AMERICAN NORTEL COMMUNICATIONS INC, 10KSB, 1998-12-21

AMERICAN NORTEL COMMUNICATIONS INC
10KSB, 1998-12-21
TELEPHONE & TELEGRAPH APPARATUS

Previous: AMERICAN NORTEL COMMUNICATIONS INC, 10QSB, 1998-12-21

Next: AMERICAN NORTEL COMMUNICATIONS INC, 10KSB, 1998-12-21

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
For the fiscal year ended JUNE 30, 1996
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 IRS Employer Identification Number

7201 EAST CAMELBACK ROAD, SUITE 320, SCOTTSDALE, AZ 85251
(Address of principal executive offices)

Issuer's telephone number: (602) 945-1266
Securities registered pursuant to Section 12(b) of the Act: NONE

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. [ ] Yes [X] 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: $ 46,548

State the aggregate market value of the voting stock held and 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.)

As of November 30, 1998, there was 15,545,785 common shares outstanding at a
weighted average market price per share of $.15 cents at an aggregated value of
$2,425,412 and total number of votes were 15,545,785.

*The common share price is the average trading price on the NASDAQ OTC.

<PAGE>
- --------------------------------------------------------------------------------
PART I
- --------------------------------------------------------------------------------

ITEM 1. Description of Business.

ITEM 2. Description of Property.

ITEM 3. Legal Proceedings.

ITEM 4. Submission of Matters to a Vote of Security Holders.

- --------------------------------------------------------------------------------
PART II
- --------------------------------------------------------------------------------

ITEM 5. Market for Common Equity and Related Stockholder Matters.

ITEM 6. Management's Discussion and Analysis of Financial Condition and
Results of Operations.

ITEM 7. Financial Statements and Supplementary Data.

ITEM 8. Changes In and Disagreements With Accountants
on Accounting and Financial Disclos-ures.

- --------------------------------------------------------------------------------
PART III
- --------------------------------------------------------------------------------

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

ITEM 10. Executive Compensation.

ITEM 11. Security Ownership of Owners and Management.

ITEM 12. Certain Relationships and Related Transactions.

- --------------------------------------------------------------------------------
PART IV
- --------------------------------------------------------------------------------

ITEM 13. Exhibits, Financial Statement Schedules, and Reports.

<PAGE>
PART I

ITEM 1. DESCRIPTION OF BUSINESS

Overview

American Nortel Communications, Inc. ("ANC" or "Company") is a reseller of
long-distance telecommunications services. ANC resells to customers long
distance telephone time that it purchases or leases from other long distance
carriers. At the end of June of 1995, the existing management of ANC resigned
and transferred its stock holdings and its rights under contract to Wilcom, Inc.
On July 1, 1995, ANC entered into a Management Service and Consulting Agreement
with Wilcom, Inc. who engaged William P. Williams, Jr. to render services to ANC
as Director, Chief Executive Officer for twelve-months. Eva Williams, spouse of
William P.Williams is the sole shareholder of Wilcom, Inc. William P. Williams
was elected to and became the sole member of Board of Directors of ANC and
Chairman of the Board of Directors of ANC and, continues to serve sole Director
and Chief Executive Officer. During is 1996 fiscal year, ANC's engaged in
barter transactions in which it exchanged prepaid long distance calling services
for real estate and other property. The barter transactions were ultimately
unsuccessful and ANC in 1997 abandoned or rescinded the transactions.
Thereafter, ANC has devoted itself to more traditional long distance telephone
service. Its volume of business has grown substantially and ANC was profitable
during its 1998 fiscal year. The volume of sales has continued to increase at a
substantial rate during the first quarter of its 1999 fiscal year ending
September 30, 1998 and thereafter.

ANC has been delinquent in filing its required periodic reports with the
Securities Exchange Commission (SEC). Its has filed no form 10-QSB quarterly
reports or 10-KSB annual reports for its 1996, 1997, 1998 fiscal years until the
present time and is now seeking to the correct the filing delinquencies. As a
result of the failures to file the reports investors in ANC stock have not had
available to them financial and other information which would be necessary for
informed investment decisions. In addition, ANC has issued news releases some
of which may be inconsistent with the information contained in this and other
filings which are contained in this 10KSB report and other reports which are
being filed with the commission. ANC has sold stock to investors, some of which
may have been ultimately resold into the public market. Its officers and
control person have resold stock of ANC and there has been an active trading
market for ANC stock. As a consequence of ANC's late filings of periodic
reports investors did not have available to them full financial and other
information concerning the Company and such failures may result in claims
against the Company. Recently the SEC has written a letter to ANC regarding its
failure to file. It has also requested ANC to provide documents. ANC cannot at
this point say what if of any actions the SEC may take against ANC. Any action
taken by the SEC could have an adverse impact on ANC. Described below in this
report are certain matters relating to and occurring after June 30, 1996 which
ANC believes are helpful for the fuller understanding of ANC and its activities.

<PAGE>
ANC is engaged in the business as a reseller by providing long distance
telephone services to both small business and residential customers. As a
reseller it purchases or leases long distance time from other carriers and
resells that time to others. It is charged for the time it obtains beyond
certain minimum requirements on a permanent basis and in turn charges its
customers a certain amount per minute above what it is required to pay. To a
large extent ANC's profits are dependent on the spread between its cost per
minute and the amount it charges its customers. ANC also "out-sources" its
marketing efforts to telemarketers and it pays those telemarketers a certain
amount for each new customer obtained. In 1996 fiscal year ANC was a direct
biller, but currently have the Local Exchange Carriers (LEC) bill and collect
for it. LECs receive a fee representing a certain percentage of amounts
collected. The practice of billing through LECs has substantial advantages
since it increases the likelihood and promptness of payment.

ANCs method of operations has certain advantages and disadvantages. It
substantially reduces its out of pocket expenses of such things as capital,
equipment costs, rent and salaries. But it also makes ANC more dependent upon
the performance of others who it does not control and upon its ability to
contract for such services at a reasonable price. With regard to its largest
cost obtaining long distance time there is a surplus of lines held by other
carriers and ANC believes that such surplus will continue for the foreseeable
future.

During its 1996 fiscal year ANC's business was different than described
above. When present management took over at the end of June of 1995 the Company
was inactive. During 1996 ANC sold prepaid long distance services and exchanged
the prepaid long distance service in large transactions for real estate and
other property. The use of "Barter Transactions" was not successful and the
barter transactions were abandoned or rescinded in 1997. Since then ANC has
engaged in the business of selling "1 plus and 800" long distance service to
small business and residential customers. It has primarily relied on
telemarketers to sell such services. The present method of business has proven
much more successful. ANC sales have grown rapidly and it has become profitable.
The barter transactions are discussed in detail in the financial statements
footnote number 2.

Competition

The long distance telephone industry has been characterized as intense
competition. There are many large and small competitors in the industry, many
of which shares the same target market as ANC. Many of the competitors
have much larger resources, are more established and have a larger customer
base. There are also a large number of resellers many of whom operate in a
manner similar to ANC. Another factor affect competition in the industry is
intense price competition. Prices have been decreasing over the last several
years sometimes dramatically for all kinds of telephone services. Customers
have become more sophisticated and price conscious. They are likely to switch
services when new competitor packages become available. ANC has experienced in
the past, an average customer account life of six-months. As a result, ANC
constantly obtains new customers to replace their account attrition. Other

<PAGE>
sources of competition may be developing because of new offerings by
telecommunication providers such as, cable television industry, Internet
telephony, and voice and data communication. ANC's applications for billing
though LECs has been granted and ANC has focused its attention to the sale of "1
plus and 800" long distance service. See financial statement Footnote 2 for
further details.

Barter Transactions

The barter transactions were entered into with expectation that they would
provide a source of cash flow either through resale or the operation or
development of the property. In many instances these expectation were not
fulfilled either because the problems with the properties, difficulties in
selling the properties, the lack of expected values in the property, and
substantial drop in value of prepaid phone cards to sellers. In addition, there
had been a material decline in the per minute rates charged on calling cards
which led to a request from sellers to rescind the transactions. While ANC was
under no obligation to rescind the transactions it felt it was in the best
interests of both parties to do so.

ANC's 1996 fiscal barter transactions constituted a source of sales of
telephone services. The barter transactions involved the sale of prepaid phone
cards for real and other property. In fiscal year 1996 a total of $1,222,067 in
barter transactions were recorded. While transactions were recorded in fiscal
year 1996, revenues were deferred until such time the prepaid calling cards were
used. In fiscal year 1997, barter transactions were rescinded or abandoned.
ANC incurred $167,605 of losses in connection with such abandonment and
rescissions.

Delinquent filing of Reports and Inadequacies of Disclosures

ANC failed to file its periodic form 10KSB annual and 10QSB periodic
reports for its 1996, 1997, 1998 fiscal years. It is also delinquent in its
1999 first quarter report 10-QSB for the period ending September 30, 1998. It
has by filing this report and certain other reports simultaneously began to file
these delinquencies. It hopes to shortly complete the filing of all the
required periodic reports.

During the time in which ANC failed to file reports it was engaged in the
sale of stock and other securities. These securities sales are described in the
financial statements Footnote 10. Certain of these securities were resold to
other investors under Rule 144 and Regulations S exemptions. In connection with
these sales ANC provided certification that all required disclosures had been
made. These statements have not been satisfied, as ANC has not filed its
periodic reports as indicated above. An active over-the-counter trading market
has existed for ANC stock. Investors have been buying and selling in his market
without the information which is included in this report.

<PAGE>
Development of Business

The Company was originally incorporated in British Columbia, Canada on May
17, 1979. The Company's name was changed to Coldspring Resources Ltd. in June
4, 1987. In 1987, the Company of limited partnerships and private companies
that were engaged in the mining development and exploration business. The
Company exited the mining business by 1990 and written off or sold its mining
assets and 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
and 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 principally in the United States
and Mexico.

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 was headquartered in Salt Lake City, Utah.

On September 14, 1994, the Company 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 ANC bankruptcy case was subsequently
converted to a Chapter 7 proceeding and was thereafter dismissed on February 7,
1995. NorTel-US was sold June 27, 1995 for nominal consideration to an
affiliate of former directors, leaving the Company as the surviving entity.

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 is 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."

Acquisition of Stockholders' Interest

On June 27, 1995 the board of directors of the Company agreed to turn over
management and control of the Company to Wilcom, Inc. for the purpose of
reorganizing the Company and reestablishing the Company's business operations.
In connection therewith, these directors resigned and William P. Williams, Jr.
was elected as a member of the board of directors and was elected president of
the Company. The former directors assigned their interest in the Amended
Managers Agreement and the Earn-out Preferred Share Agreement between NorTel
CCI, Inc., themselves and the Company to Wilcom, Inc., thereby transferring
3,300,000 shares of the Preferred A Series One Preferred Stock, each share with
one vote on all matters submitted to the shareholders, to Wilcom, Inc. and

<PAGE>
assuring Wilcom, Inc. voting control of the Company. NorTel CCI was controlled
by the former directors. Further, NorTel CCI, Inc. assigned approximately
500,000 shares of common stock of the Company owned by it to Wilcom, Inc. On
that same date, Wilcom, Inc. and the Company rescinded those agreements by
mutual consent and canceled the 3,300,000 shares of Preferred A Series One
Preferred Stock in consideration for the re-establishment, re-designation and
re-issuance of 3,300,000 shares of Preferred A Series One Preferred Shares ("New
Preferred") to Wilcom, Inc., each New Preferred entitled to one vote and
convertible into one share of common stock at any time after the bid price for
the Company's common stock has averages more than $1.00 for thirty consecutive
trading days on the NASDAQ OTC Bulletin Board.

Change in Management

On June 27, 1995, the Company accepted the resignations of Kenneth D.
Rogers, William H. Rogers and John H. Picken as officers and directors effective
June 27, 1995 with the appointment of William P. Williams, Jr. as director and
president. This change in of management was effected by an arrangement between
former management and Wilcom, Inc. and its president William P. Williams, Jr.
for the purpose of trying to reestablish the Company's business operations.

Regulatory Background

The Company is certified by the U.S. Federal Communications Commission (the
"FCC") 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.

The existing domestic long distance telecommunications industry was
principally shaped by a 1984 court decree (the "Decree") that required the
divestiture by AT& T of its 22 bell operating companies ("BOCs"), organized the
BOCs under seven regional Bell operating companies ("RBOCs") and divided the
country into some 200 Local Access Transport Areas or "LATAs." The incumbent
local exchange carriers ("ILECS"), which include the seven RBOCS as well as
Independent local exchange carriers, were given the right to provide local
telephone service, local access service to long distance carriers and intra-LATA
long distance service (long distance service within LATAS), but the RBOCs were
prohibited from providing inter-LATA service (service between LATAs). The right
to provide inter-LATA service was given to AT&T and the other interexchange
carriers ("IXC"). Conversely, IXCs were prohibited from providing local
telephone service.

A typical inter-LATA long distance telephone call begins with the local
exchange carrier ("LEC") transmitting the call by means of its local network to
a point of connection with an IXC. The IXC, through its switching and
transmission network, transmits the call to the LEC serving the area where the
recipient of the call is located, and the receiving LEC then completes the call
over its local facilities. For each long distance call, the originating LEC
charges an access fee. The IXC also charges a fee for its transmission of the
call, a portion of which consists of a terminating fee which is passed on to the
LEC which delivers the calls. To encourage the development of competition in

<PAGE>
the long distance market, the Decree required LECs to provide all IXCs with
access to local exchange services "equal in type, quality and price" to that
provided to AT&T. These so-called "equal access" and related provisions were
intended to prevent preferential treatment of AT&T and to level the access
charges that the LECs could charge IXCs, regardless of their volume of traffic.
As a result of the Decree, customers of all long distance companies were
eventually allowed to initiate their calls by utilizing simple "1 plus" dialing,
rather than having to dial longer access or identification numbers and codes.

The Telecommunications Act (enacted on February 8, 1996) is expected to
significantly alter the telecommunications industry. The Decree has been lifted
and all restrictions and obligations associated with the Decree have been
eliminated by the new legislation. The seven RBOCs are now permitted to provide
long distance service originating (or case of "800" service, terminating)
outside the local services areas or offered in conjunction with other ancillary
services, including wireless services. Following application to the FCC, and
upon a finding by the FCC that the RBOC faces facilities-based competition and
has satisfied a congressionally-mandated "competitive checklist" of
interconnection and access obligations, an RBOC will be permitted to provide
long distance service within its local service area, although in so doing it
will be subject to a variety of structural and nonstructural safeguards intended
to minimize abuse of its market power in these local service areas. Having
opened the interexchange market to RBOC entry, the Telecommunications Act also
removes all legal barriers to competitive entry by interexchange and other
carriers into the local telecommunications market and direct RBOCs to allow
competing telecommunications service providers, such as the Company, to
interconnect their facilities with the local exchange network, to acquire
network components on an unbundled basis and to resell local telecommunications
services. Moreover, the Telecommunications Act prevents IXCs that serve greater
than five percent of pre-subscribed access lines in the US. (which includes the
nation's three largest long distance providers) from jointly marketing their
local and long distance services until the RBOCs have been permitted to enter
the long distance market or for three years, whichever is sooner. This
provision of the Act is intended to give all other long distance providers a
competitive advantage over the larger long distance providers in the newly
opened local telecommunications market. As a result of the Telecommunications
Act, long distance carriers will allow significant new competition in the long
distance telecommunications market, but will also be afforded significant new,
business opportunities in the local telecommunications market.

Legislative, judicial and, such as the Company, technology factors have
helped to create the foundation for smaller long distance providers to emerge as
alternative long distance service. The FCC has required to all IXCs allow the
resale of their services, and the Decree substantially eliminated different
access arrangements as distinguishing features among long distance carriers. In
recent years, national and regional network providers have substantially
upgraded the quality and capacity of their domestic long distance networks,
resulting in significant excess transmission capacity for voice and data
communications. The Company believes that, as a result of digital fiber optic
technology, excess capacity has been, and will continue to be, an important
factor in long distance telecommunications. As a consequence, not only have the

<PAGE>
smaller long distance service providers been provided a legal framework under
which they compete with the network-based carriers, they also represent a source
of traffic such to carriers with excess capacity. Thus, resellers have become
an integral part of the long distance telecommunications industry.

Industry Evolution

Resellers represent a paradox in the telecommunications marketplace. They
are simultaneously an important source of revenues to the major long distance
providers and yet the resellers represent a risk to their product quality,
reputation and pricing. Not only do long distance service resellers receive
legal protection to compete with the network based major carriers, but also the
reseller's sale of network based carriers excess capacity represents a source of
additional traffic for such carriers. The three major carriers and most
regional carriers have substantial excess telecommunication transmission
capacity and their constant technological and facility upgrading continues their
capacity.

Resellers primarily exist due to their ability to offer substantially
discounted long distance toll rates, and increasingly, discounted calling card
rates and other discounted services, to their prime target markets, which are
small and medium sized businesses. The main target market for most resellers is
not as profitable as other markets for wholesale or major carriers to serve and
the major carriers have focused on the larger businesses, generally those who
are currently paying less then $25,000 a month in long distance charges.

Traditionally, many resellers originated as customer base groups or
aggregators of customers, and their operations generally are marked by low
overhead.

Resellers often offer services that larger carriers are not prepared to
offer, such as customized location billing, non-telecom billing services,
international call-back, customized calling cards, multiple carrier service at
single locations with single invoices, and split dedicated service. Although
some regulatory barriers exist, the costs of overcoming these are low. With low
entry barriers, a significant portion of the telecommunications market is still
open to significant competition on a price and service basis. To date,
resellers have been able to quickly build sizable customer bases on marketing
and telemarketing strengths. In many cases rapid growth has strained some
reseller's ability to manage their growing revenues and their general business
enterprise. Therefore, their ability to attract capital to finance receivables,
improve facilities and equipment, and develop management and systems
infrastructure, will be the difference between resellers that survive, and those
that will merge or be acquired, as independent companies.

