SIMS COMMUNICATIONS INC
424B3, 1998-11-25
TELEPHONE COMMUNICATIONS (NO RADIOTELEPHONE)
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                                                            File # 333-60851
                                                            Rule 424(b)(3)
PROSPECTUS                 SIMS COMMUNICATIONS, INC.

                                 Common Stock

         This Prospectus relates to:

         1.  The  sale  of  3,782,301   shares  of  the  Common  Stock  of  Sims
Communications,  Inc. (the  "Company") by the owners of such shares.  The shares
were sold by the  Company  in  various  private  offerings  for  cash,  services
rendered, and in settlement of claims against the Company.

         2. The sale of up to  336,315  shares  of the  Company's  common  stock
issuable  upon the  exercise of options and  warrants.  The options and warrants
were issued by the Company to:

              (i) certain  investors in connection  with the  Company's  private
offerings.

              (ii) Sales Agent's in connection with certain private offerings of
the Company's securities,

              (iii) financial  consultants  for  services  provided to the
Company, and

              (iv)  to  other  third   parties  in   settlement  of  claims  and
liabilities.

         The owners of the Common  Stock  referred to above,  and the holders of
the options and  warrants,  to the extent they exercise the options and warrants
and  receive  shares of the  Company's  Common  Stock,  are  referred to in this
Prospectus as the "Selling Shareholders".

         The Company will not receive any proceeds from the resale of the shares
by the Selling Shareholders. The Selling Shareholders may resell the shares they
acquire by means of this Prospectus from time to time in the public market.  The
Selling  Shareholders  have  advised the Company that they will offer the shares
through broker/dealers at market prices with customary commissions being paid by
the Selling  Shareholders.  The costs of  registering  the shares offered by the
Selling  Shareholders  are being paid by the Company.  The Selling  Shareholders
will pay all  other  costs  of the  sale of the  shares  offered  by  them.  See
"Dilution and Comparative Share Data" and "Selling Shareholders".

         THESE  SECURITIES ARE SPECULATIVE AND INVOLVE A HIGH DEGREE OF RISK AND
SHOULD  BE  PURCHASED  ONLY BY  PERSONS  WHO CAN  AFFORD  TO LOSE  THEIR  ENTIRE
INVESTMENT.  FOR A  DESCRIPTION  OF CERTAIN  IMPORTANT  FACTORS  THAT  SHOULD BE
CONSIDERED  BY  PROSPECTIVE  INVESTORS,  SEE "RISK  FACTORS" AND  "DILUTION  AND
COMPARATIVE SHARE DATA".

THESE  SECURITIES  HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE  COMMISSION  NOR HAS THE  COMMISSION  PASSED  UPON  THE  ACCURACY  OR

<PAGE>

ADEQUACY  OF  THIS  PROSPECTUS.  ANY  REPRESENTATION  TO  THE  CONTRARY  IS  A
CRIMINAL OFFENSE.

On  November 23, 1998 the closing prices of the Company's Common Stock on  the
NASDAQ Small-Cap Market was $1.25 See "Market Information".

                   The Date of this Prospectus is November 24, 1998.


<PAGE>


                            

                              TABLE OF CONTENTS
                                                       Page
PROSPECTUS SUMMARY .................................8
RISK FACTORS........................................10
DILUTION AND COMPARATIVE SHARE DATA ................14
MARKET FOR THE COMPANY'S COMMON STOCK ..............17
MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF
 OPERATIONS ........................................18
BUSINESS............................................24
MANAGEMENT..........................................31
PRINCIPAL SHAREHOLDERS .............................40
SELLING SHAREHOLDERS ...............................42
DESCRIPTION OF SECURITIES ..........................48
EXPERTS.............................................49
LITIGATION..........................................49
INDEMNIFICATION ....................................50
FINANCIAL STATEMENTS ...............................F-1


<PAGE>


                              PROSPECTUS SUMMARY

         The following  information is qualified in its entirety by the detailed
information appearing elsewhere in this Prospectus.

THE COMPANY

         SIMS Communications,  Inc. (the "Company") was incorporated in Delaware
on August 15, 1991 to design and market a  computerized  system  which  provides
unattended  rental  of  cellular  telephones  through a  stand-alone  dispensing
station. The Company's system, known as an Automated Communications Distribution
Center  ("ACDC"),  was  designed to serve the needs of traveling  sales  people,
convention and seminar  participants,  and anyone else who is  temporarily  away
from normal  communications  facilities  and needs to maintain  contact  with an
office or home while traveling.

         Prior to 1996 the Company  operated  ACDC units for its own account and
also sold  franchises  which  provided  third  parties the right to operate ACDC
units at various franchised locations.

         The Company's first ACDC units became operational in September l993. In
August  1995,  the  Company  had 50 ACDC units in  operation  and the  Company's
franchisees (13 in total) had 28 ACDC's in operation. At September 30, l998, the
Company  was not  operating  any ACDC  units and the  Company's  only  remaining
franchisee had four ACDC units in operation.

         During  1996 the  Company  introduced  four  additional  programs in an
effort to  diversify  and broaden the  Company's  product and service  mix:  (i)
cellular telephone activations,  (ii) sale of pre-paid calling cards, (iii) sale
of long distance telephone service and (iv) rental of cellular  telephones using
overnight  courier  service.  With the exception of the sale of pre-paid calling
cards, these four programs were discontinued in December 1997.

         Effective  December 31, 1996 the Company  acquired all the issued and
outstanding shares of Link  International,  Inc.  ("Link").  Link manufactures
and  distributes  machines which dispense  prepaid calling cards and terminals
which are used by  merchants to perform a variety of  transactions,  including
accepting  credit  cards  and  bank  debit  cards  in  payment  for  sales  of
merchandise  and services.  See "Business - Link  International  Technologies,
Inc."

         Effective  January 30, 1998 the Company  issued  550,000  shares of its
common stock to the  shareholders of Moviebar,  Incorporated  and  Vectorvision,
Incorporated in consideration  for the acquisition of a business known as "Movie
Vision."  Movie  Vision  rents   videocassettes,   primarily  containing  motion
pictures,  through automated  dispensing units in hotels. Movie Vision currently
has videocassette  dispensing machines in approximately 140 hotels in the United
States.


<PAGE>

            Effective May 30, 1998 the Company acquired One Medical Service Inc.
in consideration for 142,349 shares of common stock and 187,500  warrants.  Each
warrant  allows the holder to purchase one  additional  share of common stock at
any time  prior  to May 30,  2003 at a price of $2.00  per  share.  One  Medical
service  uses  Link's  Point-of-Sale  transaction  terminals  to  permit  retail
pharmacies and their  customers to purchase home medical  equipment.  Additional
services offered through the terminal include check guarantee and  verification,
point of sale activation of prepaid phone card and cellular time, frequent buyer
programs and verification of Medi-Cal benefits in California.

         All  historical  share data in this  Prospectus  has been  adjusted  to
reflect the following stock splits relating to the Company's common stock:  June
1995:  2-for-1 forward split,  February 1996:  1-for-10 reverse split,  February
l998:1-for-4 reverse split.

         Unless  otherwise  indicated,  all references to the Company  include
the operations of Link, Movie Vision and One-Medical

         The Company's  executive offices are located at 18001 Cowan,  Suite C &
D, Irvine, CA 92614. The Company's telephone number is (714) 724-9094.

Common Stock
Outstanding:       As of September 30, 1998, the Company had 9,417,957  shares
                   of Common  Stock  issued  and  outstanding.  The  number of
                   outstanding  shares  does not give  effect to shares  which
                   may be  issued  upon  the  exercise  and/or  conversion  of
                   options,   warrants   or   other   convertible   securities
                   previously  issued  by  the  Company.   See  "Dilution  and
                   Comparative   Share  Data",   "Selling   Shareholders"  and
                   "Description of Securities".

NASDAQ Symbol:          Common Stock:  SIMS

RISK FACTORS

         The  purchase  of the  Securities  offered  involves a high degree of
risk and immediate  substantial dilution to investors.  See "Risk Factors" and
"Dilution".



<PAGE>


SUMMARY FINANCIAL INFORMATION

         The  following  sets forth certain  financial  data with respect to the
Company and is  qualified  in its  entirety by  reference  to the more  detailed
financial statements and notes thereto included elsewhere in this Prospectus.

Statement of Operations Data:

                                       Years  Ended  June 30,
                                   1998                     1997
                                   -----                    ----

Revenues                         $980,951               $2,923,532
Cost of Sales                    (523,479)              (1,608,572)
Operating and other
Expenses                       (7,503,483)              (4,657,587)
(Loss Income from
  Discontinued Operations)        (63,737)                 553,731
                           ---------------           -------------
Net (Loss)                    $(7,109,748)             $(2,788,896)
                             ============              ============

Balance Sheet Data:
                                         June 30,
                                 1998                      1997
                                 ----                      ----

Current Assets                $1,088,022                $2,006,289
Total Assets                   5,602,751                 5,544,173
Current Liabilities            2,785,015                 3,630,430
Total Liabilities              3,372,542                 3,716,349
Working Capital (Deficit)     (1,697,013)               (1,624,141)
Shareholders' Equity           2,230,209                 1,827,824

No Common Stock dividends have been declared by the Company since its inception.

                                 RISK FACTORS

         The securities offered hereby are speculative and involve a high degree
of risk and should be  purchased  only by  persons  who can afford to lose their
entire  investment.  Therefore,  prospective  investors  should read this entire
Prospectus and carefully  consider,  among others, the following risk factors in
addition to the other  information set forth in this Prospectus  prior to making
an investment.

         History of Losses.  The Company has incurred losses since it was formed
in 1991.  From the date of its  formation  through  June 30,  1998,  the Company
incurred net losses of approximately  $(20,417,000).  During the year ended June
30, l998 the Company had a loss of $(7,109,748). The Company expects to continue

<PAGE>

to incur losses until such time, if ever, as it generates  substantial  revenues
and earns net income. There can be no assurance that the Company will be able to
generate sufficient revenues and become profitable.

         The  Company is  vulnerable  to a variety of business  risks  generally
associated with small companies,  any one of which could have a material adverse
effect on its business, financial condition and results of operations. Potential
investors should be aware of the difficulties encountered by small companies and
the other risk factors set forth in this section. The Company's future operating
results  will  depend on a number  of  factors,  including  the  demand  for its
products and services,  government regulation,  the Company's ability to compete
with much larger companies,  its ability to successfully market its products and
services, retain qualified sales and other personnel, successfully manage growth
(including  monitoring an expanded level of operations and  controlling  costs),
and the availability of additional financing,

         The Company's  operations have placed,  and are expected to continue to
place,  significant strain on the Company's management,  staff, working capital,
and  financial  control  systems.  The failure to maintain or upgrade  financial
control  systems,  to  recruit  additional  staff or to respond  effectively  to
difficulties  encountered  during expansion could have a material adverse effect
on the Company's business,  financial condition and results of operations. There
can be no  assurance  that the  Company's  systems and controls or staff will be
adequate.  There can be no  assurance  that the  Company  will be able to earn a
profit from its operations.

         Need for  Capital.  This  offering  is being  made in behalf of certain
Selling Shareholders. The Company will not receive any proceeds from the sale of
the  shares  offered  by  the  Selling  Shareholders.  The  Company's  continued
operations will depend upon the availability of additional funding. There can be
no assurance  that the Company  will be able to obtain  additional  funding,  if
needed, or if available on terms satisfactory to the Company.

         Competition  There can be no assurance that the Company will be able to
compete with the numerous  other  companies  which are engaged in the  Company's
lines  of  business.  Many of  these  competitors  have  greater  financial  and
marketing resources than those of the Company.

         Agreements  with Credit Card  Companies.  The  Company's  point-of-sale
terminals and video dispensing machines are capable of operating on an automatic
basis as the result of a nationwide  credit card  system.  By means of telephone
lines and computers, this system links credit card companies,  issuing banks and
credit card  processing  firms  throughout the United States and allows products
and services to be purchased  through  credit cards.  The Company  presently has
agreements with credit card processors  which authorize the use of various major
credit cards in the Company's machines.  In order for the Company to continue to
have the  services of these  credit card  processors  available,  the Company is
required to meet certain  conditions as provided in the  agreements  between the
credit card  processors and the Company.  In the event the Company fails to meet
these conditions,  the credit card processors may automatically refuse to accept
credit cards,  in which case the Company's  machines  would be unable to process
transactions.



<PAGE>


         Dependence  on  Personnel.  The future  success of the Company  will be
highly  dependent  upon the personal  efforts of its executive  officers and the
loss of the services of any of the  Company's  executive  officers  could have a
material  adverse  effect on the Company.  The Company  believes that its future
success  will also  depend  upon its  ability  to attract  and retain  qualified
marketing,  operating and programming personnel.  There can be no assurance that
the Company  will be able to hire and retain  such  necessary  personnel  in the
future.

         Market for  Company's  Securities;  Volatility  of  Securities  Prices.
Prices for the  Company's  Common  Stock have been highly  volatile  and will be
influenced  by a number of factors,  including  the depth and  liquidity  of the
market for the Company's Common Stock, the Company's financial results, investor
perceptions  of  the  Company,   and  general  economic  and  other  conditions.
Additionally, in the last several years, the stock market has experienced a high
level of price and  volume  volatility  and  market  prices  of many  companies,
particularly  small and  emerging  growth  companies,  the common stock of which
trade in the  over-the-counter  market, have experienced wide price fluctuations
which have not  necessarily  been related to the operating  performance  of such
companies.

         No Assurance of Continued NASDAQ Listing. Although the Company's Common
Stock and Warrants are  currently  listed on the NASDAQ  Small-Cap  Market,  the
National  Association  of  Securities  Dealers,  Inc.  ("NASD")  requires,   for
continued  inclusion  on the NASDAQ  Small-Cap  Market,  that the  Company  must
maintain  $2,000,000  in  tangible  net  worth  and  that  the bid  price of the
Company's  Common Stock must be at least $1.00.  The Company has been advised by
the NASD that as of June 30,  1998 the Company  was not in  compliance  with the
listing standards for the NASDAQ Small-Cap Market. Although the Company believes
it can comply with these listing  standards,  if the Company's  securities  were
delisted from the NASDAQ Small-Cap Market, the Company's  securities would trade
in the unorganized interdealer  over-the-counter market through the OTC Bulletin
Board which provides  significantly  less  liquidity  than the NASDAQ  Small-Cap
Market.  Securities  which are not traded on the NASDAQ  Small-Cap Market may be
more difficult to sell and may be subject to more price  volatility  than NASDAQ
listed securities.  There can be no assurance that the Company's securities will
remain listed on the NASDAQ Small-Cap Market.

         If the Company's Common Stock was delisted from NASDAQ,  trades in such
securities may then be subject to Rule 15g-9 under the  Securities  Exchange Act
of 1934,  which rule imposes  certain  requirements on  broker/dealers  who sell
securities  subject to the rule to persons other than established  customers and
accredited investors. For transactions covered by the rule, brokers/dealers must
make a special  suitability  determination  for purchasers of the securities and
receive the purchaser's written agreement to the transaction prior to sale. Rule
15g-9,  if  applicable  to sales of the  Company's  securities,  may  affect the
ability of broker/dealers  to sell the Company's  securities and may also affect
the  ability  of  investors  in this  offering  to sell such  securities  in the
secondary  market and  otherwise  affect  the  trading  market in the  Company's
securities.

         The  Securities  and  Exchange   Commission  has  rules  that  regulate
broker/dealer practices in connection with transactions in "penny stocks". Penny

<PAGE>

stocks  generally are equity  securities  with a price of less than $5.00 (other
than securities registered on certain national securities exchanges or quoted on
the NASDAQ  system,  provided  that current  price and volume  information  with
respect to transactions in that security is provided by the exchange or system).
The penny stock rules require a broker/dealer, prior to a transaction in a penny
stock not  otherwise  exempt  from the  rules,  to deliver a  standardized  risk
disclosure  document prepared by the Commission that provides  information about
penny  stocks and the nature and level of risks in the penny stock  market.  The
broker/dealer  also  must  provide  the  customer  with  current  bid and  offer
quotations for the penny stock,  the compensation of the  broker/dealer  and its
salesperson  in the  transaction,  and monthly  account  statements  showing the
market  value of each penny stock held in the  customer's  account.  The bid and
offer   quotations,   and  the   broker/dealer   and  salesperson   compensation
information,  must be  given  to the  customer  orally  or in  writing  prior to
effecting the transaction and must be given to the customer in writing before or
with the customer's  confirmation.  These  disclosure  requirements may have the
effect of reducing the level of trading  activity in the secondary  market for a
stock that becomes subject to the penny stock rules.

         Transactions with Affiliates.  The Company has in the past entered into
transactions and agreements with the Company's management and certain affiliated
parties  and the  Company may in the future  enter into other  transactions  and
agreements incident to its business with certain of its affiliates. Although the
Company  intends that the terms of any such future  transactions  and agreements
will be no less favorable  than those which could be obtained from  unaffiliated
third  parties,  no  assurances  can be given  that this  will be the case.  See
"Management  -  Transactions   with  Former   Management"   and   "Management  -
Transactions With Present Management".

         Options,  Warrants and Convertible  Securities.  The Company has issued
options,  warrants and other convertible  securities  ("Derivative  Securities")
which allow the holders to acquire  additional  shares of the  Company's  Common
Stock.  In some cases the Company has agreed that, at its expense,  it will make
appropriate  filings with the  Securities  and Exchange  Commission  so that the
securities underlying certain Derivative Securities will be available for public
sale. Such filings could result in substantial  expense to the Company and could
hinder future financings by the Company.

