(g) of the Act:
COMMON STOCK, NO PAR VALUE
- ------------------------------------------------------------------------------
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has
been subject to such filing requirements for the past 90 days. [X] Yes [ ] No

Check if there is no disclosure of delinquent filers in response to Item 405
of Regulation S-B is not contained in this form, and no disclosure will be
contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form
10-KSB or any amendment to this Form 10-KSB.

State issuer's revenues for its most recent fiscal year. $ 2,404,083
-----------

State the aggregate market value of the voting stock held by non-affiliates
computed by reference to the price at which the stock was sold, or the average
bid and asked prices of such stock, as of a specified date within the past 60
----------------------------------
days. (See definition of affiliate in Rule 12b-2 of the Exchange Act.)
- ----

THE AGGREGATE MARKET VALUE OF THE VOTING STOCK WAS:

Weighted Average
Type of No. of Market Price per Aggregated No. of
Date Share Shares Share Value Votes
- ----------------- ------------- --------- ------------------ ----------- ---------
<S> <C> <C> <C> <C> <C>

June 30, 1994 Common 3,023,132 $ 1.16 $ 3,506,833 3,023,132
Preferred 3,300,000 $ 1.21 $ 4,000,000 3.300,000
----------- ---------
$ 7,506,833 6,323,132
=========== =========
December 15, 1994 Common 3,023,132 $ 0.13 393,007 3,023,132
Preferred 3,300,000 -0- -0- 3,300,000
----------- ---------
393,007 6,323,132
=========== =========
</TABLE>

*THE COMMON SHARE PRICE IS THE AVERAGE TRADING PRICE ON THE BOSTON STOCK
EXCHANGE.

<PAGE>

<TABLE>
<CAPTION>
AMERICAN NORTEL COMMUNICATIONS INC. AND SUBSIDIARIES
<S> <C> <C>
FORM 10-KSB 1

Index 2

PART I

Item 1. Description of Business. 3

Item 2. Description of Property. 7

Item 3. Legal Proceedings. 8

Item 4. Submission of Matters to a Vote of Security Holders. 8

PART II

Item 5. Market for Common Equity and Related Stockholder Matters. 9

Item 6. Management's Discussion and Analysis or Plan of Operation. 10

Item 7. Financial Statements 15

Item 8. Changes In and Disagreements With Accountants on Accounting and Financial Disclos-ure. 16

PART III

Item 9a. Directors and Executive Officers, Promoters, and Control Persons. 17

Item 9b. Compliance with Section 16(a) of the Exchange Act 18

Item 10. Executive Compensation. 18

Item 11. Security Ownership of Certain Beneficial Owners and Management. 20

Item 12. Certain Relationships and Related Transactions. 21

PART IV

Item 13. Exhibits, Financial Statement Schedules, and Reports on Form 8-K 22

SIGNATURE PAGE 25
</TABLE>

<PAGE>
PART I

ITEM 1. DESCRIPTION OF BUSINESS

History

The Company was originally incorporated in British Columbia, Canada on
May 17, 1979. In conjunction with a one for five consolidation, the
Company's name was changed to Coldspring Resources Ltd. on June 4, 1987.

In 1987, the Company was inactive and was classified as dormant under the
rules of the Vancouver Stock Exchange. The then current management organized
a reverse take-over by a number of limited partnerships and private companies
which were engaged in the mining development and exploration business and who,
on July 14, 1987, transferred their mining assets into the Company for
Treasury shares on July 14, 1987. The Company is no longer in the mining
business, and has written off or sold its mining assets. In conjunction with a
one for ten consolidation, the Company's name was changed to Isleshaven
Capital Corporation on July 14, 1989. In 1990, under its current management,
the Company became active in the long distance telecommunications business.

The Company changed it name to NorTel Communications Inc. on June 17,
1991. In conjunction with a one for ten consolidation, the Company's name was
changed to American NorTel Communications Inc. on May 11, 1992. The Company
filed its Certificate of Registration and Articles of Continuance with the
Secretary of State of the State of Wyoming and became a Wyoming corporation
effective February 9, 1993. The Company currently operates only in the
telecommuni-cations business, providing long distance telephone service in
combination with additional related services in the United States and a
growing number of foreign countries.

Prior to September 14, 1994, the Company conducted almost all of its
telecommunications business through NorTel Communications Inc. ("NorTel-US"),
a wholly-owned Wyoming corporation that is also headquartered in Salt Lake
City, Utah. A new subsidiary Mexitech Corporation Ltd. had no assets or
operations as at June 30, 1994. All former subsidiaries of the Company, other
than the above, were not active and were sold for nominal consideration or
were dissolved. All of these former subsidiaries, except TravelTel Inc., a
Washington State corporation, were incorporated for uses which did not
materialize or which ended.

On September 14, 1994 American NorTel Communications Inc. and NorTel
Communications Inc. filed petitions under Chapter 11 of the U.S. Bankruptcy
Code, under case numbers 948-24604 and 948-24605 respectively in the United
States Bankruptcy Court, District of Utah, Central Division. The American
NorTel Communications, Inc. Bankruptcy proceeding was subsequently converted
to a Chapter 7 proceeding and was thereafter dismissed on February 7, 1995.

The Company's Common Stock was approved for listing on the Boston Stock
Exchange effective June 22, 1994. However, it was delisted on January 20,
1995 for failure to meet maintenance requirements. The Common Stock had
previously been listed for trading on the Vancouver Stock Exchange from
September 18, 1980 until August 15, 1994. The Company's common stock is also
traded in the over-the-counter market and was quoted in the National
Association of Securities Dealers Inter-dealer Quotation System ("Electronic
Bulletin Board") under the NASDAQ symbol "ARTM". See "Market Information"
under "Market for Common Stock and Related Stockholder Matters."

Business of Issuer

The Company is a Federal Communications Commission certified long
distance carrier. The Company owns telecommunica-tions equipment and
switches, as well as having developed its own telecommunications software.
This enables the Company to provide Customers in other countries with
value-added or extra services in addition to its long distance telephone
service. The Company rents the networks of major carriers (at a wholesale or
discounted price) to deliver long distance telephone calls and faxes. The
Call-back system provides much lower cost U.S.-based international calling
rates to foreign-based companies as an alternative to rates provided by local
monopolies. Call-back service allows a Customer in a foreign country to use
foreign facilities to dial a telephone number in the U.S. and receive dial
tone at a switch at the Company's U.S. location, which the Customer can then
use to complete the call to any foreign country. The amount Customers pay the
Company for long distance and the value-added services, less the usage rent
paid to carriers, is the Company's gross margin to pay its sales costs,
overhead, and provide its profit.

Telecommunications. The Company is certified by the Federal
------------------
Communications Commission of the United States (the "F.C.C.") and is
authorized under Section 214 of the Communications Act of 1934 to provide
international switched services by reselling the international switched
services of other carriers. On April 12, 1994, the F.C.C. upheld the legality
of granting applications to resell the public switched services of other U.S.
carriers on a "Call-back" basis.

In order to provide long distance telephone service to its mostly foreign
Customers, the Company rents network services from national, regional, and
international carriers. The choice of carriers used has varied over time. In
contrast, since the average voice call is over five minutes in length, to
capture the lowest overall price the Company uses the carriers, such as
Sprint, that charge a higher first minute rate and lower subsequent rate. The
Company intends to continue shifting its choice of carriers with
least-cost-routing, and in general as both the Company's needs and size
changes, and as the carriers' prices and services change. At this time, the
Company has no reason to believe Sprint will not continue to remain its most
used carrier.

The Company has developed its own proprietary micro-computer based
switching, voice processing and voice Messaging software. The Company can
create customized telecommunications systems in response to Customer needs.
The Company intends to continue to complete the development of future products
which can contribute to short term revenues such as improved fax distribution,
international debit cards, and on-line hotel phone billing systems. Since the
Company develops its own software, the Company has all the software details or
"source/access codes" which enables the Company's programmers to adjust or
modify the software for a network system change or for a new use for a group
of Customers, when necessary. The source/access codes are not always
available when the software is purchased from an outside source, and thus the
Company's ability to adjust or modify the software provides a technological
edge in system customization, that may not be otherwise possible. The Company
is currently focusing on improvements to its international system, but has not
set any specific time tables for the introduction of any specific future
products.

The Company does its own billing, using its own proprietary software
system. All billing and switching requirements are now handled by a networked
micro-computer based system. The Company's intention in creating a
micro-based system is to reduce the cost, time and complexities of both growth
and future changes.

The majority of the Company's volume is now international-related
business based on its Call-back system. For the fiscal year ended June 30,
1992, the Company's on-going or month after month repetitive telephone
business income, including monthly charges for its value-added services, such
as voice Messaging, and from various types of long distance calling services
represented only 36.4% of the Company's gross revenue, and very little was
from international Customers. For the year ended June 30, 1993, this type of
income has increased to almost 100% of revenue. For the current fiscal year
ended June 30, 1994, international business, which is the Company's main focus
for the future, contributed most of the Company's gross income and all net
income. Much of the long distance service either used a value-added service,
such as Call-back or redirected calling, or accessed a value-added service,
such as voice mail. However, it is not possible to accurately calculate the
gross revenue which is caused by or relates to the value-added services as
opposed to the portion of the Company's telecommunications business which is
reselling the network services of another carrier. Virtually all of the
Company's Customers exist because of the value-added services which they use.

Competition. The telecommunications business is extremely competitive,
with very large, well-financed long distance carriers and local telephone
monopolies (in the U.S. and in foreign countries) dominating. Margins for
agent-type sellers or resellers of regular long distance products in the
United States, such as 1-plus outbound and 800 lines, are slim and subject to
frequent price and service changes. The large carriers offer pricing to larger
U.S. Customers that the Company cannot currently match and at the same time
maintain acceptable margins. Accordingly, at this time, the Company does not
intend to provide regular long distance service within the USA to large
organiz-ations.

To the extent the Company can continue to rent the networks of regional
carriers at less than from the national long distance carriers, the Company
will be able to continue to offer rates to small and medium size U.S.
businesses for regular long distance service in the U.S. that are
approximately 25% below those of AT&T, Sprint and MCI, and yet maintain a
gross margin of approximately 25%. This business is not likely to develop
significantly due to the absence of funding for commissions for direct
selling.

AT&T and the other major long distance carriers are prevented from
providing basic phone services directly to U.S. Customers to the extent this
is reserved for the monopoly Regional Bell Operating Companies ("RBOC") and
therefore such value-added products as local voice mail. As well, RBOC's are
generally legally prevented from providing long distance and information
service, and therefore such value-added services as 800 or long distance voice
mail. Due to contracts with the telephone monopolies of most countries, the
large international carriers generally do not provide international calling
services directly to the Customers in those countries nor do the international
monopolies deliver calls outside their countries.

The value-added services the Company provides include international
Call-back and 800-redirected calling, voice mail, telephone calling cards,
automated attendants, billing services and call redirecting. The major focus
of the Company at this time is its International Private Line systems. These
services are available individually from other vendors. However, the
Company's targeted market niche is to provide a package or combination of its
version of these value-added services and particularly focus on business that
allies with large carriers, rather than competes directly with them. For
example, AT&T, MCI, Sprint, DB Cable & Wireless and other "carriers-carriers"
are not in the "Call-back" business; but when the Company uses Sprint to
deliver calls to certain foreign countries, the foreign phone monopoly usually
grants Sprint some reciprocal business. The Company packages or assembles
these value-added services along with training and long distance telephone
services to create customized telecommunications systems for its Customers.
The intent is to help the Company's Customers improve both costs and the
efficient use of the time of their key employees. The Company believes that
its package of products and services is sufficiently attractive, and therefore
the Company expects to capture a sufficient amount of business in these
segments of the market to achieve economies of scale. This belief is based on
management's view of current market conditions, and the Company's technology;
however, there is no assurance that current government regulations and
policies of the telephone monopolies in various countries and international
carriers will not change and cause the Private Line system provided by the
Company to become less attractive in certain markets.