The major carriers and some of the regional carriers will continue to
depend upon a portion of their profits being derived from their wholesalers and
resale market sales, since resellers can currently serve their target market, at
a price that the major carrier cannot or will not provide. The Company's
management believes that opportunities for future existing in the highest gross

<PAGE>
profit product/service areas, including prepaid calling cards, international
services, cellular and wireless services, video and data transmission, web-sight
and internet-access, 800 number service, voice mail and electronic mail. As a
result, the Company expects that the number of call minutes billed by resellers
will continue to rise at an annual rate that is substantially greater than the
number of call minutes billed by the major carriers. Within the resale market
as a whole, switchless resellers appear to see a higher percentage growth than
do facilities based carriers in all the segments previously mentioned. However,
more switchless resellers will become facilities based as they acquire small
companies and as their traffic increase in geographic zones, which will increase
their ability to purchase or lease a switch. More traffic flowing in a given
area would enhance a reseller's ability to make a switch economically viable and
more profitable for that geographic zone. Should this trend continue there would
be substantially fewer resellers that are switchless in the next five to ten
years.

Market Strategy

The Company intends to increase market share in each market it serves
through the acquisition of strategic competitive firms providing value-added
services to the core businesses of the Company. Marketing tactics will employed
to not only conserve resources, but to increase credibility and visibility in
the targeted marketplace. Strategic planning to be used includes editorial
coverage in industry specific media along with general interest publications.

The Company plans to promote "value-added" services or product areas that
will be the focus of the Company's marketing strategy. 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 of long distance
services along with the value-added products and services.

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, MCIWorldCom 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 MCIWorldCom into voice mail has
expanded the market by enhancing the credibility of the product.

Service and Products

<PAGE>
The Company offers a basic "1 plus and "800" long distance services. ANC
is successful as a provider of these basic services because of the volume
discounts it has been able to negotiate with its underlying carrier.

The Company charges its customers on the basis of minutes or partial
minutes of usage at rates which vary with the distance, duration, time of day of
the call and type of call. Rate charges for a call are not affected by the
particular transmission facilities selected for the call transmission but are
affected by the type of call a user may select. All billing is done through the
local exchange carrier ("LEC"). The Company offers a flat rate long distance
calling service throughout the United States which providers' rates which will
are the same per minute rate regardless of the call's origin or destination.
Billing occurs in six-second increments.

Telecommunications Act

On February 8, 1996, Congress enacted the Telecommunications Act, which
effected a sweeping overhaul of the Communications Act of 1934 (the
"Communications Act"). In particular, the Telecommunications Act substantially
amends Title II of the Communications Act that governs telecommunications common
carriers. The Telecommunications Act was intended by Congress to open telephone
exchange service markets to full competition, to promote competitive development
of new service offerings, to expand public availability of telecommunications
service and to streamline regulations of the industry. The Telecommunications
Act makes all state and local barriers to competition unlawful, prohibits state
and local governments from enforcing any law, rule or legal requirements that
prohibits or has the effect of prohibiting any person from providing interstate
or intrastate telecommunications services and directs the FCC to conduct
rulemaking proceedings on local competition and other related matters.

Implementation of the provisions of the Telecommunications Act will be the
task of the FCC, the state public utility commissions and a joint federal -
state board. Much of the implementation of the Telecommunications Act must be
completed in numerous rulemaking proceedings with short statutory deadlines.
These proceedings are expected to address issues and proposals already before
the FCC in pending rulemaking proceedings affecting the long distance industry
as well as additional areas of telecommunications regulation not previously
addressed by the FCC and the states. States retain jurisdiction in the
Telecommunications Act to adopt laws necessary to preserve universal service,
protect public safety and welfare, ensure the continued quality of
telecommunications services and safeguard the rights of consumers.

Some specific provisions of the Telecommunications Act which are expected
to affect long distance service providers are summarized below:

Expanded Interconnection Obligations. The Telecommunications Act
establishes a general duty of all telecommunications carriers to interconnect

<PAGE>
with other carriers, directly or indirectly. The Telecommunications Act also
contains a detailed list of requirements with respect to the interconnection
obligations of LECs. These interconnection obligations include resale, number
portability, dialing parity, access to rights-of-way and reciprocal
compensation. ILECs have additional obligations including: to negotiate in good
faith; to provide for network interconnection at a technically feasible point on
terms that are reasonable and non-discriminatory; to provide non-discriminatory
access to facilities, equipment, features, functions and capability on an
unbundled basis; to offer for resale at wholesale rates any service that ILECs
provide on a retail basis; and to provide actual co-location of equipment
necessary for interconnection or access.

The Telecommunications Act establishes a framework for state commissions to
mediate and arbitrate negotiations between ILECs and carriers requesting
interconnection services or network elements. The Telecommunications Act
establishes deadlines, policy guidelines for state commission decision making
and federal preemption in the event a not commission fails to act. While the
FCC has recent promulgated rules implementing these provisions of the
Telecommunications Act, the impact of these rules on the Company cannot be
determined at this time.

Provision of Interexchange Services. The Telecommunications Act eliminates
the previous prohibition on RBOC provision of interexchange services origination
(or in case of "800" service, terminating) outside their local service areas and
all interchange services associated with the provision of most commercial mobile
wireless services, including services originating within their local service
areas.

In addition, the Telecommunications Act allows RBOCs to provide landline
interexchange services in the state in which they provide landline local
exchange service; provided, however, that before engaging in landline long
distance service in a state in which it provides landline local exchange
service, an RBOC must (i) provide access and interconnection to one or more
unaffiliated competing facilities-based providers of telephone exchange service,
unless after 10 months enactment of the Telecommunications Act no such competing
provider has requested such access and interconnection more than three months
before the RBOC has applied for authority and (ii) demonstrate to the FCC its
satisfaction of the Telecommunications Acts "competitive checklist."

The specific interconnection requirements contained in the "competitive
checklist," which the RBOCs must offer on a non-discriminatory basis, include
network interconnection and unbundled access to network elements, including long
loops, switching and transport; access to poles, ducts, conduits and
rights-of-way owned or controlled by them; access to emergency 911, directory
assistance, operator call completion and white pages; access to telephone
numbers, databases and signaling for call routing and completion; availability
of number portability; local dialing parity; reciprocal compensation
arrangements; and resale opportunities.

Review of Universal Service requirements. The Telecommunications Act
contemplates that interstate telecommunications providers will "make an

<PAGE>
equitable and non-discriminatory contribution" to support the cost of providing
universal service, although the FCC can grant exemption in certain
circumstances. The FCC is in the process of promulgating rules to implement
these provisions of the Telecommunications Act, and the outcome of such
proceedings and its effect on the Company cannot be determined.

Limitation on Joint Marketing of Local and Long Distance Services. Long
distance providers that serve greater than five percent of pre-subscribed access
lines in the United States (which includes the nation's three largest long
distance providers) are precluded from jointly marketing local and long distance
service until the RBOCs are permitted to enter the long distance market, or
three years from the cite of enactment of Telecommunications Act, whichever is
sooner.

Deregulation. The FCC is authorized to forbear from applying statutory or
regulatory provision that is not necessary to keep telecommunications rates and
terms reasonable or to protect consumers. A state may not apply a statutory or
regulatory provision that the FCC decides to forbear from applying. In
addition, the FCC must review its telecommunications regulations every two-years
and change any that are no longer necessary.

ITEM 2. DESCRIPTION OF PROPERTY

Leases

The Company's municipal office is located in Scottsdale, Arizona,
under a lease, which expires in March 1999. The Company leases 1700 square feet
of office space for approximately $25,000 annually. The Company's existing
premises are inadequate for the Company's current needs. The Company employed
approximately five employees during the fiscal year 1996 and 1997.

ITEM 3. LEGAL PROCEEDINGS

On September 14, 1994, the Company 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 ANC bankruptcy proceeding was
subsequently converted to a Chapter 7 proceeding and was thereafter dismissed on
February 7, 1995.

ANC has been named as defendant in the following:

CLIC International Corporation vs. W.P. & Eva Williams, d.b.a. ANC - The suit,
claiming damages in an amount less than $30,000 is related to a barter trade of
phone cards for light bulbs for the Fall Creek Inn, was filed during fiscal 1997
and is recorded as a disputed claim. The suit is pending but accrued as of June
30, 1997.

<PAGE>
KPMG Peat Marwick vs. Certified Surety Group, Ltd. and ANC - The suit, claiming
damages in the amount of $30,000 is for services rendered by KPMG related to its
audit of the June 30, 1993 ANC financial statements. The amount, which is being
disputed by ANC management, has been accrued as of June 30, 1995.

Kendel Corp. vs. ANC - The suit is discussed in the financial statement detail
in Footnote 2, "Fall Creek Inn". The lessor repossessed the property on January
31, 1997 and filed suit for breach of contract and recovery of damages. A
default judgment was initially entered, granting Plaintiff rent, possession and
damages in excess of $3,000,000. A motion to set the default judgment aside was
successful and there has been no appeal. The Court ordered that possession be
permanently transferred to the Plaintiff leaving the Plaintiff in possession and
full ownership, with ANC no longer having an interest in the property. The case
is still pending on the issue of damages. Since either party has conducted no
discovery, Counsel is unable to evaluate the potential exposure to ANC in this
case at this time.

Lantern Bay, Inc. and Richmond Heights vs. ANC - The suit is discussed in detail
in the financial statements Footnote 15, "Palace View". The Lantern Bay portion
was settled in fiscal 1998 for $15,000

Records Retrieval vs. ANC - The suit is discussed in detail in Note 15, "Long
Distance Service Agreements." The suit was settled in fiscal 1998 for
approximately $42,000.

Hartzog Conger Cason vs. ANC - The suit is discussed in detail in Note 8,
"Settlement of Notes and Interest". Certain of the note holders have received
judgment and others are pending. ANC is delinquent on paying the principal and
interest amounts due under the note terms. The note holders have filed suit
against ANC and the surety company. On April 7, 1998 a judgment was entered
against ANC in favor of Herman Meinders and Marguerite Colton. The respective
amounts of the judgments are $144,529 and $33,876 including interest at 9% per
annum. The claim of Express Services is pending with no current trial setting.
However, it is anticipated that judgment will be entered in favor of Express
Services, Inc. for all amounts claimed due and owing. A claim on the Eason note
has yet been asserted but ANC counsel anticipates that at some point suit will
be filed and judgment will be established for all amounts claimed due.

Long Distance Service Agreements

<PAGE>
In March 1996 ANC entered into an Agreement with Vancouver Telephone
Company ("VTC") whereby ANC provided long-distance services to VTC through its
carrier, ELI. Through June 30, 1996 VTC had paid approximately $6,000 to ANC
under the agreement and an additional $14,000 through November 1996. The fiscal
1996 revenue was greater than 10% of the revenues of ANC.

The Anaheim Splash

ANC owned the Anaheim Splash a Continental Indoor Soccer League for a brief
period of time in fiscal 1996. On February 16, 1996, ANC entered into an
agreement to acquire the franchise from the Continental Indoor Soccer League
(the "CISL") which required, among other things, the placement of $400,000 worth
of ANC common stock as a security deposit and $10,000 as an advance payment
against the player compensation assessment. ANC tendered 400,000 shares of ANC
common stock as payment for the security deposit. However, since the market
price of the stock was less than the deposit required, the CISL requested, that
additional shares be deposited to them. Under terms of the agreement, there is
a deferred league operating assessment of approximately $88,000 and additional
player compensation assessments of $150,000. On March 1, 1996, ANC also entered
into a ten-year lease agreement with the Arrowhead Pond. The lease terms
include liquidated damages of $25,000 in the event of termination.

In April of 1996, ANC verbally assigned its rights under the CISL agreement
to Mr. Gary Sparks. Mr. Sparks operated the team for approximately one year.
CISL has taken the position that Mr. Sparks did not assume any obligations that
ANC may have incurred in connection with its team ownership or termination of
with CISL agreements. CISL has indicated that it may liquidate the ANC stock,
which CISL holds on deposit in settlement of any outstanding obligations.
Presently, the CISL has made no attempts to liquidate the stock and ANC has
requested its' stock transfer agent to place a "stop transfer" notation on its
stock register.

An analysis of the current market price of ANC stock indicates that a
liquidation of the stock would most likely yield proceeds sufficient to satisfy
the minimum commitments as specified in the agreements. In the event such
proceeds are insufficient, the CISL could make additional assessment to ANC.
Accordingly, ANC has fully reserved these deposits to reflect the anticipated
loss on abandonment. Although no litigation has resulted from termination of
the above agreements, CISL counsel was not able to provide assurance that such
claim may be made in the future if the liquidated proceeds are insufficient.

Delinquent Filings

The Company was advised that the Securities Division of the Arizona
Corporation Commission had begun an investigation of the Company. The Division
personnel will neither confirm nor deny that an investigation is proceeding.
Such investigations, in the preliminary stages, are kept confidential and are
not necessarily indicators of wrongdoing.

<PAGE>
The Company is a party to other legal proceedings other various claims and
law suits in the normal course of its business which, in the opinion of the
Companies management, are not individually or collectively material to its
business.

ANC was advised that the Securities Division of the Arizona Corporation
Commission had begun an investigation of ANC. The Division personnel will
neither confirm nor deny that an investigation is proceeding. Such
investigations, in the preliminary stages, are kept confidential and are not
necessarily indicators of wrongdoing. ANC has had no further contact from
Division personnel since November 3, 1997.

ANC is a party to legal proceedings and other various claims and law suits
in the normal course of its business which, in the opinion of the Companies
management, are not individually or collectively material to its business.

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

The Company submitted no matters to a vote of its security holders during
the fiscal year ended June 30, 1996.

PART II

ITEM 5. MARKET FOR COMMON EQUITY AND RELATED SHAREHOLDER MATTERS

The Company's Common Shares were listed on the Boston Stock Exchange until
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 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, markdown 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 Federal Reserve
statistical release "Foreign Exchange Rates."

Quarter ended June 30, 1996. . . 1 1/2 1 1/16

Quarter ended March 31, 1996 . . 2 1/8 1 3/16

Quarter ended December 31, 1995. 2 1/2 3/16
------------ -----------
Quarter ended September 31, 1995 7/16 1/8

1995

Quarter ended June 30, 1995. . . .46 .15

Quarter ended March 31, 1995 . . 7/8 .03

Quarter ended December 31, 1994. .02 .02

Quarter ended September 30, 1994 .12 .02
</TABLE>

At June 30, 1996, there were 8,769,500 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. As a result of
the large accumulated deficit, no payment of dividends may be paid until profits
are earned. The terms of debt instruments and preferred shares do and will
limit the payment of dividends on Common Stock.

The Transfer Agent and Registrar for the Company is American Stock
Transfer.

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

Certain statements in this report are forward looking statements that
involve risks and uncertainties. Among the factors that could cause actual
results to differ materially from those described in such forward looking
statements are the following: the Company's ability to manage rapid growth;
litigation; changes in regulations; competition in the long distance
telecommunications market; the Company's ongoing relationship with its long
distance carriers; dependence upon key personnel; subscriber attrition; the
adoption of new, or changes in, accounting policies, practices, and estimates
and the application of such policies, practices, and estimate; federal and state
governmental regulation of the long distance telecommunications industry; the
Company's ability to develop its own long distance network; the Company's
ability to maintain, operate, and upgrade its information systems; and the
Company's success in offering additional communications products and services.

In the fiscal year end June 30, 1996, the Company began using barter trade
as another avenue to expand business operations. The Company acquired assets
through barter trading, by the use of prepaid long distance phone cards. The
Company utilized its existing telecommunication equipment, and initiated prepaid
phone card long distance service. With the infrastructure in place, ANC
negotiated barter trading prepaid long distance telephone service in exchange
for real estate and equipment.

The objective of these transactions was to increase cash flow by enabling
the company to liquidate these assets at above phone card costs. Management
hoped to accomplish its objective by increasing net equity in the Company
thereby, increasing the Company's viability and diversifying its asset base.

By December 31, 1996, management decided to cease any further barter
trading. Preliminary projections have indicated that these transactions would
increase the Company's liquidity. However, the competition between long
distance service providers decreased the price per minute on prepaid long
distance telephone service. Therefore, ANC had to decrease the price per minute
to be competitive within the industry; thus losing the liquidity of the barter
trading that was originally forecasted by management. Subsequently, the barter
transactions proved to be non-beneficial for both parties.

Barter Trades

In December 1995, ANC began trading long distance phone time for other
assets. The Company has recorded the barter trades at the lower of the
wholesale long distance calling price of $.15 per minutes or estimated net
realizable value of the property received. See financial statement Footnote 2.

<PAGE>
Barter Trade Analysis

When it commenced its barter trade program in December 1995, the Company
believed that investment in real estate would increase profitability, because
the Company believed that realizable market values in certain geographical areas
would increase. However, properties, which the Company bartered for, did not
increase, or actually decrease, in value from the prices at which the Company
purchased the real estate. Also, equipment that was barter traded subsequently
became obsolete and ANC was unable to receive a return on its investment. As a
consequence, ANC rescinded all barter trades by year end June 30, 1997, because
ANC believed that the assets market values had decreased and did not want their
barter traders affected by the decrease in market values to detrimentally effect
any of the real estate, and equipment that was barter traded. Many of the
barter rescissions were mutually agreed upon. After the rescission of these
transactions ANC believes any losses sustained on these transactions were
inconsequential, and it introduced ANC into an expanding and exciting new market
sector in its existing telecommunications services.

Results of Operations

Fiscal Year End June 30, 1996 Compared to Fiscal Year End June 30, 1995

Revenues for the fiscal year ended June 30, 1996 decreased to $46,548 from
$326,843 during fiscal year ended June 30, 1995 principally as of result of
deferred revenues that were recognized in subsequent periods.