         For the terms of these Derivative Securities,  the holders thereof will
have an  opportunity  to profit  from any  increase  in the market  price of the
Company's Common Stock without assuming the risks of ownership.  Holders of such
Derivative  Securities  may  exercise  and/or  convert  them at a time  when the
Company  could  obtain  additional  capital on terms more  favorable  than those
provided  by the  Derivative  Securities.  The  exercise  or  conversion  of the
Derivative Securities will dilute the voting interest of the owners of presently
outstanding  shares of the Company's  Common Stock and may adversely  affect the
ability of the Company to obtain additional  capital in the future.  The sale of
the shares of Common  Stock  issuable  upon the  exercise or  conversion  of the
Derivative  Securities  could adversely affect the market price of the Company's
stock. See "Dilution and Comparative Share Data".

         Shares  Available  for Resale.  As of September  30,  1998,  there were
9,417,957 shares of the Company's  Common Stock issued and outstanding.  Of this

<PAGE>

amount,  approximately 4,200,000 shares (exclusive of the shares offered by this
Prospectus) are "restricted securities" as defined by Rule 144 of the Securities
Act of 1933, as amended (the "Act").

         Rule  144  provides,  in  essence,  that  shareholders,  after  holding
restricted  securities for a period of one year may, every three months, sell in
ordinary  brokerage  transactions  an amount  equal to the  greater of l% of the
Company's then outstanding Common Stock or the average weekly trading volume, if
any,  of  the  stock  during  the  four  calendar  weeks   preceding  the  sale.
Non-affiliates of the Company who hold restricted securities for a period of two
years may, under certain  prescribed  conditions,  sell their securities without
regard to any of the requirements of the Rule.

         Approximately  3,500,000  shares of restricted stock have satisfied the
one year holding period required by Rule 144. The remaining shares of restricted
stock will become available for resale pursuant to Rule 144 beginning in January
1999.

         No  prediction  can be made as to the effect,  if any, that the sale of
Common Stock (or the  availability of such Common Stock for sale) by the holders
of the Company's restricted stock will have on the market price of the Company's
securities.  Nevertheless,  the possibility of a substantial number of shares of
Common Stock being offered for sale in the public  market may  adversely  affect
prevailing  market  prices  for the  Common  Stock and could  impair  investors'
ability to sell the  Company's  Common Stock or the  Company's  ability to raise
capital through the sale of its equity securities.

         Lack of Dividends. There can be no assurance that the operations of the
Company will result in any revenues or will be profitable.  At the present time,
the Company intends to use available funds to finance any possible growth of the
Company's  business.  Accordingly,  while payment of dividends  rests within the
discretion  of the Board of  Directors,  no  common  stock  dividends  have been
declared or paid by the Company.  The Company does not  presently  intend to pay
dividends and there can be no assurance that dividends will ever be paid.

         Preferred Stock. The Company's Articles of Incorporation  authorize the
Company's Board of Directors to issue up to 1,000,000 shares of Preferred Stock.
The  provisions  in the  Company's  Articles  of  Incorporation  relating to the
Preferred  Stock would allow the Company's  directors to issue  Preferred  Stock
with  multiple  votes per share and  dividends  rights which would have priority
over any dividends paid with respect to the Company's Common Stock. The issuance
of Preferred Stock with such rights may make the removal of management difficult
even if such removal would be considered  beneficial to shareholders  generally,
and will have the  effect  of  limiting  shareholder  participation  in  certain
transactions  such as  mergers  or tender  offers if such  transactions  are not
favored by incumbent management.

                     DILUTION AND COMPARATIVE SHARE DATA

         As of September 30, 1998, the present shareholders of the Company owned
9,417,957  shares of the Company's  Common Stock,  which had a net tangible book
value of approximately  $0.18 per share.  Upon completion of this Offering,  and
assuming all options and warrants are exercised,  purchasers of the common stock

<PAGE>


offered by this Prospectus will own 4,118,616 shares or approximately 43% of the
Company's Common Stock and the present  shareholders of the Company will own 57%
of the Company's Common Stock.

Shares presently outstanding (1)                        9,417,957

Shares offered by this prospectus
See "Selling Shareholders"                              4,118,616

Net tangible book value per share                          $0.18

Equity ownership by present shareholders
after this offering                                           57%

Equity ownership by investors in this Offering                43%

         The purchasers of the securities offered by this Prospectus will suffer
an immediate  dilution if the price paid for the  securities  offered is greater
than the net tangible book value of the Company's Common Stock.

         "Net tangible  book value" is the amount that results from  subtracting
the  total  liabilities  and  intangible  assets of the  Company  from its total
assets.  "Dilution" is the difference  between the offering price per share paid
by investors in this  offering and the net tangible  book value of the Company's
common stock.

    (1) As of  September  30, 1998 the Company  had  9,417,957  shares of Common
Stock issued and outstanding.  The following table reflects the shares of Common
Stock which may be issued by the Company as the result of the sale of additional
securities by the Company, the exercise of options and warrants issued, or to be
issued,  by the Company and the conversion of convertible  securities  issued by
the Company.

                                                Number of             Note
                                                 Shares             Reference

         Shares Outstanding                     9,417,957

         Shares issuable upon exercise
          of warrants issued to sales agents
          and financial consultants               238,753               A

         Shares issuable upon conversion of notes
         and exercise of  warrants sold in
         private offering                         256,937               B

         
<PAGE>



         Shares issuable upon exercise of options
         previously granted by Company          2,164,000               C

         Shares issuable upon conversion of
         Series A and Series B Preferred Stock     35,000               D

         Additional shares issuable in connection
         with the acquisition of One Medical
         Services, Inc.:                                                E
                 Warrant Shares                   187,500
                  Incentive Shares              1,485,000

         Share issuable upon conversion of loan   142,900               F

TOTAL

A. In connection with prior private offerings of the Company's common stock, the
Company paid  Commissions  to the sales agents for such offerings in the form of
cash and warrants. The Company has also entered into a number of agreements with
various financial  consultants.  Pursuant to the terms of these agreements,  the
Company has issued to the financial  consultants  shares of common  stock,  plus
warrants to purchase additional shares of common stock. The warrants referred to
above are  exercisable at prices  ranging  between $2.00 and $7.00 per share and
expire between 2001 and 2003.

B. Between February and December l997 the Company sold $1,017,500 of convertible
notes (the "Notes"), together with warrants for the purchase of 97,562 shares of
the  Company's  common  stock.  The Notes bear  interest at 8% per annum and are
presently due and payable.  As of July 31, 1998 Notes in the principal amount of
$762,500 (plus accrued  interest) have been converted into 534,285 shares of the
Company's common stock.  The remaining Notes are  collectively  convertible into
159,375 shares of the Company's  Common Stock at a conversion price of $1.60 per
share.  The Warrants are exercisable at any time prior to May 31, 2000 at prices
ranging between $5.00 and $10.00 per share.

C.  See "Management - Stock Option and Bonus Plans".

D. See "Description of Securities".

E.  Effective May 30, 1998 the Company  acquired One Medical  Services,  Inc. in
consideration   for  142,349  shares  of  common  stock  and  187,500   warrants
exercisable  at $2.00 per share at any time prior to May 30,  2003.  The Company
has also  agreed to issue to the former  owners of One  Medical up to  1,485,000
additional  shares of common  stock  depending  on the future  operating  of One
Medical.  The number of shares to be issued will be  determined  by dividing the
quarterly net income of One Medical (for each fiscal  quarterly  beginning  June
30, 1998 and ending June 30, 2001, by the average closing price of the Company's
common stock for the five day trading period prior to the end of each quarter.


<PAGE>


F.   The Company has borrowed  $250,000  from an  non-affiliated  third party.
    At the option of the third  party the loan is  convertible  into shares of
    the  Company's  common  stock.  The number of shares to be issued upon the
    conversion  of the  loan is  determined  by  dividing  the  principal  and
    accrued  interest  to be  converted  by the  average  market  price of the
    Company's  common stock  during the five day period  prior to  conversion.
    The  shares  in the  table  assume  the  principal  amount  of the loan is
    converted  when the market  price of the  Company's  common stock is $1.75
    per share.

         The shares  referred to in Notes A, and B, above are being  offered for
public sale by means of this propectus.  See "Selling Shareholders".  The shares
issuable upon the exercise of options, and which are referred to in Note C, have
been registered for public sale by means of a registration statement on Form S-8
which has been filed with the Securities and Exchange Commission

                    MARKET FOR THE COMPANY'S COMMON STOCK

         As of  September  30, 1998,  there were  approximately  600  beneficial
owners of the Company's  Common Stock.  The Company's  Common Stock is traded on
the National  Association of Securities Dealers Automatic  Quotation  ("NASDAQ")
System.  Set forth  below are the range of high and low bid  quotations  for the
periods  indicated  as  reported  by  NASDAQ.   The  market  quotations  reflect
interdealer prices, without retail mark-up, mark-down or commissions and may not
necessarily  represent  actual  transactions.  The Company's  Common Stock began
trading in February 1995. The market  quotations have been adjusted to reflect a
two for one forward stock split, which was effective in June 1995, a one-for ten
reverse  stock  split which was  effective  in March  1996,  and a  one-for-four
reverse stock split which was effective in February 1998.



      Quarter
      Ending                Common Stock
                            High      Low


       9/30/95             $95.00   $20.00
      12/31/95             $31.24   $ 7.48
       3/31/96             $18.72   $ 3.72
       6/30/96             $ 7.12   $ 4.00

       9/30/96             $ 5.36   $ 2.00
      12/3l/96             $ 4.48   $ 2.64
       3/31/97             $ 7.76   $ 3.44
       6/30/97             $11.24    $4.12

       9/30/97              $2.31    $1.25
      
<PAGE>


      12/31/97              $5.00    $1.50
       3/31/98              $2.87    $1.09
       6/30/98              $2.75    $1.56

         Holders of Common Stock are  entitled to receive such  dividends as may
be declared by the Board of Directors  out of funds legally  available  therefor
and, in the event of liquidation,  to share pro rata in any  distribution of the
Company's  assets after  payment of  liabilities.  The Board of Directors is not
obligated to declare a dividend.  The Company has not paid any dividends on it's
Common Stock and the Company  does not have any current  plans to pay any Common
Stock dividends.

         The provisions in the Company's  Articles of Incorporation  relating to
the  Company's  Preferred  Stock would allow the  Company's  directors  to issue
Preferred  Stock with rights to multiple  votes per share and  dividends  rights
which would have priority over any dividends  paid with respect to the Company's
Common  Stock.  The issuance of  Preferred  Stock with such rights may make more
difficult  the removal of  management  even if such removal  would be considered
beneficial  to  shareholders  generally,  and will have the  effect of  limiting
shareholder  participation  in  certain  transactions  such as mergers or tender
offers if such transactions are not favored by incumbent management.

          MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATIONS

         The following  selected  financial  data should be read in  conjunction
with the more detailed financial  statements,  related notes and other financial
information included herein.

Statement of Operations Data:

                                Years  Ended  June 30,
                                   1998                     1997
                                   -----                    ----

Revenues                        $980,951                $2,923,532
Cost of Sales                   (523,479)               (1,608,572)
Operating and other
Expenses                      (7,503,483)               (4,657,587)
(Loss) Income from
  Discontinued Operations        (63,737)                  553,731
                          ---------------            -------------
Net (Loss)                   $(7,109,748)              $(2,788,896)
                             ============              ============

Balance Sheet Data:
                                            June 30,
                                 1998                      1997
                                 ----                      ----
Current Assets                $1,088,022                $2,006,289
Total Assets                   5,602,751                 5,544,173
Current Liabilities            2,785,015                 3,630,430
Total Liabilities              3,372,542                 3,716,349

<PAGE>

Working Capital (Deficit)     (1,697,013)               (1,624,141)
Shareholders' Equity           2,230,209                 1,827,824

No Common Stock dividends have been declared by the Company since its inception.

Results of Operations

         The  following  table  shows  the  percentage  of the  Company's  gross
revenues  by  category  for the periods  indicated,  as well as the  anticipated
revenue percentage from each category for the year ending June 30, 1999.

                                 Percent of Gross Revenues
                                                            Year Ending
                                  Years Ending June 30,     June 30, 1999
                                 1997           1998        (Projected) (1)
                                 ----           ----     ------------------

        Rental of cellular
        telephones directly
        from Company and
        from ACDC Units.          19%            13%            --

        Sale of ACDC units,
         and related
         equipment.               25%            --             --

         Fees paid by cellular
        telephone companies for
        activation of cellular
        telephones                38%            37%            --

         Sale of prepaid calling cards.           5%            13%      4%

        Sale of long distance
        telephone service.         1%             3%            --

        Revenues from Link
        International             12%             9%            50%

        Revenues from Moviebar    --             23%            14%

         Revenues from One Medical
        Service                   --              1%            32%

         Miscellaneous Income     --              1%            --


<PAGE>


 (l)  There  can  be  no  assurance  that  these  percentages  will  not  change
significantly  based upon events which may not be within the Company's  control.
Projected   revenues   for  the  year  ending  June  30,   l999   constitute   a
forward-looking  statement  which is  subject to risks and  uncertainties  which
could cause actual results to differ  materially from those  projected.  Factors
that could cause or  contribute  to such  differences  include  lack of adequate
funding,  loss of major customers and inability to meet sales  projections.  The
Company  undertakes  no  obligation  to publicly  release any  revision to these
forward-looking  statements which may be made to reflect events or circumstances
after the date of this  report or to reflect  the  occurrence  of  unanticipated
events.

        Prior to 1996 the  Company  operated  ACDC units for its own account and
also sold  franchises  which  provided  third  parties the right to operate ACDC
units at various  franchised  locations.  The Company's  first ACDC units became
operational in September  l993. In August 1995, the Company had 50 ACDC units in
operation  and  the  Company's  franchisees  (13  in  total)  had 28  ACDC's  in
operation.  At September 30, 1998,  the Company was not operating any ACDC units
and the Company's only remaining franchisee had four ACDC units in operation.

        In 1996 the Company  introduced  four programs in an effort to diversify
and  broaden the  Company's  product and service  mix:  (i)  cellular  telephone
activations,  (ii) sale of pre-paid  calling cards,  (iii) sale of long distance
telephone service and (iv) rental of cellular telephones using overnight courier
service.  With  the  exception  of the sale of  pre-paid  calling  cards,  these
programs were discontinued in December 1997.

        Effective  December 31, 1996, the Company acquired Link  International
Technologies,  Inc. in consideration for the issuance of 168,539 shares of the
Company's Common Stock.

        Effective  January  30, 1998 the Company  issued  550,000  shares of its
common stock to the  shareholders of Moviebar,  Incorporated  and  Vectorvision,
Incorporated in consideration  for the acquisition of a business known as "Movie
Vision."  Movie  Vision  rents   videocassettes,   primarily  containing  motion
pictures,  through automated  dispensing units in hotels. Movie Vision currently
has video cassette dispensing machines in approximately 140 hotels in the United
States. For financial  statement  purposes,  the acquisition of Movie Vision was
valued at $1,100,000.

        Effective May 30, 1998 the Company acquired One Medical  Services,  Inc.
in  consideration  for  142,350  shares of common  stock  and  187,500  warrants
exercisable  at $2.00 per share at any time prior to May 30,  2003.  The Company
has also  agreed to issue to the former  owners of One  Medical up to  1,485,000
additional  shares of common stock depending on the future operating  results of
One Medical.  The number of shares to be issued will be  determined  by dividing
the quarterly net income of One Medical (for each fiscal quarter  beginning June
30,  1998 and  ending  June  30,  2001),  by the  average  closing  price of the
Company's  common stock for the five day trading period prior to the end of each
quarter.  Using terminals  developed by Link pharmacy  customers can communicate
with medical vendors and suppliers and directly order home medical equipment.

<PAGE>


Year Ending  June 30,  1998

     During the year ending June 30, 1998 the Company's  revenues  declined as a
result of the  suspension of the Company's  ACDC program and the  termination of
the  following  programs  which  were first  introduced  in 1996:  (i)  cellular
telephone  activations,  (ii) sale of long distance  telephone service and (iii)
rental of cellular telephones using overnight courier service.

      During fiscal 1998 the Company  concentrated  on its three new  divisions:
Link,  Movievision and One Medical Service.  During the year ended June 30, 1998
revenues  from the Link and Movie Vision  divisions  were  $148,000 and $371,000
respectively. Revenues from the One Medical Service division, which was acquired
effective May 30, 1998, were not significant during fiscal 1998.

      General  and  Administrative  expenses  as well as Selling  and  Marketing
expanses increased due to the acquisition of Link, Movie Vision, and One Medical
Service,  the lease of the Company's production facility in Tampa and changes in
the management of the Company.

      The following  factors also  contributed  to the Company's loss during the
year ending June 30, 1998:

      A. An expense  of  $1,687,422  as the  result of issuing  shares of stock,
options and warrants for services rendered.

      B. In  February  1998,  the  Company  settled a lawsuit  filed by a former
Master  Licensee of ACDC units  resulting in a special  charge of $424,300.  The
terms of the  settlement  require the Company to pay $115,000 over 21 months and
issue 300,000 shares of common stock to the former master licensee.

      C. In March  1997,  the  Company  entered  into a License  Agreement  with
Cancall Cellular  Communications,  Inc. ("Cancall") whereby the Company provided
Cancall with a license to operate  and/or  distribute  the Company's ACDC units,
prepaid  calling  card  machines  and  point-of-sale  terminals.  The  Licensing
Agreement  also required  Cancall to purchase a certain number of ACDC units and
point-of-sale terminals from the Company.  Between March and September 1997, the
Company sold 30 ACDC units to Cancall for  $705,000.  In payment of the $500,000
licensing fee and the 30 ACDC units,  Cancall  issued  1,807,800  shares of it's
Class B Preferred Stock to the Company.  As of September 30,1997 the Company had
valued the Cancall  Preferred  Stock at $1,310,000.  Subsequent to September 30,
1997 the Company and Cancall ( i ) agreed to rescind the licensing agreement and
the sale of the ACDC units (ii) the  equipment  previously  sold to Cancall were
returned to the Company and (iii) an expense of ($764,000) was recorded.