Marketing Strategies and Product Description. The Company has two
------------------------------------------------
primary "value-added" services or product areas that are the focus of the
Company's marketing strategy:

(a) International Calling, including the "Private Line" systems with
Telephone Calling Cards; and
(b) Voice Messaging, including Voice Mail, Core Services, and
Advertising and Services Systems.

Because of the uncertainty of future costs from major carriers and
current and potential competition, the Company does not intend to rely solely
on the sale of regular long distance services at prices below those of the
major carriers, or to depend on products that cannot be sold unless the
underlying long distance is at a very large discount. By providing customized
systems and value-added services, the Company can also provide many of the
regular long distance products that are tied into the system without
excessively discounting the price of the long distance. However, a discount
for the long distance will generally be used to promote the sale of the
packages of long distance services along with the value-added products and
services.

In general, the Company applies its own programming, voice processing
technologies and computer and switch technologies, to develop each of its
products or services to maximize any advantage it can create for users of its
products. Some of these services, such as a 900 Line Services System Voice
Processing Tree, cannot be used by a Customer without the Company customizing
one or more of these services into a package that is unique for that Customer
group. The Company has oriented much of its programming efforts to modularize
each service or the major components of each service, so that a custom package
of services can be assembled by simply connecting the relevant pre-built
building blocks.

After certain value added features are modularized, some services, such
as the international "Call-back" system or basic voice Messaging, do not
require customization to add Customers, and are sold directly to add Customers
one at a time. Virtually all Customers become Customers because of the
value-added services, but the monthly billing to a Customer does not
differentiate between a normal long distance call and a long distance call
that accesses a value-added service, such as voice mail, U.S. 800 calling, or
uses a value-added service such as a redirected call or international
"Call-back".

International Calling is the Company's major revenue generator at this
time and its focus in the near future The Company has two systems for
international calling. In both systems, the Customer dials directly to the
Company's switch in Salt Lake City on one of several dedicated lines.
Depending on his location and the difference between the cost to call from
there to Salt Lake City compared with the cost to call from Salt Lake City to
there, the Customer is redirected or connected through the Company's switches
to the destination number. In the basic "Call-back" system, the Company's
software will enable the Customer in a foreign country to cause both ends of
the call to originate from Salt Lake City. Aside from cost savings, the two
methods are intended to make calling more convenient from countries and areas
where operator assistance is normal or connection via regular long distances
switches is less reliable and more expensive than via dedicated lines. In
countries where one or the other system provides an advantageous method for
local businesses to call or fax out, the Company's major growth and sales
program is to set up "sharing of profits" or Distributorship agreements with
local entrepreneurs that have sales forces, or intend to develop sales forces.
Malaysia, Thailand, Costa Rica, Honduras, Panama, Hong Kong, Korea, Mexico,
Singapore, and South Africa agreements have been completed and others are in
negotiation or have been very recently completed.

The Company can direct calls to any country having a national telephone
system - approximate-ly 180 countries. With its International 800 and
"Private-line" or "Call-back" systems and its ability to rent the networks of
at least one of the major carriers as well as a specialist carrier, the
Company can give callers direct-dialing from any country where any of its
carriers have lines. With its new micro-based switching the Company connects
calls using the least cost carrier or route not only by country, but also by
time of day, and by nature or expected length of call, such as a fax as
opposed to a voice call.

Example: Combining Value-added Service and Long Distance: The "serial
dialing" system developed for the Company's South African and other
international Customers is such an example. Normally, a South African
business has significantly more difficulty than a US business completing an
international telephone connection, and when a line is obtained it usually
takes between one-half a minute and a minute to connect. With the Company's
serial calling, once the Customer is on line with the Company's system he
doesn't need to hang-up to make additional international calls. In essence,
Company's computers give him a new U.S. dial tone at the end of each call, in
part, by maintaining the connection between South Africa and the Company's
computers and switches in Salt Lake City, Utah. The price of the first
international call by the South Africa Customer via the Company's network is
significantly less than the same call made through the South African telephone
monopoly. However, with multiple serial calls, the Customer can achieve major
savings in cost and significant gains in its executive time and convenience.
The Company's gross margin or contribution to overhead and profit as a
percentage of selling price is much better than for U.S. to U.S. long
distance. Of greater importance is that one minute of such calls, by
comparison, contributes about twenty times as much to the Company's overhead
and profit (after carrier costs) than one minute of long distance in the
United States. Another example is "Speed-Dialing". Each Customer line has
the capacity to add 99 speed dial numbers which help to improve Customer
convenience and productivity and to reduce errors.

The Company has developed its own proprietary voice Messaging and voice
processing system. Almost all existing competitor systems are voice mail only
and are designed to provide a single company an insulated internal system.
These systems are very difficult to convert to a large integrated system of
users, and in that regard they have limited capacity for new concepts and
users. The Company's system was specifically designed to be a large
integrated system with diverse users, and to enable the addition of new
features over time. The Company's system allows many companies and
individuals to be combined on one large local network with full networking
capabilities amongst everyone on a network. In the future, the regional Bell
operating companies ("RBOC's") may become more aggressive in selling local
voice mail utilizing their advantage of no local access charges to the end
user and perhaps other voice mail vendors. Similarly, MCI and other major
carriers may become more aggressive in selling long distance voice mail
utilizing their own lower cost long distance access. Currently, the entry of
the RBOC's and MCI into voice mail has expanded the market by enhancing the
credibility of the product. If these giants focus more on this aspect of the
communications industry, the Company may find it more difficult to compete,
especially for larger Customers.

Because of its focus on international Customers, the Company is not
currently selling these systems except on a nominal scale, directly through
its own employees and with the assistance of small independent marketing
organizations who have been contracted solely to sell the Company's custom
systems.

Compared to reselling regular long distance services in the U.S., Voice
Messaging is a very desirable product. The gross profit or margins are
approximately 85% after operating costs but before capital recovery compared
to less than 33 1/3% before capital recovery for most U.S. long distance
reselling. The key difference is that Voice Messaging box rentals do not
involve line charges to a third party carrier, such as Sprint. The Company
expects to recover, in less than one year, the cost of all equipment, sales,
and related overhead necessary to add voice Messaging Customers.

Research and Development. The Company is currently focusing on
--------------------------
improvements to its international system, but has not set any specific time
tables for the introduction of any specific future products. The Company is
refining and finalizing the development of a Hotel Private Line system which
essentially gives non-US hotels the benefits of lower U.S.-based international
long distance rates to all over the world. This substantially reduces a
hotel's costs for International and U.S. fax and voice calls. A major central
fax facility is being installed to significantly reduce costs and improve the
quality of faxes sent. The existing system can provide all information
necessary to bill guests at any time. The Hotel Private Line system can
usually be adapted to fit systems now existing in the hotel.

Employees . The total number of full time employees in the Company is
---------
five, excluding five "commission only" sales personnel and employees in Sales
Distributorships.

Payment and Credit Methods. The Company generally requires all new
----------------------------
Customers to provide an assured method of payment. The primary method is
payment by U.S. dollar credit card, such as Visa or American Express.
Alternatively, advance cash deposits are also sometimes used. In all cases,
regardless of the method of payment used, the Company now requires a back-up
credit card that is pre-authorized for 120% of the expected usage for each
month as assurance of payment. The Company makes some exceptions for a few
larger Customers, by accepting a cash deposit, or a letter of credit, or a
bond, as long as payment is made within ten days or else the back-up credit
card is used.

In prior years, the Company earned revenues from the mining business and
consulting fees and minor fees from tax oriented financial instruments. None
of these apply in the current fiscal year and none are expected in the future.
The Company's sole focus is telecommunications, particularly its "Call-back"
systems. Prior to mid-1992, the Company has earned management and consulting
fees for providing services to Canadian limited partnerships and joint
ventures as well as others. These entities were trying to apply technology
developed by the Company to international markets that the Company could not
afford to pursue at that time. The Company charged fees to these syndicates
for management time spent to assist them. The more successful these
syndicates are, the greater will be the international Customer base that will
contribute regular revenue each month, not only for these syndicates, but also
the Company. Virtually no consulting fees were earned since mid-1992 as
Canadian tax polices reduced the financing for these syndicates. It is
unlikely that these syndicates will devise new ways to obtain sufficient
funding that the Company will earn consulting fees from them in the future.

Subsequent Events

ITEM 2. DESCRIPTION OF PROPERTY

Property and equipment consisted primarily of office equipment and
computer equipment owned by NorTel. These assets were put into storage when
the Company ceased operations in December of 1994. The bankruptcy trustee is
currently in the process of selling the property and equipment. The estimated
value is less than $10,000 due to the age of the equipment and its condition.

The costs of internally developed telecommunication software were
capitalized upon the establishment of technological feasibility. The
capitalized costs of certain software were written off in 1994 since the
software was not completed and the technology was deemed to be outdated.

The Company is no longer in the mining business and divested its
remaining nominal mining assets as part of the Lynbrook Settlement Agreement
in June 1994.

ITEM 3. LEGAL PROCEEDINGS

On November 29, 1993, the State of Minnesota included the Company's
subsidiaries COOP Communications, Inc. And NorTel Communications Inc. And
several other persons, in a complaint under Minnesota Statutes 8.31, 325D.44,
325F.67, and 325F.69 (1992). The State alleged that actual or proposed
seminars in Minnesota put on by two of the other defendants using materials
created by Profit Education Systems ("PES") and allegedly focusing on how to
become rich using 900 lines involve false, misleading, and deceptive
representations and business tactics. The Company was not involved in the
seminars or the related literature and sales at seminars. No problems exist
with the consumer protection authorities in other states where the same
literature and seminars have been and continue to be held. The Company was a
party firstly because it may supply the seminar attendee, and purchaser of a
PES package with a 900 line pursuant to its joint provider agreement MCI
Communications and secondly because the state incorrectly alleged "PES is a
company created by NorTel". The Company disagreed totally with the
allegations. The Company settled the Complaint without expense to it.

On January 5, 1994, Helen Schumann in Salt Lake County District Court
Action No. 93907015 alleged to have been damaged to the extent of $10,015,000
by the Company and each of its directors. Schumann was a sales person for
TravelTel, Inc. (Now Bankrupt) who according to TravelTel's records was paid
$7,500 in commission advances, on the false representation that Schumann was
working on a full time basis to contract customers for TravelTel; was entitled
to less than $1,000 in commissions; and when commission advances were ceased,
ceased to provide what little sales effort had been provided prior thereto.
To justify the $10 million in damages, the claim by Schumann alleged that
Schumann was not paid commissions for the vast majority of her alleged sales
or so called "Base salary" and that medical insurance previously paid by
Travel Tel was subsequently allowed to lapse. The Company believed this
complaint was totally without merit and the action was dismissed for lack of
prosecution.