Expenses for the fiscal year ended June 30, 1996 decreased to $377,715 from
$437,178 during fiscal year ended June 30, 1995. ANC's primary expenses in
fiscal 1996 were a result of fees and commissions on telemarketing that were
engaged in selling long distance service.

During fiscal year ended June 30, 1994, NorTel Communications, Inc. (the
Debtor) a subsidiary of the Company, 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 in March 3, 1995. ANC had an inter-company receivable from NorTel
Communications and this amount became uncollectable in the amount of $4,517,717.
The bankruptcy filing 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. As a consequence. The
Company ceased business operations in December 1995.

<PAGE>
Previously authorized issued and outstanding Preferred A Series One
Preferred Stock was issued to former officers and directors was cancelled,
reestablished, redesigned and reissued to Wilcom, Inc. as Preferred A Series One
Convertible, Preferred Stock. This Preferred Stock was issued in exchange for
consulting services valued at ($198,000) rendered by Wilcom, Inc. for the fiscal
year ended June 30, 1995.

Valuation adjustments were made to reflect the lower of cost or market for
barter trading assets. The market reflected a decrease in orignially valued
assets, and resulted in a decrease the assets acquired through barter trading.
Also operating loss from discontinued operations resulted from ANC proactively
rescinding the barter assets and investments, primarily real estate, including
an operating motel and other leased real estate. In addition, during fiscal
1996, ANC recorded losses on assets held but subsequently abandoned in fiscal
1997. The losses consist of losses on tangible personal property of
approximately $47,000 and losses on real estate of approximately $64,000.
During fiscal 1996 ANC also recorded a loss on the Anaheim Splash of $200,000.

Liquidity: ANNUAL RESULTS OF OPERATIONS

<TABLE>
<CAPTION>
JUNE 30, 1996 JUNE 30, 1995
--------------- --------------
<S> <C> <C>
Current Assets. . . . $ 266,353 65
--------------- --------------

Current Liabili-ties. 2,268,485 941,308
- --------------------- --------------- --------------

Stockholders' Deficit
$ (2,002,132) ( 941,243)
--------------- --------------
</TABLE>

Capital Resources

For the fiscal year ended June 30, 1996, ANC decreased Cash Flow from
Operations of $(124,673) from $(26,865) for period ended June 30, 1995. Cash
Flows From Investing Activities for the purchase of property plant and equipment
($37,213). Cash Flow From Financing Activities increase from the previous
period by $278,174.

Settlement of Notes and Interest

ANC is delinquent on paying the principal and interest amounts due under
the note terms. The note holders have filed suit against ANC and the surety
company. On April 7, 1998 a judgment was entered against ANC in favor of Herman
Meinders and Marguerite Colton. The respective amounts of the judgments are
$144,529 and $33,876 including interest at 9% per annum.

<PAGE>
In December 1998, the claim of Express Services is pending with no trial
date set. However, it is anticipated that judgment will be entered in favor of
Express Services, Inc. for all amounts claimed due and owing. A claim on the
Eason note has yet been asserted but ANC anticipates that at some point suit
will be filed and judgment will be established for all amounts claimed due. The
court determined that interest is payable at the 9% rate specified in the
agreement without penalty. ANC is negotiating the settlement of these notes and
the retirement of other notes, and in fiscal 1996 ANC did not make any debt
service payments.

Year 2000

The Company and its service provider utilize software, which truncates the
year to a two-digit field. Accordingly, when the date passes the year 2000,
errors may occur in the calculation and processing of data significant to the
revenue recognition of the Company. ANC management and its service providers
are taking steps to modify their equipment and software programs before any such
problems are encountered.

The year 2000 issue also affects the Company's internal systems including
the Company's information technology (IT) and non -IT systems. ANC is assessing
the readiness for its systems for handling the year 2000. Although the
assessment is still underway management currently believes that all material
systems will be compliant for the year 2000 and the cost to address the issues
is not material. Nevertheless, ANC is creating contingency plans for certain
internal systems.

New Accounting Standards

Statement of Financial Accounting Standards No. 128, "Earning Per Share"
specifies the computation, presentation and disclosure requirements for earnings
per share for entities with publicly held common stock. This statement requires
the presentation of basic earnings per share and diluted earnings per share.

Statement of Financial Accounting Standards No.129, "Disclosure of
Information about Capital Structure" is intended to consolidate existing
disclosure requirements into one publication to make them easier to apply. This
new standard continues the requirement to disclose certain information about an
entity's capital structure, as contained in other authoritative literature. The
adoption of this standard requires no change in the financial statements
disclosures requirements of the Company.

Accounting Standards Not Yet Adopted

Statement of Financial Accounting Standards No 130, "Reporting on
Comprehensive Income" establishes standards for reporting and display of
comprehensive income (all changes in equity during a period except those
resulting from investments by and distributions to owners) and its components in
financial statements. This new standard, which will be effective for the
Company for quarter ended June 30, 1998, is not currently anticipated to have
significant impact on the Company's financial statements based on the current
financial structure and operations of the Company.

<PAGE>
Statement of Financial Accounting Standards No.131, "Disclosure about
Segments of the Enterprise and Related Information" establishes standards for
reporting information about operating segments in annual financial statements,
selected information about operating segments in interim financial reports and
disclosures about products and services, geographic area and major customers.
This pronouncement will be required to be implemented in the year ended June 30,
1999 and may result in presenting more detailed information in the notes to the
Company's financial statements.

ITEM 7. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

The financial statements attached to this Report are incorporated herein.

<PAGE>
INDEPENDENT AUDITORS' REPORT

Board of Directors and Stockholders
American Nortel Communications, Inc.
Scottsdale, Arizona

We have audited the accompanying balance sheet of American Nortel
Communications, Inc., (the "Company"), as of June 30, 1996 and the related
statements of operations, cash flows and stockholders' deficiency for the year
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 audit. Other auditors audited the financial statements
for the year ended June 30, 1995 for which their opinion, dated October 9, 1996,
contained a comment about the ability of the Company to continue as a going
concern. As discussed in Note 11, the Company has restated its 1995 financial
statements during the current year to record preferred stock transactions in
conformity with generally accepted accounting principles. The other auditors
reported on the 1995 financial statements before the restatement.

We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatements. 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 audit provides a reasonable basis for our opinion.

In our opinion, except for the effects of such adjustments, if any, as might
have been determined to be necessary had counsel been able to render an opinion
regarding certain contingencies disclosed in Note 10, the financial statements
referred to above present fairly, in all material respects, the financial
position of American Nortel Communications, Inc. as of June 30, 1996, and the
result of its operations and its cash flows for the year then ended in
conformity with generally accepted accounting principles.

We also audited the adjustment described in Note 11 that we applied to restate
the 1995 financial statements. In our opinion, such adjustment is appropriate
and has been properly applied.

Commencing in fiscal 1996, the Company entered into numerous material barter
transactions, described in Note 2, to acquire assets in exchange for
long-distance telephone services. Additional transactions were entered into in
fiscal 1997. During fiscal 1997, Company management rescinded these
transactions. At the time of the recision, a substantial number of minutes
committed were either unissued or unactivated. Additionally, a substantial
number of activated minutes were revoked. The effects of these transactions are
identified on the balance sheet and on the statement of operations as gains and
losses from discontinued operations.

Significant material contingencies exist as of June 30, 1996 and are more fully
described in Note 10. Significant contingencies result from the issuance of
common stock of the Company's management and other third parties, default on
debt obligations and, the Company's delinquency in its public filings.

La Voie, Clark, Charvoz & May, P.C.
/s/ La Voie, Clark, Charvoz & May, P.C.

Tucson, Arizona
June 30, 1998

<PAGE>
<TABLE>
<CAPTION>
AMERICAN NORTEL COMMUNICATIONS, INC.
BALANCE SHEETS

As of June 30,
---------------------------------
1996 1995
---------------- ---------------
ASSETS (Substantially Pledged) (Restated)
- -----------------------------------------------------------------
<S> <C> <C>
Current assets:
Cash. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 116,353 $ 65
Prepaid consulting and compensation - Note 3. . . . . . . . . . . 150,000 -
---------------- ---------------
Total current assets. . . . . . . . . . . . . . . . . . . . . . . 266,353 65

Property and equipment, net - Note 4. . . . . . . . . . . . . . . 30,768 -

Other assets:
Advances to control group, net . . . . . . . . . . . . . . . . . 28,251 -
Barter accounts, net. . . . . . . . . . . . . . . . . . . . . . . - -
Investments acquired through barter, net. . . . . . . . . . . . . 6,667 -
Investments acquired through barter, subsequently rescinded, net. 1,215,400 -
---------------- ---------------

TOTAL ASSETS. . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1,547,439 $ 65
================ ===============

LIABILITIES AND STOCKHOLDERS' DEFICIENCY
- -----------------------------------------------------------------
Liabilities:
Current liabilities:
Accounts payable. . . . . . . . . . . . . . . . . . . . . . . . . $ 220,311 $ 77,819
Barter trade commitments. . . . . . . . . . . . . . . . . . . . . 1,093,400 -
Accrued taxes . . . . . . . . . . . . . . . . . . . . . . . . . . 26,035 -
Accrued interest. . . . . . . . . . . . . . . . . . . . . . . . . 253,739 188,489
Notes payable - Note 8. . . . . . . . . . . . . . . . . . . . . . 675,000 675,000
---------------- ---------------
Total current liabilities . . . . . . . . . . . . . . . . . . . . 2,268,485 941,308
---------------- ---------------

Unearned phone card revenues. . . . . . . . . . . . . . . . . . . 381,567 -
---------------- ---------------
TOTAL LIABILITIES . . . . . . . . . . . . . . . . . . . . . . . . 2,650,052 941,308

Commitments and contingencies - Note 10 . . . . . . . . . . . . . - -

Stockholders' Equity (Deficiency):
Preferred stock, 3,300,000 shares issued and outstanding. . . . . 198,000 198,000
Common stock, no par value, 50,000,000 shares authorized
8,769,500 (1996) and 3,023,132 (1995) shares issued and
outstanding. . . . . . . . . . . . . . . . . . . . . . . . . . 20,840,832 20,143,157
Accumulated deficit . . . . . . . . . . . . . . . . . . . . . . . (22,141,445) (21,282,400)
---------------- ---------------

TOTAL STOCKHOLDERS' DEFICIENCY. . . . . . . . . . . . . . . . . . ( 1,102,613) ( 941,243)
---------------- ---------------

TOTAL LIABILITIES AND
STOCKHOLDERS' DEFICIENCY. . . . . . . . . . . . . . . . . . . . $ 1,547,439 $ 65
================ ===============
</TABLE>

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

<PAGE>
<TABLE>
<CAPTION>
AMERICAN NORTEL COMMUNICATIONS, INC.
STATEMENTS OF OPERATIONS

Years Ended June 30,
-------------------------
1996 1995
----------- ------------
REVENUES: (Restated)
- ---------------------------------------------
<S> <C> <C>
Long-distance telecommunications. . . . . . . $ 46,548 $ 326,843

Cost of long-distance services. . . . . . . . 32,010 235,892
----------- ------------

Gross profit. . . . . . . . . . . . . . . . . 14,538 90,951
----------- ------------

EXPENSES:
- ---------------------------------------------

Selling . . . . . . . . . . . . . . . . . . . 3,600 -
General and administrative. . . . . . . . . . 306,269 358,857
Interest. . . . . . . . . . . . . . . . . . . 65,250 78,321
Other . . . . . . . . . . . . . . . . . . . . 2,596 -
----------- ------------

377,715 437,178
----------- ------------

LOSS FROM CONTINUING OPERATIONS . . . . . . . (363,177) (346,227)

Other losses incurred:
Loss on write-off of note from subsidiary . . - 4,517,717
Consulting fee related to reorganization. . . - 198,000
Valuation adjustment, lower of cost or market 55,380 -
Operating loss from discontinued operations . 129,532 -
Loss on abandoned assets. . . . . . . . . . . 310,956 -
----------- ------------

Loss before income tax benefits . . . . . . . (859,045) (5,061,944)

Income tax benefits - Note 9. . . . . . . . . - -
----------- ------------

NET LOSS. . . . . . . . . . . . . . . . . . . $ (859,045) $(5,061,944)
=========== ============

LOSS PER SHARE FROM CONTINUING OPERATIONS . . $ (0.09) $ (0.11)
=========== ============

NET LOSS PER SHARE. . . . . . . . . . . . . . $ (0.21) $ (1.67)
=========== ============

Weighted average shares outstanding . . . . . 4,030,138 3,023,132
=========== ============
</TABLE>

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

<PAGE>
<TABLE>
<CAPTION>
AMERICAN NORTEL COMMUNICATIONS, INC.
STATEMENTS OF STOCKHOLDERS' DEFICIENCY

Preferred Stock Common Stock Accumulated
------------------------- ----------------------- ---------------
Shares Amount Shares Amount Deficit
----------- ------------ --------- ------------ ---------------
(Restated) (Restated) (Restated)
<S> <C> <C> <C> <C> <C>
Balances at June 30, 1994. . . . . . . . . . . . . 3,300,000 $ 3,300,000 3,023,132 $20,143,157 $ ( 22,045,327)

Removal of investment in subsidiary 5,824,871

Recision of preferred shares . . . . . . . . . . . (3,300,000) (3,300,000) -

Net loss, as previously reported ( 4,863,944)

Restatement for preferred shares reissued. . . . . 3,300,000 198,000 ( 198,000)
---------------

Net loss, as restated ( 5,061,944)
----------- ------------ --------- ------------ ---------------

Balances at June 30, 1995. . . . . . . . . . . . . 3,300,000 198,000 3,023,132 20,143,157 (21,282,400)
Unidentified share differential from
transfer between transfer agents 56,368 -

Shares issued for cash . . . . . . . . . . . . . . 1,165,000 314,625

Shares issued to related parties in exercise
of warrants, offset to loans from related parties 840,000 16,800

Shares issued to related parties for services. . . 3,250,000 307,500

Shares issued for assets . . . . . . . . . . . . . 400,000 200,000

Shares issued for other services . . . . . . . . . 35,000 8,750

Shares previously issued to related party,
tendered for shares sold by ANC for $50,000,
proceeds distributed to related party . . . . . . - -

Shares previously issued to related party,
tendered in payment to investment advisors. . . . - (150,000)

Net loss . . . . . . . . . . . . . . . . . . . . . ( 859,045)
----------- ------------ --------- ------------ ---------------

Balances at June 30, 1996. . . . . . . . . . . . . 3,300,000 $ 198,000 8,769,500 $20,840,832 $ (22,141,445)
=========== ============ ========= ============ ===============
</TABLE>

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

<PAGE>
<TABLE>
<CAPTION>
AMERICAN NORTEL COMMUNICATIONS, INC.
STATEMENTS OF CASH FLOWS

Years Ended June 30,
--------------------------
1996 1995
------------ ------------
CASH FLOWS FROM OPERATIONS: (Restated)
- -----------------------------------------------
<S> <C> <C>
Net loss. . . . . . . . . . . . . . . . . . . . $ ( 859,045) $(5,061,944)

Adjustments to reconcile net loss to net cash
provided by (used for) operating activities:
Depreciation and amortization . . . . . . . . . 8,939 -
Loss on reorganization items. . . . . . . . . . - 5,824,871
Expenses paid with common stock . . . . . . . . 166,250 -
Consulting fee paid with preferred stock. . . . - 198,000
Expenses paid with bartered phone cards . . . . 450,406 -
Changes in assets and liabilities:
Accounts payable. . . . . . . . . . . . . . . . 17,492 (1,066,113)
Accrued interest. . . . . . . . . . . . . . . . 65,250 78,321
Accrued taxes . . . . . . . . . . . . . . . 26,035 -
------------ ------------

Net cash used for operating activities. . . . . (124,673) (26,865)
------------ ------------

CASH FLOWS FROM INVESTING ACTIVITIES:
- -----------------------------------------------

Purchase of property and equipment. . . . . . . ( 37,213) -
------------ ------------

CASH FLOWS FROM FINANCING ACTIVITIES:
- -----------------------------------------------

Loans from control group. . . . . . . . . . . . 140,894 -
Repayments to control group . . . . . . . . . . ( 177,345) -
Common stock issued for cash. . . . . . . . . . 314,625 -
------------ ------------

Net cash provided by financing activities . . . 278,174 -
------------ ------------

CASH AND CASH EQUIVALENTS:
- -----------------------------------------------

Increase (decrease) in cash . . . . . . . . . . 116,288 (26,865)

Cash at beginning of year . . . . . . . . . . . 65 26,930
------------ ------------

Cash at end of year . . . . . . . . . . . . . . $ 116,353 $ 65
============ ============

Cash paid during the year for interest. . . . . $ - $ -
============ ============
</TABLE>

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

<PAGE>
AMERICAN NORTEL COMMUNICATIONS
NOTES TO THE FINANCIAL STATEMENTS
YEARS ENDED JUNE 30, 1996 AND 1995

1. NATURE OF OPERATIONS, SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, USE OF
ESTIMATES AND RECLASSIFICATIONS

NATURE OF OPERATIONS

The Company has existed in various forms since 1979 and has evolved from a
mining exploration and development business to a telecommunications business.
The Company has been known as American Nortel Communications, Inc. ("ANC") since
1992 and became a Wyoming corporation in 1993. ANC currently operates only in
the telecommunications business, providing long distance telephone service in
combination with additional related services in the United States and a number
of foreign countries.

Prior to September 14, 1994, ANC conducted almost all of its telecommunications
business through NorTel Communications, Inc. ("NorTel-US"), a wholly owned
subsidiary in Salt Lake City, Utah. All subsidiaries, including NorTel-US, were
not active and were sold for nominal consideration or were dissolved.