      D. Between June through September 1996 the Company sold 30 ACDC units to a
master  licensee in  California  resulting in gross  revenues of  $664,000.  The
Company has not  received  payment for the units and a reserve of $374,980  (the
profit for the units sold) was recorded for uncollected receivables.


<PAGE>

      E. The Company recorded a valuation  reserve  ($200,000) for the Company's
investment  in  Smartphone,  a non  consolidated  subsidiary  which sold prepaid
cellular telephones.

      F. An increase in the ACDC depreciation and patent  amortization rates due
to technological changes in the industry.

Year Ending June 30, l997

        Revenues  during  the year  ending  June  30,  1997  increased  from the
comparable  period in 1996 due to the  expansion  of four  programs  which  were
introduced in 1996 in an effort to diversify  and broaden the Company's  product
and service mix. These programs were (i) cellular  telephone  activations,  (ii)
sale of pre-paid calling cards,  (iii) sale of long distance  telephone  service
and (iv) rental of cellular telephones using overnight courier service. With the
exception  of  the  sale  of  pre-paid   calling  cards,   these  programs  were
discontinued in December 1997.

        Revenues  also  increased  as the  result of a  one-time  licensing  fee
($500,000)  received  pursuant  to a License  Agreement  between the Company and
Cancall Cellular Communications,  Inc. (Cancall). The License Agreement provided
Cancall with the right to operate and/or distribute the Company's ACDC units, as
well as Link's prepaid calling card machines and POS terminals (collectively the
"Products").  In consideration  for the rights granted pursuant to the Licensing
Agreement,  Cancall  agreed to pay the Company  $500,000 in shares of  Cancall's
Class B Preferred  stock.  The  Licensing  Agreement  also  required  Cancall to
purchase a certain  number of ACDC  units and POS  terminals  from the  Company.
During the year  ending  June 30,  1997 the  Company  sold  thirty ACDC units to
Cancall for  $705,000.  In payment of the $500,000  licensing fee and the thirty
ACDC units,  Cancall issued  1,807,800 shares of it's Class B Preferred Stock to
the Company.  Subsequent  to June 30, 1997 the Company and Cancall (i) agreed to
rescind  the  licensing  agreement  and the  sale of the  ACDC  units  (ii)  the
equipment  previously  sold to Cancall were returned to the Company and (iii) an
expense of ($764,000) was recorded.

        The  activation  program  of  cellular  telephones  for  members  of the
Florida,  Louisiana,  and  Mississippi  AAA clubs  began in January  1996.  This
program allowed a AAA member to receive a free cellular  telephone if the member
agreed to a one year cellular telephone service contract. The Company received a
commission for each activation.  The Company discontinued this program in fiscal
1988.

        Revenues  from the  rental of  cellular  telephones  through  ACDC units
decreased during the year ending June 30,1997 as the Company closed certain ACDC
locations that were not profitable.

        As an  alternative  to selling  ACDC units to  franchisees  the  Company
entered into various master  licensing  arrangements  with third parties.  These
arrangements normally involve the single sale of 10 or more ACDC units for (i) a
large location (such as an airport),  (ii) part or all of a foreign country,  or
(iii) a specific  region in the United  States.  As of June 30, 1997 the Company
had sold 30 ACDC units to third  parties  under master  licensing  arrangements,

<PAGE>


resulting  in gross  revenues of  approximately  $664,000,  and had sold 10 ACDC
units to a corporation  affiliated with certain former officers and directors of
the Company for $150,000. Although all of these sales occurred prior to December
31,  1996,  as a result of credit  terms  extended by the Company  approximately
$793,000  was still owed to the Company as of June 30, 1997 for these  equipment
sales. The Company has not received payment for the units and subsequent to June
30, 1997 a reserve of $374,980  (the profit for the units sold) was recorded for
uncollected receivables.

        Effective  December  31,  1997 the Company  acquired  all the issued and
outstanding shares of Link International,  Inc. ("Link").  Link manufactures and
distributes  machines which dispense  prepaid  calling cards and terminals which
are used by merchants to perform a variety of transactions,  including accepting
credit  cards and bank  debit  cards in  payment  for sales of  merchandise  and
services.  The terminals  manufactured by Link are sometimes referred to as "POS
terminals".  As a result of this  acquisition,  Link's revenue and expenses have
been  consolidated  with those of the Company for the six months ending June 30,
1997.  During this six month  period,  Link's  revenues from sales of equipment,
prepaid calling cards and technical service were  approximately  $60,000,  which
amount excludes  revenues  attributable to the Licensing  Agreement  between the
Company and  Cancall.  During the six month  period  ending June 30, 1997 Link's
cost of sales accounted for 0.4% of the Company's consolidated cost of sales and
Link's  other  expenses   accounted  for   approximately  1%  of  the  Company's
consolidated operating expenses.

        The  increase in Cost of Sales  during the year  period  ending June 30,
1997 reflects the  acquisition of Link, the expansion of the Company's  cellular
telephone rental, cellular telephone activation,  prepaid calling cards and long
distance telephone programs.

Liquidity and Sources of Capital

        During the year  ending  June 30,  1998 the  Company's  operations  used
approximately $2,800,000 of cash.

        In order to fund its  operating  losses,  the Company sold shares of its
common stock in private  placements and borrowed funds from private lenders.  In
July 1998, the Company issued  1,402,500 shares of its common stock at $1.00 per
share, raising $1,172,125 net of $230,375 in offering related expenses.

        The Company's scrip terminals are sold to a leasing Company which leases
the terminals back to the Company.  The leased scrip terminals are placed with a
merchant  free of  charge.  The  Company  receives  a fee for  each  transaction
processed by the scrip terminal. The Company uses a portion of these fees to pay
the monthly charges for the leased  terminals.  The funds received from the sale
of the  terminals  to the leasing  company are a source of cash to the  Company.
Other than the foregoing,  and any cash  generated by the Company's  operations,
the Company does not have any available credit, bank financing or other external
sources  of  liquidity.  Due  to  historical  operating  losses,  the  Company's
operations have not been a source of liquidity.  In order to obtain capital, the

<PAGE>


Company may need to sell  additional  shares of its common stock or borrow funds
from  private  lenders.  During the next  twelve  months the  Company  will need
capital to fund its operations,  repay outstanding debt and fund receivables and
inventory balances.

        Although there can be no assurance in this regard,  the Company  expects
that  during  fiscal  1999  cash  generated  by  operations  and the sale of the
Company's  point-of-sale  and scrip  terminals  will satisfy the Company's  cash
requirements.  During the  twelve  months  ending  June 30,  1999 the  Company's
anticipated  capital  requirements are $700,000 for inventory,  and $150,000 for
equipment and fixed assests.

        The Company may suffer  future  losses,  in which case the Company  will
need to obtain  additional  sources of capital in order to continue  operations.
There can be no  assurance,  however,  that the Company  will be  successful  in
obtaining additional funding.

Year 2000 Issue

   The "Year  2000" issue  affects the  Company's  installed  computer  systems,
network  elements,  software  applications  and other business systems that have
time-sensitive  programs  that may not properly  reflect or  recognize  the Year
2000. Because many computers and computer  applications define dates by the last
two digits of the year,  "00" may not be properly  identified  as the Year 2000.
This error could result in  miscalculations  or system failures.  The Company is
conducting a review of its computer  systems to identify  those areas that could
be affected by the "Year 2000" issue and is developing an implementation plan to
ensure  compliance.  The Company  presently  believes that the Year 2000 problem
will not pose significant operational concerns nor have a material impact on the
financial  position or results of operation in any given year. The total cost of
modifications  and  conversions  is not  expected  to be  material  and  will be
expensed as incurred.  However, failures of computer systems maintained by third
parties  could  have a  material  impact on the  Company's  ability  to  conduct
business.

                                   BUSINESS

         SIMS Communications,  Inc. (the "Company") was incorporated in Delaware
on August 15, 1991 to design and market a  computerized  system  which  provides
unattended  rental  of  cellular  telephones  through a  stand-alone  dispensing
station. The Company's system, known as an Automated Communications Distribution
Center  ("ACDC"),  was  designed to serve the needs of traveling  sales  people,
convention and seminar  participants,  and anyone else who is  temporarily  away
from normal  communications  facilities  and needs to maintain  contact  with an
office or home while traveling.  An ACDC unit is capable of dispensing from 1 to
12 cellular  phones on an  automated  basis.  The system uses  electronic  funds
transfer and accepts American Express,  Visa,  MasterCard,  Discover and Diner's
Club credit cards for payment in advance by the customer.

        Prior to 1996 the  Company  operated  ACDC units for its own account and
also sold  franchises  which  provided  third  parties the right to operate ACDC
units at various franchised locations.

<PAGE>


        The Company's first ACDC units became  operational in September l993. In
August  l995,  the  Company  had 50 ACDC units in  operation  and the  Company's
franchisees (13 in total) had 28 ACDC's in operation. At September 30, 1998, the
Company  was not  operating  any ACDC  units and the  Company's  only  remaining
franchisee had four ACDC units in operation.

        In 1996 the Company  introduced  four programs in an effort to diversify
and  broaden the  Company's  product and service  mix:  (i)  cellular  telephone
activations,  (ii) sale of pre-paid  calling cards,  (iii) sale of long distance
telephone service and (iv) rental of cellular telephones using overnight courier
service.  With the exception of the sale of pre-paid  calling cards,  these four
programs were discontinued in December 1997.

        Effective  December  31,  1996 the Company  acquired  all the issued and
outstanding shares of Link International,  Inc. ("Link").  Link manufactures and
distributes  machines which dispense  prepaid  calling cards and terminals which
are used by merchants to perform a variety of transactions,  including accepting
credit  cards and bank  debit  cards in  payment  for sales of  merchandise  and
services.  Unless otherwise  indicted,  all references to the Company's business
and operations included the business and operations of Link.

        Effective  January  30, 1998 the Company  issued  550,000  shares of its
common stock to the  shareholders of Moviebar,  Incorporated  and  Vectorvision,
Incorporated in consideration  for the acquisition of a business known as "Movie
Vision."  Movie  Vision  rents   videocassettes,   primarily  containing  motion
pictures,  through automated  dispensing units in hotels. Movie Vision currently
has video cassette dispensing machines in approximately 140 hotels in the United
States.

         Effective  May 30, 1998 the Company  acquired One Medical  Service Inc.
The One Medical  Service  technology  is used in the  pharmaceutical  market and
allows the pharmacy and its customers to  communicate  with medical  vendors and
suppliers  and  directly  order home  medical  equipment  through a  proprietary
point-of-sale terminal.

        All  historical  share  data in this  report  have  been  adjusted  to
reflect the following  stock splits  relating to the  Company's  common stock:
June 1995:  2-for-1  forward  split,  February 1996:  1-for-10  reverse split,
February 1998: 1-for-4 reverse split.

        The Company's  executive offices are located at 18001 Cowan,  Suite C&D,
Irvine, California 92614. The Company's telephone number is (949) 724-9094.

Link International Technologies, Inc.

        Effective  December 31, 1996,  the Company  acquired Link  International
Technologies,  Inc. ("Link") in consideration for the issuance of 168,539 shares
of the Company's Common Stock. For financial  statement purposes the acquisition
was  accounted for under the purchase  method and the assets  acquired from Link
(net of liabilities) were valued by the Company at approximately $600,000.


<PAGE>


        Link has developed a series of  state-of-the  art pre-paid long distance
telephone  card  dispensing  machines  which allow for  payment  with bank debit
cards, credit cards or cash.

        Link has  developed  and patented  certain  technologies  which  provide
unique  features  for its  phone  card  vending  machines.  The  first  and most
important  feature is that  LINK's  machine is the only  vending  machine in the
market  which can  individually  activate  prepaid  phone cards (or other "value
stored" cards, including  chip-embedded "smart" cards) at the point of sale. All
prepaid phone cards stored in LINK's machines are "dead" (i.e. "inactive") until
each one is individually  activated once cash is received or a customer's credit
or debit card has been accepted by the machine and successfully processed.  This
patented device, using a proprietary bar code technology, eliminates the risk of
fraud  or  theft  as well as the need  for  large  capital  investment  which is
required by other machines that dispense only  pre-activated  (or "live") cards.
The  machines  can be  operated  either by  direct  telephone  line or  wireless
technology,  at the option of the customer.  Second,  although  LINK's  machines
accept cash and credit cards,  Link's machines are the only vending devices that
requires  the  customer to use personal  identification  number when  purchasing
prepaid phones cards with a bank debit card. This  particular  feature serves to
eliminate  the expense  (ie.  "charge  backs") to the  merchant  for  mistakenly
accepting fraudulent or stolen credit cards.

         Link has designed two versions of its prepaid  telephone  card machine.
Its first  product  (introduced  in 1995) is a full  sized  stand-alone  vending
machine  which is used in locations  where size is not  important  and where the
machine's  lighted  billboard  signage  is  desired  for  advertising.   Typical
locations  include check  cashing  locations,  office  product  stores,  motels,
airports, universities, and other high traffic locations. This machine, with six
vending slots and a thermal graphic printer, offers other sales opportunities to
the merchant  such as recharging  cellular  phone time,  dispensing  promotional
coupons,  dispensing  prepaid gas cards for service station chains,  and selling
and dispensing tickets for concerts,  sporting events, lotteries, ski lifts, and
the like. Although capable of dispensing a variety of products, Link has decided
to concentrate  heavily on the market for prepaid  telephone  cards and plans to
install this machine at large regional accounts and chains.

        All major  hardware  is  subcontracted  and  virtually  snaps into place
allowing this miniature dispensing machine to be moved and installed in under 30
minutes by one  individual.  The location for the machine needs only  electrical
power and a telephone line. The machine requires very little maintenance and can
be connected to an on-line computer in order to monitor sales,  cash on hand and
inventory requirements.

         Link's  phone card  machines  can also be used to dispense  other items
such as:

    - pre-paid gasoline cards
    - smart chip cards
    - coupons
    - stamps
    - sporting, theatrical and other event tickets


<PAGE>

         Link  has  also  developed  a  counter  top  point-of-sale  transaction
terminal, ("known as the "Debitlink" terminal), primarily for use in the sale of
goods and  services.  This  terminal,  which accepts bank debit cards as well as
major credit cards, includes the capability of pre-paid long distance phone card
activation,  customer frequency programs,  check guarantee and pre-paid cellular
time  activation.  The  Debitlink  terminal  uses the same  technology  and host
reporting  as Link's phone card  dispensing  machines.  The Company  markets its
Debitlink to smaller stores,  most of which do not have point-of-sale debit card
capability  and  to  retail  pharmacies.  The  Company  began  marketing  Link's
Debitlink terminals in August 1997.

         The Company receives revenues from sales of its Debitlink  terminal and
for all  transactions  processed  by the  terminal.  As of  September  15,  1998
approximately  70 Debitlink  terminals  were in operation and 50 terminals  were
awaiting installation.

         Link also markets its  proprietary  scrip  terminals  which provide the
same benefits as cash dispensing ATM machines  without the prohibitive  costs to
the  merchant.  A customer  using a bank debit  card  inserts  the card into the
terminal and selects a dollar  denomination  ($5,  $10,  $20,  etc.).  The scrip
terminal  dispenses  a  receipt  to the  customer  which  can be used to pay for
merchandise  and/or  services.  The customer  receives  cash for any  difference
between  the dollar  denomination  of the scrip and the amount of the  purchase.
Once the transaction is processed,  funds are electronically  transferred to the
merchant's bank account from the customer's bank account within 48 hours.

         Scrip terminals appeal to fast food  restaurants,  convenience  stores,
bars, pharmacies, arcades and other outlets where cash is needed for products or
services.  While occupying little store space, scrip terminals increase sales by
giving customers purchasing power, thereby, generating impulse buying and larger
purchases.  Similarly,  consumers find scrip terminals  beneficial due the their
convenience and the fact that they provide a safe alternative to isolated ATM's.
The Company  receives a transaction fee (charged to the customer rather than the
retailer) for each transaction processed by the scrip terminal.

         As of September 15, 1998  approximately  540 scrip  terminals were in
   operation.

Movie Vision

         Effective  January 30, 1998 the Company  issued  550,000  shares of its
common stock to the  shareholders of Moviebar,  Incorporated  and  Vectorvision,
Incorporated in consideration  for the acquisition of a business known as "Movie
Vision."  Movie  Vision  rents  video  cassettes,  primarily  containing  motion
pictures,  through automated  dispensing units in hotels. Movie Vision currently
has video cassette dispensing machines in approximately 140 hotels in the United
States.

One-Medical

         Effective May 30, 1998 the Company acquired One Medical Services,  Inc.
in  consideration  for  142,350  shares of common  stock  and  187,500  warrants

<PAGE>

exercisable  at $2.00 per share at any time prior to May 30,  2003.  The Company
has also  agreed to issue to the former  owners of One  Medical up to  1,485,000
additional  shares of common stock depending on the future operating  results of
One Medical.  The number of shares to be issued will be  determined  by dividing
the quarterly net income of One Medical (for each fiscal quarter  beginning June
30,  1998 and  ending  June  30,  2001),  by the  average  closing  price of the
Company's  common stock for the five day trading period prior to the end of each
quarter.

          One Medical provides a financial processing and communications network
for the Home Medical  Equipment  (HME) industry.  Since the Company's  DebitLink
terminal has the ability to process  information  and verify  insurance  medical
cards,  this network can connect HME buyers with a network of HME vendors.  This
proprietary  network has been designated for the medical and managed  healthcare
market,  but the  Company's  primary  focus at the  present  time is the  retail
pharmacy industry.