Other than as set out above, there are no known pending or threatened
material legal proceedings to which the Company is, or is likely to be, a
party or of which any of its properties are or are likely to be subject.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

The Annual General Meeting of the shareholders of American NorTel
Communications, Inc. was held at the Company's offices in Salt Lake City, Utah
on May 5, 1994. The following resolutions were approved.

(1) Dr. Kenneth D. Rogers was re-elected at the meeting. William H.
Rogers and John H. Picken are the other two directors whose term of office
will continue after the meeting.

(2) The Directors were authorized and directed to negotiate with KPMG
Peat Marwick to renew their appointment as auditors. (Note: Because KPMG was
a significant creditor under the Chapter 11 bankruptcy proceeding filed by
American NorTel, KPMG resigned as auditor citing conflict of interest.)

(3) The actions of the Directors for the year ended June 30, 1994,
were approved and ratified.

PART II

ITEM 5. MARKET FOR COMMON EQUITY AND RELATED SHAREHOLDER MATTERS
The Company's Common Shares were listed on the Boston Stock Exchange June
22, 1994 under the symbol "ANL" and are presently traded in the United States
in the over-the-counter market, and quoted in the National Association of
Securities Dealers Inter-Dealer Quotation System ("Electronic Bulletin
Board") under the NASDAQ symbol "ARTM". Additionally, the Company's Common
Stock had been previously listed on the Vancouver Stock Exchange ("VSE") under
the symbol "ANM" from September of 1980 until its delisting in August of 1994.
Trading on the VSE was temporarily suspended in early 1994 pending the
Company updating its filings. The delay in filing was due to the fact that
these were the Company's first financial statements in U.S. dollars and first
statements to be in accordance with US Generally Accepted Accounting
Principles. As well, it was the Company's first time with a U.S. auditor, and
included the 1993 Annual Report on Form 10K, and the September 30, 1993 and
December 31, 1993, Form 10Q. Due to the Chapter 11 petitions on September 14,
1994 the trading of the Company's shares on the BSE was temporarily suspended
on September 14, 1994 and thereafter the common stock was delisted on January
20, 1995.

The following table sets forth for the periods indicated, the high and
low bid quotations for the Company's Common Stock as reported by the Vancouver
Stock Exchange Review (in Canadian Dollars) with adjustments to reflect the
reverse stock splits, including the 10 for 1 Share Consolidation which
occurred on May 11, 1992. These quotations are believed to represent
inter-dealer quotations, without adjustment for retail mark-up, mark-down or
commission and may not represent actual transactions. The exchange rate used
to determine the U.S. dollar numbers are the monthly rates published in the
<TABLE>
<CAPTION>

US $HIGH BID US $LOW BID
------------ -----------
<S> <C> <C>
1994
- ------------------------
Second Quarter 1.45 0.87
First Quarter 1.61 1.32
1993
- ------------------------
Fourth Calendar Quarter 2.63 1.43
Third Calendar Quarter 2.72 1.08
Second Calendar Quarter 1.88 1.09
First Calendar Quarter 2.36 1.27
1992(1)
- ------------------------
Fourth Calendar Quarter 7.54 1.57
Third Calendar Quarter 4.70 3.03
Second Calendar Quarter 6.69 3.76
First Calendar Quarter 10.06 6.46
</TABLE>

Federal Reserve statistical release "Foreign Exchange Rates."

At June 30, 1994, there were 3,023,132 shares of Common Stock of the
Company outstanding. See "Security Ownership of Certain Beneficial Owners &
Management" which discloses significant shareholders and the shareholdings of
the directors and officers.

The Company has never paid dividends on any of its shares and does not
intend to pay Common Stock dividends. As a result of the large accumulated
deficit, no payment of dividends may be paid until profits are earned for
several (at least 2) consecutive years, in most circumstances. The terms of
debt instruments and preferred shares do and will limit the payment of
dividends on Common Stock under many circumstances.

The Transfer Agent and Registrar for the Company is Montreal Trust at 2nd
Floor, 510 Burrard Street, Vancouver, British Columbia.

ITEM 6.MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS

The following factors make period to period and trend analysis of the
Company's statements difficult without reference to these factors which create
non-comparability.

(1) Change in Currency and GAAP. The Company's audited financial
---------------------------
statements for the years ended June 30, 1994 and 1993, are prepared in U.S.
Dollars and in accordance with U.S. generally accepted accounting principles
("GAAP"). All prior audited statements were prepared in Canadian dollars and
in accordance with Canadian GAAP. Most historical numbers have been easily
converted by the Company from Canadian dollars and GAAP to U.S. dollars and
GAAP. However, with respect to some conversions, the best that can be done
without incurring unreasonable costs has been to make allocations or
estimates. Due to this cost and time difficulty, the historical numbers have
not been given by the Company to either the former Canadian auditor or the
current U.S. auditor to retroactively audit the numbers in U.S. dollars and
U.S. GAAP. Because of the other major changes in the Company's affairs, which
make the historical comparability of the Company's financial data less
meaningful, some of which are set forth below, incurring the time and expense
to reconstruct audited historical numbers in Canadian dollars and GAAP into
auditable form in U.S. dollars and U.S. GAAP is not merited. See Item 6,
"Differences Between US GAAP and Canadian GAAP".

(2) Bankruptcies & Write-downs. The TravelTel, Inc. bankruptcy on
--------------------------
January 29, 1993, and the subsequent sale of the subsidiary's for $1.00; and
the large write-offs of the Company's related assets impair comparability.
For example, all of the Company's software ($1,690,466 US) which used
TravelTel's equipment or TravelTel's software was written off along with
$740,000 of other TravelTel related assets. The Chapter 11 bankruptcies
ofAmerican NorTel Communications Inc. and its key subsidiary on September 14,
1994 caused write-downs of $3,540,446 in the year ended June 30, 1994.

(3) Mining Equipment. Mining equipment was generally leased until
----------------
1990, at which time equipment was acquired with the proceeds of a private
placement related to the Rio Tigre acquisition. In the last quarter of 1993,
this equipment was written down by $500,000 to a balance of $25,953 after 1993
amortization; because of legal uncertainties relating to the Rio Tigre
property. See Item 3, "Mining Property Title". The remaining equipment was
sold at book in early 1994.

(4) Accumulated and Current Amortization. Accumulated and current
------------------------------------
amortization lacks comparability due to the asset write-downs, and the major
additions of mining equipment and property prior to 1992 and
Telecommunications software and equipment since 1990, particularly at the end
of fiscal years.

(5) Mining Production Income. Mining production income was the
------------------------
main source of revenue in the fiscal year ended June 1988, and the first
quarter of fiscal 1989, from the Rincon mine, which then ceased production due
to a mud slide catastrophe, and for part of the fiscal year ended June 30,
1990, from the Rio Tigre mine, which then ceased production pending solution
of an easement problem, (See Item 3, "Mining Property Title") and at no other
time. Mining expenses in these periods do not exist in other periods.

(6) Consulting Fee Revenue. The majority of gross revenues in 1991
----------------------
and 1992, and all gross revenue, other than from mining production in prior
years, was from consulting fees and related expense recoveries. These fees
were earned in the mining business prior to 1992 and in the telecommunications
business since 1990. These revenues were earned from Canadian tax-oriented
partnerships and others. In the years ended June 30, 1993 and 1994, no such
fees and overhead recoveries were earned and none are expected in the future.
Expenses of these consulting operations have occurred in the periods when
revenues were earned and not otherwise.

(7) Telecommunications Operations. Telecommunications operations
-----------------------------
started in 1990. Under Canadian GAAP production telecommunications expenses
net of related revenues were capitalized in 1991 and 1992. A significant but
gradually decreasing percentage of the Company's telecommunications activities
have been in the development stage; with costs being capitalized, particularly
to software and distributorships.

(8) Share Consolidations. Share consolidations disrupt per share
--------------------
numbers that were not reconstructed.

(9) Exchange Rate Fluctuations. Exchange rate fluctuations were a
--------------------------
meaningful factor in historical (prior to 1992) statements prepared in
Canadian dollars, but will not be in the future.

(10) Financing Costs. In the fiscal year ended June 30, 1993, the
---------------
Company arranged a $5.0 million best efforts underwriting of Secured Notes and
then arranged high-cost bridge loans of $250,000, and $200,593 from a
corporate lender and the families of the directors, respectively. These were
made in order to greatly increase the Company's activities as required by the
underwriting. Given the inability of the surety company, (which guaranteed
the Secured Notes) to obtain an audit, only $675,000 was raised. Accordingly,
most of these costs were written off and related interest for the period is an
expense that is new and not comparable to other periods.

(11) Mining Property. Mining property was the largest asset in
---------------
prior years. The Company is no longer in the mining business and has sold its
remaining mining property and equipment. On June 30, 1993, the Company
wrote-down its mining property by $6,017,005 to $100 due to legal
uncertainties, See Item 3, "Legal Proceeding".

Differences Between US GAAP and Canadian GAAP
- ---------------------------------------------------

The Company's financial statements prepared in accordance with United
Sates Generally Accepted Accounting Principles ("GAAP") are more conservative
than was the case under Canadian GAAP in 1992 and prior years. See Form 10K
for June 30, 1993 for an explanation of the differences.

Results of Operations

Competitive Environment and General Uncertainties. The Company operates
in highly competitive markets. The business of the Company is subject to
national and worldwide economic and political influences such as recession,
political instability, the economic strength of governments, changes in
government regulations, changes in the policies of major carriers, and rapid
changes in technology. The Company will continue to attempt to mitigate these
factors by expanding its markets, building sales distributorships and
alliances both domestically and internationally, and providing better and
lower-priced value added services and long distance. Costs are being
controlled through regular budgetary reviews, efficient and effective
purchasing, cost-effective software and product design, and more efficient
utilization of resources. The Company's ability to adjust to meet significant
changes in its markets or suppliers has been greatly enhanced with its change
to using micro-computers for its telephone switching, voice processing and
billing. In particular, software changes can be completed more easily and
quickly than when a large switch and main frame computer was used.

Subsequent Bankruptcies -- Effect on Operations. The September 14, 1994
bankruptcy filings of American NorTel Communications Inc. and NorTel
Communications Inc. adversely affected net income in the year ended June 30,
1994. The bankruptcy proceedings were the result of the Company's inability
to meet current operating requirements from revenues, including an inability
to pay its principal carrier. The inability to meet current operating
expenses was the result of initial lack of liquidity, loss of its South
American customer base, and failure to close a financing. The majority of
write downs or non recurring expenses occurred due to the combination of
bankruptcies and the underlying loss of the customer base which caused the
bankruptcies.

Trends in Continuing Operations. The following trends in the Company's
affairs are not obvious from the financial statements above.

(a) Margins. As the Company changes the source of its gross
revenues to a higher percentage from international calls versus U.S. calls,
its gross profit will improve. The gross profit margin (after carrier costs
and sales commissions) on U.S. calls is expected to be about 20% in the
future. On international calls, the margin is expected to be about 35%.
These are less than the 46% average margin earned in the year ended June 30,
1993 and 37.9% to June 30, 1994.

(b) Consulting Fees. See Item 6, "Consulting Fee Revenue".
These were a large contributor in past years but none were earned in 1994 and
none are expected in the future.

(c) Mining Operations. See Item 6, "Mining Production Income"
No mining revenue occurred in 1994 and none will occur in the future. The
Company is no longer in the mining business.