On September 14, 1994, ANC and NorTel-US filed petitions under Chapter 11 of the
U.S. Bankruptcy Code, under case numbers 948-24604 and 948-24605 respectively in
the U.S. Bankruptcy Court, District of Utah, Central Division. ANC's bankruptcy
proceeding was subsequently converted to a Chapter 7 proceeding and was
thereafter dismissed on February 7, 1995. NorTel-US was sold June 27, 1995 for
nominal consideration to an affiliate of former directors, leaving ANC as the
sole surviving entity.

ANC'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 14, 1994. ANC's common stock is also traded in the over-the-counter
market and is quoted under the NASDAQ symbol "ARTM".

The Company was dormant when ANC's current President, Chief Executive Office,
and Board Chairman, William P. Williams, Jr. achieved control of the Company on
June 27, 1995. On that day, the former officers and directors resigned and
assigned their rights under certain agreements to Mr. Williams.

Subsequently, the Company has utilized various methods, including the infusion
of capital, barter trading, and the establishment of ANC as a "LEC" billed long
distance carrier to reestablish the financial viability of the Company. The
Company attempted to use prepaid phone cards to barter for goods and services,
not requiring the expenditure of cash. However, ANC encountered numerous
difficulties with this strategy, which is largely responsible for the delays in
filing the required financial statements with the Securities and Exchange
Commission ("SEC").

<PAGE>
THE ANAHEIM SPLASH

For a brief period of time in fiscal 1996, ANC owned the Anaheim Splash, a
franchise of the Continental Indoor Soccer League (this league is no longer
operating). The agreements and commitments entered into are further disclosed
under the caption "Commitments and Contingencies" later in these notes.

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The accounting policies followed by the Company and the methods of applying
those policies, which materially affect the determination of its financial
position, results of operations, or cash flows are summarized below.

CASH AND CASH EQUIVALENTS

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

REVENUE RECOGNITION - PHONE CARD REVENUE

Generally accepted accounting principles ("GAAP") require the deferral of
revenue to match the future cost of providing service. Accordingly, the prepaid
phone cards which were bartered and sold, most of which expire within 18 to 24
months of issuance, require the deferral of revenues to be recognized as the
units of time on the cards are utilized.

During the 1996 and 1997 fiscal years management committed ANC to provide
approximately 11,354,000 and 4,661,000 units of time, respectively. Committed
units related primarily to barter trades. Committed units related to cash sales
were nominal.

ANC issued approximately 3,074,000 and 8,897,000 units of time during 1996 and
1997, respectively. As units were issued, the liability for committed units was
reduced and recorded as unearned revenues. Issued units could not be used until
the card PIN numbers were activated by the Company. Cards were issued related
to the barter transactions for which the PIN numbers were never activated. As
the issued and activated units were utilized, unearned revenues were reduced and
recorded as earned revenues. Approximately 265,000 and 1,260,000 activated
units were utilized during fiscal 1996 and 1997, respectively, resulting in
generated revenues of $36,000 and $171,000 in 1996 and 1997, respectively.
During 1997, the service was suspended and the related barter transactions
rescinded by ANC management. As a good faith gesture, ANC agreed to provide
limited service through another vendor until June 30, 1998. As of June 30, 1998
the program expired and was terminated with the service provider.

<PAGE>
All remaining units in excess of those utilized in fiscal 1998, were recorded as
gain at the end of fiscal 1997, since these revenues did not relate to service
provided and originated from barter transactions which were rescinded during
that year.

COST RECOGNITION - PHONE CARD UNITS

Costs are incurred and recognized as the purchaser utilizes the units. Costs
related to providing the recognized service revenues amounted to approximately
$22,000 and $222,000, respectively, in 1996 and 1997. Production costs of
unissued cards are not considered significant enough to record as a prepaid
expense.

MARKETING COSTS

Direct response marketing costs, primarily incurred through contracted telephone
solicitation of prospective accounts are deferred and amortized over the average
life of the new accounts generated in subsequent periods.

INCOME TAXES

The provision for income taxes includes deferred income taxes resulting from
temporary differences in the recognition of certain income and expense items for
financial reporting purposes in different periods than for tax purposes. The
Company calculates its income tax provision and deferred income taxes under SFAS
109.The Company uses the flow-through method of accounting for investment tax
credits.

BASIS OF PRESENTATION

The accompanying financial statements have been prepared on the basis that the
Company will continue as a going concern, which contemplates the realization of
assets and the satisfaction of liabilities in the normal course of business.
The financial statements do not include any adjustments relating to the
recoverability and classification of recorded asset amounts or the amounts and
classification of liabilities that might be necessary should the Company be
unable to continue as a going concern.

ANC has sustained significant losses in its fiscal years ended 1995 and 1996.
The effect of these losses have been mitigated by the infusion of cash from new
equity capital and the payment of significant obligations through issuance of
the Company's common stock. The stockholders' deficiency has worsened during
these periods. Profitability from operations and favorable resolution of the
numerous claims and contingencies discussed later in these notes are required to
reduce the deficiency. If profitability is not achieved, the deficiency can
only be eliminated through the issuance of additional equity securities.

<PAGE>
USE OF ESTIMATES

The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ significantly from those estimated. Material
estimates that are particularly susceptible to significant change in the
near-term relate to the determination of the collectability of receivables,
useful lives of property and equipment and impairment of long -lived assets.

2. NON-MONETARY TRANSACTIONS

BARTER TRADES

In December 1995, ANC began trading long distance phone time for other assets.
The Company has recorded the trades at the lower of the wholesale price of $.15
per unit value or estimated net realizable value of the property received in the
following exchanges.

FISCAL 1996 BARTER TRANSACTIONS
BARTERS TRADES FOR TANGIBLE PERSONAL PROPERTY

On February 20, 1996 L&J Liquidators agreed to accept 483,500 minutes of
long-distance phone time for office furniture, office supplies and a Nordic ski
boat for a total of $72,525 at $.15 per minute. 131,500 minutes were awarded as
a finders fee for the Fall Creek Inn barter described below.
BARTER TRADE FOR REAL ESTATE - THE FALL CREEK INN

On March 30, 1996 the Kendel Corp agreed to accept 8,888,889 minutes of long
distance phone time for rights to the Fall Creek Inn in Branson, Missouri. ANC
also signed a five-year lease commencing April 15, 1996 and expiring March 14,
2001. The lease required ANC to pay the underlying loan payments to the
Mercantile Bank, which then was $20,069 per month. ANC also agreed to pay the
real and personal property taxes, maintenance and improvements, utilities and
insurance. Provided ANC was not in default on any rental payments, and, kept
and performed all other covenants and obligations required ANC could exercise
its option to purchase the property for the remaining principal and interest
balance due on the loan.

<PAGE>
2. NON-MONETARY TRANSACTIONS

On March 30, 1996 ANC took operating possession of the Inn. ANC issued
1,590,000 minutes of domestic long distance credits as of June 30, 1996 and an
additional 4,066,000 minutes during fiscal 1997. ANC also advanced cash for
operations and lease payments totaling $54,000 through June 30, 1996 and an
additional $178,000 during fiscal 1997. During 1997, the lessor repossessed
this property and the activity ceased. As of the date of the repossession,
2,477,000 minutes of long distance phone time remained unissued under the
agreement, with an additional 756,000 minutes unissued, which had been assigned
by the lessor to a third party. It is management's contention that the return
of the property to the owner effectively rescinded the obligation to supply the
minutes as agreed upon.

The lessor repossessed the property on January 31, 1997 and filed suit for
breach of contract and recovery of damages. A default judgment was initially
entered, granting Plaintiff rent, possession and damages in excess of
$3,000,000. A motion to set the default judgment aside was successful and there
has been no appeal. The Court ordered that possession be permanently
transferred to the Plaintiff leaving the Plaintiff in possession and full
ownership, with ANC no longer having an interest in the property. The case is
still pending on the issue of damages. Since either party has conducted no
discovery, Counsel is unable to evaluate the potential exposure to ANC in this
case at this time.

The leasehold, recorded at $1,200,000, was reduced by amortization of $61,000 in
fiscal 1996 prior to abandonment of the property. A valuation reserve of
$31,650 has also been recorded to reduce the value to the amount of the
remaining balance of unissued time bartered on the transaction as of June 30,
1996.

BARTER TRADE FOR REAL ESTATE - PALMDALE, CALIFORNIA LOT

On March 16, 1996 James Griffith, Jr. agreed to accept 44,444 units of domestic
long distance phone time for an undeveloped lot in Palmdale, California,
recorded at $6,667 at $.15 per minute. The trade was made through a barter
trade network transaction.

BARTER TRADE FOR AUTOMOBILE

On April 7, 1996 Joe Blanton agreed to accept 44,444 units of domestic long
distance phone time for a 1966 Jaguar Mark 10, recorded at $7,000, as the car
was subsequently sold for $7,000 cash on April 22, 1996.

<PAGE>
BARTER TRADE FOR STOCK

On April 7, 1996 Joe Blanton. agreed to accept 11,111 units of domestic long
distance phone time for 100,000 shares of Penn Pacific Stock, recorded at $1,667
at $.15 per minute.

BARTER TRADE FOR REAL ESTATE - POINTE ROYALE, MISSOURI PATIO HOME

On April 10, 1996 Len D. Clayton agreed to accept 1,166,667 units of domestic
long distance phone time for a patio home in Pointe Royale, Missouri, valued at
$275,000 by ANC management. ANC also agreed to assume a loan of approximately
$130,000 secured by the property. Title was to be transferred upon delivery of
long distance units. Since ANC took possession, but not ownership, ANC was
never legally named a creditor on the loan. The net investment of $145,000 has
accordingly been recorded as a deposit on a realty transaction, which was
subsequently forfeited.
On April 10, 1996, when ANC took possession of the property, it issued 391,000
minutes of domestic long distance credits. During fiscal 1997 ANC issued another
770,000 minutes.

During fiscal 1997, ANC returned the property to the owner.

A valuation reserve of approximately $49,000 has been recorded to adjust the
value to the amount of the remaining balance of unissued time bartered on the
transaction as of June 30, 1996.

BARTER TRADE FOR BOAT

On April 22, 1996 CL Carr agreed to accept 88,889 units of domestic long
distance phone time for a 1963 35 foot Cris Craft boat for a recorded value of
$13,333 at $.15 per minute. A valuation reserve of $13,333 has been established
as of June 30, 1996 to adjust the carrying value to the amount subsequently
realized upon return of the asset to the owner.

Minutes issued are included in the Pointe Royale minutes disclosed above.

BARTER TRADE FOR ART

In May 1996 Ed Iverson agreed to accept 11,000 units of domestic long distance
phone time for five limited edition art prints recorded at $1,650 at $.15 per
minute.

BARTER TRADE FOR EQUIPMENT

On May 8, 1996 George La Goe agreed to accept 52,222 units of domestic long
distance phone time and $2,000 cash for a tractor and other equipment. ANC
issued 52,222 minutes of domestic long distance credits (including 22,222 issued
to Barter Business Network) as of June 30, 1996 prior to abandonment of the
property in fiscal 1997. An additional valuation reserve of $9,833 has been
established to reflect the amount realized on subsequent abandonment.

<PAGE>
BARTER TRADE FOR AUTOMOBILE

On May 15, 1996 Steve Muskett agreed to accept $5,500 in trade credits (BXI) and
$500 cash for a 1969 Lincoln Continental Mark 3, recorded at $6,000. ANC issued
12,222 minutes of domestic long distance credits to BXI for this barter trade.
The amount has been fully reserved as a subsequently abandoned asset.

BARTER TRADE FOR REAL ESTATE - RIDGEDALE, MISSOURI LOTS

On June 5, 1996 Heritage West, Inc. agreed to accept 116,000 units of domestic
long distance phone time for six undeveloped lots in Ridgedale, Missouri, valued
at $17,400 at $.15 per minute. The units were to be ordered within 24 months of
the agreement date and expire 18 months after the issue date. The deed was not
assigned to ANC until July 1, 1996 and there is no evidence it was legally
recorded. The minutes tendered in fiscal 1996 were recorded as a deposit on a
realty transaction.

ANC issued 16,000 minutes of domestic long distance credits as of June 30, 1996
and an additional 63,000 minutes during fiscal 1997 prior to return of the
property. As of the date the property was returned, 37,000 minutes of long
distance phone time were still due the owner under the agreement. A valuation
reserve of $2,400 was recorded to adjust the value to the amount of the
remaining balance of committed but unissued time bartered on the transaction as
of June 30, 1996.

BARTER TRADE FOR BICYCLES

On June 26, 1996 the Equitas Group, Inc. agreed to accept 73,560 units of
domestic long distance phone time for 222 bicycles located in a warehouse near
Dallas, Texas, recorded at $11,034 at $.15 per minute. A valuation reserve has
been established at June 30, 1996 to fully recognize the loss on subsequent
abandonment.

STOCK TRANSACTIONS

The Company has entered into numerous transactions where it traded its stock for
assets or services. These transactions are disclosed under the caption "Common
Stock Issued".

3. PREPAID EXPENSES

Prepaid expenses consist of a $75,000 management fee paid to Wilcom, Inc. for
fiscal 1997, paid in June, 1996 by the issuance of ANC stock at $.15 per share.
Also included is $75,000 compensation paid to Eva Williams, (the wife of William
P. Williams, Jr.) for fiscal 1997 and 1998, paid in June 1996 by the issuance of
ANC stock at $.15 per share.

<PAGE>
4. PROPERTY AND EQUIPMENT

Property and equipment, at cost, consists primarily of telecommunications
equipment, net of accumulated depreciation of $8,939 and a valuation reserve of
$4,987 to reduce the cost of equipment acquired through barter. Depreciation is
calculated using the straight-line method over a five year estimated useful
life.

5. BARTER ACCOUNTS AND INVESTMENTS

BARTER ACCOUNTS

Barter accounts consist of phone cards placed with five barter groups, net of a
valuation reserve of approximately $33,000, to reflect the subsequent loss on
abandonment of these deposited amounts.

INVESTMENTS ACQUIRED THROUGH BARTER

Investments acquired through barter consists of assets, discussed in Note 2,
acquired in transactions which were not rescinded, but were later abandoned.
The assets, all tangible personal property, are stated net of a valuation
reserve of approximately $119,000.

INVESTMENTS ACQUIRED THROUGH BARTER, RESCINDED

Investments acquired through barter consist of the Fall Creek Inn leasehold and
other deposits on realty transactions, discussed in Note 2, which were
subsequently rescinded by ANC in fiscal 1997. These assets are stated net of
accumulated amortization of $61,000 and a valuation reserve of approximately
$64,000.

6. INVESTMENT IN AFFILIATE

Investment in affiliate consists of 400,000 shares of ANC common stock placed on
deposit with the Continental Indoor Soccer League in accordance with terms of a
franchise agreement further discussed in Note 10, "The Anaheim Splash". The
asset is stated net of a valuation reserve of $200,000 to reflect the probable
loss of this asset.

7. BARTER TRADE COMMITMENTS

Barter trade commitments consist of the value of the committed but unissued
long-distance units traded for various assets, discussed more fully in Note 2.
During fiscal 1997 the remaining commitment, totaling $687,000, was offset
against the rescinded barter assets in determining the net loss on abandonment.

<PAGE>
8. NOTES PAYABLE

CONVERTIBLE NOTES PAYABLE

9% convertible secured notes due December 31, 1996 with interest payable
quarterly, convertible into common stock of ANC at $4.00 per share, with
warrants (which expired December 31, 1995) to purchase up to 78,125 common
shares at $4.00 per share, originally secured by guarantee bond (10% per annum)
purchased from a surety company:

<TABLE>
<CAPTION>
<S> <C>
Herman Meinders. . . . . . . . . . . . . $100,000
Express Services, Inc.,
formerly BancOklahoma Trust Company. . 450,000
Southwest Securities, Inc.(Gerald Eason) 50,000
Marguerite Colton. . . . . . . . . . . . 25,000
</TABLE>

9% convertible secured notes due December 31, 1998 with quarterly interest
payments, escalating to 18.2% in years 2 through 6, convertible into 6,000
shares of common stock of ANC at $5.00 per share, with warrants (which expired
September 7, 1997) to purchase 6,000 common shares at $5.00 per share,
originally secured by guarantee bond (10% per annum) purchased from a surety
company:

<TABLE>
<CAPTION>
<S> <C>
Earle F. Waters, Trust. . . . . . . 25,000
EF Waters & Eleanor M Waters, Trust 25,000
--------

Total convertible notes . . . . . . $675,000
========
</TABLE>

On August 7, 1996, Wilcom issued 10,000 shares of its stock in ANC to Mr.
Meinders as payment for interest on his note.

Accrued but unpaid interest on the above notes totaled $253,739 and $188,489 as
of June 30, 1996 and 1995 respectively.

SETTLEMENT OF NOTES AND INTEREST

ANC is delinquent on paying the principal and interest amounts due under the
note terms. The note holders have filed suit against ANC and the surety
company. On April 7, 1998 a judgment was entered against ANC in favor of Herman
Meinders and Marguerite Colton. The respective amounts of the judgments are
$144,529 and $33,876 including interest at 9% per annum.

The claim of Express Services is pending with no current trial setting.
However, it is anticipated that judgment will be entered in favor of Express
Services, Inc. for all amounts claimed due and owing. A claim on the Eason note
has yet been asserted but ANC counsel anticipates that at some point suit will
be filed and judgment will be established for all amounts claimed due.

<PAGE>
8. NOTES PAYABLE

The court determined that interest is payable at the 9% rate specified in the
agreement without penalty. ANC is attempting to negotiate the retirement of the
other notes.

9. PROVISION FOR INCOME TAXES AND DEFERRED INCOME TAXES

There is no current or deferred tax expense or benefit for income taxes for the
years ended June 30, 1996 and 1995. The Company realized net operating losses
in 1996 and 1995.

The deferred tax consequences of temporary differences in reporting items for
financial statement and income tax purposes are recognized, if appropriate.
Realization of the future tax benefits related to the deferred tax assets is
dependent on many factors, including the Company's ability to generate taxable
income within the net operating loss period. The Company has considered these
factors in reaching its conclusion as to the valuation allowance for financial
reporting purposes.