          The retail  pharmacy  industry has been one of the  casualties  of the
growing  influence  of managed  healthcare.  As  efforts  to control  healthcare
spending  increase,  pharmacies  have come under  increasing  pressure  to lower
prices.  As a result,  the era of the locally owned and operated  drugstores has
virtually ended as shrinking  margins have forced a rapid  consolidation  in the
industry.  Giant pharmacy chains now dominate the industry,  taking advantage of
economics of scale in  advertising,  purchasing,  and  distribution.  Thus,  the
retail  pharmaceutical  industry is forced to look for other revenue streams and
efficiencies.  The current home healthcare market is estimated to be $20 billion
annually  and is expected to  mushroom  to $60 billion  within the next  several
years,  representing up to 100 million potential  customers.  The driving forces
behind this growth is the aging  population,  managed care pressures for earlier
hospital  discharges,  advance home medical equipment  technologies,  government
cost-cutting imperatives, and a more active elderly population.

          The One Medical network allows any pharmacy to be more  competitive in
the HME  marketplace  by being able to offer  over  23,000  products  through an
automated  catalogue  process  and a direct  connection  to local  providers  of
oxygen,  appliance repair, nursing care, and other such services.  Pharmacies in
the  network are able to provide  their  customers  with  medical  supplies  and
equipment along with product information without sending the customer to another
location  and thus  losing  control of the  customer.  As a result,  the network
provides  pharmacies with the opportunity to capture a greater percentage of the
managed  healthcare market,  generate  additional  revenues,  and simultaneously
provide greater service and convenience to their customers.

          The Company  provides  each  pharmacy  in the network  with a compact,
modular,  self contained kiosk that allows a customer to view,  inspect,  obtain
information and purchase a variety of HME equipment while at the local pharmacy.
The kiosk measures approximately 24" by 15" by 17" and contains an HME catalogue
of over 23,000 HME products, a directory of products and services offered by the
HME vendors, a telephone handset and a key pad. This "one stop" shopping service
is helpful for older, less healthy, and less mobile customers.

          The One Medical network is comprised of the following components:


<PAGE>
          Pharmacies.   In order to join the  network a pharmacy  is  required
to pay a  monthly  membership  fee of $25.  The  pharmacy  is also  required  to
purchase  one  of  the  Company's  DebitLink  terminals  which,   together  with
installation,  costs approximately  $1,150. For each pharmacy within the network
the Company  installs (free of charge to the pharmacy) the One Medical kiosk. To
insure  quality  control  and  customer  satisfaction  a pharmacy is required to
contact each pharmacy  customer that purchased  products or services through the
network. The pharmacy asks the customer certain questions concerning the quality
of the products and/or services purchased through the network. For administering
this quality control program,  the pharmacy  receives a fee for service from the
HME service  center,  the HME vendor,  or the  catalogue  vendor which  provided
products,  equipment or services to the customer.  Using the Company's DebitLink
terminal,  the pharmacy also earns fees for activating  pre-paid telephone cards
and through a computer link to the  California  Medi-Cal data base, the pharmacy
can instantly verify MEDI-CAL eligibility for California residents.  The Company
charges the pharmacy a monthly fee for the MEDI-CAL verification service.

          HME Service  Center.  The HME Service Center  provides  customers with
items such as wheelchairs,  crutches,  hospital beds, bathroom safety equipment,
respiratory therapy equipment, and medical supplies. Delivery to the customer is
made  by  van or  truck.  The  typical  HME  Service  Center  supports  10 to 15
pharmacies and is located  within ten miles of each  pharmacy.  In order to join
the network the HME Service Center is required to pay an initial  membership fee
of $1,500 and a monthly fee of $150.

          HME  Vendors  The HME  vendors  provide  customers  with items such as
oxygen concentrators,  portable oxygen tanks, urological,  ostomy, and skin care
products, home health supplies, wound care treatment, vascular support products,
breast pumps,  diagnostic testing kits,  orthopedic  equipment,  prosthesis,  IV
equipment,  and services  such as home nursing  care,  product  repair  services
construction of ramps or lifts and conversions of automobiles or vans.  Delivery
of  equipment  and  supplies  is made by van or truck.  The  typical  HME vendor
supports 10 to 15 pharmacies  and is located  within ten miles of each pharmacy.
In order to join the  network  the HME  vendor  is  required  to pay an  initial
membership  fee of $500 and a monthly  fee of $125.  The  Company  also  charges
vendors a  per-minute  fee for all calls made by  pharmacy  customers  using the
network.

          Catalogue  Vendor The catalogue vendor allows the customer to purchase
over 23,000 home medical products such as walkers,  canes,  pillows,  grab bars,
lotions,  and  dressings.  Delivery  is made by U.P.S.  or, at the option of the
customer,  overnight  courier  service.  The Company also charges the  catalogue
vendor a  per-minute  fee for all calls  made by  pharmacy  customers  using the
network.

          1 One Medical  Service.  The  Company's One Medical  Service  division
supplies  the kiosk and the  DebitLink  terminal  to the  pharmacy,  manages the
network  and  administers  the  transfer  of funds  between  the  members of the
network.  At the present time, a major home medical equipment  supplier pays for
the kiosk.

  
<PAGE>

        A customer  needing home medical  equipment or services is directed to
the pharmacy's  kiosk. The customer picks up the kiosk's  telephone handset and,
using the keypad, selects a number which corresponds with the product or service
needed by the customer. After making the selection, the customer is connected to
a  representative  at the nearest HME  service  center or HME vendor,  or with a
representative  at the  catalogue  vendor.  The customer then obtains any needed
information  relating to the product or service from the  representative  and if
desired,  orders the product or  service.  Billing for the product or service is
handled  directly  between the vendor and the customer.  Pharmacy  customers can
also  access  the One  Medical  network at home by  dialing a  toll-free  number
provided by the pharmacy.

          The Company's One Medical  Service  division  receives  revenue from a
variety of sources including initial  membership fees,  monthly membership dues,
prepaid  phone-card  sales,  charges for calls made to HME  service  centers and
vendors by pharmacy customers,  Medi-Cal verification fees, advertising rebates,
and fees for all transactions processed by the pharmacy's Debitlink terminal.

          As of September 15, 1998, 100 pharmacies,  three HME service  centers,
fifteen  HME vendors and one  catalogue  vendor were  members of the One Medical
network.

Research and Development

         During the years  ending June 30,  l997,  and 1998,  the Company  spent
approximately  $35,000, and $33,000  respectively,  on research and development.
Research and development  expenditures pertained to the design,  development and
testing of enhancements  to Link's  DebitLink  transaction  terminals as well as
other  on-line  transaction  terminals  as well  as  other  on-line  transaction
terminals.

Franchise Operations

         Prior to 1996 the Company  operated  ACDC units for its own account and
also sold  franchises  which  provided  third  parties the right to operate ACDC
units at various franchised locations.

         As of April 15, 1998 only one Company  franchisee  was  operating  ACDC
units.  Instafone of California,  one of the Company's former  franchisees,  had
previously  paid  the  Company   $1,000,000  for  deposits  of  ACDC  units  and
franchises.  Instafone  of  California  is no longer in the  business of renting
cellular  telephones  and has advised the Company  that it wants a refund of the
deposits  paid  to the  Company.  The  Company  is  attempting  to  negotiate  a
settlement  with  Instafone of California  concerning  this matter.  The amounts
received by the Company for equipment and franchise deposits as of June 30, 1997
represented 90% of the total amounts  recorded by the Company as a liability for
franchise and customer deposits on such date. See "Litigation".



<PAGE>


Competition

         The Company competes with numerous other companies which are engaged in
the  Company's  lines  of  business.  Many of  these  competitors  have  greater
financial and marketing resources than those of the Company.

Employees and Offices

         As of  September  15,  1998,  the  Company  employed  38  persons  on a
full-time  basis.  Fifteen  employees  serve  in  management  or  administrative
capacities,  and the remainder are hourly  workers in the Company's  operations.
None  of  the  Company's  employees  are  covered  by  a  collective  bargaining
agreement. The Company has never experienced an organized work stoppage,  strike
or  labor  dispute.  Management  considers  the  Company's  relations  with  its
employees to be good.

         The Company leases a 7,000 square foot  production and office  facility
in Tampa,  Florida  at an annual  rent of  $35,000.  The lease on this  facility
expires in June 2002.  The  Company's  executive  offices are located in Irvine,
California  and  consist of 4,900  square  feet of space  which are leased at an
annual  rent of $67,000.  This lease on the space  expires in August  2003.  The
Company's  offices in Boca Raton,  Florida consist of 1,400 square feet of space
and are  leased  for  $15,000  per year  pursuant  to a lease  which  expires in
December 2001.

                                  MANAGEMENT

         The Company's present officers and directors are as follows:

Name                      Age                  Position
- ----                      ---                  --------
Mark Bennett              39                  President and a Director
Michael Malet             50                  Executive  Vice  President and a
                                              Director
Ian Hart                  34                  Chief  Financial and  Accounting
                                              Officer
Marvin Berger             54                  Executive   Vice   President  of
                                              Sales and Marketing
Chet Howard               54                  Director
George Pursglove          46                  Director
Cornelia Eldridge         57                  Director

         Each  director  holds office until his successor is duly elected by the
stockholders.  Executive  officers  serve  at  the  pleasure  of  the  Board  of
Directors.

         The following  sets forth certain  information  concerning the past and
present principal occupations of the Company's officers and directors.

<PAGE>

         Mark Bennett has been the Company's  President  since November 1997 and
has been a Director of the Company since  September  1997.  Mr. Bennett has been
the  President,  Chief  Executive  Officer and a Director of Link  International
Technologies, Inc., a subsidiary of the Company, since January 1996. Since April
1995 Mr. Bennett has also been the President of New View Technologies,  a wholly
owned  subsidiary of Link. From 1985 to 1987 Mr. Bennett was the General Manager
for  MovieBar,  a video  vending  company  servicing  the hotel and  hospitality
industry,  with installations in over 35,000 hotel rooms worldwide.  In 1987 Mr.
Bennett became Vice President of International Operations and General Manager of
MovieBar and was  subsequently  named as  President of MovieBar  Company USA. In
December 1995 Mr. Bennett resigned his position with MovieBar to co-found Link.

         Michael Malet has been the Company's  Executive  Vice  President  since
November 1997 and has been a director of the Company since  September  1997. Mr.
Malet has been the  President  of New View  Technologies,  Inc.,  a wholly owned
subsidiary of Link International Technologies,  Inc., since July 1995. From 1986
to 1987 Mr. Malet was the President of Vending Control  Systems,  a manufacturer
of video vending machines.  Mr. Malet was a Sales Manager  (1987-1990) and later
President  (1991-1995)  of  Keyosk  Corporation,   a  Company  involved  on  the
development  and sale of intelligent  on-line  vending  machines,  including the
Company's ACDC Units.

     Ian Hart has been the Companys Chief Financial Officer since October 1998.
Between April 1998 and October 1998 Mr. Hart was the Chief Financial Officer for
Data Systems West.  Between  December  1997 and September  1998 Mr. Hart was the
Chief  Financial  Officer  for D2  Electrical  Contracting.  From August 1995 to
December 1997 Mr. Hart was employed by Merrill Lynch as a financial  consultant.
From  March  1992 to  August  1995  Mr.  Hart was Vice  President  of  Secondary
Marketing for Fallbrook Mortgage Corporation

 
         Marvin S. Berger  joined the Company as Vice  President  of Sales and
Marketing  in April 1998.  Prior to his  joining  the  Company Mr.  Berger was
Vice    President   of   Sales   and   Special    Accounts    with    SmarTalk
Telecommunications,  Inc. a company at which his involvement  began during the
founding  stages.  Mr. Berger has held marketing and  management  positions at
IBM, Data General Corporation and Visage Corporation.

         Chet Howard has been a director of the Company  since  September  1997.
Since 1992 Mr. Howard has been a principal of  Consolidated  Business  Group,  a
company providing financial  consulting services for development stage business.
From 1988 to 1992 Mr. Howard was Executive  Vice  President and Chief  Financial
Officer of HQ Office Supplies, Inc.

         George  Pursglove  has been a Director of the Company  since  September
1997.  Since  November 1995 Mr.  Pursglove has been a principal of  Consolidated
Business Group, a company providing financial consulting services to development
stage  businesses.  Between  March 1993 and November  1995 Mr.  Pursglove  was a
Senior Divisional  Merchandise  Manager, and later Director of Merchandising for

<PAGE>

Office  Depot.  Between April 1992 and March 1993 Mr.  Pursglove was  Divisional
Merchandise Manager for the Price Company, a retailer of home improvement goods.

         Cornelia  Eldridge has been a Director of the Company  since  September
1998.  Since 1981 Ms.  Eldridge has been the  President of Eldridge  Associates,
Inc., a management consulting firm.

         All of the Company's officers devote  substantially all of their time
on the Company's  business.  Mr., Howard,  Mr. Pursglove and Ms. Eldridge,  as
directors, devote only a minimal amount of time to the Company.

         Michael  Malet and Chet  Howard  are  members  of the  Company's  audit
committee.

Change in Management

         In November 1997 Melvin Leiner,  Darren Marks,  James Caprio and Donald
Marks  resigned as officers and  directors of the Company.  David  Barnhill also
resigned as a director  in November  1997.  In  November  1997 Mark  Bennett was
appointed  President and Michael Malet was appointed Executive Vice President of
the Company. Bruce Schames continued as an officer of the Company. Mark Bennett,
Michael  Malet,  Chet  Howard and George  Pursglove  remained  directors  of the
Company.  In October 1998 David Markowski and Bruce Schames resigned as officers
of the Company.  In October 1998 Ian Hart was appointed an officer of the
Company.

Executive Compensation

         The  following  table  sets  forth in  summary  form  the  compensation
received  by (i) the Chief  Executive  Officer of the  Company  and (ii) by each
other executive officer of the Company who received in excess of $100,000 during
the fiscal year ended June 30, 1998.

                                               Other                 Re-
                                               Annual                stricted
                                               Compen-     Stock     Options
      Name and   Fiscal   Salary    Bonus      sation      Awards    Granted
Principal Position          Year       (1)        (2)          (3)      (4)
    (5)

Mark Bennett     1998   $111,350      --       $8,400     93,750    560,500
President and
Chief Executive
Officer

Michael Malet    1998   $100,923      --       $8,400     81,250    457,000
Executive Vice President

(1) The dollar value of base salary (cash and non-cash) received.

<PAGE>

(2) The dollar value of bonus (cash and non-cash)  received.

(3) Any other annual compensation not properly categorized as salary or
    bonus,  including  perquisites and other personal benefits,  securities or
    property.  Amounts in the table represents automobile allowances.

(4)  During the year ending June 30, 1998,  the shares of the  Company's  common
     stock issued as compensation for services.

         The table  below  shows the  number of shares of the  Company's  Common
Stock owned by the  officers  listed  above,  and the value of such shares as of
June 30, 1998.

    Name                          Shares                    Value 
    ----                          ------                    -----
Mark Bennett                      224,900                   $393,575
Michael Malet                     157,802                   $276,154

(5)   The  shares of Common  Stock to be  received  upon the  exercise  of all
     stock options granted during the. year ending June 30, 1998.

Options Granted

         The  following  tables set forth  information  concerning  the  options
granted  during the fiscal year ended June 30, 1998, to the  Company's  officers
and  directors,  and  the  fiscal  year-end  value  of all  unexercised  options
(regardless of when granted) held by these persons.  As of October 15, 1998 none
of the options listed in table below have been exercised.


                                                        Number of
                       % of Total                       Securities    Value of
                       Options                          Underlying  Unexercised
                       Granted to   Exercise            Unexercised In-the-Money
            Options    Employees in Price Per Expiration Options at  Options at
 Name       Granted(1) Fiscal Year  Share     Date       FY End (#)  FY End ($)
- ------      ----------- ----------- --------- ---------- ---------- -----------

Mark Bennett    560,500     38.5%    $1.50    5/29/03    560,500      $140,000
Michael Malet   457,000     31.4%    $1.50    5/29/03    457,000      $114,250

David Markowski 439,000     30.2%    $1.50    5/29/03    439,000      $109,750

Chet Howard      25,000      1.7%    $1.50    5/29/03     25,000        $6,250

George Pusglove  37,500      2.6%    $1.50    5/29/03     37,500        $9,375

<PAGE>

(1) Represents  shares  issuable  upon  exercise of options.  All options were
exercisable at June 30, 1998.

Long Term Incentive Plans - Awards in Last Fiscal Year

         None.

Employee Pension, Profit Sharing or Other Retirement Plans

         Except as  provided in the  Company's  employment  agreements  with its
executive officers,  the Company does not have a defined benefit,  pension plan,
profit sharing or other retirement  plan,  although the Company may adopt one or
more of such plans in the future.

Compensation of Directors

         Standard  Arrangements.  At  present  the  Company  does  not  pay  its
directors for attending meetings of the Board of Directors, although the Company
expects to adopt a director  compensation  policy in the future. The Company has
no  standard  arrangement  pursuant  to  which  directors  of  the  Company  are
compensated   for  any  services   provided  as  a  director  or  for  committee
participation or special assignments.

         Other  Arrangements.  During the year  ending June 30, 1998 the Company
issued shares of common stock to the  following  directors in  consideration  of
services rendered to the Company:

                                             Shares
                        Name                 Issued(1)

                     Chet Howard             25,000

                     George Pursglove        37,500

(1) Certain of these shares were issued  pursuant to the  Company's  Stock Bonus
Plan. See "Stock Bonuses" below.

         See the table titled "Options Granted" above for information concerning
stock options granted to the Company's officers and directors.

         Except as disclosed  elsewhere in this  prospectust  no director of the
Company received any form of compensation from the Company during the year ended
June 30, 1998.