(d) Growth Costs. In the past, the Company has incurred two
groups of monthly cash costs over which it has discretionary control; costs to
develop software for specific targeted markets, and costs to develop a sales
force/distributorship infrastructure for future sales to those markets. The
revenue to date from the international call back system and new capital
raising has supported a continuation of such expenditures. These costs will
steadily become much smaller in the future. Project financing is expected to
pay for a major part of the costs to establish more distributorships. See
Item 6, "Project Financing"

Liquidity

Working Capital:

<TABLE>
<CAPTION>
AUDITED UNAUDITED
-------------- ------------------------------
June 30, 1994 June 30, 1993 June 30, 1992
-------------- -------------- --------------
<S> <C> <C> <C>
Current Assets $ 26,930 $ 1,100,451 $ 714,612
Current Liabilities $ 1,929,100 $ 918,481 $ 654,555
Working Capital $ <1,902,170> $ 181,970 $ 60,057
Current Ratio 0.01 times 1.20 times 1.09 times
</TABLE>

The Company made little progress to improve its working capital in the year
ended June 30, 1994. In November 1993 the high cost bridge loan ($250,000
initially and $211,691 at June 30, 1993) was paid out from the sales of
shares. The Company continued its efforts to raise working capital to support
and expand operations. The Company is implementing a policy to that requires
international customers to require deposits plus their credit card or
automatic bank debit authorization for faster collections of accounts.

The Company has no future obligations to incur capital expenditures. The
Company continues to use its best efforts to keep the majority of its overhead
and all of its capital expenditure items controlled by management discretion.

A variety of events beyond the Company's control could, and subsequent to
June 30, 1994 did, dramatically effect the Company's need for cash. The
Company's carriers could change their terms of trade for better or worse.
Competitors could provide an easy-credit/slow-pay alternative to customers
that now pay the Company via deposits and/or a U.S. dollar credit card or
automatic bank debits. This could force the Company to extend more credit.
See Item 6, "Competitive Environment and General Uncertainties". See Item 6,
("Capital Resources") for a discussion of the actions the Company was or is
taking to increase its capital, to mitigate the foregoing uncertainties.

As a generalization, by the end of 1994, the Company's cash flow from
operations basically equaled its overhead expenditures Accordingly, for the
Company to improve its liquidity/working capital or grow faster, it will be
required to raise additional capital.

Equity sales of common shares has been the Company's main source of
funding in the past and will probably be required in the near future. The
Company intends in due course, to achieve growth through project financing.
See Item 6, "Project Financing". If project financing is successful, equity
financing will be expected to decline.

Unusual Past Bridge Financing and Lease Financing. See Items 6,
"Financing Costs". In the future, the Company intends to have no new short
term loans of the type arranged in late 1992 and paid out in November 1993
from the proceeds of common share sales. The Company has the option to
accumulate interest on this debt (not pay in cash) and intends to pay down
this debt, after certain first priority debt is paid - primarily Sprint. The
Company has negotiated with the secured creditor to use certain equipment to
obtain base financing to be repaid from future equity funding; subject to
certain reasonable conditions.

Secured Notes and Future Guaranteed Debt. In late 1992, the Company
entered into an underwriting agreement to issue up to $5.0 million of its 9%
four year convertible secured notes with warrants to buy common shares (the
"Notes"). A surety company's guarantee was the security. The intention was,
and is, that with the Company common stock becoming listed on the Boston
Stock Exchange and the price would rise sufficiently that the issued notes
($675,000) will be converted to common shares. To the extent, the Company is
confident that future debt, whether guaranteed or not, can be converted to
equity, the Company will raise additional cash using similar secured notes.

Project Financing. The international call back business requires, or is
better if, a sales force exists in each international city where the Company
wishes to and is able to attract customers. The Company believes such sales
forces should be reasonably independent distributorships owned primarily by
the sales managers and their financial backers but with certain controls by
the Company. The financing of such distributorships provides an excellent
opportunity for future off-balance sheet equity financing. The Company's long
term intention is that new city distributorships can be created with equity
financing that ties only to the distributorship's revenues. This was
currently the case for the sales distributorships in Argentina and Brazil
where the Company's securities or cash were not used to develop those
distributorships. These distributorships did not have the Company's control
factors built in as is the case for newer distributorships. Unfortunately, a
lack of control factors resulted in the Brazil and Argentina distributorships
severing ties with the Company and becoming independent operations resulting
in a substantial reduction in Company revenues. In the near term, in order
to develop a track record of distributors of the Company's products so that
such low risk self-financing is available faster and in greater quantity than
is now the case, the Company intends to use its securities to help launch the
next several distributorships.

ITEM 7. FINANCIAL STATEMENTS

The financial statements are filed pursuant to Item 13(a).

<PAGE>

ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURES.

There were no disagreements on accounting and financial disclosures with
either of the former auditors or the current auditors. For the audit for the
year ended June 30, 1994, the previous auditor, KPMG Peat Marwick resigned
because it was a creditor in the bankruptcy of the Company.

KPMG Peat Marwick replaced the firm of BDO Dunwoody Ward effective
December 30, 1993, and audited the year ended June 30, 1993 statements. The
major reason for the change was that BDO Dunwoody Ward Mallette did not have a
Utah office and the Company had moved its incorporation to Wyoming from
British Columbia, its headquarters to Salt Lake City from Vancouver, and the
Company had to change its accounting to U.S. dollars (from Canadian dollars)
and in accordance with U.S. Generally Accepted Accounting Principles ("GAAP")
(from Canadian GAAP.)

The reports of KPMG Peat Marwick for the year ended June 30, 1993 and
those of BDO Dunwoody Ward Mallette on the Company's financial statements for
the previous two fiscal years did not contain an adverse opinion or a
disclaimer of opinion and were not qualified or modified as to uncertainty,
audit scope, accounting principles or practices, financial statement
disclosure, or auditing scope and procedures which, if not resolved to the
satisfaction of the auditors, would have caused the auditors to make reference
to the matter in their reports.

These changes were filed with the SEC on Form 8-K.

PART III

ITEM 9.A. DIRECTORS AND EXECUTIVE OFFICERS, PROMOTERS, AND CONTROL PERSONS

Directors and Executive Officers. The Directors and Executive Officers of the Company are as
-------------------------------- follows:

Name Age Position
- --------------------- --- ----------------------------------------------------------------------
<S> <C> <C>

Dr. Kenneth D. Rogers 54 President, Director and Chairman of the Board, Managing Director and
Bountiful, Utah Chief Financial Officer
William H. Rogers 56 Secretary and Director, Managing Director and Chief Operations Officer
Salt Lake City, Utah
John H. Picken 49 Treasurer and Director, Managing Director and Chief Technical Officer
Salt Lake City, Utah

</TABLE>

The Directors of the Company hold office for three year terms with
one-third of their terms expiring at each annual meeting of the Stockholders
upon their successors being duly elected and qualified. J. H. Picken's term
expires at the next annual meeting (1994), and W. H. Rogers' and K. D.
Rogers' terms expire at the 1995 and 1996 annual meeting respectively. The
Company presently has an executive committee and an audit committee, both
comprised of K. D. Rogers, W. H. Rogers and J. H. Picken. No family
relationships exist between or among Directors and officers of the Company,
except that Dr. Kenneth D. Rogers and William H. Rogers are brothers.

The background and principal occupations of each director and officer of
the Company are as follows:

Dr. Kenneth D. Rogers has been the Chairman, President and a Director of
the Company since 1986; and a -Director of NorTel CCI, Inc., a private
consulting and investment company --and certain of its predecessor entities
since 1980. His education includes a B. Comm. (1961), M.B.A. (1963), and Ph.D
(1966), all in business administration. He has thirty years of diversified,
senior level business experience.

Mr. William H. Rogers has been the Secretary and a Director of the
Company since April, 1986; and a Director of NorTel CCI, Inc. a private
consulting and investment companies, and certain of its predecessor entities
since 1980. His education includes a B.A. (1961) and numerous post graduate
level courses in economics, political science, and law. He has thirty years
of diversified senior level business experience.

Mr. John H. Picken has been the Treasurer and Director of the Company
since 1989; Di-rector of Lynbrook Centroamerica S.A., a mine operations
company since 1984 and Los Colig-alleros S.A., an investment holding company;
- --a Director of NorTel CCI, Inc. a private investment and consulting company,
and certain of its predecessor entities since 1985--. His education includes
a B.S. in Engineering (1968). He has fifteen years experience in technical
operations and management of large scale resource projects, and eight years of
diversified general business management experience, including ten years of
international business experience.

Other Officers. The following three persons are officers of
---------------
subsidiaries, are not executive officers of the Company and are included in
the compensation group:

Mr. Gary L. Jensen - Vice President of Programming and Product
Development of NorTel-US or its predecessor entities since mid-1989. Mr.
Jensen (age 56) has a B.S. Degree from Brigham Young University and a
Technical Degree from the Devry Institute of Technology. Mr. Jensen has had
more than 15 years, senior level experience in the programming, installation,
and implementation of computerized long distance networks and billings system
and other telecommunications and electrical applications. Mr. Jensen resides
in North Salt Lake, Utah.

Mr. Robert C. Stenquist - Assistant Secretary and Chief Accountant of
NorTel-US or its predecessor entities since early 1989. Mr. Stenquist (age
66) attended Weber State University in Utah and the University of Utah
studying accounting and economics. His business background includes nineteen
years banking including ten years of auditing; and from 1982 to 1989 as an
administrator and loan officer in the securities and mortgage finance
businesses respectively, with other concerns. He supervises the accounting
function in the Company's corporate office, Salt Lake City, Utah. He resides
in North Salt Lake, Utah.

Mrs. Vicki L. Poelman - Vice President, General Manager and a director of
COOP Communications, Inc. since its formation in April 1992. From 1988 to
1992, Mrs. Poelman (age 51) was Executive Vice President of COOP Business
Services, Inc. the Provo, Utah based telephone reseller and rebiller from
which the Company acquired the Customer list used to develop the business of
it subsidiary, COOP Communications, Inc. She resides in Provo, Utah.

Involvement in Certain Legal Proceedings. The Company's three Directors,
K. D. and W. H. Rogers and J. H. Picken were Directors and executive officers
of TravelTel, Inc., a former subsidiary of the Company, when it went into
Chapter 11 Bankruptcy on January 29, 1993. Gary L. Jensen, and Robert C.
Stenquist were also involved in TravelTel, Inc. in capacities similar to those
they hold for the Company. Since the fiscal year end the Company's three
directors have been formally charged with aiding approximately 700 Canadians
evade Canadian income taxes for 1986 and 1987. The proceedings are in
Edmonton, Canada when they commence.

Long Term Control. The Company's three Directors have long term (12
years) management contracts via NorTel CCI, Inc., and are parties to the
Earn-Out Preferred Shares Agreement. See "Amended Managers Agreement" and
"Earn-out Preferred Share Agreement." The Provisions of these agreements make
it very likely that the three existing Directors will be in absolute control
of the Company for at least twelve (12) years. The Company intends these
agreements to correlate the interests of the managers and certain others
including NorTel CCI, Inc., with those of the other shareholders, and to
define the earnings targets the Company expects them to achieve for the mutual
benefit of the other shareholders, the Company, and themselves. However,
there is no certainty that as the Company and its environment changes, or the
affairs of the Directors change (example the Canadian income tax evasion
charges) that differences in these interests may arise. In addition, if the
existing management is not leading the Company as other shareholders might
wish, the existing management will be very difficult to remove. These
contracts were not entered into in arm's length negotiations. See "Certain
Relationships and Related Transactions" and "Executive Compensation."