At June 30, 1996 the Company has unused net operating losses of $10,600,000
expiring from 2009 through 2011. No deferred tax asset has been recorded as the
Company has provided a valuation allowance in the full amount of the benefit
until such time as deferred tax liabilities are realized or future earnings are
considered likely.

10. COMMITMENTS AND CONTINGENCIES:

LITIGATION

ANC is named as defendant in the following suits:

CLIC International Corporation vs. WP & Eva Williams, d.b.a. ANC - The suit,
claiming damages in an amount less than $30,000 is related to a barter trade of
phone cards for light bulbs for the Fall Creek Inn, was filed during fiscal 1997
and is recorded as a disputed claim. The suit is pending but accrued as of June
30, 1997.

KPMG Peat Marwick vs. Certified Surety Group, Ltd. and ANC - The suit, claiming
damages in the amount of $30,000 is for services rendered by KPMG related to its
audit of the June 30, 1993 ANC financial statements. The amount, which is being
disputed by ANC management, has been accrued as of June 30, 1995.

Kendel Corp. vs. ANC - The suit is discussed in detail in Note 2, "Fall Creek
Inn". The suit is pending.

Lantern Bay, Inc. and Richmond Heights vs. ANC - The suit is discussed in detail
in Note 2, "Palace View". The Lantern Bay portion was settled in fiscal 1998
for $15,000 and properly accrued as of June 30. 1997.

Records Retrieval vs. ANC - The suit is discussed in detail in Note 15, "Long
Distance Service Agreements." The suit was settled in fiscal 1998 for
approximately $42,000 and properly accrued as of June 30, 1997.

<PAGE>
Hartzog Conger Cason vs. ANC - The suit is discussed in detail in Note 8,
"Settlement of Notes and Interest". Certain of the note holders have received
judgment and others are pending.

LONG DISTANCE SERVICE AGREEMENTS

On September 20, 1995 ANC entered into a Lightswitch Services Agreement with
Electric Lightwave, Inc. ("ELI") whereby ELI agreed to provide switched services
to ANC. The term of the agreement was for one year with continuation on a
month-to-month basis thereafter. During the six-month "ramp-up" period, ANC was
billed for actual usage. After the ramp-up period they were billed the greater
of the minimum usage (50,000 per month) or actual minutes of use. Additionally,
a surcharge of $.01 was to be charged if the minimum commitment was not met.
In March 1996 ANC entered into an Agreement with Vancouver Telephone Company
("VTC") whereby ANC provided long-distance services to VTC through its carrier,
ELI. Through June 30, 1996 VTC had paid approximately $6,000 to ANC under the
agreement and an additional $14,000 through November 1996. The fiscal 1996
revenue was greater than 10% of the revenues of ANC.

LEASES

The Company has entered into lease obligations for office space for its
corporate headquarters in Scottsdale, Arizona and its support center in Salt
Lake City, Utah. The Scottsdale agreement, dated April 1, 1997 expired on March
31, 1998 and has been extended for six months. The Utah agreement dated January
1996 expired on March 31, 1997. Under terms of the agreements ANC pays monthly
rents totaled approximately $2,000. The Company paid rents of $18,000 and
$23,000 during the 1996 and 1997 fiscal years respectively.

As discussed above under the caption "Barter transactions", the Company entered
into agreements to lease a hotel and other rental properties. The leases, which
were for periods from two to five years, contained provisions to apply the lease
payments to the purchase of the properties. These transactions were
subsequently terminated by the Company resulting in forfeiture of its property
interests. These terminations resulted in litigation with the lessors which are
further discussed under the caption "Barter Trades". Under these leases, rents
totaling $65,000 in 1996 and $161,000 in 1997 were paid prior to the
forfeitures. Additionally, $15,000 was paid subsequent to 1997 for settlement
of a default claim.

THE ANAHEIM SPLASH

<PAGE>
As previously disclosed, ANC owned the Anaheim Splash for a brief period of time
in fiscal 1996. ANC management entered into certain agreements in connection
with this ownership. On February 16, 1996, ANC management entered into an
agreement to acquire the franchise from the Continental Indoor Soccer League
(the "CISL") which required, among other things, the placement of $400,000 worth
of ANC common stock as a security deposit and $10,000 as an advance payment
against the player compensation assessment. ANC tendered 400,000 shares of ANC
common stock as payment for the security deposit. However, since the market
price of the stock was less than the deposit requirement, the CISL has
requested, through counsel, that additional shares be surrendered to them.
Under terms of the agreement, there is a deferred league operating assessment of
approximately $88,000 and additional player compensation assessments of
$150,000. On March 1, 1996, ANC also entered into a ten-year lease agreement
with the Arrowhead Pond. The lease terms include liquidated damages of $25,000
in the event of termination.

In approximately April of 1996, ANC assigned its rights under these agreements
to Mr. Gary Sparks. ANC has no written agreement to substantiate this
assignment. CISL counsel verbally confirmed that Mr. Sparks had indeed stepped
into ANC's position and operated the team for approximately one year. CISL
counsel also commented that Mr. Sparks did not assume any obligations that ANC
may have incurred in connection with its ownership or termination of the above
agreements. He also indicated that the CISL may move to liquidate the stock in
settlement of any outstanding obligations. Presently, the CISL has made no
attempts to liquidate the stock and ANC has requested its' stock transfer agent
to place a "stop transfer" notation on its stock register.

Although no litigation has resulted from termination of these agreements, CISL
counsel could provide no assurance that such claim may be made in the future if
the liquidated proceeds are insufficient.

ACTIONS OF THE BOARD

Significant blocks of stock have been issued to officers and their affiliates as
disclosed under the caption "Common Stock Issued". It is not possible to
determine the effect, if any, of bringing current the required 1934 Act filings
and the financial statements and disclosures contained therein, may have on the
actions of current or former shareholders of the Company affected by these
transactions.

EFFECTS OF DELINQUENT FILINGS ON MARKET ACTIVITY

The Company is delinquent in its filings under the 1934 Act. The last filing
was the March 31, 1996 Form 10-QSB which requires substantial revision to its
disclosures and previously reported financial statements contained therein.
Significant trading of ANC stock has occurred by both related and unrelated
parties during the period subsequent to its filing. It is not possible to
determine the effect, if any, of bringing current the required 1934 Act filings
and the financial statements and disclosures contained therein, may have on the
actions of current or former shareholders of the Company affected by these
revisions.

EFFECTS OF PRESS RELEASES ON MARKET ACTIVITY

In an attempt to mitigate the effects of not providing current 1934 Act filings,
ANC management has periodically announced certain information which it believed
would be beneficial to shareholders. As a result of these press releases,
market activity may have occurred, including the buying and selling of ANC stock
by both related and unrelated parties. Certain information contained in press
releases, based on information available to management at the time, contained
information which has been substantially revised through the audit process.
Subsequent releases, containing the corrected information, have not yet been
released to the public. It is not possible to determine the effect, if any, of
bringing the required 1934 Act filings and the financial statements and
disclosures contained therein, may have on the actions of current or former
shareholders of the Company who made investment decisions based on those
releases.

<PAGE>
EFFECTS OF DELINQUENT FILINGS ON RULE 144 AND REG S STOCK ISSUANCES

As discussed more thoroughly under "Capital Transactions", representation
letters have been provided which contain assertions that the Company satisfied
the current public information conditions contained in the 1933 Securities Act.
The Company has been delinquent in its public filings but has attempted to keep
the public informed through press releases while it makes a concerted effort to
become current in its filings. Company Counsel is determining the factual
issues of this matter and is currently unable to determine the materiality of
violations, if any, or their impact on the financial statements of the Company.

INVESTIGATIONS

During 1997, the company was advised that the Securities Division of the Arizona
Corporation Commission had begun an investigation of the Company. The Division
personnel will neither confirm nor deny that an investigation is proceeding.
Such investigations, in the preliminary stages, are kept confidential and are
not necessarily an indicator of wrong doing.

RISK OF COMPETITION AND REGULATION

The Company is operating in an extremely competitive market in which their
customer base is subject to turnover resulting from solicitation by carriers
offering lower rates. Additionally, carriers with higher volumes may be able to
negotiate lower rates for the cost of their service provided which, in turn, can
be passed on through a lower rate structure. Additionally, industry competitors
may have a greater capital base to sustain them through periods of reduced
prices.

RISK OF YEAR 2000 PROBLEMS

The Company and its service provider utilize software which truncates the year
to a two-digit field. Accordingly, when the date passes the year 2000, errors
may occur in the calculation and processing of data significant to the revenue
recognition of the Company. ANC management and the service provider are taking
steps to modify these programs before any such problems are encountered. In the
event they are not successful in their efforts, the revenue stream of the
Company may suffer significant adverse effects.

<PAGE>
RISK FROM PHONE-CARD CANCELLATIONS

As previously discussed, ANC management decided to not activate service on
certain phone cards from barter trades. Additionally, they decided to suspend
service on phone cards which had been activated. As a result of a billing
dispute with the carrier, service was suspended for approximately 6 months while
ANC worked to establish service with another carrier. To mitigate the adverse
reaction to cancellation of the cards, ANC management authorized service to all
properly validated cardholders through June 30, 1998 at which time the service
was finally terminated. Management believes that the validated claims of all
cardholders have been satisfied by the above action and asserts that no
additional claims have been made.

11. RELATED PARTY TRANSACTIONS

On June 27, 1995 the ANC Board of Directors, consisting of William P. Williams,
Jr., rescinded the Amended Managers Agreement and the Earn-Out Preferred Share
Agreement as discussed under the note caption "Preferred Stock" and canceled the
3,300,000 shares of Preferred A Series One Preferred Stock issued to the former
officers and directors of ANC. The shares were redesignated and reissued to
Wilcom, Inc. for services rendered related to the reorganization of the Company.

Although the recision was reflected in the previously issued financial
statements for the year ended June 30, 1995, the reissuance of the shares for
services was omitted from those statements. The shares were transacted at $.06
per share, the same prices as other common shares issued for services at
approximately the same date.

Under the agreement, Wilcom was also granted warrants to purchase 440,000 common
shares at $1.00 per share prior to June 28, 1999. The purchase price was
subsequently reduced to $.02 per share through action of the current Board of
Directors and the warrants exercised on October 17, 1995.

As authorized by a previous warrant agreement, Shelton Financial, Inc., a
wholly-owned entity of Company management, purchased 400,000 common shares on
October 26, 1995 at $.02 per share. The agreement, entered into in 1992, had
set the exercise price at $3.00 per share. The price was subsequently reduced
to $.02 per share through action of the current Board of Directors.

On July 1, 1995 ANC entered into a Management Services and Consulting Agreement
with Wilcom, Inc. who engaged William P. Williams, Jr. to render services to ANC
as Director, Chief Executive Officer and President for twelve months. The terms
of the agreement provided for payment of 2,000,000 shares of ANC common stock
and options to purchase another 2,000,000 shares at 100.25% of the closing bid
price on July 1, 1995 (1/16th), exercisable through June 30, 1998. The shares
and options delivered under the agreement were to be free trading shares
registered under Form S-8.

<PAGE>
On July 16, 1995 the Board approved the issuance of 2,000,000 shares to Wilcom,
Inc. as compensation for 1996 under the above agreement.

On May 13, 1996 the Board approved the issuance of 500,000 shares to Wilcom,
Inc. as compensation for 1997. Since restricted stock was issued, the
transaction price was recorded at $.15 per share (60% of the $.25 market price)
giving effect to the trading restrictions on marketability.

On May 15, 1996 the Board approved the issuance of 750,000 shares to Eva
Williams as compensation for 1996. Since restricted stock was issued, the
transaction price was recorded at $.15 per share (60% of the $.25 market price)
giving effect to the trading restrictions on marketability. The Board
subsequently determined that the stock would be issued as compensation for the
three-year period 1996 - 1998 as compensation for her services for officer.
This resulted in prepaid compensation of $75,000 as of June 30, 1996 and $37,500
as of June 30, 1997.

On July 10, 1997 the Board approved the issuance of 1,000,000 shares at $.34 per
share to Wilcom, Inc. for management services rendered during fiscal 1998.
Additionally, 3,300,000 shares were issued to Wilcom, Inc. in exchange for the
3,300,000 shares of convertible preferred shares which were issued in June 1995,
as discussed above.

FLOW OF FUNDS TO AND FROM WILLIAMS/WILCOM/SHELTON

Eva Williams, the Secretary of the Company, is the sole shareholder of Wilcom,
Inc., the majority shareholder of ANC. William P. Williams, the Company's
President and CEO, is the spouse of Eva and the sole shareholder of Shelton
Financial, Inc., also a shareholder of ANC. Williams, Wilcom and Shelton have
all advanced funds to and received funds from ANC. They have also paid
obligations on behalf of ANC. It is not practicable to segregate the flow of
funds between these three entities and ANC and accordingly they are reported in
the aggregate. The advances to and from this related group and ANC is reported
in the cash flows statement.

12. CAPITAL TRANSACTIONS

PREFERRED STOCK

As discussed above, the previously authorized, issued and outstanding Preferred
A Series One Preferred Stock issued to former officers and directors was
canceled, reestablished, redesignated and reissued to Wilcom, Inc. as Preferred
A Series One Convertible, Preferred Stock. The stock has the relative rights,
preferences and limitations as follows:

<PAGE>
Dividends - The holders are entitled to dividends declared by the Board and are
entitled to participate with the holders of Common Stock in any dividend
distributions on a prorata basis.

Preferences on Liquidation - The holders are entitled to receive the residual
assets on a prorata basis with the holders of the Common Stock.

Voting Rights - The holders are entitled to one vote for each share of Preferred
Stock.

Conversion Rights - Each share is convertible at any time after the bid price
for the Common Stock has averaged more than $1.00 for thirty consecutive trading
days into one share of Common Stock.

Other Rights - The holders must approve certain expenditures, certain other
preferred issuances, certain asset dispositions and mergers.

COMMON STOCK ISSUED

PROVISIONS OF RULE 144

Rule 144 of the Securities Act of 1933 allows for limited trading of a company's
stock without registration provided that the Company and the shareholder comply
with certain provisions. This is referred to as Rule 144 stock. The Rule
requires that the shares bear a legend notifying the holder of the restriction,
that the stock be held for at least two years if issued to an unrelated party
and at least three years if issued to a related party. After the three-year
period the related party could dispose of limited quantities of the stock
restricted by the reported shares outstanding or the average trading volume of
the shares. To remove the restrictive legend, the issuer is required to satisfy
certain current public information conditions of Rule 144 (c).

The Rule was amended in 1997 to shorten the required holding periods from three
to two and two to one years respectively and now "piggybacks" the calculation
period from the date of first issuance by the Company.

<PAGE>
RULE 144 RESTRICTED SHARES FOR CASH

During the years ended June 30, 1996 and 1997 and subsequently ANC sold
restricted shares for cash:

<TABLE>
<CAPTION>
Shares Range Proceeds
--------- ----------- ---------
<S> <C> <C> <C>
FY96 1,165,000 $ .21 - .50 $ 314,625
FY97 272,000 $.25 - 1.00 214,300
</TABLE>

THE FOLLOWING MATERIAL "NON-MONETARY" TRANSACTIONS INVOLVED RULE 144 RESTRICTED
ANC STOCK:

<TABLE>
<CAPTION>
Date Description Shares Each Total
- ------------------ ------------------------------------- --------- ----- --------
<S> <C> <C> <C> <C>
October 17, 1995 . Wilcom, Inc., exercise warrants
offset to liability to control group 440,000 $ .02 $ 8,800

October 26, 1995 . Shelton Financial, exercise warrants
offset to liability to control group 400,000 $ .02 $ 8,000

February 20, 1996. Gary Jensen, for services 35,000 $ .25 $ 8,750

March 21, 1996 . . Continental Indoor Soccer League,
deposit for Anaheim Splash 400,000 $ .50 $200,000

June 3, 1996 . . . Wilcom, Inc, 1996 mgmt fees
per 1995 agreement 2,000,000 $ .06 $120,000
Wilcom, Inc. 1997 mgmt fees 500,000 $ .15 $ 75,000

June 17, 1996. . . Eva Williams, 1996 - 1998
Officer compensation 750,000 $ .15 $112,500

September 25, 1996 Zion Company, payment on
Ehrenberg property 40,000 $ .50 $ 20,000

February 5, 1997 . John Lee, loan fee 1,000 $1.00 $ 1,000

February 5, 1997 . Don Whittler, loan fee 5,000 $1.00 $ 5,000
March 4, 1997. . . Glenn Crotts, loan fee 30,000 $1.00 $ 30,000

May 8, 1997. . . . H.R. Colvin, loan fee 20,000 $1.00 $ 20,000

May 13, 1997 . . . MRG Enterprises, consulting fee 25,000 $ .75 $ 18,750

May 13, 1997 . . . Zion Company, additional payment
on Ehrenberg property 28,000 $ .75 $ 21,000

August 6, 1997 . . Stephen Roberts, legal fees
per 1996 agreement 60,000 $ .02 $ 1,200

October 29, 1997 . Wilcom, Inc. Preferred stock
Conversion (1995 agreement) 3,300,000 $ .06 $198,000
Wilcom, Inc., 1998 mgmt fees 1,000,000 $ .34 $340,000

November 20, 1997. Don Whittler, interest on loan 11,246 $ .70 $ 7,872

January 21, 1998 . Global Telecom, for purchase
of long distance accounts 58,000 $ .50 $ 29,000
</TABLE>

<PAGE>
In addition to the above, Wilcom also exchanged some of it's shares for payment
of ANC obligations:

<TABLE>
<CAPTION>
Date Description Shares Each Total
- -------------- ------------------------------- ------- ----- -------
<S> <C> <C> <C> <C>
July 16, 1996. Stock issued
for investor services 200,000 $ .30 $60,000
July 16, 1996. Stock issued
for investor services 300,000 $ .30 $90,000
August 7, 1996 Stock issued to Herman Meinders
for interest on note 10,000 $ .50 $ 5,000
</TABLE>

PROVISIONS OF REGULATION S

Regulation S of the Securities Act of 1933 allows issuance of unregistered
shares to foreign investors. Prior to amendment of the regulations in 1997 the
investor was required to hold the shares for at least 40 days before selling the
shares on the US market. The shares were issued with restrictive legend. To
remove the restrictive legend after the 40 day period, the issuer is required to
satisfy certain current public information conditions.