<PAGE>


Stock Option and Bonus Plans

         The Company has an Incentive Stock Option Plan, two Non-Qualified Stock
Option  Plans and two Stock  Bonus  Plans.  A summary  description  of each Plan
follows.  In some cases these three  Plans are  collectively  referred to as the
"Plans".

Incentive Stock Option Plan.

         The Incentive  Stock Option Plan  authorizes the issuance of options to
purchase up to 1,500,000 shares of the Company's  Common Stock,  less the number
of shares  already  optioned  under both this Plan and the  Non-Qualified  Stock
Option Plan.  The  Incentive  Stock Option Plan will remain in effect until 2008
unless terminated  earlier by action of the Board. Only officers,  directors and
key  employees of the Company may be granted  options  pursuant to the Incentive
Stock Option Plan.

          In order to qualify for  incentive  stock option  treatment  under the
Internal Revenue Code, the following requirements must be complied with:

         1.  Options  granted  pursuant to the Plan must be  exercised  no later
than:

         (a) The  expiration  of  thirty  (30)  days  after the date on which an
option holder's employment by the Company is terminated.

         (b) The  expiration  of one year  after  the  date on  which an  option
holder's employment by the Company is terminated,  if such termination is due to
the Employee's disability or death.

         2. In the event of an option  holder's death while in the employ of the
Company,  his  legatees or  distributees  may  exercise  (prior to the  option's
expiration) the option as to any of the shares not previously exercised.

         3.  The  total  fair  market  value  of  the  shares  of  Common  Stock
(determined  at the time of the grant of the option) for which any  employee may
be granted  options  which are first  exercisable  in any calendar  year may not
exceed $100,000.

         4. Options may not be exercised  until one year  following  the date of
grant.  Options  granted to an employee  then owning more than 10% of the Common
Stock of the Company may not be  exercisable  by its terms after five years from
the date of grant.

         5. The purchase  price per share of Common Stock  purchasable  under an
option is  determined  by the  Committee but cannot be less than the fair market
value of the Common Stock on the date of the grant of the option (or 110% of the
fair  market  value in the case of a person  owning the  Company's  stock  which
represents  more than 10% of the total  combined  voting power of all classes of
stock).

<PAGE>


Non-Qualified Stock Option Plans.

         The Non-Qualified  Stock Option Plans authorize the issuance of options
to purchase up to 3,00,000 shares of the Company's  Common Stock.  The Company's
employees,  directors,  officers,  consultants  and  advisors are eligible to be
granted options pursuant to the Plans,  provided however that bona fide services
must be rendered by such  consultants  or advisors and such services must not be
in  connection  with  the  offer  or sale  of  securities  in a  capital-raising
transaction. The option exercise price and expiration date are determined by the
Committee.

Stock Bonus Plans.

         Up to 1,500,000  shares of Common Stock may be granted  under the Stock
Bonus Plans.  Such shares may consist,  in whole or in part, of  authorized  but
unissued shares, or treasury shares.  Under the Stock Bonus Plans, the Company's
employees, directors, officers, consultants and advisors are eligible to receive
a grant of the Company's shares; provided, however, that bona fide services must
be  rendered  by  consultants  or  advisors  and  such  services  must not be in
connection   with  the  offer  or  sale  of  securities  in  a   capital-raising
transaction.

Other Information Regarding the Plans.

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

         In the  discretion  of the  Board  of  Directors,  any  option  granted
pursuant  to the Plans may  include  installment  exercise  terms  such that the
option becomes fully exercisable in a series of cumulating  portions.  The Board
of Directors may also  accelerate the date upon which any option (or any part of
any options) is first exercisable. Any shares issued pursuant to the Stock Bonus
Plan and any options granted  pursuant to the Incentive Stock Option Plan or the
Non-Qualified  Stock  Option Plan will be forfeited  if the  "vesting"  schedule
established  by the Board of  Directors at the time of the grant is not met. For
this purpose,  vesting means the period during which the employee must remain an
employee  of the  Company  or the  period of time a  non-employee  must  provide
services to the Company.  At the time an employee ceases working for the Company
(or at the time a non-employee ceases to perform services for the Company),  any
shares or options  not fully  vested will be  forfeited  and  cancelled.  In the
discretion  of the Board of  Directors  payment  for the shares of Common  Stock
underlying  options may be paid through the delivery of shares of the  Company's
Common Stock having an  aggregate  fair market value equal to the option  price,
provided  such shares have been owned by the option holder for at least one year
prior to such  exercise.  A  combination  of cash and shares of Common Stock may
also be permitted at the discretion of the Board of Directors.

<PAGE>


        Options are generally  non-transferable except upon death of the option
holder.  Shares  issued  pursuant to the Stock Bonus Plan will  generally not be
transferable  until the  person  receiving  the  shares  satisfies  the  vesting
requirements imposed by the Board of Directors when the shares were issued.

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

         The Plans  are not  qualified  under  Section  401(a)  of the  Internal
Revenue Code, nor are they subject to any provisions of the Employee  Retirement
Income Security Act of 1974.

Summary.

         The following sets forth certain  information as of September 30, 1998,
concerning  the stock  options and stock  bonuses  granted by the Company.  Each
option represents the right to purchase one share of the Company's Common Stock.

                                Total        Shares                  Remaining
                                Shares    Reserved for    Shares      Options/
                               Reserved   Outstanding    Issued As    Shares
Name of Plan                  Under Plan    Options     Stock Bonus  Under
Plan

Incentive Stock Option Plan   1,500,000          --           N/A          --
Non-Qualified Stock Option
  Plan                        3,000,000   2,164,000           N/A     836,000
Stock Bonus Plan              1,500,000         N/A       749,625     750,375

Stock Bonuses

         The Company, in accordance with the terms of its Stock Bonus Plans, has
issued  shares  of Common  Stock to  certain  Company  officers,  employees  and
consultants.  The following  persons  (including  former officers and directors)
received shares of the Company's common stock as stock bonuses:

                              Shares  Issued as Stock Bonus
    Name                   1996           1997            1998
    ----                   ----           ----            ----

Melvin Leiner *          62,500        12,500
Darren Marks *           62,500        12,500
James J. Caprio *        62,500
Donald Marks *           62,500
Bruce Schames *          18,750


<PAGE>

Mark Bennett                                           18,750
Michael Malet                           5,000          16,250
David Markowski *                                       6,250
Chet Howard                                             6,250
George Pursglove                                       12,500
Other employees and
consultants as a group   192,500       86,875         111,250
                         -------       ------         -------

                          461,250      116,875        171,500
                          =======      =======        =======

* Former Officer and Director

Transactions with Former Management.

Melvin Leiner,  Donald Marks,  James Caprio and Darren Marks were officers and
directors of the Company  between  August 1991 and November  1997. See "Change
in Management" above.

         In December  1995 the Company  issued 10,945 shares of its Common Stock
to Melvin Leiner,  Donald Marks, James Caprio and Darren Marks (43,778 shares in
total) as  repayment  of loans,  each in the  amount  of  $90,500,  made by such
persons to the Company.

         In March 1996 the Company issued 6,250 shares of its Series B Preferred
Stock to Melvin  Leiner,  Donald  Marks,  James Caprio and Darren Marks  (25,000
shares in total) as repayment of loans,  each in the amount of $25,000,  made by
such persons to the Company.

         In June 1996 the Company  issued  62,500  shares of its Common Stock to
Melvin Leiner,  Donald Marks,  James Caprio and Darren Marks (250,000  shares in
total) as  repayment  of loans,  each in the  amount of  $125,000,  made by such
persons to the Company.

         In June 1996 the  Company  issued  shares of its Common  Stock to the
following  former  officers  and  directors in repayment of loans made by such
persons to the  Company:  Melvin  Leiner:  25,922  shares in repayment of loan
of $51,843;  Donald  Marks:  28,588  shares in  repayment  of loan of $57,175;
James  Caprio:  28,616  shares in  repayment  of loan of  $57,232;  and Darren
Marks:  21,860 shares in repayment of loan of $43,720.

         In September  1996, the Company  acquired a 10% interest in Smartphone,
Inc. (a corporation  that sells a debit cellular  telephone) from Melvin Leiner,
Donald Marks,  James Caprio and Darren Marks in consideration for 100,000 shares
of the Company's  common  stock.  The  Company's  investment  in Smartphone  was
recorded at $200,000,  which was the original  cost of the former  officers' and
directors' investment in Smartphone.

         During the year ended June 30,  1996,  the Company sold five ACDC units
and related technology to Lonestar,  Inc., a corporation owned by Melvin Leiner,
Darren Marks,  James Caprio and Donald Marks for  $350,000.  The sales price for
these units was paid by  offsetting  advances of $350,000  which had  previously

<PAGE>

been made to the Company by such officers. In December l996 the Company sold ten
additional ACDC units to Lonestar for $l50,000. Lonestar made an initial payment
of  $15,000  for these ACDC  units and has a balance  of  $123,859  owing to the
Company.

Transactions  with  Present  Management

     Effective  January 30, 1998 the Company issued 550,000 shares of its common
stock  to  the  shareholders  of  Moviebar,   Incorporated   and   Vectorvision,
Incorporated in consideration  for the acquisition of a business known as "Movie
Vision."  Movie  Vision  rents  video  cassettes,  primarily  containing  motion
pictures,  through automated  dispensing units in hotels. Movie Vision currently
has video cassette dispensing machines in approximately 140 hotels in the United
States. For financial  statement  purposes,  the acquisition of Movie Vision was
valued at $1,100,000. Mark Bennett, the President and a director of the Company,
was shareholder of both Moviebar,  Incorporated and  Vectorvision,  Incorporated
and received 55,000 shares of the Company's common stock in connection with this
transaction.

         During the fiscal 1998 the Company  issued  18,750 shares of its common
stock to David Markowski, a former officer of the Company in consideration  for
services provided to the Company. The Company also issued Mr. Markowski  6,250
shares of common stock pursuant to the Company's stock bonus plan.

         See "Stock  Option and Bonus  Plans" above for  information  concerning
stock options and stock bonuses  granted to the Company's  present  officers and
directors.

                            PRINCIPAL SHAREHOLDERS

         The following table sets forth,  as of September 30, 1998,  information
with  respect  to  the  only  persons  owning  beneficially  5% or  more  of the
outstanding  Common Stock and the number and  percentage of  outstanding  shares
owned by each director and officer and by the officers and directors as a group.
Unless  otherwise  indicated,  each owner has sole voting and investment  powers
over his shares of Common Stock.

                                       Number of             Percent of
Name and Address                       Shares  (1)               Class
(2)

Mark Bennett                                                          
18001 Cowan, Suite C&D
Irvine, CA 92614                         224,900                 3%

Michael Malet                            157,802                 2%
18001 Cowan, Suite C&D
Irvine, CA 92614

<PAGE>

Ian Hart                                       --                --
18001 Cowan, Suite C&D
Irvine, CA  92614                         

Marvin Berger
18001 Cowan, Suite C&D
Irvine, CA  92614                         80,000                  1%

Chet Howard
1805 Apricot Glen Drive
Austin, TX  78746                         25,000                   *

George Pursglove
9380 N.W. 39 Court
Coral Springs, FL 33065                   27,500                   *
 
Cornelia Eldridge
4514 Elkhorn Road
Sun Valley, Idaho 83353                     --                  --

Officers and Directors as a
Group (7 persons)                        516,202                  7.1%

*  Less than 1%

(2)  Excludes  shares  issuable  prior to December 31, 1998 upon the exercise of
options or warrants granted to the following persons:

Name                         Options exercisable prior to December 31, 1998
- ----                         ----------------------------------------------

Mark Bennett                      560,500
Michael Malet                     457,000
Ian Hart                               --
Chet Howard                        50,000
George Pursglove                   50,000

(2)  Includes  shares  referenced  in footnote  (1) above but excludes any other
shares  issuable  upon the  exercise  of any  warrants  or  options  or upon the
conversion  of  any  promissory  notes  or  other  convertible  securities.  See
"Dilution and Comparative share data."


<PAGE>

                             SELLING SHAREHOLDERS 

This Prospectus relates to:

         1.  The  sale  of  3,782,301   shares  of  the  Common  Stock  of  Sims
Communications,  Inc. (the  "Company") by the owners of such shares.  The shares
were sold by the  Company  in  various  private  offerings  for  cash,  services
rendered, and in settlement of claims against the Company.

         2. The sale of up to  336,315  shares  of the  Company's  common  stock
issuable  upon the  exercise of options and  warrants.  The options and warrants
were issued by the Company to:

              (i) certain  investors in connection  with the  Company's  private
offerings.

              (ii) Sales Agent's in connection with certain private offerings of
the Company's securities,

              (iii)     financial  consultants  for  services  provided to the
Company, and

              (iv)  to  other  third   parties  in   settlement  of  claims  and
liabilities.

         The owners of the Common  Stock  referred to above,  and the holders of
the options and  warrants,  to the extent they exercise the options and warrants
and  receive  shares of the  Company's  Common  Stock,  are  referred  to as the
"Selling Shareholders".



<PAGE>


         The names of the Selling Shareholders are:

Name                                  Shares  Shares to be Sold Share Ownership
                      Shares          Issuable This Offering  After Offering(1)
                      Presently Owned Upon
                                      Exercise
                                      of
                                      Options
                                      or
                                      Warrants

Maxwell K. Scheuerer          37,500                    37,500
Maxwell B. Scheuerer           5,000                     5,000             --
James Gilloon                 12,500                    12,500             --
Carl Schafer                  47,500                    37,500            10,000
Michael Pickens              125,000                   125,000              --
Robert Herdina                 1,250                     1,250             --
Ann Lou Last                  25,000                    25,000             --
Fred Matulka                   8,750                     8,750             --
Anthony A. Cappola             5,000                     5,000             --
Madeline A Esposito            5,000                     5,000             --
William M.Goatley
Revocable Trust               88,648                    35,000            53,648

Scott Lyng                    15,000                     5,000            10,000
Michael & Associates         110,000                   110,000              --
Cary A. Paulis                10,000                    10,000              --

James E. and Helen M.          6,000                     6,000              --
Picou
Matthew Sakurda              18,750                    10,000            8,750
Carl Shaifer                 10,000                    10,000              --
Kenneth Stilger              20,000                    20,000              --
Franklin Stone               10,000                    10,000              --
Alberta Tabony                55,000                    5,000            50,000
Frank H. Harvey              43,750                    40,000            3,750
Neils Lauersen               150,000                  150,000              --
Nabih Akkawi                 15,000                    15,000              --
Warren Becker                10,000                    10,000              --
Nancy and Richard Bixby      10,000                    10,000              --
Lewis F. Bruce               10,000                    10,000              --
Adrienne and Sal Coppola     17,500                    17,500              --
Rodney J. Darling            30,000                    30,000              --
Maher Fasheh                 10,000                    10,000              --
Rodney Fingleson             10,000                    10,000              --
Ray C. Felshman Sr., IRA     50,000                    50,000              --
Account
Ken Hiniker                  25,000                    25,000              --

<PAGE>

Errol Kaplan                 45,000                    45,000              --
Leslie Kasar                 10,000                    10,000              --
Steven D. Kremer, M                                                        --
Sterling I.G.A.              30,000                    30,000
Mark J. Levy                 10,000                    10,000              --
Thomas M. Pisula             150,000                  150,000              --
Mark A. Raifman              35,500                    30,000            5,500
Larry C. Roark               100,000                  100,000              --
Gregory Rubel                 2,000                    2,000               --
Glen L. Rufenach             20,000                    20,000              --
Paul Sciarrino               10,000                    10,000              --
Steven W. Seaworth           10,000                    10,000              --
 Scott Sibella                5,000                    5,000               --
James Sink                   225,000    25,000        125,000           125,000
Kenneth Stilger              25,000                    25,000              --
Marc R. VanNess              25,000                    25,000              --
Charles M. Wheet             15,000                    15,000              --
Richard Clinton              20,000                    20,000              --
Yoram Cohen                  18,000                    18,000
Dennis Cohen                  5,000                    5,000               --
Karolin Dadasahhakimi        75,000                    75,000              --
Financial Processing                                                       --
Institutions, Inc.           50,000                    50,000
Ian Garrun                    5,000                    5,000               --
Barry Halperin               125,000                  125,000              --
Valerie Koff                  5,000                    5,000               --
Sanford I. Litchman                                                        --
Revocable Living Trust       50,000                    50,000
Robert H. Mandelbaum          2,500                    2,500               --
Randy and Luz Marks          50,000                    50,000              --
Martin Marks                 100,000                  100,000              --
Arnold L. Rosen              464,000                  464,000              --
Terence P. Scheckler          5,000                    5,000               --
William Solfisburg           451,034                   50,000           401,034
W.R. Smith Profit Trust      50,000                    50,000              --
Allen Yasmeh                 57,000                    57,000              --
Jeffrey Zwiebel              235,000                  235,000              --
David Schevel                 3,000                    3,000               --
Mervin Herson                 3,000                    3,000               --
Edward Haggerty               6,250                    6,250
Harold E. Hamburg Trust      35,000                    10,000            25,000
William Brennen              10,000                    10,000
Pamela Buckley               10,000                    10,000
F.J. Burroughs               14,000                    14,000
Joyce Marshall                5,000                    5,000