ITEM: 9.B COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT

The Company is unaware of any filings relating to insider trading or
otherwise required of Directors, Officers or holders of 10% of the Company's
shares that have not been made. NorTel CCI, Inc. and some of the parties
transacting with it in July 1994, were probably required to report in August,
but to the Company's knowledge have not yet done so.

ITEM 10. EXECUTIVE COMPENSATION

General. No executive officer or other officer of the Company received
cash compensation, paid or accrued, exceeding $60,000 during its fiscal years
ended June 30, 1992, June 30, 1993, or June 30, 1994. Pursuant to the Amended
Managers Agreement, the Company has agreed to pay each of the three Directors
as the senior officers more than this amount, but to date the majority of
their agreed compensation has been waived. The Directors have not been
compensated for any previous meetings of the Board of Directors. Specific
plans to compensate the Directors have been established at $100 per month
each, but to date, these have been waived by all Directors.

All executive officers and Directors of the Company and the three
officers of subsidiaries as a group (six persons), in all capacities during
its fiscal year ended June 30, 1994, received the aggregate amount of
compensation of $244,600 (June 30, 1993 - nine persons $168,600), paid or
accrued, from the Company and its subsidiaries. The amount shown excludes
funds expended by the Company or reimbursed to such persons for expenses, some
of which may be personal benefits. The Company is unable to determine,
without unreasonable effort or expense, the extent to which such benefits may
be personal, if at all, and after reasonable inquiry, has concluded that the
aggregate amount, if any, of personal benefits does not exceed the lesser of
$25,000 or 10% of the cash compensation for any one person, or with respect to
the group does not exceed the lesser of $25,000 times the number of persons in
the group or 10% of the aggregate cash compensation reported for the group.

Benefit Plans. The Company does not have a pension plan, retirement
--------------
plan, profit sharing plan or similar existing benefits for its Directors,
officers, or employees, except pursuant to the "Earn-out Preferred Share
Agreement" described below. The Company has a stock option plan which
provides options to purchase the Common Stock of the Company to its Directors,
executive officers, and the other employees. In that regard, as of June 30,
1994, there were outstanding stock options and warrants to purchase the Common
Stock of the Company that were held by five of the above six persons, as
described below:

EXERCISE

SECURITY OF NUMBER PRICE
NAME THE COM-PANY OF SHARES (CDN $) EXPIRATION DATE
- ------------------------- ------------ --------- -------- ---------------

Gary Jensen (2) Options 6,500 $ 4.90 March 1, 1996
John H. Picken (2) Options 37,889 $ 6.10 June 29, 1997
Dr. Kenneth D. Rogers (2) Options 13,872 $ 5.60 June 29, 1995
William H. Rogers (2) Options 37,888 $ 6.10 June 29, 1997
Bob Stenquist (2) Options 2,000 $ 4.90 March 1, 1996
---------
Total Group of 6 98,149
- ------------------------- =========

</TABLE>

(1) The number of shares and exercise price of options and warrants have been
adjusted to reflect the one-for-ten reverse split of the Common Stock of the
Company on May 11, 1992.

(2) See "Directors, Executive Officers, Promoters & Control Persons" for a
description of the role of these persons in the Company. The balance of the
group of six persons referred to above under "Cash Compensation" hold no
Options or Warrants except as set forth under "COOP Customers List." Other
employees have options under the same plan.

COOP Customer List. Pursuant to an agreement effective March 26, 1992,
as amended July 15, 1993, the Company agreed to pay a company wholly owned by
the direct family of Vicki Poelman for a Customer List, an amount in Company
Common Stock at $10.00 per share (solely for the purpose of this agreement -
but approximated the VSE market price at the time). The amount was to be the
net income of the Company's wholly owned subsidiary, COOP Communications,
Inc., for the forty (40) month period from April 1, 1992 to June 30, 1995 and
may be between nil and $500,000. To date, the net income from the Customer
List (the COOP subsidiary) has been negligible. The agreement was terminated
by mutual consent of the parties without expense to the Company.

Amended Managers Agreement. The Company has contracted with NorTel CCI,
Inc., on a cash fee and Earn-out share performance basis the full-time
services of the Company's three Directors and executive officers (Kenneth D.
Rogers, William H. Rogers and John H. Picken) until December 31, 2005. The
contract increases or decreases the monthly cash fees as the Company is doing
better or worse respectively. The Company may accrue the fees or defer
payment of cash in times of cash shortages. The agreement provides for a
minimum of $4,000 per month of cash fees per manager and a maximum of $15,000.
This contract was amended effective April 1, 1994; and up to June 30, 1994,
the minimum has been waived. The agreement grants these three persons the day
to day authority, responsibility, and accountability for all decisions of the
Company. The agreement ties to the Earn-out Preferred Share Agreement (see
below) pursuant to which the participants thereof have agreed to vote as a
pool (via NorTel CCI, Inc.) To insure continued directorships and control of
the Company by existing NorTel CCI, Inc. And thereby the three Directors for
at lease twelve years.

The Amended Managers Agreement and Earn-out Preferred Share Agreement
both encourage and allow the participants to add to the management team. This
is intended to increase the likelihood that the Earn-out levels are achieved
and to enable the existing participants to add other people to share in the
rewards of achieving a higher percentage of the potential Earn-out or
Performance Shares. It is the current intentions of the Company and its
existing Directors to use their best efforts to add others to the management
Earn-put group. Discussions are currently in process with certain existing
employees and others, but no agreement can be assured at this time.

Earn-Out Preferred Share Agreement. This agreement is between the three
----------------------------------
Directors of the Company (the "Managers"), the Company, NorTel CCI, Inc., the
registered owner of all the 3.3 million Class A Series 1 Preferred Shares (the
"Earn-out Preferreds"), the three Directors of the Company, and Barbara
Rogers, wife of K.D. Rogers, Nancy Picken, wife of J. H. Picken and 97704
Canada Ltd., a Rogers controlled company. Each share of Earn-out Preferred
Stock has one (1) vote. See "Dilution, Capitalization & Description of
Capital Stock." The agreement pools the 3.3 million votes of the outstanding
3.3 million Earn-out Preferreds, giving the participants in the Earn-out
Preferred Share Agreement (other then the Company), as a group, the absolute
control over the Company. The Earn-out Preferreds are owned (registered) 100%
by NorTel CCI, Inc. The Earn-out Preferreds were paid for by three equal
Promissory Notes, each of which is signed jointly by NorTel CCI, Inc. and one
of the three Managers. The Notes are due on or before December 31, 2005,
without interest and will be canceled if bonuses to pay for conversion are not
earned. See "Security Ownership of Certain Beneficial Owners and Management."

The Earn-out Preferreds are convertible into Common Stock if the Notes
are paid in cash or based on an Earn-out formula. The conversion is
progressively more difficult to earn. As conversion is earned, each of the
Earn-out Preferreds may be converted into ten Common Shares. The Company is
obligated to pay a bonus to the Managers or NorTel CCI, Inc. in an amount
sufficient to pay for that portion of the Notes which related to those
Earn-out Preferreds for which conversion has been earned. Any portion of the
Notes not paid in cash or paid through the earning of conversion prior to the
December 31, 2005, is to be canceled along with the related Earn-out
Preferreds.

The Earn-out formula is based on criteria, established for management
Performance Shares, by the British Columbia Securities Commission (Policy
3-07); the authority for the jurisdiction where the Company was incorporated
at the time the original Preferred Share Agreement was entered into. The
number on a prorated basis of the 3.3 million Common Shares to which some or
all of the Earn-out Preferreds may be converted on a one (1) Earn-out
Preferred for one (1) Common Share basis is equal to the "Cumulative Cash
Flow" of the Company divided by an Earn-out Factor, namely four times the
square of the Performance Share Percentage, expressed as a decimal. The
Performance Share Percentage is the percentage that the portion of the
Earn-out Preferreds or Performance Shares being evaluated as being earned is
of the number of Common Shares then outstanding, including the Earn-out shares
which are being earned at the Cumulative Cash Flow Level. "Cumulative Cash
Flow" is a term defined in the Earn-out Preferred Share Agreement, and is
calculated as follows: Net income (loss) plus (1)description and
amortization; (2) increases in bad debt or equivalent reserves; (3) accrued
interest on debt if the amount accumulates; (4)expended research and
development costs; (5) write-downs or write-offs of assets or other similar
non-cash reductions of net income.

The Earn-out Preferred Share Agreement amended or replaced the Preferred
Share Agreement effective April 1, 1994, and split the Earn-out Preferreds on
a ten (10) for one (1) basis. More than 700,000 Earn-out Preferreds had
earned convertibility to Common Shares by March 31, 1994, and the right to a
$700,000 bonus from the Company to pay the related Notes owing to the Company.
As part of the Lynbrook Settlement Agreement these 700,000 Earn-out
Preferreds and the related conversions right and bonus were redeemed by the
Company. The Notes for the remaining 3.3 million shares remain at $4.0
million and the future Earn-out calculations will be made after deducting the
Cumulative Cash Flow necessary to earn the convertibility for the 700,000
shares that are canceled.

If the number of Common Shares is greater, the amount of Cumulative Cash
Flow needed to earn convertibility is less, but the Earn-out participants
would collectively own a proportionally smaller percentage of the Company.

ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

Principal Shareholders of Common Shares The following table sets
-------------------------------------------
forth each shareholder owning 10% or more of the Company's Common Stock, and
the aggregate ownership of the Company's Common Stock by the group of nine
officers and Directors set forth above as a group, as of June 30, 1994. No
shareholder owns 10% or more of the shares. See Note (2) to table below.
None of these persons other than the three Directors own shares.

PERCENTAGE OF
NUMBER OF OUTSTANDING
NAME SHARES OWNED COMMON STOCK
------------ --------------
<S> <C> <C>

John H. Picken, Salt Lake City, UT (1) 64,317 2.1%
Kenneth D. Rogers, Bountiful, UT (1) 15,406 0.5%
William H. Rogers, Salt Lake City, UT(1) 15,407 0.5%
- ---------------------------------------- ------------ --------------
95,130 3.1%
------------ --------------
Total

</TABLE>

Voting - Common and Preferred Shares. Subject to either payment of
---------------------------------------
$1.00 per Earn-out Preferred Share or certain "Earn-out" or "earnings
performance", the Company's 3.3 million outstanding Class A Preferred Shares
Series 1 (the "Earn-out Preferreds") are convertible into up to 3.3 million
Common Shares prior to December 31, 2005, and are entitled to 3.3 million
votes until then. Including the Earn-out Preferreds, and the 3,023,132
outstanding shares, significant share holdings in terms of voting authority
are as follows:

OWNER TYPE OF SHARE VOTES (4) % OF VOTES
- --------------------------------------------- ------------- ----------- -----------
<S> <C> <C> <C> <C>
3 Directors as a Group (see table above) common 95,130 1.5%
NorTel CCI, Inc. (1) (2) preferred -3,300,000 51.5%
NorTel CCI, Inc. (4) common 516,951 8.1%
----------- -----------
Total of above Preferred and Common Votes (5) 3,912,081 or 61.1%
- --------------------------------------------- ----------- -----
<FN>
(1) NorTel CCI, Inc., is a Utah corporation in which the Directors of the
Company and their families collectively own sufficient interests that NorTel
CCI, Inc. is related to the Company. The CCI Preferreds include Warrants to
buy 440,000 Common Shares at $1.00 per share.
(2) See "Certain Relationships and Related Transactions" for disclosure of
indirect minority interest of certain Directors in NorTel CCI, Inc.
(3) See "Earn-out Preferred Share Agreement" under "Executive Compensation"
above for disclosure of the control of the Company by the existing Directors
and certain others. To the extent the conversion of the Earn-out Preferreds is
achieved, a major portion, and possibly all of the resulting Common Shares
will become beneficially owned by the management that achieves the Earn-out.
At this time, the only participating managers are the Company's three
Directors.
(4) The Earn-out Preferreds have these votes at this time and are
convertible to this same number of shares of Common Stock. See "Earn-out
Preferred Share Agreement" in the preceding section.
(5) 3,912,081 voting rights of the listed parties is 61.1% of 6,323,132 total
voting rights.
</TABLE>

ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

Earn-out Preferred Share Agreement. The ownership of all 3.3 million
------------------------------------
of the Secured, Participating Class A Preferred Shares - Series 1 (the "CCI
Preferreds") by NorTel CCI, Inc., itself, makes NorTel CCI, Inc. "related" to
the Company in that it owns more than 10% of the voting control of the
Company. All of the Company's Directors have interests in NorTel CCI, Inc.
and were parties to, and expect to benefit from, this agreement as were 97704
Canada Ltd. (66 2/3% owned by the family holding companies of K.D. & W. H.
Rogers), Barbara Rogers (wife of Kenneth D. Rogers, Director), and Nancy
Picken (wife of John H. Picken, Director). See "Earn-out Preferred Share
Agreement" under "Executive Compensation."