During 1997 the regulation was amended, extending the holding period to conform
to that required by Rule 144 and requiring the issuers to report the issuance of
such shares.

REG S RESTRICTED SHARES ISSUED FOR CONVERTIBLE DEBENTURES:

During the years ended June 30, 1997 and 1998 ANC issued restricted shares for
convertible debentures:

<TABLE>
<CAPTION>
Shares Range Total
------- ---------- --------
<S> <C> <C> <C>
FY97 181,118 $ .42 $ 76,069
FY98 436,152 .27 - .35 125,278
</TABLE>

CONVERSIONS OF UNRESTRICTED STOCK

During the years ended June 30, 1997 and 1998 various owners of ANC common stock
submitted Forms 144 with respect to the conversion of at least 100,000 and
2,327,000 restricted shares of common stock, respectively. The Forms were
accompanied by representation letters stating, among other things, that the
Company satisfied the current public information conditions contained in Rule
144(c). ANC has been delinquent in its 1934 Act filings since the March 31,
1996 Form 10-QSB but has provided other contemporaneous information to the
market through its press releases.

Factual issues relating to these matters have been referred by the Company to
Counsel for review and determination. At this time it has not been determined
if any, or how many, or when, such restricted shares may have been sold in
reliance upon Rule 144, or if such sales were made exclusively in reliance upon
Rule 144. Until those facts are determined Counsel is unable to determine if
any violations of the 1933 Securities Act were committed by the Company or the
consequences of such violations to any sellers or the Company. Counsel is
unable to assess the materiality of any possible violations or the financial
impact of possible violations on the financial statements of the Company. As
soon as a reasonable assessment of facts is made, should violations be
indicated, the Company intends to make appropriate and necessary action to
resolve these issues.

SALES OF WILCOM UNRESTRICTED SHARES

Wilcom, Inc., the majority shareholder, was issued restricted shares as
discussed above under related party transactions. Wilcom has converted and sold
100,000 and 1,030,000 shares in fiscal 1997 and 1998, respectively, to freely
trading shares which it believes to be within the holding period and other
trading limitations required by Rule 144. These amounts are included in the
disclosure in the preceding paragraph.

SHAREHOLDER DISPUTES

As reported in previously published statements, several individuals have claimed
that they paid for stock they have not received. Management asserts that this
did not result in any litigation and has been resolved to the satisfaction of
the parties.

13. NON-CASH TRANSACTIONS ELIMINATED FROM CASH FLOWS

<PAGE>
BARTER TRANSACTIONS ELIMINATED AT JUNE 30, 1996:

<TABLE>
<CAPTION>
<S> <C>
Property and equipment . . . . . . . . $ (7,481)
Valuation account. . . . . . . . . . 4,987
Barter accounts. . . . . . . . . . . . (32,980)
Valuation account. . . . . . . . . . 32,980
Investments - bartered . . . . . . . . (378,067)
Valuation account. . . . . . . . . . 371,400
Investments - bartered, rescinded. . . (1,389,625)
Valuation account. . . . . . . . . . 313,225
Amortization . . . . . . . . . . . . 61,000
Accounts payable - barter. . . . . . . 1,093,400
Unearned phone card revenue. . . . . . 381,567
------------

Barter transaction total . . . . . . . $ 450,406
============

STOCK TRANSACTIONS ELIMINATED:

Prepaid consulting paid with stock . . $ ( 75,000)
Prepaid compensation paid with stock . ( 75,000)
Anaheim Splash deposit paid with stock (200,000)
Accounts payable paid in stock . . . . 125,000
Investment fees paid with Wilcom stock 25,000
ANC stock issued to Wilcom . . . . . . (8,800)
ANC stock issue to Shelton . . . . . . (8,000)
Common stock issued. . . . . . . . . . 383,050
Compensation paid with stock . . . . . (166,250)
</TABLE>

14. OTHER GAINS AND LOSSES

LOSS ON DISCONTINUED OPERATIONS

<PAGE>
As previously discussed, during fiscal 1996, ANC abandoned its investment in the
Anaheim Splash. Prior to the abandonment, ANC received proceeds from ticket
sales totaling approximately $26,000 and incurred expenses paid through cash and
barter of approximately $17,000. The CISL may liquidate the 400,000-share
deposit to meet the obligations incurred by ANC as a result of entering into and
then defaulting on its agreements with the CISL and the Anaheim Pond. Some of
the recorded $200,000 loss on abandonment could, when the amount is determined,
be more properly classified as loss from discontinued operations but would have
no effect on either the loss from continued operations or net loss of the
Company.

As previously discussed, during fiscal 1997, ANC abandoned its investments in
bartered assets, primarily real estate, including an operating motel and other
leased condominium units. Fiscal 1996 operations related to property management
consist of the following components:

<TABLE>
<CAPTION>
<S> <C>
Revenues. . . . . . . . . . . . . . . . . . . . . . $ 83,000
----------

Expenses:
Operating leases. . . . . . . . . . . . . . . . . 65,000
Leasehold amortization. . . . . . . . . . . . . . 61,000
Other operating expenses . . . . . . . . . . . . 72,000
----------

Total expenses. . . . . . . . . . . . . . . . . . . 198,000
----------

Loss on discontinued property management operations $(115,000)
==========
</TABLE>

Additionally, ANC sustained fiscal 1996 expenses of approximately $23,000
related to its discontinued barter operations.

LOSS ON ABANDONMENTS:

During fiscal 1996, ANC recorded losses on assets held but subsequently
abandoned in fiscal 1997. The losses, discussed more specifically in Note 2,
consist of losses on tangible personal property of approximately $47,000 and
losses on real estate of approximately $64,000. During fiscal 1996 ANC also
recorded a loss on the Anaheim Splash of $200,000.

15. SUBSEQUENT EVENTS

FISCAL 1997 BARTER TRANSACTIONS

BARTER TRADE FOR REAL ESTATE - GRAND CAYMAN LOTS

On May 3, 1996 Caribbean Realty Management, Ltd. agreed to accept 1,800,000
units of domestic long distance phone time for eight undeveloped lots on the
Grand Cayman Island, valued at $270,000 at $.15 per minute. The units were to
be ordered within 24 months of the agreement date and expire 18 months after the
date the units were issued. Since no consideration had been given by ANC until
fiscal 1997 it was recorded as a fiscal 1997 transaction.

<PAGE>
ANC issued 1,170,000 minutes of domestic long distance credits during fiscal
1997 prior to discovery that the owner did not have satisfactory title to the
property. As of the date the project was terminated, 630,000 minutes of
committed long distance phone time had not been tendered. ANC sustained a loss
on abandonment of $270,000 during 1997.

BARTER TRADE FOR REAL ESTATE - LANTERN BAY, MISSOURI CONDOMINIUMS

On June 18, 1996 Eddie Hunter agreed to accept 133,332 units of domestic long
distance phone time for three condominiums in Lantern Bay, Missouri, valued at
$215,000 at $.15 per minute plus assumed debt. The financing was to be in the
form of a two-year lease/purchase agreement equivalent to the debt service on
the underlying debt of approximately $195,000. Since no consideration had been
given by ANC until fiscal 1997 it was recorded as a fiscal 1997 transaction.

ANC issued 133,332 minutes during fiscal 1997 prior to abandonment of the
property. During fiscal 1997, ANC returned the property. ANC issued 30,000
additional minutes for settlement of damages asserted by the owner. ANC
sustained a loss on abandonment of $20,000 during 1997.

BARTER TRADE FOR REAL ESTATE - PALACE VIEW CONDOS, MISSOURI CONDOMINIUMS

On June 26, 1996 Lantern Bay Condos, Inc. agreed to accept 440,000 units of
domestic long distance phone time for three condominiums in Palace View Condos,
Missouri, valued at $472,664 at $.15 per minute plus debt assumed. The
financing was to be in the form of a two-year lease/purchase agreement
equivalent to the debt service on the underlying debt of $406,664. Since ANC
did not tender consideration until fiscal 1997 it was recorded as a fiscal 1997
transaction.

<PAGE>
On June 28, 1996 ANC took possession of the property. ANC issued 440,000
minutes during fiscal 1997 prior to abandonment of the property. During fiscal
1997, the owner repossessed the property and filed suit for breach of contract
and recovery of damages. The suit was dismissed without prejudice and ANC
management subsequently settled the claim for $15,000. ANC sustained a loss on
abandonment of $66,000 during 1997.

BARTER TRADE FOR REAL ESTATE - PALACE VIEW CONDOS, MISSOURI CONDOMINIUMS

On June 26, 1996 Richmond Heights, Inc. agreed to accept 440,000 units of
domestic long distance phone time for three condominiums in Palace View Condos,
Missouri, valued at $430,893 at $.15 per minute plus assumed debt. The
financing was to be in the form of a two-year lease/purchase agreement
equivalent to the debt service on the underlying debt of $364,893. Since ANC
did not tender consideration until fiscal 1997 it was recorded as a fiscal 1997
transaction.

On June 28, 1996 ANC took possession of the property. ANC issued 440,000
minutes during fiscal 1997 prior to abandonment of the property. During fiscal
1997, the owner repossessed the property and filed suit for breach of contract
and recovery of damages. The suit was dismissed without prejudice but has not
been refiled or settled. ANC sustained a loss on abandonment of $66,000 during
1997.

BARTER TRADE FOR REAL ESTATE - KENTUCKY LOTS

On June 14, 1996 Barter Systems, Inc. agreed to accept approximately 158,000
units of domestic long distance phone time for 17 undeveloped lots in Kentucky,
valued at $23,700 at $.15 per minute. The title transfer was to take place when
the units were delivered. Since ANC did not tender consideration until fiscal
1997 it was recorded as a fiscal 1997 transaction

ANC issued approximately 100,000 minutes during fiscal 1997 prior to return of
the property. As of the date the property was returned, 58,000 minutes of long
distance phone time remained unissued under the agreement. ANC sustained a loss
on abandonment of approximately $24,000 during 1997.

BARTER TRADE FOR REAL ESTATE - KINGMAN, ARIZONA LOTS

On June 26, 1996 the Equitas Group, Inc. agreed to accept 80,000 units of
domestic long distance phone time for 18 five acre parcels of undeveloped land
near Kingman, Arizona, valued at $12,000 at $.15 per minute. All units were to
be ordered within 18 months of the agreement. Warranty title to the lots was to
be conveyed upon delivery of the units. Since ANC did not tender consideration
until fiscal 1997 it was recorded as a fiscal 1997 transaction

ANC issued 80,000 minutes during fiscal 1997 prior to abandonment of the
property. ANC sustained a loss on abandonment of $12,000 during 1997.

BARTER TRADE FOR REAL ESTATE - EHRENBURG, ARIZONA LAND

On June 28, 1996 the Curtis Family Trust agreed to accept 1,250,000 units of
domestic long distance phone time and 40,000 shares of ANC common stock for 20
acres of undeveloped land near Ehrenburg, Arizona, valued at $307,500 at $.15
per minute. The stock was to be freely tradable by October 31, 1996 and ANC was
to furnish additional shares (to bring the aggregate share value up to $120,000)
if the price was less than $3 per share. Since ANC did not tender consideration
until fiscal 1997 it was recorded as a fiscal 1997 transaction.

ANC issued 1,250,000 minutes during fiscal 1997 prior to abandonment of the
property. On September 25, 1996 ANC issued 40,000 restricted shares to the Zion
Company (Curtis Family Trust). It also issued 28,000 additional shares in May
1997 in accordance with the agreement provisions. ANC sustained a loss on
abandonment of $188,500 during 1997, net of $40,000 realized on sale of acreage.

<PAGE>
BARTER TRADE FOR ART

On March 15, 1997 Original Masterworks, Inc. agreed to accept 12,222,000 minutes
of prepaid domestic long-distance service for 110 pieces of museum quality art.
No minutes were issued and no art received under the agreement and ANC
management terminated the transaction. According to ANC management, the deal
was abandoned when the appraisal did not support the claimed value of the art.

FISCAL 1997 NOTES PAYABLE

On December 20, 1996 ANC entered into an agreement with Don Wittler, whereby Mr.
Wittler would loan $20,000 to ANC. The loan would be made under terms of a
one-year note with interest at 5% per month, payable monthly. Mr. Wittler
received 5,000 shares of ANC common stock for entering into the agreement. The
loan was repaid in its entirety in fiscal 1998.

On December 27, 1996 ANC entered into an agreement with John Lee, whereby Mr.
Lee would loan $10,000 to ANC. The loan would be made under terms of a one-year
note with interest at 5% per month, payable monthly. Mr. Lee received 1,000
shares of ANC common stock for entering into the agreement. The loan was repaid
in its entirety in fiscal 1998.

During January 1997, ANC entered into a verbal agreement a related party,
whereby the party loaned $20,000 to ANC. The loan is for five years with a
balloon payment including interest at 10%.

On February 10, 1997 ANC entered into an agreement with Glenn Crotts, where Mr.
Crotts would advance up to $200,000 to ANC for the sole and only purpose of
purchasing long distance customer accounts. The advances would be made under
terms of a one year, multiple advance notes with interest at 10% per annum,
payable monthly. The first advance of $50,000 on February 10, 1997 was to
purchase accounts from Nortel, Inc. under terms of a contract dated January 29,
1997. The agreement provides that collections on billings for the accounts
purchased would be collected by Integretel with the cash flow applied to
interest and principal. Mr. Crotts received 30,000 shares of ANC common stock
for entering into the agreement. Additionally, Wilcom pledged 500,000 shares of
its ANC stock as security for the loan. The maximum amount advanced under the
agreement was $100,000, which was repaid in its entirety in fiscal 1998.

On March 3, 1997 ANC entered into an agreement with H.R. Colvin, whereby Mr.
Colvin would advance up to $100,000 to ANC. The advances would be made under
terms of a one-year, multiple advance note with interest at 12% per annum,
payable monthly. Mr. Colvin received 20,000 shares of ANC common stock for
entering into the agreement. The maximum amount advanced under the agreement
was $25,000, which was repaid in its entirety in fiscal 1998.

<PAGE>
DISPUTED LIABILITIES WITH VENDORS

The liabilities to the following vendors are being disputed by ANC as of June
30, 1997:

<TABLE>
<CAPTION>
<S> <C>
Thomas & Quinlan. . . . . $ 93,461
E.A.I. Marketing. . . . . 14,000
On Target Marketing, Inc. 30,282
Records Retrieval, Inc. . 48,138
Electric Lightwave. . . . 175,358
--------

Total disputed claims . . $361,239
========
</TABLE>

LONG DISTANCE SERVICE AGREEMENTS

In an attempt to generate new accounts ANC contracted with the following firms:

On October and November 1996 ANC entered into a marketing agreements with Thomas
& Quinlan ("T&Q"), E.A.I. Marketing ("EAI"), and On Target Marketing ("OTM"),
dba Jones Boys, where these telemarketers agreed to provide ANC with
telemarketing services.

On January 16, 1997 ANC entered into a Service Agreement with Records Retrieval,
Inc ("RRI") to provide verification services for new accounts acquired by ANC's
telemarketers at the greater of $2.25 each or 65% of the projected daily
minimum. The agreement was for one year, automatically renewable from year to
year unless proper notification is given by ANC to terminate the agreement.

The above vendors accumulated unpaid charges to ANC under these agreements. The
amounts are disclosed above under the caption "disputed claims". ANC disputes
these unpaid charges on the basis that the accounts generated under this
telemarketing campaign resulted in an unacceptably high reject rate. However, on
September 30, 1997, Records Retrieval obtained a judgment of $41,498 against ANC
on their portion of the obligation. The judgment bears interest at 10% per
annum and is payable in monthly installments of $3,648. Settlements with other
vendors in this dispute have not yet been reached.

In approximately December 9, 1996, ANC entered into a Sub-Reseller Agreement
with LDC Telecommunications, Inc where LDC would provide telecommunications
services to ANC.

On December 9, 1996 ANC entered into a Billing Services Agreement (One Plus
(1+)) with Integretel Incorporated ("IGT") whereby IGT would provide ANC
telephone company billing and collection and associated services to the
telecommunications industry. The agreement term is for two years, automatically
renewable in two-year increments unless appropriate notice to terminate is given
by either party. Under the agreement, IGT bills, collects and remits the
proceeds to ANC net of reserves for bad debts, billing adjustments, telephone
company fees and IGT fees. If either the transaction volume decreases by 25%
from the preceding month or less

<PAGE>
than 75% of the traffic is billable to major telephone companies IGT may at its
own discretion increase the reserves and holdbacks. The accounts receivable
balance from IGT on June 30, 1997 of $167,108 resulted in proceeds of $137,965,
net of fees of $10,340 and dilution (bad debts and billing adjustments) of
$18,803.

On December 19, 1996 ANC entered into a Master Agreement for Purchase and Sale
of Accounts with IGT whereby IGT purchases accounts from ANC for a purchase
price consisting of an advance component and a deferred component. The advance
component which is calculated by multiplying the estimated purchase price by the
advance component percentage is payable within ten days of receipt of the
transaction batch pertaining to the purchased accounts. The deferred component
is the differential of the amount actually collected by IGT and the advance
component and is payable when the amount is determined. Except for the right of
IGT to refuse to accept or reject acceptance of accounts and except for the
right of IGT to charge back amounts to ANC under certain circumstances, the sale
of accounts is without recourse and IGT assumes the full credit risk. Certain
chargebacks and fees are recourse obligations of ANC. IGT maintains both
Non-recourse and Recourse accounts comprising the Combined account for ANC. The
maximum purchase obligation of IGT to ANC was set at $700,000 when the agreement
was drafted. This was subsequently increased to $3,000,000 as of March 31,
1998.