<PAGE>

William McBeath              50,000                    50,000
Charles Merlis               20,000                    20,000
Marvin Oishi                 10,000                    10,000
Johnny Smith                 10,000                    10,000
Thomas Snelgowski            20,000                    20,000
Catherine Mead                1,000                    1,000
John Cassara                 15,000     10,000         25,000
Richard Glasgow              20,000     20,000         40,000
Albert Milstein              35,112                    13,551            21,561
Melvin Liener                15,625                    15,625
Darren Marks                 15,625                    15,625
Jim Caprio                   15,625                    15,625
Don Marks                    15,625                    15,625
Moviebar Co.                 260,750                   50,000           210,750
Jack Levit                   275,000                   50,000           225,000
Fernando DeMarquet           10,000                    10,000              --
Yetta Levit                  17,000                    17,000
Howard Lefkowitz                        1,125          1,125               --
Gerald Mendelovitz                      375             375                --
Marcus G. Bebee                         3,125          3,125               --
Peter E. Robbins                        3,125          3,125               --
Herman and                                                                 --
Marlena Goldblatt                       1562.50       1562.50
Gabriel Herman                2,250     1562.50       1562.50            2,250
Jeff Kontir                             1562.50       1562.50              --
Thomas
Oelschliger                   8,594     1562.50       1562.50            8,594
Max Strauss                   9,344     1562.50       1562.50            9,344
David Welch                             3,125          3,125               --
Keith Cooper                 18,125     1,875          1,875             18,125
Bernard Etra                            750             750                --
Allen Franco                            750             750                --
George Frost                            1,875          1,875               --
Peter Joseph                 36,250     3,750          3,750             36,250
Richard Kandel                 817      1,875          1,875              817
Kandal & Son, Inc.P.S.P.
                               817      1,875          1,875              817
Werteim  &  Co.Retirement                                                  --
Plan,FBO RonaldLeibman

                                        1,875          1,875
Wayne Katz                              750             750                --
Ronald Liebmann                         63,125         63,125              --
David McCooey                           3,750          3,750               --
Albert Milstein                         1,875          1,875               --

<PAGE>

Robert Rosenberg             17,043     1,875          1,875             17,043
Leonard Schoen                          3,750          3,750               --
James  Simanton,Revocable               7,500          7,500               --
Trust
Thomas, Thomas,Armstrong &              3,000          3,000               --
Niesen Retirement
Plan, FBO Charles
E. Thomas Jr
SRK Associates                          1,875          1,875               --

Dennis Wallach                          1,125          1,125               --
Dr. Lennart C.                          2,025          2,025               --
Belok
Dr. Lennart C.                          1,275          1,275               --
Belok MD PC
Sidney, Bors                            1,875          1,875               --
Jean Cheng                              3,250          3,250               --
                                                                           --
Leon Ladd                               50,000         50,000              --
Investor
RelationsInternational       12,500     12,500         25,000              --
Michael Carey                 4,510        450
                                                450                4,510
Baritex, Inc.                50,000                    50,000              --
Small Business               50,000                    50,000              --
   Brokers, Inc.
Luge Financial               50,000                    50,000              --
   Corporation
E.B. Lyon IRA                37,500                    37,500
SRG & Associates             12,500                    12,500

Instacall -
Robert Herbol                300,000                  100,000         200,000
Texas CapitalSecurities, Inc. 25,000      12,500       37,500
Harbor Financial, Inc.                    29,250 (2)   29,250 (2)
Thomas Renna                  18,000       8,250 (3)   26,250 (3)
1st Discount Brokerage, Inc.              25,000       25,000
SMP Financial Consultants    50,000       50,000
RJJ Capital Consultants      20,000                    20,000
Wimbledon Investments        65,000       65,000
Continental Capital
& Equity Corporation        120,000                   120,000
<PAGE>

(1) Amount  represents less than 10% of the Company's  common stock,  except for
William  Solfisburg,  who will own 4.2% of the Company's common stock after this
offering.

(2) Texas Capital  Securities,  Inc.  assigned  29,250 of its Warrants to this
person.

(3) Texas  Capital  Securities,  Inc.  assigned  8,250 of its Warrants to this
person.

         Manner  of Sale.  The  shares of Common  Stock  owned,  or which may be
acquired,  by the Selling  Shareholders may be offered and sold by means of this
Prospectus from time to time as market conditions permit in the over-the-counter
market,  or otherwise,  at prices and terms then prevailing or at prices related
to the then-current  market price, or in negotiated  transactions.  These shares
may be sold by one or more of the following methods,  without limitation:  (a) a
block  trade in which a broker or dealer so  engaged  will  attempt  to sell the
shares as agent but may  position and resell a portion of the block as principal
to facilitate the transaction;  (b) purchases by a broker or dealer as principal
and resale by such broker or dealer for its account pursuant to this Prospectus;
(c)  ordinary  brokerage  transactions  and  transactions  in which  the  broker
solicits  purchasers;  and (d)  face-to-face  transactions  between  sellers and
purchasers  without a  broker/dealer.  In  effecting  sales,  brokers or dealers
engaged by the Selling  Shareholders may arrange for other brokers or dealers to
participate.  Such brokers or dealers may receive  commissions or discounts from
Selling Shareholders in amounts to be negotiated.

         The Selling  Shareholders and any  broker/dealers who act in connection
with the sale of the Shares hereunder may be deemed to be "underwriters"  within
the meaning of  ss.2(11) of the  Securities  Acts of 1933,  and any  commissions
received  by them and profit on any resale of the Shares as  principal  might be
deemed to be underwriting  discounts and  commissions  under the Securities Act.
The Company has agreed to indemnify the Selling  Shareholders and any securities
broker/dealers who may be deemed to be underwriters against certain liabilities,
including liabilities under the Securities Act as underwriters or otherwise.

         The Company has  advised  the  Selling  Shareholders  that they and any
securities   broker/dealers  or  others  who  may  be  deemed  to  be  statutory
underwriters will be subject to the Prospectus  delivery  requirements under the
Securities  Act of 1933.  The Company has also advised each Selling  Shareholder
that in the  event  of a  "distribution"  of the  shares  owned  by the  Selling
Shareholder,  such Selling  Shareholder,  any "affiliated  purchasers",  and any
broker/dealer  or other  person who  participates  in such  distribution  may be
subject to Rule 102 under the Securities Exchange Act of 1934 ("1934 Act") until
their  participation  in that  distribution is completed.  A  "distribution"  is
defined in Rule 102 as an offering of  securities  "that is  distinguished  from
ordinary trading  transactions by the magnitude of the offering and the presence
of special  selling efforts and selling  methods".  The Company has also advised
the  Selling  Shareholders  that  Rule 101  under  the 1934  Act  prohibits  any
"stabilizing bid" or "stabilizing  purchase" for the purpose of pegging,  fixing
or stabilizing the price of the Common Stock in connection with this offering.


<PAGE>

         Rule 102 makes it  unlawful  for any person who is  participating  in a
distribution to bid for or purchase stock of the same class as is the subject of
the  distribution.  If Rule  102  applies  to the  offer  and sale of any of the
Shares,   then   participating   broker/dealers   will  be  obligated  to  cease
market-making  activities nine business days prior to their participation in the
offer and sale of such Shares and may not  recommence  market-making  activities
until their  participation in the  distribution has been completed.  If Rule 102
applies to one or more of the principal  market-makers  in the Company's  Common
Stock, the market price of such stock could be adversely affected.

                          DESCRIPTION OF SECURITIES

Common Stock

         The Company is authorized to issue  40,000,000  shares of Common Stock,
(the "Common Stock"). Holders of Common Stock are each entitled to cast one vote
for  each  share  held of  record  on all  matters  presented  to  shareholders.
Cumulative  voting is not  allowed;  hence,  the  holders of a  majority  of the
outstanding Common Stock can elect all directors.

         Holders of Common Stock are  entitled to receive such  dividends as may
be declared by the Board of Directors  out of funds legally  available  therefor
and, in the event of liquidation,  to share pro rata in any  distribution of the
Company's  assets after  payment of  liabilities.  The board is not obligated to
declare a dividend.  It is not  anticipated  that  dividends will be paid in the
foreseeable future.

         Holders of Common Stock do not have  preemptive  rights to subscribe to
additional shares if issued by the Company. There are no conversion, redemption,
sinking  fund or  similar  provisions  regarding  the Common  Stock.  All of the
outstanding  shares of Common Stock are fully paid and  nonassessable and all of
the shares of Common  Stock  offered as a  component  of the Units will be, upon
issuance, fully paid and non-assessable.

Preferred Stock

         The Company is  authorized  to issue up to 300,000  shares of Preferred
Stock.  The  Company's  Articles  of  Incorporation  provide  that the  Board of
Directors  has the  authority  to divide the  Preferred  Stock into  series and,
within the limitations  provided by Delaware  statute,  to fix by resolution the
voting power,  designations,  preferences,  and relative participation,  special
rights, and the qualifications, limitations or restrictions of the shares of any
series so established.  As the Board of Directors has authority to establish the
terms of, and to issue, the Preferred Stock without  shareholder  approval,  the
Preferred Stock could be issued to defend against any attempted  takeover of the
Company.

         In April 1995, the Company's directors established the Company's Series
A Preferred Stock and authorized the issuance of up to 50,000 shares of Series A
Preferred  Stock as part of this series.  Each share of Series A Preferred Stock
is  entitled  to a  dividend  at the rate of $1.60  per  share  when,  as and if

<PAGE>

declared  by the  Board of  Directors  out of funds  legally  available  for the
payment of  dividends.  Dividends  not declared by the Board of Directors do not
cumulate.  Upon any liquidation or dissolution of the Company,  each outstanding
share of Series A Preferred  Stock is entitled to  distribution of $20 per share
prior to any  distribution  to the holders of the Company's  Common Stock.  Each
share of Series A  Preferred  Stock is entitled to one vote per share and at any
time  after  July 1, 1999 is  convertible  into 0.2 of a share of the  Company's
Common Stock.  Subsequent to the  establishment of the Series A Preferred Stock,
the Company issued 25,250 shares of Series A Preferred Stock to eight persons in
consideration for the termination of their franchises with the Company.

         In March 1996, the Company's directors established the Company's Series
B Preferred  Stock and authorized the issuance of up to 100,000 shares of Series
B Preferred Stock as part of this series. Each share of Series B Preferred Stock
is  entitled  to a  dividend  at the rate of $0.15  per  share  when,  as and if
declared  by the  Board of  Directors  out of funds  legally  available  for the
payment of  dividends.  Dividends  not declared by the Board of Directors do not
cumulate.  Upon any liquidation or dissolution of the Company,  each outstanding
share of Series B Preferred Stock is entitled to distribution of $1.00 per share
prior to any  distribution  to the holders of the Company's  Common Stock.  Each
share of  Series B  Preferred  Stock is  entitled  to one vote per  share and is
convertible  into 0.25 of a share of the Company's  Common Stock.  In March 1996
the  Company  issued  25,000  shares of its Series B  Preferred  Stock to Melvin
Leiner, Donald Marks, James Caprio and Darren Marks (100,000 shares in total) as
repayment of loans,  each in the amount of $25,000,  made by such persons to the
Company.

                                Transfer Agent

         Corporate Stock Transfer,  Inc., of Denver,  Colorado,  is the transfer
agent for the Company's Common Stock.

                                   EXPERTS

         The  consolidated  balance sheet of the Company as of June 30, l998 and
the  Statements of Operations,  Shareholders'  Equity and Cash Flows for the two
years then ended have been included herein in reliance on the report of Ehrhardt
Keefe Steiner & Hottman P.C., independent accountants, given on the authority of
that firm as experts in accounting and auditing.

                                  LITIGATION

         The  Company's  California  franchisee  has  demanded  that the Company
purchase  this  franchise,   as  well  as  the  franchisee's   ACDC  units,  for
approximately $1,000,000. The Company is currently negotiating the terms of this
acquisition with the franchisee.  If the Company and the franchisee cannot reach
an  agreement  as to  the  acquisition  of the  franchise,  the  franchisee  has
indicated  that it intends to file suit  against  the  Company for breach of the
franchise agreement. As of June 30, 1998 the Company had a liability of $724,000
for franchise and equipment deposits paid by this franchisee to the Company.

  
<PAGE>


       Other than the foregoing,  there are no legal  proceedings to which the
Company is a party or to which its  properties  are subject,  other than routine
litigation  incident to the Company's  business which is covered by insurance or
which would not have a material adverse effect on the Company.

                               INDEMNIFICATION

         The Delaware  General  Corporation Law authorize  indemnification  of a
director, officer, employee or agent of the Company against expenses incurred by
him in  connection  with any action,  suit, or proceeding to which he is named a
party by reason of his  having  acted or served  in such  capacity,  except  for
liabilities  arising from his own misconduct or negligence in performance of his
duty. In addition, even a director,  officer,  employee, or agent of the Company
who was found liable for misconduct or negligence in the performance of his duty
may obtain  such  indemnification  if, in view of all the  circumstances  in the
case, a court of  competent  jurisdiction  determines  such person is fairly and
reasonably   entitled  to   indemnification.   Insofar  as  indemnification  for
liabilities  arising  under  the  Securities  Act of 1933  may be  permitted  to
directors,  officers,  or  persons  controlling  the  Company  pursuant  to  the
foregoing  provisions,  the Company has been informed that in the opinion of the
Securities  and Exchange  Commission,  such  indemnification  is against  public
policy as expressed in the Act and is therefore unenforceable.



<PAGE>


Table of Contents


                                                                         Page

Independent Auditors' Report.............................................F - 1

Financial Statements

   Consolidated Balance Sheet............................................F - 2

   Consolidated Statements of Operations.................................F - 3

   Consolidated Statements of Stockholders' Equity.......................F - 4

   Consolidated Statements of Cash Flows.................................F - 5

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

<PAGE>




F - 1



                           INDEPENDENT AUDITORS' REPORT



Board of Directors and Stockholders
SIMS Communications, Inc. and Subsidiaries
Irvine, California


We  have  audited  the   accompanying   consolidated   balance   sheet  of  SIMS
Communications,  Inc.  and  Subsidiaries  as of June 30,  1998  and the  related
consolidated statements of operations,  stockholders' equity, and cash flows for
the years  ended June 30,  1998 and 1997.  These  financial  statements  are the
responsibility of the Company's management.  Our responsibility is to express an
opinion on these financial statements based on our audits.

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

In our opinion, the consolidated  financial statements referred to above present
fairly, in all material respects, the financial position of SIMS Communications,
Inc. and  Subsidiaries  as of June 30, 1998 and the results of their  operations
and cash flows for the years  ended June 30,  1998 and 1997 in  conformity  with
generally accepted accounting principles.

The  accompanying  financial  statements  have been  prepared  assuming that the
Company  will  continue  as a  going  concern.  As  discussed  in  Note 2 to the
financial statements,  the Company has suffered recurring losses from operations
which raise  substantial doubt about its ability to continue as a going concern.
Management's  plan in regard to these  matters is also  described in Note 2. The
financial  statements do not include any adjustments  that might result from the
outcome of this uncertainty.


                                           Ehrhardt Keefe Steiner & Hottman PC
September 15, 1998
Denver, Colorado



<PAGE>


                    SIMS COMMUNICATIONS, INC. AND SUBSIDIARIES


                See notes to consolidated financial statements.

                                     
                            Consolidated Balance Sheet
                                   June 30, 1998

                                        Assets
Current assets
   Cash and cash equivalents (Note 7)                               $  263,878
   Accounts receivables, less allowance for doubtful
    accounts of $27,584                                                128,984
   Inventories                                                         452,473
   Prepaid expenses                                                     92,667
   Notes receivable, current portion (Notes 5 and 10)                  150,000
                                                                    ----------
         Total current assets                                        1,088,002

Property and equipment (Note 4)                                      2,589,447
                                                                    ----------
Other assets
   Notes receivable less allowance of $400,902                         445,360
(Notes 5 and 10)
   Patents, net of accumulated amortization of                         401,121
$115,624
   Goodwill (Note 3)                                                   952,069
   Other                                                               126,752
                                                                    ----------
         Total other assets                                          1,925,302
                                                                    ----------
Total assets                                                        $5,602,751
                                                                    ==========
                         Liabilities and Stockholders' Equity
Current liabilities
   Accounts payable                                                 $  543,058
   Accrued expenses                                                    599,770
   Bank line of credit (Note 7)                                        250,000
   Franchise deposits                                                  827,661
   Current maturities of long-term debt (Note 8)                       547,794
   Current obligations under capital lease (Note 8)                     16,732
                                                                      ---------
         Total current liabilities                                   2,785,015

Long-term liabilities
   Long-term debt (Note 8)                                             500,853
   Obligations under capital lease (Note 8)                             86,674 
                                                                     ---------- 
         Total long-term liabilities                                   587,527
                                                                     ----------
Total liabilities                                                    3,372,542
                                                                     ----------
Commitments and contingencies (Notes 5 and 16)

Stockholders'  equity (Notes 11, 12 and 13) Preferred stock,  Series A, B and C,
   $.001 par
    value, 300,000 shares authorized - 50,000 (A),
    100,000 (B), 500 (C) and 149,500 (Undesignated),
    125,250 shares issued and outstanding                                   125
    (liquidation preference of $605,000)
   Common stock $.0001 par value 40,000,000 shares
    authorized, 7,959,033 issued and outstanding                            796
   Additional paid in capital                                        22,646,232
   Accumulated deficit                                              (20,416,944)
                                                                     -----------
         Total stockholders' equity                                   2,230,209
                                                                      ----------
Total liabilities and stockholders' equity                           $5,602,751
                                                                      =========

<PAGE>


                       Consolidated Statements of Operations
                                                            Year Ended June 30,
                                                          1998            1997
Revenue (Note 15)
   Telecommunications                               $   446,524      $ 2,923,532
   Financial processing                                 147,533               -
   Automated Movie Rentals                              371,416               -
   Medical transaction processing                        15,478               -
                                                       --------       ----------
        Total revenue                                   980,951        2,923,532
                                                       --------       ----------
Cost of goods sold                                      523,479        1,608,572
                                                       --------       ----------
Gross profit                                            457,472        1,314,960
                                                       --------       ----------
Operating expenses
   General and administrative                         2,718,064        1,774,162
   Depreciation and amortization                        474,372          247,990
   Selling expenses                                   1,058,252        1,128,395
   Equity based compensation                          1,687,422        1,431,741
   Loss on termination of licensing and equipment
   agreement (Note 6)                                   764,000               -
   Research and development                              32,760           34,686
   Litigation settlement (Note 16)                      444,300               -
                                                       --------       ----------
        Total expenses                                7,179,170        4,616,974
                                                       --------       ----------
Operating loss                                      (6,721,698)      (3,302,014)

Other income (expense)
   Interest expense                                   (158,263)         (71,537)
   Interest income                                       28,424          30,924
   Loss on write down of investment (Note 6)            (200,000)              -
   Other                                                   5,526               -
                                                       ---------      ----------
                                                      (324,313)         (40,613)
                                                       ---------      ----------
Loss from continuing operations before income taxes  7,046,011)      (3,342,627)

Income tax benefit (Note 9)                                  -                -
                                                       ---------      ----------
Net loss from continuing operations                 (7,046,011)      (3,342,627)
                                                       ---------      ----------
Net (loss) income from discontinued  operations    $   (63,737)     $   553,731
(Note 18)                                              =========      ==========

Net loss                                            (7,109,748)     $(2,788,896)
                                                    ==========      =========== 
Basic  and  diluted  loss per share  from  continuing $  (1.78)     $     (2.00)
operations                                          ===========     ============
Basic and diluted (loss) earnings per share from
 discontinued operations (Note 18)                 $      (.01)     $       .33
                                                       ========     ============
Basic and diluted net loss per share               $     (1.79)     $     (1.67)
                                                  =============     ============
Weighted average common shares  outstanding
(Notes 12  and 13)                                    3,961,389        1,666,823
                                                    ===========     ============
<PAGE>


                         SIMS COMMUNICATIONS, INC. AND SUBSIDIARIES


                      See notes to consolidated financial statements.