Amended Management Agreement. The Company's three Directors, Kenneth
------------------------------
D. Rogers, William H. Rogers, and John H. Picken, were all parties to and
expect to benefit from this agreement. See "Executive Compensation." This
agreement is tied to the Earn-out Preferred Share Agreement and together they
give these three persons control over the Company for 12 years, along with a
very large ownership/share incentive in the form of Earn-out or performance
shares (the "Earn-out Preferreds"). This contract was not entered into in
arm's length negotiations. See "Amended Managers Agreement" under "Executive
Compensation."

NorTel CCI, Inc.. NorTel CCI, Inc. ("CCI") is a Utah corporation with
-----------------------------------
registered offices at 136 East South Temple, Suite 2150, Salt Lake City, Utah,
84111-1125. CCI was formerly an inactive subsidiary of the Company, which was
transferred to the current owners, including the Company's Directors and
officers, including the share holdings in the Company held by CCI. Because of
the interests of the Directors and officers in CCI, CCI is related to the
Company. Pursuant to agreements with related parties (non-arm's length), CCI
has replaced a variety of related and other parties that previously had
various agreements or involvements with the Company, as summarized below:

1.Pursuant to the "Notes" - CCI Preferreds Exchange Agreement effective April
1, 1994, and subject to the Company raising an additional $750,000 (net) of
equity, CCI will become the registered and beneficial owner of 44,000 shares
($440,000 worth) of Class B Preferred Stock (the "CCI Preferreds") and
Warrants to buy 440,000 Common Shares at $1.00 (US) per share at anytime prior
to June 28, 1999, in exchange, in part for the $441,079 of Notes due, directly
and indirectly, by the Company to CCI.

2. Pursuant to the Lynbrook Settlement Agreement effective April 1, 1994, and
otherwise the $1.0 million debt due by Lynbrook Corporation N.V. ("Lynbrook")
to the Company in respect to the Earn-out Preferreds, and the similar Notes
from Espinar Ltd ($1,000,000) and Yorkdale Financial Corporation ($2,000,000)
have been replaced by $4.0 million of Notes on the same terms. The three new
Notes for $1-1/3 million each, are each signed jointly by CCI and one of the
three Directors of the Company. The number of Earn-out Preferreds was split
on a ten (10) for one (1) basis and then was reduced to 3.3 million shares
with 3.3 million votes and convertible to 3.3 million Common Shares. Lynbrook
and others transferred approximately 500,000 shares of the Company's Common
Stock to CCI, and the Company and CCI agreed, subject to the Company raising
$750,000 of equity (net) to exchange part of Lynbrook's Notes payable to the
Company for a Promissory Note payable from CCI in the amount of $400,000.

3. Pursuant to the Lynbrook Settlement Agreement and otherwise, Lynbrook sold
to the Company its 5.0% of Paid Billings, in excess of $250,000 per month,
over-riding royalty interest or residuals interest on international revenues
to the Company (the "Over-riding Revenue Interest") in exchange for, or paid
by, the return to Lynbrook of the balance of its Notes payable to the Company.
Although the Company benefits greatly from the elimination of its obligation
to pay $700,000 of bonuses and the elimination (redemption) of 700,000 of the
Earn-out Preferreds (set forth in Item 2 above) because the Notes to pay for
the Earn-out shares are still $4.0 million, the Company has not booked any
asset amount or equity reduction for these transactions related to the
Earn-out Preferreds. The Company has booked the purchase of the Over-riding
Revenue Interests for $1.34 million, the amount of all the former Lynbrook
debt to the Company except the $400,000 which is to be replaced by a Note from
CCI after the Company has raised an additional $750,000 of equity (net), and
the Notes for the Earn-out Preferreds, and $40,000, providing the Company with
slightly more than the remaining net book value of those assets.

4. Pursuant to the Lynbrook Settlement Agreement, Lynbrook acquired all of the
Company's remaining mining assets for $40,000, providing the Company with
slightly more than the remaining net book value of those assets.

By virtue of the above and related agreements, Lynbrook, Espinar Ltd, and
Yorkdale Financial Corporation are expected to no longer be either creditors
or debtors of the Company, and own little, if any, Common Stock of the Company
and therefore will not be relevant related parties. Reference is hereby made
to the 1993 Annual Report in Form 10K for past transactions with these
entities.

PART IV

ITEM 13. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K

The following documents are filed as a part of this Annual Report:

(a) Financial Statements Page

(1) Independent Auditors' Report relating to:

Consolidated Balance sheets - June 30, 1994 and 1995
Consolidated Statements of Operations - Years ended June 30, 1994
and 1995
Consolidated Statements of Stockholders' Equity - Years ended June
30, 1994 and 1995
Consolidated Statement of Cash Flows - Years ended June 30, 1994 and
1995
Notes to Consolidated Financial Statements

(2) Independent Auditors' Report relating to:

Consolidated Balance Sheet - June 30, 1993.
Consolidated Statement of Operations - Year ended June 30, 1993.
Consolidated Statement of Stockholder's Equity - Year ended June 30,
1993.
Consolidated Statement of Cash Flows - Year ended June 30, 1993.
Notes to Consolidated Financial Statements - Year ended June 30,
1993.

(b) Financial Statement Schedules

Financial statement schedules have been omitted for the reason that
they are not required or are not applicable, or the required information is
shown in the financial statement notes thereto.

The exhibits filed as part of this report are as follows:

(1) Underwriting Agreement: Agreement dated October 20, 1993, between the
----------------------
Company and American Trading & Investment, Inc. to underwrite up to $5.0
million of 9.0%, four year convertible Secured Notes (guaranteed by a surety
company) with Warrants, to buy common shares. Filed with the Securities and
Exchange Commission as an exhibit, numbered (1), to the annual report of
Registrant on Form 10-K for the year ended June 30, 1993, which exhibit is
incorporated herein by reference.

(3) Articles of Incorporation and By-Laws: Articles of Incorporation and
-------------------------------------
By-Laws, filed as Item 19B Rev. 1 in Form 8 Securities and Exchange Commission
Report - Amendment No. 2 and 3, and incorporated herein by this reference.
Filed with the Securities and Exchange Commission as an exhibit, numbered (2),
to the annual report of Registrant on Form 10-K for the year ended June 30,
1993, which exhibit is incorporated herein by reference.

(4) Instruments Defining the Rights of Security Holders, Including
---------------------------------------------------------------------
Indentures:
----------

4.1 Agreement dated October 28, 1992, between Shelton Financial, Inc. and the
Company for Secured Promissory Note and related Security Agreement and
warrants to buy common shares with amendment letter dated April 26, 1993, with
additional warrants. Filed with the Securities and Exchange Commission as an
exhibit, numbered 4.1, to the annual report of Registrant on Form 10-K for the
year ended June 30, 1993, which exhibit is incorporated herein by reference
4.2 Secured Note of the Company dated March 5, 1993 in favor of Herman
Meinders, in the amount of $100,000, due December 31, 1996, as amended to
December 31, 1993, and related Guarantee Bond, issued by Certified Surety
Group, Ltd. The note includes warrants to buy 12,500 common shares of the
Company at $4.00 U.S. per share until December 31, 1994. Additional Secured
Notes on essentially the same terms as the foregoing are as follows:
<TABLE>
<CAPTION>

Current Secured Noteholder Amount Original Note Date Warrants in Shares
- ----------------------------------- -------- ------------------ ------------------
<S> <C> <C> <C>

BancOklahoma Trust Company, Trustee $450,000 December 31, 1992 56,250
Southwest Securities, Inc. $ 50,000 January 30, 1993 6,250
Marguerite Colton $ 25,000 March 16, 1993 3,125
==================
Total including Meinders 78,125
------------------
</TABLE>

Additional Secured Noes on very similar terms are as follows:
<TABLE>
<CAPTION>

Current Secured Noteholder Amount Original Note Date Warrants in Shares
- ------------------------------------------------ ------- ------------------ ------------------
<S> <C> <C> <C>

Earle F. Waters, Trust #25002570 (1) $25,000 September 17, 1992 3,000
Earle F. Waters and Eleanor M. Waters, Trust (1) $25,000 September 17, 1992 3,000
==================
Total 6,000
------------------
<FN>
(1) These warrants are at $5.00(CDN) per share and expire on September 7,
1997
</TABLE>

Filed with the Securities and Exchange Commission as an exhibit, numbered 4.2,
to the annual report of Registrant on Form 10-K for the year ended June 30,
1993, which exhibit is incorporated herein by reference.

4.3 General Indemnity Agreement dated December 20, 1993 between the Company
and Certified Surety Group Ltd. the surety company which guaranteed the
$675,000 of Secured Notes that are outstanding. Filed with the Securities and
Exchange Commission as an exhibit, numbered 4.3, to the annual report of
Registrant on Form 10-K for the year ended June 30, 1993, which exhibit is
incorporated herein by reference.

4.4. Preferred Share Agreement dated June 14, 1993 between the Company and
97704 Canada Ltd and Barbara J. Rogers, William H. Rogers, Kenneth D. Rogers,
John H. Picken, Lynbrook Corporation N.V., Yorkdale Financial Corporation, and
Espinar Ltd. Filed with the Securities and Exchange Commission as an
exhibit, numbered 4.4, to the annual report of Registrant on Form 10-K for the
year ended June 30, 1993, which exhibit is incorporated herein by reference.