On January 8, 1997 ANC entered into an agreement with the Furst Group, Inc., LDC
and IGT whereby IGT would assign net proceeds from services provided by LDC on
behalf of ANC customers to Furst. Under the agreement, 78% of the net proceeds
were remitted to Furst and 22% to ANC. The agreement was terminated by ANC in
July 1997. During the duration of the agreement ANC assigned a total of
approximately $256,000 of its net proceeds to Furst. Furst has provided no
accounting to ANC of these proceeds to determine if there are any amounts that
are due ANC which would result from proceeds being withheld in excess of the
cost of services provided by LDC and Furst.

On January 9, 1997 ANC entered into a Carrier Transport Switched Services
Agreement with LDC. In accordance with the agreement, ANC granted a security
interest in certain assets of ANC which include all right, title, and interest
in the customer lists, accounts receivable, customer and account contracts, and
all rights relating to such contracts serviced by the agreement and all present
and future accounts receivable attributable to such customer accounts including
the proceeds of any sale, transfer or encumbrance thereof and all awards or
payments related thereto. The security interest granted was documented in a
Security Agreement between ANC and LDC on January 9, 1997.

On February 4, 1997 ANC entered into Contract of Sale with Nortel, Inc. whereby
Nortel sold to ANC 125,000 unprovisioned ANI's for $575,000. $50,000 was payable
on February 15, 1997, $150,000 upon verification of long distance carrier
receiving a total of 50,000 ANI's and $375,000 upon verification of long
distance carrier receiving a total of 75,000 ANI's. An addendum signed on the
same day provides for payment of the first $50,000 to be made to Career
Communications Corp. Nortel, Inc. signed a release and assignment to Career
Communications Corp. related to the 125,000 unprovisioned ANI's. ANC
management subsequently terminated this agreement after the quality of the first
ANI's was below ANC standards.

On April 24, 1997 ANC entered into a Reseller Agreement with Total Network
Services, a division of Cable and Wireless. The agreement, which runs for an
initial duration of 24 months, provides for minimum monthly payments for service
of $10,000, $30,000 and $40,000 in the 2nd, 3rd and 4th months respectively
after service initiation and $50,000 thereafter through the term of the
agreement. Through June 30, 1997 and 1998 the actual utilization has exceeded
the minimums.

On June 24, 1997 ANC entered into a Contract of Sale with Global Telecom
International, Inc. to purchase 2,400 shares of GTI plus the traffic base. ANC
tendered 58,000 shares of common stock in January 1998 to consummate this
transaction. On September 11, 1997 the agreement was amended from a price of
$.34 per share to $.50 per share.

On August 1, 1997 ANC entered into a Consultant's Finders Fee Agreement with
Career Communications Corp ("CCC") for its assistance in acquiring Global
Telecom International, Inc. for $75,000 in freely tradable shares of ANC. In
accordance with the agreement, CCC was to be paid $7,500 on execution of the
agreement and $17,500 on September 4, 1997.

Effective August 1, 1997 ANC entered into an agreement with Telesolutions
("TSN") to provide data processing services related to compiling call detail
from carriers and submission of LEC billing data to Integretel. The agreement
is for one year or until either party terminates with 120 days notice.

On November 18, 1997 ANC entered into a service agreement with Accutel, Inc.
whereby Accutel would acquire and provide LEC customers to ANC which meet
certain criteria as specified in the agreement. ANC would pay Career
Communications for such verified customers a fee for 1,000 ANI's on an as needed
basis.

<PAGE>
COMMON STOCK WARRANTS

On November 7, 1996 the Company entered into an agreement with J.R. Younker &
Associates of Nova Scotia to expose the Company to key investment managers and
dealers throughout the world. The agreement entitles Younker and other named
parties to receive non-restrictive warrants for a total of 50,000 shares of ANC
common stock at the average trading price for the last 20 days ($1.05). The
warrants expire on November 7, 2001. Younker also received a commission on
funds invested in the Company as a result of his efforts.

On December 19, 1996 the Company issued additional warrants under the above
agreement with Younker at a price of $1.05 per share, expiring on January 19,
2001.

The Company also entered into an agreement with Mr. Ray Hackney to solicit
investors. The agreement entitled Mr. Hackney to purchase shares and receive a
commission on funds invested in the Company as a result of his efforts.

On July 16, 1997 the Company entered into an agreement with MRG Enterprises,
Inc. to sell 250,000 free trading
shares at $.35 and 250,000 warrants at $1.00 for one year. MRG would receive a
6% finder's fee for putting together the deal. The agreement was mutually
terminated due to the Company's inability to provide current 1934 Act filings
and MRG's inability to secure investors.

CONVERTIBLE DEBENTURES

In March 1997, the Company marketed $230,000 principal amount convertible
redeemable debentures due March 1, 2000. Interest was 10% per annum on the face
payable monthly in advance and was payable in cash or in stock at the Company's
discretion. The debentures were convertible at any time commencing after 45
days into shares of the Company's common stock at a price equal to the lower of
70% of the closing bid price of the stock immediately preceding closing or 70%
of the closing bid price of the stock immediately preceding the date the Company
received the conversion notice from the debenture holder.

The Company successfully placed the $230,000 debenture with Canadian Advantage
LP, Thomson Kernaghan & Co, Ltd, the general partner. The debenture, dated
April 8, 1997, resulted in the receipt of $201,500 net funds. The debenture did
not provide for issuance at a discount. The difference between the face amount
and the net funds received was for a 12% ($28,500) finders fee paid to Select
Capital. In accordance with the conversion provisions and the provisions of
Regulation S of the Securities Act of 1933, the general partner requested
conversion of $75,000 to common stock on May 30, 1997 at $.42 per share, $80,000
on July 7, 1997 at $.28125 per share and $75,000 on August 7, 1997 at $.2429.
The Company honored the May 30 and July 7 conversions issuing a total of 483,341
shares which included 9,838 shares for interest totaling $3,047. The August 7
conversion has not yet been honored by the Company leaving a remaining debenture
balance of $75,000 plus accrued interest.

<PAGE>
In April 1997, the Company also attempted to market $1,875,000 principal amount
one year 12% Series A Senior Subordinated Convertible Redeemable Debentures.
The debentures were to be sold at a 20% discount or $1,500,000 if the whole
issue was sold. Interest was 12% per annum on the face payable monthly in
advance. Interest was payable in cash or in stock at the Company's discretion.
The first quarter's interest was payable at the time of closing in the form of
common stock under Regulation S at 20% below the 5-day average bid at the date
of the subscription. The debentures were convertible at any time commencing
after 45 days into shares of the Company's common stock at a price equal to the
lower of 80% of the closing bid price of the stock immediately preceding closing
or 80% of the closing bid price of the stock immediately preceding the date the
Company received the conversion notice from the debenture holder. ANC granted a
lien against its assets having a value of not less than $2,250,000.

Under this offering, a Netherlands entity, De Affiliatie B.V., subscribed to
debentures totaling $62,500, for which the Company received net proceeds
totaling $44,000 on May 29, 1997. The proceeds received less than the 80% were
for a finders fee of 12% ($6,000) paid to Select Capital. In accordance with
the conversion provisions and the provisions of Regulation S of the Securities
Act of 1933, the investor requested conversion of $31,250 to Common stock on
July 17, 1997 at $.30 per share which was subsequently honored by the Company
resulting in the issuance of 104,167 shares of common stock. The remaining
unconverted debenture balance is $31,250 plus accrued interest.

Also under this offering, a Swiss entity, EBC Zurich AG, subscribed to
debentures totaling $12,500 for which the Company received net proceeds totaling
$8,800 on April 28, 1997. The proceeds received less than the 80% were for a
finders fee of 12% ($1,200) paid to Select Capital. In accordance with the
conversion provisions and the provisions of Regulation S of the Securities Act
of 1933, the investor requested conversion of $12,500 to common stock on June
23, 1997 at $.325 per share which was subsequently honored by the Company
resulting in the issuance of 29,762 shares of common stock. There is a disputed
balance of 5,952 shares which the investor claims is due based on a disputed
differential in the conversion price per share.

The Company entered into an agreement with Select Capital to market the
debentures. The agreement was mutually canceled by Select Capital and the
Company for failure of the Company to provide current filings required by the
1934 Act and failure of Select to obtain sufficient sales of the debentures.
Select was to receive common stock and warrants to purchase common stock in
addition to a fee and expenses based on a percentage of funds received as a
result of their efforts.

<PAGE>
TREASURY STOCK REPURCHASES

On August 21, 1996 ANC repurchased 66,858 shares of restricted ANC stock from
Wilcom, Inc., the majority shareholder of ANC, for $117,000, or $1.75 per share
which was the market price of free trading stock at that date.

On February 28, 1997 ANC purchased 60,000 shares of restricted ANC stock from
Sherry L Jabour for $32,100 or $.535 per share. ANC was required to repurchase
the shares as part of a settlement, constituting return of her original $30,000
investment plus 7% interest for one year. These shares were subsequently sold
on April 25, 1997 for $30,000 without being transferred into ANC's name. Wilcom
combined 40,000 shares of its restricted ANC stock as part of a 100,000-share
transfer of restricted shares to other shareholders. $50,000 was deposited to
ANC as payment for those shares by the respective shareholders and then paid to
Wilcom.

On April 21, 1997 ANC purchased 292,000 shares of restricted ANC stock from John
Busby for $128,000, or $.44 per share. Mr. Busby previously purchased the stock
from Wilcom in August and September 1996 for $146,000 or $.50 per share.

On April 21, 1997 ANC purchased 100,000 shares of restricted ANC stock from Jeff
Holmes for $25,000, or $.25 per share. Mr. Holmes previously purchased the
shares from ANC in June 1996 for $25,000.

The above shares purchased from Busby and Holmes (392,000) were canceled on June
22, 1998.

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

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 ANC.

On June 7, 1996 Crouch, Bierwolf & Chisholm ("Crouch Bierwolf"), Certified
Public Accountants, of Salt Lake City, Utah, were engaged to conduct an audit of
the financial statements of ANC for the fiscal years ended June 30, 1995 and
1994 (which accompanied its Form 10-KSB Annual Reports for the fiscal years
ended June 30, 1994 and June 30, 1995, filed with the Securities and Exchange
Commission on or about November 18, 1996). During registrant's two most recent
fiscal years and any interim periods preceding their engagement, ANC had not
consulted Crouch Bierwolf regarding the application of accounting principles to
a specified transaction, either completed or proposed; or the type of audit
opinion that might be rendered on ANC's financial statements or any other
financial presentation whatsoever, or any disagreement or reportable event with
any former accountant.

<PAGE>
After completing the 1995 and 1994 fiscal year audits, Crouch Bierwolf
initiated the audit of the financial statements of ANC for the fiscal year ended
June 30, 1996. On or about May 1, 1997 the audit was discontinued because of
discussions and disagreements between ANC and Crouch Bierwolf with respect to
the complexity of the audit resulting from certain barter transactions in which
the registrant had traded prepaid long distance time for various properties, the
valuations of the properties acquired in those transactions, and difficulties
Crouch Bierwolf had in staffing for audit fieldwork out of state. The decision
to terminate the relationship was made by the Chief Executive Officer and
President who constitutes the sole member of the Board of Directors. Registrant
had no audit committee. On May 1, 1997 Crouch Bierwolf sent a letter to
Registrant confirming that the client-auditor relationship had ceased.
Subsequently, ANC approached Crouch Bierwolf about continuing the audit and
informed Crouch Bierwolf that ANC accepted the method of valuation proposed by
Crouch Bierwolf. However, ANC was informed that Crouch Bierwolf was unwilling
to undertake further audit work because of the difficulties of staffing for
audit fieldwork out of state.

Other than the disagreements disclosed above, there were no disagreements
between ANC and Crouch Bierwolf, whether resolved or not resolved, on any matter
of accounting principles or practices, financial statement disclosure or
auditing scope or procedure, which, if not resolved, would have caused them to
make reference to the subject matter of the disagreement in connection with
their respective reports.

Other than expressing substantial doubt about the ability of ANC to
continue as a going concern, the reports of Crouch Bierwolf do not contain any
adverse opinion or disclaimer of opinion, and are not qualified or modified as
to uncertainty, audit scope or accounting principles.

On July 31, 1997 Semple & Cooper, LLP ("Semple & Cooper"), Certified Public
Accountants, of Phoenix, Arizona, were engaged to conduct an audit of the
financial statements of ANC for the fiscal year ended June 30, 1996. Semple &
Cooper initiated an audit of the financial statements of ANC for the fiscal year
ended June 30, 1996 and continued until January 22, 1998 when registrant and
Cooper & Semple terminated the client-auditor relationship by mutual agreement.
During registrant's two most recent fiscal years and any interim periods
preceding their engagement, ANC had not consulted Semple & Cooper regarding the
application of accounting principles to a specified transaction, either
completed or proposed; or the type of audit opinion that might be rendered on
ANC's financial statements or any other financial presentation whatsoever, or
any disagreement or reportable event with any former accountant.

On February 9, 1998 Semple & Cooper sent a letter to Registrant confirming
their resignation effective January 22, 1998. The reason for the termination
was the complexity of the audit resulting from certain barter transactions in
which the registrant had engaged and difficulties Semple & Cooper had in
staffing for the audit.

<PAGE>
There were no disagreements between ANC and Semple & Cooper, whether
resolved or not resolved, on any matter of accounting principles or practices,
financial statement disclosure or auditing scope or procedure, which, if not
resolved, would have caused them to make reference to the subject matter of the
disagreement in connection with their respective reports.

On March 2, 1998 LaVoie, Clark, Charvoz & May, P.C. ("LaVoie Clark"),
Certified Public Accountants, of Tucson, Arizona, were engaged to conduct an
audit of the financial statements of ANC for the fiscal years ended June 30,
1998, 1997 and 1996. During registrant's two most recent fiscal years and any
interim periods preceding their engagement, ANC had not consulted LaVoie Clark
regarding the application of accounting principles to a specified transaction,
either completed or proposed; or the type of audit opinion that might be
rendered on ANC's financial statements or any other financial presentation
whatsoever, or any disagreement or reportable event with any former accountant.

All decisions to engage and/or terminate the relationships between ANC and
Crouch Bierwolf, Semple & Cooper, and LaVoie Clark were made by the Chief
Executive Officer and President who constitutes the sole member of the Board of
Directors. Registrant has no audit committee.

ANC failed to timely report these changes with the SEC on Form 8-K. ANC
has by filing this report and by shortly completing the filing of respective
Forms 8-K with respect to these changes begun to correct these delinquencies.

PART III

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

Directors and Executive Officers

Mr. William P William sole Directors and sole Executive Officers of the Company
is as follows:

<TABLE>
<CAPTION>
Name Age Position
- ----------------------- --- ---------------------------------------------------------
<S> <C> <C>
Mr. W. P. Williams, Jr. 44 Chairman of the Board, Chief Executive Officer, President
--- ---------------------------------------------------------
Eva Williams Secretary
- ----------------------- ---------------------------------------------------------
</TABLE>

The Directors of the Company hold office until their successors are duly
elected and qualified. The background and principal occupations of each
director and officer of the Company are as follows:

<PAGE>
W. P. Williams, Jr. has been the Chairman, Chief Executive Officer, and
President of the Company since June of 1995. His broad responsibility includes
overseeing all operational functions of the Company. He has twenty years of
diversified, senior level business experience. Mr. Williams came to the Company
having served 12 years as president and Chairman of the Board of Shelton
Financial, Inc. He has a B.A. Degree in Business from Baylor University and a
MBA from Baylor University as well. The Company's CEO, through his interest in
Wilcom, and its ownership of 3,300,000 shares of New Preferred, and ownership of
approximately 6,000,000 shares of common stock, each with one vote, has a
controlling interest of the Company. See "Certain Relationships and Related
Transactions" and "Executive Compensation."

Eva Williams, the Secretary of ANC since June, 1995, is the spouse of Williams
P. Williams, Jr. ANC's President, CEO and sole director. Eva Williams is the
sole shareholder of Wilcom, Inc. the majority shareholder of ANC. Williams P.
Williams, Jr. is the sole shareholder of Shelton Financial, Inc., also a
shareholder of ANC.

ANC's sole Director, through his beneficial interest in and control of
Wilcom and Shelton Financial, and their ownership of voting shares of New
Preferred and ownership of voting shares of common stock, has control of ANC
for an indefinite period of time. In addition, if the existing management is
not leading ANC as other shareholders might wish, the existing management will
be very difficult to remove. These contract were not entered into in arm's
length negotiations. See "Certain Relationships and Related Transactions" and
"Executive Compensation."

COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT

The Company is aware that all filings required of section 16(a) of the
Exchange Act of Directors, Officers or holders of 10% of the Company's shares
have not been timely and the Company has instituted procedures to ensure
compliance in the future. Mr. Williams was delinquent for period ending June
30, 1996. The Company will bring delinquent filings current by December 31,
1998.

ANC has begun to correct these delinquencies by filing this report and by
making its Directors, Officers or holders of 10% of ANC's shares aware of their
Section 16(a) filing requirements and of the necessity of correcting these
delinquencies by completing the required filing.

ITEM 10. EXECUTIVE COMPENSATION

General. Executive officer or other officer of the Company have not
received cash compensation, paid or during its fiscal year ended June 30, 1996.
The Directors have not been compensated for any previous meetings of the Board
of Directors. Mr. Williams's sole Director and Chief Executive Officer pursuant
to the Management Agreement between ANC and Wilcom, Inc. is compensated through
the issuance of stock to Wilcom, Inc. See Item 12 of this report.