                                           F - 5
                          Consolidated Statements of Stockholders' Equity
                             Years Ended June 30, 1998 and 1997
<TABLE>

<S>                                    <C>             <C>           <C>           <C>               <C>        <C>
                                   Subscribed Preferred Stock        Preferred Stock              Preferred Stock 
                                    Subscribed                          Series A                       Series B                    
                                   Additional
                                    Number of                       Number of                    Number of          
                                    Shares           Amount         Shares        Amount           Shares     Amount


Balance - June 30, 1996                125,250   $ 365,000              -       $      -              -    $      -   

Issuance of common  stock issued
for  investments  (Notes 6                 -           -                -              -              -           -      
Issuance of common stock fo
 services (Note 12)                        -           -                -              -              -           -         

Issuance of common  stock for cash
  (ranging  from $2.00 to
 $2.80 per share),  net of $198,160 
in offering costs (Note                    -           -                -               -             -           -           
 12)

Issuance of common stock upon
  conversion  of notes payable
 (ranging from $2.00 to $2.80 per
 share) (Note 12)                          -           -                -               -             -           -            

Imputed  value  of stock  options 
 granted  for  consulting                  -           -                -               -             -           -            

Subscribed preferred stock issued       (125,250)   (365,000)        25,250            25         100,000        100        

Net loss                                  -           -                -                -            -            -       

Balance June 30, 1997                     -           -              25,250            25         100,000        100  

Issuance of common stock in
 connection  with  acquisitions           -           -                 -               -           -             - 
(Notes 3 and 12)

Issuance  of common  stock for cash 
 (ranging  from $.80 to
 $1.00) net offering costs of
$633,421 (Note 12)                        -           -                 -               -           -             - 

Issuance of common stock for
  conversion  of notes  payable
 to investors in  connection  with
 a Regulation S offering,                 -           -                 -                -           -           -   
 net of expenses of $162,956
(Note 12)

Issuance of common stock in 
exchange for services (Note 12)           -           -                 -                -           -           -   

Unearned compensation expense 
(Note 12)                                 -           -                 -                -           -           -        

Issuance of common stock upon 
conversion  of notes payable              -           -                 -                -           -           -      
and interest (Note 12)

Issuance of common stock upon 
 conversion of former officer
 notes payable and accrued
salaries (Note 12)                        -           -                 -                -           -           -     

Issuance  of common  stock in
  connection  with  litigation            -           -                 -                -           -           -      
settlement (Notes 12 and 16)

Imputed  value of  stock  option 
 grants  in  exchange  for
 consulting and other services
 (Note 12)                                 -           -                -                 -           -           -          

Net loss                                   -           -                -                 -           -           -         
                                        -------     --------          --------         --------    -------      ------
Balance - June 30, 1998                    -       $   -              25,250         $   25       100,000      $ 100    
                                        =======   ==========          =======        ==========   ========     ======= 
             

</TABLE>


<PAGE>


                          Consolidated Statements of Stockholders' Equity
                             Years Ended June 30, 1998 and 1997
<TABLE>
 <S>                                                         <C>          <C>             <C>               <C>              <C>    
                                      

                                                          Number of                   Paid-in          Accumulated
                                                            Shares      Amount         Capital            Deficit         Total


Balance - June 30, 1996                                   1,007,477   $     101      $11,061,037         $(10,518,300)    $907,838

Issuance   of   common    stock   issued   for              268,539          27          799,973               -           800,000
investments (Notes 6 and 12)

Issuance of common  stock for  services  (Note              223,125          22          927,956               -           927,978
12)

Issuance  of common  stock  for cash  (ranging
 from $2.00 to $2.80                                        573,143          57        1,176,583               -         1,176,640
 per  share),  net  of  $198,160  in  offering
 costs (Note 12)

Issuance of common  stock upon  conversion  of
 notes payable                                               48,215           5          124,995               -          125,000
 (ranging  from  $2.00  to  $2.80  per  share)
 (Note 12)

Imputed  value of stock  options  granted  for                    -           -          679,264               -         679,264
consulting services and
 interest (Note 12)

Subscribed preferred stock issued                                 -           -           364,875              -           -

Net loss                                                          -           -              -           (2,788,896)   (2,788,896)
                                                            --------        ----         ---------       -----------   -----------  
Balance June 30, 1997                                      2,120,499         212       15,134,683       (13,307,196     1,827,824

Issuance of common  stock in  connection  with               692,350          69        1,327,691              -        1,327,760
acquisitions (Notes 3
 and 12)

Issuance  of common  stock  for cash  (ranging
 from $.80 to $1.00)                                       2,246,500         225        1,475,855              -        1,476,080
 net offering costs of $633,421 (Note 12)

Issuance  of common  stock for  conversion  of
 notes payable to                                            846,827          85          936,959              -          937,044
 investors in  connection  with a Regulation S
 offering, net of
expenses of $162,956 (Note 12)

Issuance  of  common  stock  in  exchange  for             1,015,749         102        1,696,134              -        1,696,236
services (Note 12)

Unearned compensation expense (Note 12)                          -           -          (136,475)              -        (136,475)

Issuance of common  stock upon  conversion  of               506,791          50         707,039               -         707,089
notes payable and
interest (Note 12)

Issuance of common  stock upon  conversion  of
 former officer notes                                        230,317          23         419,174               -         419,197
 payable and accrued salaries (Note 12)

Issuance of common  stock in  connection  with               300,000          30         309,270               -         309,300
litigation settlement
(Notes 12 and 16)

Imputed   value  of  stock  option  grants  in
 exchange for consulting                                        -             -          775,902               -         775,902
 and other services (Note 12)

Net loss                                                        -             -             -             (7,109,748)  7,109,748)
                                                            ---------       ----      -----------         -----------   ---------
Balance - June 30, 1998                                    7,959,033   $     796      $22,646,232       $(20,416,944) $2,230,209
                                                            =========       =====     ===========        ============ ===========   
</TABLE>


<PAGE>


                           Consolidated Statements of Cash Flows

                                                           Year Ended June 30,

                                                         1998             1997
Cash flows from operating activities
   Net loss                                         $(7,109,748)    $(2,788,896)
   Adjustments to reconcile net loss to net cash    -----------      ----------
    used in operating activities
     Depreciation                                      400,552         206,186
     Amortization                                       73,820          41,804
     Imputed value of options granted for services     127,661         503,763
      and interest
     Sales settled by receipt of notes receivable          -         (430,000)
     Impairment of investment                           200,000              -
     Termination of licensing and equipment agreement   764,000              -
     Provision for uncollectible notes receivable       400,902              -
     Officer salaries converted to equity               419,197              -
     Sales settled by receipt of investments                 -       (1,310,000)
     Stock issued for services and in connection
      with litigation settlement                      1,869,061         927,978
     Changes in assets and liabilities
       Accounts and other receivables                   167,832         116,737
       Inventories                                       51,574         662,655
       Prepaid expenses                                 113,193          28,545
       Accounts payable                                (147,349)        104,909
       Accrued expenses                                (103,339)         (5,002)
       Franchise deposits and customer deposits         (11,493)         88,391
                                                      ----------      ----------
                                                      4,325,611         935,966
                                                      ----------      ----------
         Net cash used in operating activities       (2,784,137)     (1,852,930)
                                                      ----------      ----------
Cash flows from investing activities
   (Advances) repayments on notes receivable, net       (54,372)          7,110
   Acquisition costs paid, net of cash acquired        (424,095)             -
   Capital expenditures                                 (34,122)        (13,522)
   Change in other assets                                62,664         (24,855)
                                                        -------         --------
         Net cash used in investing activities         (449,925)        (31,267)
                                                       ---------        --------
Cash flows from financing activities
   Proceeds from issuance of long-term debt             805,459         797,500
   (Payments on) proceeds from officer advances         (65,809)         50,209
   Payments under capital lease obligation              (10,200)         (7,565)
   Proceeds from issuance of common stock, net         2,820,781       1,176,640
   Payments on long-term debt                          (348,191)       (159,229)
                                                       ---------       ---------
         Net cash provided by financing activities     3,202,040       1,857,555
                                                       ---------       ---------
Net decrease in cash                                    (32,022)        (26,642)

Cash and cash equivalents at beginning of year          295,900         322,542
                                                        -------         --------
Cash and cash equivalents at end of year             $  263,878      $  295,900
                                                       ========         =======
Supplemental disclosure of cash flows information
     Cash paid during the year for interest was $169,345 (1998)
 and $70,710 (1997).
Non-cash investing and financing activities (Note 17)


<PAGE>


                         SIMS COMMUNICATIONS, INC. AND SUBSIDIARIES

                         Notes to Consolidated Financial Statements


                                           F - 31

Note 1 - Organization and Significant Accounting Policies

Organization

Sims  Communications,  Inc. and  Subsidiaries  was  incorporated in the state of
Delaware on August 15, 1991. The Company was initially formed as a communication
equipment company and had expanded its focus to include  telecommunications  and
cellular and prepaid telephone activities.  Currently,  the Company provides low
cost, turnkey point-of-sale (POS) transaction  automation solutions to retailers
and pharmacies.  These solutions include a comprehensive  network of transaction
processing  applications using its patented,  intelligent DebitLink POS terminal
with custom  software.  Functions  include  processing  on-line  credit card and
medical  reimbursement  approvals,  processing  automated home medical equipment
product  orders  and  payments,  processing  credit  card  and ATM  charges  and
payments, cash-backs, activating prepaid phone cards, obtaining prepaid cellular
phone  service,  securing  check  guarantees  and  authorizations  and  tracking
customer affinity programs.  Additionally,  the Company rents videocassettes and
cellular phones through automated dispensing units.

Principles of Consolidation

The   consolidated   financial   statements   include   the   accounts  of  SIMS
COMMUNICATIONS,  Inc. and its wholly owned  subsidiaries  SIMS  Franchise  Group
Inc., Cellex  Communications Inc. (Note 18), SIMS Communications  International,
Inc., Link  International  Technologies,  Inc. and its wholly owned subsidiaries
New View Technologies,  Inc., Link Dispensing Systems, Inc., and Southeast Phone
Card, Inc.;  additionally,  the consolidated  financial  statements  include the
accounts of One Medical  Service,  Inc.,  Moviebar Company USA, Inc., and Vector
Vision,   Inc.  since  their  respective  date  of  acquisition  (Note  3).  All
significant  intercompany  balances and  transactions  have been  eliminated  in
consolidation.

Use of Estimates

The preparation of financial  statements in conformity  with generally  accepted
accounting   principles  requires  management  to  make  certain  estimates  and
assumptions  that affect the reported  amounts of assets and  liabilities at the
date of the  financial  statements  and the  reported  amounts of  revenues  and
expenses during the reporting  period.  Management  believes that such estimates
have been based on reasonable  assumptions and that such estimates are adequate,
however, actual results could differ from those estimates.

Cash and Cash Equivalents

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


<PAGE>



Note 1 - Organization and Significant Accounting Policies (continued)

Inventories

Inventories  consist  primarily  of  automated  video  dispensing  units,  video
cassette players,  movie video cassettes,  debitlink data transmission units and
other associated miscellaneous parts and equipment and are recorded at the lower
of cost or market determined by the first-in, first-out method.

Property and Equipment

Property and equipment are recorded at cost and depreciated over their estimated
useful lives (5 to 7 years),  utilizing the straight-line  method.  Expenditures
for maintenance and repairs are charged to expense as incurred.

Organization Costs

Organization  costs  have been  capitalized  and are being  amortized  using the
straight-line method over a five year period.

Net loss Per Common Share

Net loss per common  share is based upon the weighted  average  number of common
shares outstanding during each of the respective periods. Common shares issuable
upon the exercise of convertible notes and common stock options and warrants are
excluded  from the  weighted  average  number of shares  since  their  effect is
anti-dilutive.

Advertising

Advertising costs are expensed as incurred.

Goodwill

The excess of the cost of the net tangible and identifiable intangible assets of
acquired businesses is stated at cost and will be amortized over seven years.

Patents

Patent  costs  are  those  costs  related  to filing  for  patents  and the cost
allocated  to the  patents  based upon  business  acquisitions.  These costs are
amortized  on a  straight-line  basis over the  estimated  useful  live of seven
years.


<PAGE>



Note 1 - Organization and Significant Accounting Policies (continued)

Fair Value of Financial Instruments

The  carrying  amounts  of  financial   instruments   including  cash  and  cash
equivalents,  receivables,  accounts payable, and accrued expenses  approximated
fair value as of June 30, 1998 because of the relatively short maturity of these
instruments.

The carrying  amounts of debt issued  approximate  fair value  because  interest
rates on these instruments  approximate  market interest rates and a significant
portion are classified as current maturities.

Income Taxes

The Company uses the asset and liability  method of accounting for income taxes.
Under the asset and liability  method,  deferred tax assets and  liabilities are
recognized for the future tax consequences  attributable to differences  between
the financial  statement carrying amounts of existing assets and liabilities and
their  respective tax basis.  Deferred tax assets and  liabilities  are measured
using  enacted tax rates  expected  to be  recovered  or settled.  The effect on
deferred tax assets and  liabilities  of a change in tax rates is  recognized in
income in the period that includes the enactment date.

Impairment of Long-Lived Assets

The Company  follows the Statement of Financial  Accounting  Standards (SFAS No.
121) "Accounting for the Impairment of Long-Lived  Assets." Under the provisions
of this statement, the Company has evaluated its long-lived assets for financial
impairment  and  will  continue  to  evaluate  them  as  events  or  changes  in
circumstances  indicate that the carrying amount of such assets may not be fully
recoverable.

The Company evaluates the  recoverability of long-lived assets not held for sale
by  measuring  the  carrying   amount  of  the  assets   against  the  estimated
undiscounted  cash  flows  associated  with them.  At the time such  evaluations
indicate that the future  undiscounted  cash flows of certain  long-lived assets
are not sufficient to recover the carrying value of such assets,  the assets are
adjusted to their fair values.

Revenue Recognition

Telecommunications revenue is recognized upon the sale and delivery of equipment
upon  activation  of a customers  cellular  account,  upon the  completion  of a
customer  phone rental and upon  delivery of prepaid  calling  cards.  Automated
movie rental  revenues are recognized at the time of rental and upon delivery of
prepaid calling cards. Financial and medical transaction processing revenues are
recognized at the time of transaction.


<PAGE>



Note 1 - Organization and Significant Accounting Policies (continued)

Research and Development

Research  and  development  costs  consist  primarily  of costs  related  to the
conceptual  formation,  design,  tooling and  development  of prototypes and are
expensed as incurred.

Concentration of Credit Risks

Financial  instruments that potentially  subject the Company to concentration of
credit risk consist primarily of temporary cash investments and receivables. The
Company  places  its  cash  investments  with  high  credit  quality   financial
institutions  and,  by policy  limits the amount of credit  exposure  to any one
institution.  The  Company  grants  credit to hotels that the Company has placed
automated  movie  rental  units in. The  Company  periodically  performs  credit
analysis  and  monitors  the  financial  condition  of its  clients  in order to
minimize  credit  risk.  Additionally,  the  Company  attempts to limit its note
receivable credit risk by maintaining sufficient collateral.

Reclassifications

Certain   accounts  in  the  June  30,  1997  financial   statements  have  been
reclassified to conform to the June 30, 1998 presentation.

Note 2 - Continued Operations

The  accompanying  financial  statements  have been  prepared on a going concern
basis  which   contemplates   the  realization  of  assets  and  liquidation  of
liabilities in the ordinary  course of business.  During the year ended June 30,
1998, the Company continued to suffer recurring losses from operations in excess
of $7,100,000, resulting in an accumulated deficit of approximately $20,400,000.
However, in July 1998, the Company raised approximately  $1,170,000 in a private
placement  offering and is continuing  to look for  additional  equity  capital.
Additionally, the Company is in the process of negotiating the sale or placement
of a significant number of the point-of-sale  transaction  automation processing
units with retailers and pharmacies located throughout  California,  Florida and
New York. As of September 15, 1998, the Company has placed or sold approximately
600 of these  units.  The Company  also plans to place a  significant  number of
rental  cellular  telephone  dispensing  units  into  hotels  where the  Company
currently  has the automated  videocassette  dispensing  units.  There can be no
assurances  that the Company will be successful in obtaining  additional  equity
financing  or be  able to  generate  significant  profits  from  the  operations
described  above.  The  consolidated  financial  statements  do not  include any
adjustments  that might be  necessary  if the Company is unable to continue as a
going concern.