4.5 Employee Options Agreement dated May 11, 1990, between the Company and in
favor of Leonard MacMillan, in the amount of 30,000 Optioned Shares at a price
of $1.55 CDN and exercisable on or before January 26, 1995, (which after the
May 11, 1992, consolidation and the price change noted below is for 3,000
shares at $5.60 filed with Form 8, Item 19 (1) (b) (5) and along with the
following Option Subscription Agreements on the same terms as the foregoing
and outstanding on June 30, 1993:

Date of Number of Purchase Price
Employee Name Agreement Shar-es(2) Per Unit CDN
- ------------------------ ------------ ---------- --------------
<S> <C> <C> <C>
Kenneth D. Rogers May 11, 1990 13,872 $ 5.60
Curt Huber May 11, 1990 3,000 $ 5.60
Marv Livingston (1) May 11, 1990 3,000 $ 5.60
Sandy Valckx May 11, 1990 3,000 $ 5.60
- ------------------------ ----------
Total June 30, 1993 (in 25,872
==========
cluding MacMillan)
Total (not canceled) in 22,872
----------
cluding MacMillan
<FN>
(1) Subsequently canceled as these persons are no longer employees or
directors. (2) Options originally granted on the same terms as the forgoing
to Sue Gallagher (3,000 shares), John Merko (3,000 shares), and Sam Winrob
(3,000 shares at $15.50 CDN), Ron Livingston (3,000 shares), Kevin Gowland
(3,000 shares), and Jerry Walliser (3,000 shares) were canceled prior to June
30, 1993 as these persons were no longer employees or directors.
</TABLE>

4.6 VSE approval to reduce to price of options from $1.55 to $0.56 for all
persons in number 4.5 except Sam Winrob who remains at $1.55. Filed with the
Securities and Exchange Commission as an exhibit, numbered 4.6, to the annual
report of Registrant on Form 10-K for the year ended June 30, 1993, which
exhibit is incorporated herein by reference.

4.7. Option Subscription Agreements dated March 1, 1991, between the Company
in favor of Bob Stenquist for 20,000 Optioned Shares at $0.49 CDN on or before
March 1, 1996, (which after the 10 for 1, the May 11, 1992, consolidation
became 2,000 shares at $4.90, along with the following Option Subscription
Agreements on the same terms as the foregoing are filed with Form 8, Item 9
(1) (b) (8):

Date of Number of Price Per
Employee Name Agreement Shares(3) Unit CDN
- ----------------------------------------- ------------- ---------- ----------
<S> <C> <C> <C>
Mike Root (1) March 1, 1991 2,000 $ 4.90
Russ Sorensen March 1, 1991 5,000 $ 4.90
Gary Jensen March 1, 1991 6,500 $ 4.90
Lucky Janda March 1, 1991 10,000 $ 4.90
David Marshall (1) March 1, 1991 2,000 $ 4.90
Alan Cornwall (1) March 1, 1991 10,146 $ 4.90
Richard Buchli March 1, 1991 500 $ 4.90
- ----------------------------------------- ----------
Total June 30, 1993 (including Stenquist) 38,146
==========
Total not canceled (including Stenquist) 24,000
----------
<FN>
(1) Subsequently canceled as these persons are no longer employees or
directors. (2) Reflects consolidations. (3) Options originally granted on
the same terms as the foregoing to Perry Porter (500 shares), Debbie Lucero
(Williams)(500 shares), Marvin Nielson (3,000 shares), Jim Ormsbee (3,000
shares), Rick Bennett (2,000 shares) were canceled prior to June 30, 1993, as
these persons were no longer employees or directors.
</TABLE>

4.8 Stock Option Agreements dated June 29, 1992, between the Company,
Williams H. Rogers and John H. Picken for 37,888 and 37,889 (after
consolidation) options for shares respectively at $6.10 CDN, filed with Form
8, Item 19 (1) (b) (19) and are incorporated herein by this reference.
Options for 10,000 shares granted as above for George E. Davis was canceled on
after June 30, 1993, as he was no longer a director.

(9) Voting Trust Agreement: No specific Voting Trust Agreement exists, but
----------------------
the Preferred Share Agreement includes features obtain to a Voting Trust
Agreement. See Preferred Share Agreement, this Item, Exhibit 4.4 as
referenced above in "Instruments Defining the Rights of Security Holders,
Including Indentures".

(10) Material Contracts:
-------------------

10.1 NorTel Managers Agreement dated June 14, 1993, as amended to November
26, 1993, between the Company and William H. Rogers, Kenneth D. Rogers, and
John H. Picken, and filed as part of Form 8, Item 19 (b) (1) (20).

10.2 Agreement Service Agreement dated April 10, 1991 and March 30, 1993,
between the Company and Sprint for the purchasing of long distance services,
and filed as part of Form 8, Item 19 (b) (1) (20).

10.3 Wholesale Marketing Agreement dated February 5, 1992, between the
Company and One-2-One Communications, Inc. for the purchasing of long distance
services, and filed as part of Form 8, Item 19 (b) (1) (20).

10.4 Digital Switched Service Agreement dated October 23, 1991, between the
Company and U.S. West Communications, Inc. to supply the use of digital
exchange telecommunications service, and filed as part of Form 8, Item 19 (b)
(1) (20).

10.5 Master Agreement dated August 27, 1991, between the Company and
Intertoll Communications Network as a distributor of the Company's services in
Argentina, Brazil, and other South American countries, and filed as part of
Form 8, Item 19 (b) (1) (23).

(11) Statement Re Computation of Per Share Earnings:
----------------------------------------------------

(13) Annual Report to Security Holders, Form 10-Q or Quarterly Report to
-----------------------------------------------------------------------
Security Holders: Company Quarterly Reports dated September 30, 1992,
- -----------------
December 31, 1992, March 31, 1992, and Form 10-Q dated March 31, 1993.

(20) Other Documents or Statements to Security Holders:
-------------------------------------------------------

20.1 Private Placement Offering Memorandum for 9% Convertible Secured Notes
with Warrants dated December 24, 1992, between the Company and American
Trading & Investment, Inc. Filed with the Securities and Exchange Commission
as an exhibit, numbered 21.1, to the annual report of Registrant on Form 10-K
for the year ended June 30, 1993, which exhibit is incorporated herein by
reference.

20.2 Notice of Annual General Meeting of Members dated November 27, 1992.
Filed with the Securities and Exchange Commission as an exhibit, numbered
21.2, to the annual report of Registrant on Form 10-K for the year ended June
30, 1993, which exhibit is incorporated herein by reference.

(21) Subsidiaries of the Registrant: List of current and former
----------------------
subsidiaries.
- ------------

(99) Additional Exhibits:
----------------------

99.1 Republic of Costa Rica Mining Code, dated October 4, 1982, for the
granting and administration of exploration and exploitation permits for ore
deposits, filed with Form 18 as Item 19 (1) (b) (17) and incorporated herein
by this reference.

REPORTS ON FORM 8-K

No reports on Form 8-K were filed during the fourth quarter of the year ended
June 30, 1994.

<PAGE>

SIGNATURES

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

AMERICAN NORTEL COMMUNICATIONS INC.
(Registrant)

By: /S/ W. P. Williams, Jr. Date: November 18, 1996
--------------------------------------------------------------------------
W.P. Williams, Director and Chief Executive Officer

Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.

By: /S/ W. P. Williams, Jr. Date: November 18, 1996
--------------------------------------------------------------------------
W.P. Williams, Director and Chief Executive Officer

<PAGE>

CROUCH, BIERWOLF & CALL
Certified Public Accountants
50 West Broadway, Suite 1130
Salt Lake City, Utah 84101
[Letterhead]

INDEPENDENT AUDITORS' REPORT
----------------------------

To the Board of Directors of
American Nortel Communications, Inc.
and Subsidiary

We have audited the accompanying consolidated balance sheets of American
Nortel Communications, Inc. and subsidiary as of June 30, 1995 and 1994 and
the related consolidated statements of operations, cash flows and
stockholders' equity for the years then ended. These financial statements are
the responsibility of the Company's management. Our responsibility is to
express an opinion on these financial statements based on our audits.

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

In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of American
Nortel Communications, Inc. and subsidiary as of June 30, 1995 and 1994 and
the results of their operations and their cash flows for the years then ended
in conformity with generally accepted accounting principles.

The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Note 8, the
Company's lack of operations and lack of operating capital raise substantial
doubt about its ability to continue as a going concern. Management's plans in
regard to those matters are also described in Note 8. The financial
statements do not include any adjustments that might result from the outcome
of this uncertainty.

October 9, 1996
Salt Lake City, Utah

<PAGE>

AMERICAN NORTEL COMMUNICATIONS, INC. AND SUBSIDIARY

CONSOLIDATED FINANCIAL STATEMENTS

JUNE 30, 1995 AND 1994

<PAGE>

C O N T E N T S
<S> <C>
Independent Auditors' Report 3

Consolidated Balance Sheets 4

Consolidated Statements of Operations 5

Consolidated Statements of Stockholders' Equity 6

Consolidated Statements of Cash Flows 7

Notes to the Consolidated Financial Statements. 8

</TABLE>

<PAGE>

AMERICAN NORTEL COMMUNICATIONS, INC. AND SUBSIDIARY
Consolidated Balance Sheets

ASSETS
------
<TABLE>
<CAPTION>
June 30,
----------------------------
1995 1994
------------- -------------
<S> <C> <C>
CURRENT ASSETS

Cash (Note 1) $ 65 $ 26,930
------------- -------------

TOTAL ASSETS $ 65 $ 26,930
============= =============

LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------

CURRENT LIABILITIES
Accounts payable $ 77,819 $ 719,488
Note payable-related party (Note 6) - 365,444
Notes payable (Note 6) 675,000 734,000

Accrued interest 188,489 110,168
------------- -------------

Total Current Liabilities 941,308 1,929,100
------------- -------------

STOCKHOLDERS' EQUITY

Series A convertible preferred stock;
no par value; 50,000,000 shares
authorized; 3,300,000 shares
issued and outstanding 33,000 -

Common stock; authorized 30,000,000
common shares, no par value;
3,023,132 shares issued and
outstanding 20,143,157 20,143,157

Retained deficit (21,117,400) (22,045,327)
------------- -------------

Total Stockholders' Equity (941,243) (1,902,170)
------------- -------------

TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $ 65 $ 26,930
============= =============
</TABLE>

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

<PAGE>

AMERICAN NORTEL COMMUNICATIONS, INC. AND SUBSIDIARY
Consolidated Statements of Operations

For the Years Ended
June 30,
--------------------------
1995 1994
------------ ------------
<S> <C> <C>
Revenue $ 326,843 $ 2,404,083

Cost of sales 235,892 1,645,356
------------ ------------

Gross Profit 90,951 758,727

General and administrative expenses 470,178 1,153,479
------------ ------------

Operating income before reorganization items
and tax benefit (379,227) (394,752)
------------ ------------

Reorganization Items
Loss on abandonment and disposal of equipment (Note 2) - (2,697,281)
Loss on accounts and notes receivable (Note 5) - (865,491)
Loss of deposits (Note 3) - (36,679 )
Loss on note from subsidiary (Note 7) (4,517,717) -
-
------------ ------------

Total reorganization items (4,517,717) (3,599,451)
------------ ------------

Income/(Loss) before income tax (4,896,944) (3,994,203)

Income tax (Note 1)

NET LOSS $(4,896,944) $(3,994,203)
============ ============

WEIGHTED AVERAGE LOSS PER SHARE -
assuming full dilution $ (1.61) $ (1.41)
============ ============

AVERAGE SHARES OUTSTANDING 3,050,255 2,834,294
============ ============
</TABLE>

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

<PAGE>
AMERICAN NORTEL COMMUNICATIONS, INC. AND SUBSIDIARY
Consolidated Statement of Stockholder's Equity
The accompanying notes are an integral part of these financial statements.