<PAGE>
Benefit Plans. The Company does not have a pension plan, retirement plan,
profit sharing plan, stock option plan or similar existing benefits at this time
for its Directors, Officers, or Employees. At June 30, 1996 not options were
outstanding to acquire share of outstanding stock.

Amended Managers Agreement. This agreement was rescinded by mutual
consent after it was assigned to Wilcom as a result of the change in control of
the Company. See Item 12, "Management Services and Consulting Agreement".

The following table sets forth information concerning the compensation for
the fiscal year ended June 30, 1996, of ANC's President and Chief Executive
Officer, and the only other executive officer of ANC ("Named Executive
Officers"):

<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
--------------------------

ANNUAL COMPENSATION LONG TERM COMPENSATION
------------------------------ -----------------------
Options All Other
Name and Principal Position Year Salary Commission/Bonus (Shares) Compensation
- --------------------------- ---- ------ ---------------- -------- --------------
<S> <C> <C> <C> <C> <C>
William P. Williams, Jr.. . 1996 - - - $ 120,000(1)
President and CEO . . . . . 1995 - - - $ 198,000(2)
---- ------ ---------------- -------- --------------

Eva Williams. . . . . . . . 1996 - - - $ 37,003 (3)
Secretary . . . . . . . . . 1995 - - - -
- --------------------------- ---- ------ ---------------- -------- --------------
<FN>
1. Represents the issuance of 2,000,000 shares of ANC restricted common stock
valued at $.06 per share to Wilcom, Inc. pursuant to a Management Services and
Consulting Agreement under which Wilcom provided the executive, management and
consulting services of its president, Williams P. Williams, Jr., to ANC as
Director, CEO and president of the Company for the fiscal year ending June 30,
1996.

2. Represents 3,300,000 shares of New Preferred valued at $.06 per share and
issued to Wilcom on June 27, 1995 for services rendered related to the
reorganization of the Company after dismissal of the 1994 bankruptcy proceeding;
said shares to replace certain stock holdings and rights under contracts to
acquire stock between former management and ANC that were assigned to William P.
Williams Jr., his wife Eva Williams and to corporations controlled by them.

3. Represents the issuance of 250,000 shares of ANC restricted common stock
valued at $.15 per share (60% of market) to Ms. Williams as compensation for her
services as Secretary of the Company for the fiscal year ending June 30, 1996;
and being a part of 750,000 shares of ANC restricted common stock authorized by
the board on May 15, 1996 and subsequently determined to be compensation for her
services as Secretary for the three fiscal years ending June 30, 1996, 1997, and
1998.
</TABLE>

<PAGE>
The Summary Compensation Table does not include warrants to purchase
440,000 shares of common stock that were assigned to Wilcom, Inc. by former
officers and directors of ANC in connection with Mr. Williams assuming control
of ANC in June, 1995. Wilcom, Inc . is a Texas corporation that is wholly owned
by Eva Williams, wife of William P. Williams, Jr., the sole director, CEO and
president of ANC. See "Certain Relationships and Related Transactions". The
warrants were exercised by Wilcom and 440,000 shares were issued to Wilcom on
October 17, 1995 pursuant to the exercise of the warrants.

No executive officer or other officer of ANC received cash compensation in
the form of salary, bonus or other annual compensation, paid or accrued during
its last two fiscal years ended June 30, 1996. The sole Director has not been
compensated for any previous meetings of the Board of Directors.

ANC does not have a pension plan, retirement plan, profit sharing plan or
similar existing benefits for its current Directors, officers, or employees.

See "Certain Relationships and Related Transactions" for a description of
certain transactions between ANC and third party entities controlled by William
P. Williams, Jr. and his wife Eva Williams whose primary purpose was to furnish
compensation to a Named Executive Officer.

ITEM 11. SECURITY OWNERSHIP OF OWNERS AND MANAGEMENT

The following table sets forth information concerning ownership of ANC's
voting securities by (i) all persons known by ANC to own 5% or more of ANC's
voting securities, (ii) each Director and Named Executive Officer of ANC, and
(iii)the group of two officers and the sole Director set forth above as a group,
as of as of June 30, 1996 See Note (2) to table below.

<TABLE>
<CAPTION>
Number of Total
New Number of
Preferred Number of Voting Percentage of
Shares Common Securities Voting
Name Owned Shares Owned Owned Securitie
- ---------------------------------- ------------ --------------------------- ----------- --------------
<S> <C> <C> <C> <C>
Executive Officers and Directors:
- ----------------------------------

William P. Williams, Jr.. . . 3,300,000(1) 4,606,961(2)(3)(4)(5)(6)(7) 7,906,961 65.5%
------------ --------------------------- ----------- --------------

Eva Williams. . . . . . . . . 3,300,000(1) 4,606,961(2)(3)(4)(5)(6)(7) 7,906,961 65.5%
------------ --------------------------- ----------- --------------

Directors and Officers as
a Group (2 persons) . . . . . 3,300,000(1) 4,606,961(2)(3)(4)(5)(6)(7) 7,906,961 65.5%
------------ --------------------------- ----------- --------------

Total. . . . . . . . . . . . . 3,300,000 4,606,961 7,906,961 65.5%
------------ --------------------------- ----------- --------------

5% Shareholders:

Wilcom, Inc.. . . . . . . . . 3,300,000(1) 3,456,961(2)(3)(5)(6) 6,756,961 56.0%
------------ --------------------------- ----------- --------------

Shelton Financial, Inc. . . . 400,000(4) 400,000 3.0%
- ---------------------------------- ------------ --------------------------- -----------
<FN>

1. Includes 3,300,000 outstanding New Preferred Shares owned by Wilcom, Inc., a Texas corporation that
is wholly owned by Eva Williams, wife of William P. Williams, Jr., the sole director, CEO and president of
ANC. By reason of Ms. Williams' ownership of Wilcom, Inc. the New Preferred Shares are included as
beneficially owned by her and are also included as beneficially owned by Mr. Williams because of his
relationship to her. See "Certain Relationships and Related Transactions" for disclosure of indirect
interest of the sole Director in Wilcom, Inc.

2. Includes 516,961 shares of common stock owned by Wilcom, Inc., a Texas corporation that is wholly owned
by Eva Williams, wife of William P. Williams, Jr., the sole director, CEO and president of ANC. By reason
of Ms. Williams' ownership of Wilcom, Inc. the common shares are included as beneficially owned by her and
are also included as beneficially owned by Mr. Williams because of his relationship to her. See "Certain
Relationships and Related Transactions" for disclosure of indirect interest of the sole Director in
Wilcom, Inc. The shares were acquired from former officers and directors of ANC in connection with Mr.
Williams assuming control of ANC in June, 1995.

<PAGE>
3. Includes 440,000 shares of common stock owned by Wilcom, Inc., a Texas corporation that is wholly owned
by Eva Williams, wife of William P. Williams, Jr., the sole director, CEO and president of ANC. By reason
of Ms. Williams' ownership of Wilcom, Inc. the common shares are included as beneficially owned by her and
are also included as beneficially owned by Mr. Williams because of his relationship to her. See "Certain
Relationships and Related Transactions" for disclosure of indirect interest of the sole Director in
Wilcom, Inc. The shares were issued on October 17, 1995 pursuant to the exercise of warrants assigned to
Wilcom by former officers and directors in connection with Mr. Williams assuming control of ANC in June,
1995.

4. Includes 400,000 shares of voting common stock owned by Shelton Financial, Inc., a Texas corporation
that is wholly owned by William P. Williams, Jr., the sole director, CEO and president of ANC and husband
of Eva Williams. By reason of Mr. Williams' ownership of Shelton Financial the 400,000 Shares are included
as beneficially owned by him and are also included as beneficially owned by Ms. Williams because of her
relationship to him. See "Certain Relationships and Related Transactions" for disclosure of the direct
interest of the sole Director in Shelton Financial, Inc. The shares were issued on October 26, 1995
pursuant to a warrant agreement entered into between Shelton Financial and ANC in 1992.

5. Includes 2,000,000 outstanding voting common Shares owned by Wilcom, Inc., a Texas corporation that is
wholly owned by Eva Williams, wife of William P. Williams, Jr., the sole director, CEO and president of
ANC. By reason of Ms. Williams' ownership of Wilcom, Inc. the voting common Shares are included as
beneficially owned by her and are also included as beneficially owned by Mr. Williams because of his
relationship to her. See "Certain Relationships and Related Transactions" for disclosure of indirect
interest of the sole Director in Wilcom, Inc. The Shares were issued on May 13, 1996 as compensation to
Wilcom, Inc. for providing the management and consulting services of Mr. Williams for the fiscal year
ending June 30, 1996.

6. Includes 500,000 outstanding voting common Shares owned by Wilcom, Inc., a Texas corporation that is
wholly owned by Eva Williams, wife of William P. Williams, Jr., the sole director, CEO and president of
ANC. By reason of Ms. Williams' ownership of Wilcom, Inc. the voting common Shares are included as
beneficially owned by her and are also included as beneficially owned by Mr. Williams because of his
relationship to her. See "Certain Relationships and Related Transactions" for disclosure of indirect
interest of the sole Director in Wilcom, Inc. The Shares were issued on May 13, 1996 as compensation to
Wilcom, Inc. for providing the management and consulting services of Mr. Williams for the fiscal year
ending June 30, 1997.

7. Includes 750,000 outstanding voting common Shares owned by Eva Williams, wife of William P. Williams,
Jr., the sole director, CEO and president of ANC. By reason of Ms. Williams' ownership of the voting
common Shares they are included as beneficially owned by her and are also included as beneficially owned
by Mr. Williams because of his relationship to her. The Shares were issued on May 15, 1996 as compensation
to Ms. Williams for services rendered and to be rendered for the fiscal years ending June 30, 1996, 1997
and 1998.
</TABLE>

<PAGE>
ITEM 11. SECURITY OWNERSHIP OF OWNERS AND MANAGEMENT

The following table sets forth shareholder's owning 10% or more of the
Company's Common Stock, and the aggregate ownership of the Company's Common
Stock by the officer and Director set forth as of June 30, 1996.

<TABLE>
<CAPTION>
Percentage of
Number of Outstanding
Name Shares Owned Common Stock
- ------------ ------------- -------------
<S> <C> <C>

Wilcom, Inc. 2,977,951 34%
------------- -------------
</TABLE>

Voting - Common and Preferred Shares.

The Company's 3.3 million outstanding Preferred A Series One Preferred
Shares (the "New Preferred") are convertible into up to 3.3 million Common
Shares at any time after the bid price for the Company's Common Stock has
averaged more than $1.00 for thirty consecutive trading days on the NASD OTC
Bulletin Board, and are entitled to 3.3 million votes until then. Including the
New Preferred, and the 8,769,500 outstanding shares, significant share holdings
in terms of voting authority are as follows:

<PAGE>
<TABLE>
<CAPTION>
OWNER TYPE OF SHARE VOTES %OF VOTES
<S> <C> <C> <C>
Wilcom, Inc.. . . . . . . . . . . Common 2,977,951 24.00%
Wilcom, Inc.. . . . . . . . . . . New Preferred 3,300,000 27.00%
-------------- ---------

TOTAL OF PREFERRED & COMMON VOTES 6,277,951 51.00%
============== =========
<FN>
1. Wilcom, Inc., is a Texas corporation that is owned by the wife of the Director of
the Company and is therefore related to the Company. Wilcom is the current holder of
the New Preferred, which include Warrants to buy 440,000 Common Shares at $1.00 per
share.
2. See "Certain Relationships and Related Transactions" for disclosure of interests
of the Director in Wilcom, Inc.
3. See "New Preferred Share Agreement" under "Executive Compensation" above for
disclosure of the control of the Company by the existing Director and certain others.
To the extent the conversion of the New Preferred is achieved, management will
beneficially own a major portion, and possibly all of the resulting Common Shares.
At this time, the only management is the Company's Director.
4. The New Preferred have these votes at this time and are convertible to this same
number of shares of Common Stock. See "New Preferred Share Agreement" in the
preceding section.
5. 6,277,951 voting rights of the listed party is 51.90% of 12,069,500 total voting
rights.
</TABLE>

ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

William P. Williams, Jr., ANC's President, CEO and sole director, is the
spouse of Eva Williams, ANC's Secretary. Mr. Williams authorized all of the
transactions set forth below on behalf of ANC. Mr. Williams is also president of
Shelton Financial, Inc., a corporation wholly owned by him, and president of
Wilcom, Inc., a corporation wholly owned by his spouse. Wilcom owns more than
10% of ANC's issued and outstanding voting shares. Wilcom and Shelton have all
advanced funds to and received funds from ANC. They have also paid obligations
on behalf of ANC.

<PAGE>
Wilcom, Inc. On June 27, 1995 the board of directors of the Company
agreed to turn over management and control of the Company to Wilcom, Inc. for
the purpose of reorganizing the Company and reestablishing the Company's
business operations. In connection therewith, these directors resigned and
William P. Williams, Jr. was elected as a member of the board of directors and
was elected president of the Company. The former directors assigned their
interest in the Amended Managers Agreement and the Earn-out Preferred Share
Agreement between NorTel CCI, Inc., themselves and the Company to Wilcom, Inc.,
thereby transferring 3,300,000 shares of the Preferred A Series One Preferred
Stock, each share with one vote on all matters submitted to the shareholders, to
Wilcom, Inc. and assuring Wilcom, Inc. voting control of the Company. NorTel
CCI was controlled by the former directors. Further, NorTel CCI, Inc. assigned
approximately 500,000 shares of common stock of the Company owned by it to
Wilcom, Inc. On that same date, Wilcom, Inc. and the Company rescinded those
agreements by mutual consent and canceled the 3,300,000 shares of Preferred A
Series One Preferred Stock. Simultaneously ANC re-established, re-designated
and re-issued 3,300,000 shares of Preferred A Series One Preferred Shares ("New
Preferred") to Wilcom, Inc., each New Preferred entitled to one vote and
convertible into one share of common stock at any time after the bid price for
the Company's common stock has averages more than $1.00 for thirty consecutive
trading days on the NASDAQ OTC Bulletin Board.

Wilcom was also granted warrants to purchase 440,000 common shares at $1.00
per share prior to June 28, 1999. The purchase price was subsequently reduced
to $.02 per share through action of the current Board of Directors and the
warrants exercised on October 17, 1995.

Shelton Financial, Inc., an owned entity of Company management, purchased
400,000 common shares on October 26, 1995 at $.02 per share. The agreement,
entered into in 1992, had set the exercise price at $3.00 per share. The price
was subsequently reduced to $.02 per share through action of the current Board
of Directors.

On July 1, 1995 ANC entered into a Management Services and Consulting
Agreement with Wilcom, Inc. who engaged William P. Williams, Jr. to render
services to ANC as Director, Chief Executive Officer and President for twelve
months. The terms of the agreement provided for payment of 2,000,000 shares of
ANC common stock and options to purchase another 2,000,000 shares at 100.25% of
the closing bid price on July 1, 1995 (1/16th), exercisable through June 30,
1998. The shares and options delivered under the agreement were to be free
trading shares registered under Form S-8.

On July 16, 1995 the Board approved the issuance of 2,000,000 shares to
Wilcom, Inc. as compensation for 1996. On May 13, 1996 the Board approved
the issuance of 500,000 shares to Wilcom, Inc. as compensation for 1997. Since
restricted stock was issued, the transaction price was recorded at $.15 per
share (60% of the $.25 market price) giving effect to the trading restrictions
on marketability.

<PAGE>
On July 10, 1997 the Board approved the issuance of 1,000,000 shares at
$.34 per share to Wilcom, Inc. for management services rendered during fiscal
1998. Additionally, 3,300,000 shares were issued to Wilcom, Inc. in exchange
for the 3,300,000 shares of convertible preferred shares that were issued in
June 1995.

Eva Williams, Board Secretary of the Company, is a shareholder of Wilcom,
Inc., the majority shareholder of ANC. William P. Williams, the Company's
President and CEO, is the spouse of Eva and a shareholder of Shelton Financial,
Inc. Wilcom and Shelton have all advanced funds to and received funds from
ANC. They have also paid obligations on behalf of ANC.

<PAGE>
PART IV

ITEM 13. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS

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

(a) Financial Statements

(1) Independent Auditors' Report relating to:

Balance sheets - June 30, 1995 and 1996
Statements of Operations - Years ended June 30, 1995 and 1996
Statements of Stockholders' Equity - Years ended June 30, 1995 and 1996
Statement of Cash Flows - Years ended June 30, 1995 and 996
Notes to Financial Statements - Year ended June 30, 1996

(b) Financial Data Schedules - Required under Article 5 of Regulation S-X

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

Articles Of Incorporation

Articles Of Incorporation by by-law: 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 then ended June 30, 1993 which exhibit is
incorporated herein by reference.

<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.

By: /S/ W. P. Williams, Jr. Date: December 18, 1998
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: December 18, 1998
W. P. Williams
Director and Chief Executive Officer

<PAGE>

<ARTICLE> 5
<MULTIPLIER> 1

<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> JUN-30-1996
<PERIOD-START> JUL-01-1995
<PERIOD-END> JUN-30-1996
<CASH> 116353
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 266353
<PP&E> 47707
<DEPRECIATION> 16969
<TOTAL-ASSETS> 1547439
<CURRENT-LIABILITIES> 1593485
<BONDS> 675000
<COMMON> 20840832
0
198000
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 1547439
<SALES> 0
<TOTAL-REVENUES> 46548
<CGS> 32010
<TOTAL-COSTS> 309869
<OTHER-EXPENSES> 2596
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 65250
<INCOME-PRETAX> (859045)
<INCOME-TAX> 0
<INCOME-CONTINUING> (363177)
<DISCONTINUED> 129532
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (849045)
<EPS-PRIMARY> (21)
<EPS-DILUTED> 0

</TABLE>