Common Stock Preferred Stock Subscriptions Retained
Shares Amount Shares Amount Receivable Deficit
--------- ----------- --------- ------------ ------------ -------------
<S> <C> <C> <C> <C> <C> <C>
Balance at June 30, 1993 2,645,455 $19,654,964 400,000 $ 4,000,000 $(4,212,967) $(18,051,124)

Payments received on notes
receivable 212,967

Cancellation of preferred stock and
subscriptions receivable (400,000) (4,000,000) 4,000,000

Issuance of common stock for cash 377,677 488,193

Net Loss for year ended
June 30, 1994 (3,994,203)
--------- ----------- --------- ------------ ------------ -------------

Balance at June 30, 1994 3,023,132 20,143,157 - - - (22,045,327)

Remove investment in subsidiary 5,824,871

Issuance of preferred stock for services 3,300,000 33,000

Net Loss for year ended
June 30, 1995 (4,896,944)
--------- ----------- --------- ------------ ------------ -------------

Balance at June 30, 1995 3,023,132 $20,143,157 3,300,000 $ 3,300 $ - $(21,117,400)
========= =========== ========= ============ ============ =============
</TABLE>

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

<PAGE>
AMERICAN NORTEL COMMUNICATIONS, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS

For the Years Ended
June 30,
--------------------------
1995 1994
------------ ------------
<S> <C> <C>
Cash Flows From Operating Activities
Net Income/(Loss) $(4,896,944) $(3,994,203)
Less non-cash items:
Depreciation and amortization - -

(Gain)/Loss on reorganization items 5,824,871 3,301,489
Issuance of stock for services 33,000 -
Adjust cash for changes:
Increase (decrease) in payables (1,066,113) 44,428
Increase (decrease) in accrued expenses 78,321 (65,466)
------------ ------------

Net Cash from Operating Activities (26,865) (713,752)
------------ ------------

Net Cash from Investing Activities - -
------------ ------------

Cash Flows From Financing Activities
Issuance of common stock 488,193
Principal payments on long-term debt 212,967
------------ ------------

Net Cash from Financing Activities 701,160
------------ ------------

Net Increase (Decrease) in Cash (26,865) (12,592)

Cash at Beginning of Period 26,930 39,522
------------ ------------

Cash at End of Period $ 65 $ 26,93
============ ============

Supplemental cash flow information:

Cash Paid For:
Interest - $ 25,970

Income Taxes $ - $ -
</TABLE>

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

<PAGE>
AMERICAN NORTEL COMMUNICATIONS, INC. AND SUBSIDIARY
Notes to the Consolidated Financial Statements
June 30, 1995 and 1994

NOTE 1 -SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

a. Organization
------------

American Nortel Communications, Inc. (American Nortel) was originally
incorporated in Briti sh Columbia, Canada in May, 1992 and was
reincorporated in the state of Wyoming in February, 1993. American Nortel is
engaged in the telecommunications business as a value-added reseller and
rebiller in the long distance telephone business.

Nortel Communications, Inc. (Nortel) was incorporated in the state of Wyoming
on March 10, 1992.

The Company was concentrated in international markets, specifically South
America. During the summer of 1994, the Company was boycotted by a major
customer. Revenue declined abruptly and the Company was no longer able to
meet it's current obligations. The Company was unable to pay its primary
carrier and other creditors. This sequence of events led the Company to
petition for protection under Chapter 11.

On September 14, 1994, American Nortel and Nortel Communications, Inc. (a
wholly owned subsidiary of American Nortel) filed a petition under Chapter 11
of the Bankruptcy Code. The two companies originally filed a consolidated
petition, but American Nortel's bankruptcy petition was denied without
prejudice in February, 1995.

Nortel CCI, Inc. and COOP Communications, Inc. were wholly owned subsidiaries
for the period ended June 30, 1993. These subsidiaries were transferred to
former directors of the Company on July 1, 1994.

Nortel was acquired by Nortel CCI (a former subsidiary of American Nortel) on
June 27, 1995.

b. Basis of Presentation
-----------------------

The consolidated statements of operations include the accounts of American
Nortel Communications, Inc. and its wholly owned subsidiary, Nortel
Communications, Inc. The consolidated balance sheet as of June 30, 1994
includes the accounts of American Nortel Communications and its wholly owned
subsidiary Nortel Communications. The balance sheet as of June 30, 1995
includes the accounts of American Nortel. These entities are collectively
referred to as the Company. All significant intercompany balances have been
eliminated in consolidation.

c. Accounting Method
------------------

The Company's financial statements are prepared using the accrual method of
accounting. The Company has a June 30 year end for financial reporting
purposes.

d. Earnings (Loss) Per Share
----------------------------

The computations of earnings (loss) per share of common stock are based on the
weighted average number of shares outstanding at the date of the financial
statements. Preferred shares convertible into common shares are included in
the calculation.

AMERICAN NORTEL COMMUNICATIONS, INC. AND SUBSIDIARY
Notes to the Consolidated Financial Statements
June 30, 1995 and 1994

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

e. Income Taxes
-------------

Deferred income taxes result from temporary differences in the recognition of
accounting transactions for tax and financial reporting purposes. There were
no temporary differences at June 30, 1995 or 1994, accordingly, no deferred
tax liabilities or assets have been recognized for temporary differences.

No provision has been made in the consolidated financial statements for income
taxes because the Company has incurred losses since beginning operations in
the United States. At June 30 1995 and 1994 the Company has a domestic net
operating loss carryforward of approximately $9,800,000 and $4,800,000
respectively, which is available to offset future federal taxable income
through 2010. These carryforwards begin to expire beginning in 2008. The
Company no longer operates in Canada and does no expect any benefit from its
prior years net operating losses that were available to offset future taxable
income in Canada.

f. Cash and Cash Equivalents
----------------------------

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

NOTE 2 - PROPERTY AND EQUIPMENT

Property and equipment consisted of office equipment and computer equipment.
These assets were put into storage when the Company ceased operations in
December of 1994. The bankruptcy trustee is currently in the process of
selling the property and equipment. The estimated value is less than $10,000
due to the age of the equipment and its condition.

The costs of internally developed telecommunication software were capitalized
upon the establishment of technological feasibility. The capitalized costs
were written off in 1994 since the software was not completed and the
technology was deemed to be outdated.

NOTE 3 - DEPOSITS

Deposits consisted of vendor deposits, security deposits and credit card
deposits which were not returned to the Company. The Company was indebted to
these vendors more than the deposit amounts, consequently, the deposits were
offset against the payables.

<PAGE>
AMERICAN NORTEL COMMUNICATIONS, INC. AND SUBSIDIARY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1995 AND 1994

NOTE 4 - BANKRUPTCY

On September 14, 1994, Nortel Communications, Inc. (the "Debtor") filed a
voluntary petition for relief under Chapter 11 of the federal bankruptcy laws
in the United States Bankruptcy Court for the Central District of Utah. The
case was converted to a Chapter 7 proceeding on March 3, 1995 and a trustee
was appointed on April 3, 1995. Since his appointment, the trustee has been
investigating the Debtor's financial affairs and transfers made by the Debtor
prior to its bankruptcy filing. The trustee has made demand on several
creditors for return of preferential payments pursuant to the United States
Code, Section 547. At the date of this audit, the proceedings were still
active and the bankruptcy trustee was in the process of determining and
collecting on fraudulent and preferential transfers.

NOTE 5 - NOTES RECEIVABLE

The Company wrote off $624,495 of notes receivable in fiscal year 1994 due to
uncollectibility. Approximately $424,495 of the notes were from Lynbrook
Corporation, N.V. (Lynbrook), a Netherlands Antilles company which is
currently out of business. The balance of the notes, $200,000 were from
Nortel CCI, a previously wholly owned subsidiary which is currently inactive.
The note was considered uncollectible and written off.

NOTE 6 - NOTES PAYABLE

<TABLE>
<CAPTION>
1995 1994
<S> <C> <C>
Promissory notes to directors and
officers; 12% interest per annum;
due July 31, 1995. $ - $365,444
-------- --------

Total notes payable to related parties $ - $365,444
======== ========

Promissory note, 12% interest per
annum; unsecured; due July 31, 1995. - $ 35,000

Promissory note to employee; no
interest rate; unsecured; due on demand. - 24,000

Convertible secured notes; 9% interest
per year in first year, 18.2% thereafter;
interest payable quarterly; secured by
guarantee bond. 675,000 675,000
-------- --------

Total Notes Payable $675,000 $734,000
======== ========
</TABLE>

The notes to related parties bear interest at 1% per month or, if higher, the
interest rate the Company pays to third party lenders. The notes require
that, after certain priority payments, 50 percent of the proceeds of any
underwriting or private placement on securities to be used to pay the notes.

AMERICAN NORTEL COMMUNICATIONS, INC. AND SUBSIDIARY
Notes to the Consolidated Financial Statements
June 30, 1995 and 1994

NOTE 7 - LOSS ON NOTES RECEIVABLE FROM SUBSIDIARY

American Nortel had an intercompany receivable from Nortel during fiscal year
1995. This amount is uncollectible since Nortel is in bankruptcy.

NOTE 8 - GOING CONCERN

The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. The Company has had substantial
operating losses for the past years mostly attributable to the loss of major
customers and the subsequent bankruptcy of its operating subsidiary.
Management plans to return to the telecommunications business by selling
prepaid long-distance telephone cards

NOTE 9 - COMMITMENTS AND CONTINGENCIES

Claims have been asserted and threatened against the Company by note holders
claiming the Company is in default on payments. The total amount of the notes
is $575,000 plus interest. The Company is in the process of negotiating
settlements.

Shareholders have asserted claims that stock they paid for was never issued.
The Company's records indicate that payments were received, however, there is
some dispute regarding the issuance of the shares. The total amount paid for
the stock was $101,007. and the number of shares in question are 65,100.
These shareholders came forward on their own, no attorneys are involved and no
legal action has yet been taken.

Several claims have arisen over the non-payment of notes. Certified Surety
Group, Ltd. (Certified) issued guarantee bonds as security for these notes. A
claim has been made for payment totaling $50,000 plus interest accruing at
$562.50 per quarter. A second claim for the remainder of the notes has been
made.

NOTE 10 - EQUITY

Preferred Stock
- ----------------

On June 27, 1995, 3,300,000 shares of series A convertible preferred stock was
issued to an officer/shareholder of the Company for services rendered.

The shares have no preference as to dividends or liquidation over common
shares. Each share is entitled to one vote. Each share is convertible to one
share of common stock after the common stock has averaged more than $1.00 for
thirty consecutive trading days on the NASD OTC bulletin board.

<S> <C>

<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted
from a Form 10-KSB and Balance Sheet Statements and is qualified
in its entirety by reference to such Form N-KSB and Financial
Statements.
</LEGEND>
<MULTIPLIER> 1
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> JUN-30-1994
<PERIOD-END> JUN-30-1994
<CASH> 26,930
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 26,930
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 26,930
<CURRENT-LIABILITIES> 1,929,100
<BONDS> 0
0
0
<COMMON> 20,143,157
<OTHER-SE> (22,045,327)
<TOTAL-LIABILITY-AND-EQUITY> 26,930
<SALES> 2,404,083
<TOTAL-REVENUES> 2,404,083
<CGS> 1,645,356
<TOTAL-COSTS> 6,398,286
<OTHER-EXPENSES> 3,599,451
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (3,994,203)
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 3,599,451
<CHANGES> 0
<NET-INCOME> (3,994,203)
<EPS-PRIMARY> (1.41)
<EPS-DILUTED> (0.63)

</TABLE>