<PAGE>



Note 3 - Acquisitions

Moviebar Company USA, Inc. and Vector Vision, Inc.

In January 1998, the Company  purchased the net assets of Moviebar  Company USA,
Inc.  and all of the  outstanding  stock  of  Vector  Vision,  Inc.,  valued  at
$1,126,714  in  exchange  for  550,000  shares of the  Company's  common  stock.
Additionally,  the  Company  issued  options to  purchase  25,000  shares of the
Company's  common  stock at $ 2.20 per  share  (Notes 11 and 12).  The  acquired
Companies rent motion picture video cassettes through automated dispensing units
that are located in hotels  throughout the United States.  The  acquisition  was
accounted for under the purchase method of accounting.

The  aggregate  purchase  price has been  allocated to the net assets  purchased
based on the fair market values at the date of acquisition, as follows:

      Cash                                                $   6,518
      Accounts receivable                                    90,928
      Inventory                                              24,500
      Property and equipment                              1,127,768
      Accounts payable                                     (123,000)

                                                          $1,126,714

The common stock issued in connection  with the  acquisition was recorded at the
market value of the stock at the date of the acquisition of $2.00 per share.

No pro forma  statements of operations  are presented as the effect would not be
material to the Company's operations.

One Medical Services, Inc.

In June 1998, the Company  purchased all of the outstanding stock of One Medical
Services,  Inc.,  ("One  Medical")  valued at $1,067,398 in exchange for 142,350
shares of the  Company's  common  stock and  additional  consideration  detailed
below.  Additionally,  the Company issued options to purchase  187,000 shares of
the  Company's  common  stock at $ 2.00 per share (Notes 11 and 12). The Company
has also  agreed to issue to the former  owners of One  Medical up to  1,485,000
additional  shares of common stock depending on the future operating  results of
One Medical.  One Medical,  has developed,  in conjunction  with the Company,  a
communications  and  transaction  platform  which allows  pharmacies,  insurance
companies,  medical  providers and suppliers to process  transactions  through a
Debit Link terminal for such items as ordering,  medical reimbursement  approval
and payment.  The  acquisition  was accounted  for under the purchase  method of
accounting.


<PAGE>



Note 3 - Acquisitions (continued)

One Medical Services, Inc. (continued)

The  aggregate  purchase  price has been  allocated to the net assets  purchased
based on the fair market values at the date of acquisition, as follows:

      Cash                                               $   13,047
      Fixed Assets                                            2,282
      Contract Values                                       100,000
      Goodwill                                              952,069

                                                         $1,067,398

      Acquisition costs                                  $  443,660
      Promissory note assumed                               182,108
      Fair value of common stock and options issued         441,630

                                                         $1,067,398

The common  stock issued in  connection  was recorded at the market value of the
stock at the date of the acquisition of $1.60 per share.

No pro forma  statements of operations  are presented as the effect would not be
material to the Company's operations.

Note 4 - Property and Equipment

Property and equipment consist of the following:
                                                           June 30,
                                                             1998
Property and equipment
   Vehicles                                              $   20,608
   Furniture and fixtures                                   107,209
   Machinery and equipment                                3,350,437
   Software                                                  52,000
   Less accumulated depreciation                           (940,807)

                                                         $2,589,447



<PAGE>




Note 5 - Notes Receivable

The Company made  advances to and entered into a joint  venture  agreement  with
Commonwealth Group International, Inc. and Frederick C. Sayle. The $150,000 note
receivable  bears  interest  at a rate  of 10% per  annum,  with  principal  and
interest payable by February 1, 1998.  Additionally,  the Company is entitled to
16.7%  of  the  gross  revenues  from   agreements   with   Commonwealth   Group
International,  Inc. which include cable television and cellular  communications
licenses owned by CGI-UKRAINE Ltd and ASWEST,  Commonwealth Group International,
Inc. joint venture partners.

As of June 30,  1997,  the Company had sold  equipment to a customer for a total
sales  price of  $664,000.  During the year ended June 30,  1997,  a company was
contracted  to provide  services  necessary  to get the units  operational,  but
failed to  perform.  As such,  all  amounts  due  related to the sales have been
extended.  The total  amount of  $664,000  is payable  under the terms of a note
receivable  which bears  interest  at 8.5%.  Principal  and  interest is payable
commencing by December 31, 1997 in equal monthly  installments of  approximately
$14,000 through November 30, 2002. No payments have been received as of June 30,
1998. Accordingly, the Company has impaired the outstanding balance to $289,020,
which represents the value of the underlying  assets,  by recording a reserve of
$374,980.

Note 6 - Investments

Smartphone

During  the year ended  June 30,  1997,  the  Company  acquired  a 10%  minority
interest in  Smartphone,  Inc. (a company that sells prepaid  cellular air time)
from  certain  former  officers  and former  directors  of the  Company at their
original  cost basis of  $200,000.  This was effected by the issuance of 100,000
shares of common stock which were valued at $2.00 a share.  As of June 30, 1998,
in  accordance  with the  company's  policy  of  accounting  for  impairment  of
long-lived assets, the entire $200,000 has been impaired.

Cancall

During  the year  ended  June 30,  1997,  the  Company  sold 30 rental  cellular
telephone  dispensing units and 100 telephone debit card dispensers for $810,000
as well as  entering  into a  licensing  agreement  for  $500,000  with  Cancall
Cellular  Communications,  Inc., (Cancall) for a total price of $1,310,000.  The
licensing agreement entitles Cancall the right to market, distribute and operate
the  Company's  products  and  trademarks  on  an  exclusive  basis  within  the
territories  of Canada  and  Europe  and on a  non-exclusive  basis  within  the
territories  of the United  States and Asia.  The exclusive  license  within the
European  territory is subject to certain minimum purchase  commitments the must
be met by  Cancall  over a two  year  period.  In  consideration  for the  above
transaction,  the Company received  1,807,800 shares of Cancall's Class A $ 1.00
par value preferred  stock.  The preferred stock can be converted into 3,013,000
shares of Cancall's common stock at a rate of  $.60(Canadian)  per share after a
one year mandatory holding period. The transaction was valued at the cost of the
underlying goods sold.


<PAGE>



Note 6 - Investments (continued)

Cancall (continued)

During the year ended June 30, 1998,  the Company  terminated  the licensing and
equipment agreement and the equipment was returned to the Company, the preferred
stock was returned to Cancall and a loss provision for $764,000 was provided.

Note 7 - Bank Line of Credit

The Company  maintains a secured  revolving line of credit with a bank for up to
$250,000.  The  balance  at  June  30,  1998  was  approximately  $250,000.  The
line-of-credit is secured by a restricted  certificate of deposit with a balance
at June 30, 1998 of approximately $250,000. The line-of-credit bears interest at
5.77% payable monthly. The line-of-credit expires June 5, 1999.

Note 8 - Notes Payable and Capital Leases
                                                                       June 30,
                                                                         1998
Promissory note payable at 10% interest payable monthly
 commencing September 15,  1995. Balance of principal is
payable in full by September, 1999. As additional
 consideration,  the Company  agrees to pay the note
 holder 13.0% of all profits  received through the
Company's agreements with Commonwealth
 Group International, Inc. (Note 5).                                $  310,348

8.0%  convertible  notes  payable -  individuals,  interest
 payable  quarterly,  principal  due at maturity  dates 
 ranging  from August 1997 to May 1998.  Debt  includes 
 conversion to common stock feature with conversion rates 
ranging from  $1.25 to $2.50 per share. Additionally,
 each note holder  was  issued  options  to  purchase
   shares  of  the Company's stock (Note 12                            325,000
 )

Note payable - corporation, bearing interest at bank prime 
plus 1% (9.5% at June  30, 1998), principal
 payments  of  $5,000  plus   interest   due  monthly                   20,000
 through September 1998.


<PAGE>



Note 8 - Notes Payable and Capital Leases (continued)
                                                                       June 30,
                                                                         1998
Non interest  bearing note payable -  individual, 
 principal  payable in monthly
 installments of $1,500
 through June 2000.                                                     45,000

Note  payable  -  bank,   bearing  interest  at  11%,
 principal   and   interest    payable   in   monthly
 installments   of  $541   through   June  14,  1998.                    1,191
 Collateralized by equipment.

Note payable -  corporation,  bearing  interest at 12%, 
 monthly  principal  and  interest  payments of $2,500,
  due August 2001.  Debt  includes  conversion  to
 common stock feature that provides for conversion at any
 time while the note is  outstanding at a conversion price
 based on the previous five day  average.  Collateralized 
 by  substantially  all the company's assets.                          182,108
 

Note payable - individuals,  bearing interest at 10%,
 principal and interest due  in full on September 20,
 1998. Debt includes conversion agreement that provides
 for conversion into the Company's common  stock at $1.00 
per share  from  September  13,  1998 until maturity.                  100,000
 

Note payable - individual,  principal and interest due in
 full July 1998, 10% of  principal balance
 borrowed interest charge.                                              65,000
                                                                     1,048,647
Less current maturities                                               (547,794)

Total                                                                $ 500,853

Principal  payment on notes payable subsequent to June 30, 1998
are as follows:

            Year Ending June 30,

                   1999                                  $  547,794
                   2000                                     335,359
                   2001                                      10,718
                   2002                                     154,776

                                                         $1,048,647


<PAGE>



Note 8 - Notes Payable and Capital Leases (continued)

Capital Leases

The  Company  leases  various  office   equipment  which  is  accounted  for  as
capitalized  leases. The following is a schedule of future minimum capital lease
payments  together with the net present value of the minimum lease obligation as
of June 30, 1998.

        Year Ending June 30,

              1999                                         $ 33,295
              2000                                           33,295
              2001                                           33,295
              2002                                           32,197
              2003                                           19,250
                                                            -------
              Total                                         151,332
              Less interest                                 (47,926)
                                                            --------
                                                            103,406
              Less current portion                          (16,732)
                                                            --------
                                                           $ 86,674
                                                            ========
The assets recorded under capital leases are as follows:

        Furniture, fixtures and equipment                  $105,531
        Less accumulated amortization                       (24,900)
                                                            ---------
                                                           $ 80,631
                                                            =========
Amortization  expense for  equipment  under capital lease was $14,679 and $2,271
for the years ended June 30, 1998 and 1997, respectively.

Note 9 - Income Taxes

Deferred  tax  liabilities  and assets are  determined  based on the  difference
between the financial  statement and tax basis of assets and  liabilities  using
enacted tax rates in effect for the year in which the  differences  are expected
to reverse. The measurement of deferred tax assets is reduced, if necessary,  by
the  amount of any tax  benefits  that,  based on  available  evidence,  are not
expected to be realized.


<PAGE>



Note 9 - Income Taxes (continued)

The principal temporary  differences that will result in deferred tax assets and
liabilities  are certain  expenses and losses  accrued for  financial  reporting
purposes  not  deductible  for tax  purposes  until paid,  depreciation  for tax
purposes in excess of  depreciation  for  financial  reporting  purposes and the
deferral of franchise costs and franchise sales revenues for financial reporting
purposes which are recognized for tax purposes in the period paid. The effect of
the differences  outlined above generated a long-term deferred tax asset that is
fully  impaired  because of a lack of profitable  operating  history.  The fully
impaired  asset,  computed  at a 34  percent  tax  rate at  June  30,  1998  was
approximately  $6,500,000.  Accordingly,  there  is no net  deferred  tax  asset
reflected in the accompanying consolidated financial statements.

The differences between the federal income tax rate and the effective income tax
rate as reflected in the accompanying statements of operations are:

                                                                Year Ended
                                                                 June 30,
                                                          1998           1997

Statutory federal income tax rate (benefit)              (34.0)%         (34.0)%
Valuation allowance for net operating loss                34.0            34.0

Effective tax rate (benefit)                                - %             - %
                                                         =======         =======
The deferred tax asset consists of the following:
                                                                      June 30,
                                                                        1998

      Total long-term deferred tax asset                            $6,500,000
      Valuation allowance                                           (6,500,000)

                                                                    $       -
                                                                    ===========
At June 30, 1998,  the Company has  approximately  $19,000,000  of net operating
loss  carryforwards  for  income tax  reporting  purposes  which  expire in 2007
through 2013. During 1995 and 1998, there were transactions involving changes in
ownership   which  could   restrict  the   utilization  of  net  operating  loss
carryforwards in the future.


<PAGE>



Note 10 - Related Party

Sales

As of June 30,  1997,  the  Company  sold  equipment  and  other  technology  to
Lonestar,  Inc., an entity owned entirely by former officers of the Company. The
sales price was  $500,000  and was used to satisfy  $365,000  of former  officer
advances  payable and created a $135,000 note  receivable.  The note  receivable
bears  interest  at 8.25%  and is  payable  in  equal  monthly  installments  of
principal and interest of  approximately  $2,750  commencing  April 1997 through
March 2002. As of June 30, 1998, the  outstanding  balance was $96,340 net of an
allowance of $30,000.

During the fiscal year ended June 30, 1997, former officers sold telephone debit
card  dispensers  to the Company for a sales price of $30,600 which was recorded
as officer advances payable.

During the fiscal year ended June 30, 1997, the Company purchased a 10% interest
in Smartphone, Inc. from former officers of the Company (Note 16).

Officer Advances Payable

During the years ended June 30, 1998 and 1997,  former officers advanced amounts
to the Company to help fund  operations and meet  obligations.  At June 30, 1998
and 1997, $0 and $65,809,  respectively,  was  outstanding  and due on demand to
certain  former  officers and former  directors of the Company.  During the year
ended June 30, 1998, the Company  converted to common stock amounts  outstanding
to these former officers  related to advances and accrued  salaries.  A total of
$419,197 was converted to 230,317 shares of common stock.

Note 11 - Stock Option and Bonus Plans

The Company has an Incentive  Stock Option  Plan, a  Non-Qualified  Stock Option
Plan and a Stock Bonus Plan. A summary description of each Plan follows.

Incentive Stock Option Plan

The  Incentive  Stock  Option Plan  authorizes  the  issuance of up to 1,250,000
shares of the Company's  Common Stock to persons that exercise  options  granted
pursuant to the Plan.  It became  effective on April 15, 1993 and will remain in
effect  until April 15, 2001 unless  terminated  earlier by action of the Board.
Only officers, directors and key employees of the Company may be granted options
pursuant to the Incentive Stock Option Plan.


<PAGE>



Note 11 - Stock Option and Bonus Plans (continued)

Incentive Stock Option Plan (continued)

In order for the stock options to qualify for Incentive Stock Option treatment:

1. The total fair market value of the shares of Common Stock  (determined at the
   time of the  grant of the  option)  for  which any  employee  may be  granted
   options  which are first  exercisable  in any  calendar  year may not  exceed
   $100,000.

2. Options  may not be  exercised  until one year  following  the date of grant.
   Options  granted to an employee  owning more than 10% of the Common  Stock of
   the  Company  may not be  exercisable  by its terms after five years from the
   date of grant.

3. The purchase price per share of Common Stock  purchasable  under an option is
   determined  by a committee  but cannot be less than the fair market  value of
   the Common  Stock on the date of the grant of the option (or 110% of the fair
   market  value  in the case of a  person  owning  the  Company's  stock  which
   represents more than 10% of the total combined voting power of all classes of
   stock).

Non-Qualified Stock Option Plan

The  Non-Qualified  stock Option Plan authorizes the issuance of up to 3,000,000
shares of the Company's  Common Stock to persons that exercise  options  granted
pursuant  to the Plan.  It became  effective  April 15,  1993 and will remain in
effect until April 15, 2001 unless terminated earlier by the Board of Directors.
The  Company's  employees,  directors,  officers,  consultants  or advisors  are
eligible to be granted options pursuant to this Plan, provided however that bona
fide services must be rendered by such consultants or advisors and such services
must  not  be  in  connection  with  the  offer  of  sale  of  securities  in  a
capital-raising  transaction.  The  option  exercise  price is  determined  by a
Committee but cannot be less than the market price of the Company's Common Stock
on the date the option is granted.


<PAGE>



Note 11 - Stock Option and Bonus Plans (continued)

Non-Qualified Stock Option Plan (continued)

The following is a summary of options and warrants granted:
                                        Non-Qualified   Options        Exercise
                            Incentive     Stock        Issued Not       Price
                              Stock        Options      Related to       Per
                               Options                    a Plan         Share


Outstanding June 30, 1996       45,000         -            -      $22.00-$26.00
   Options expired                -            -            -             -
   Options exercised              -            -            -             -
   Options granted             692,250       10,000      202,313     4.00-13.00

Outstanding June 30, 1997      737,250       10,000      202,313     4.00-26.00
   Options expired             225,000         -            -             8.00
   Options exercised              -            -            -             -
   Options granted           1,556,500      250,000      676,500      .80-8.00

Outstanding June 30, 1998    2,068,750      260,000      878,813    $ .80-26.00

The Company has the following stock options outstanding as of June 30, 1998:

                                                                 Currently
   Options         Exercise                                     Exercisable
 Outstanding           Price            xpiration Date            Options


     22,500             22.00        September 1999                22,500
     22,500             26.00        September 1999                22,500
    275,000              4.00        December 2006                275,000
    161,000              4.00        December 2001                161,000
     22,500             13.00        September 1999                22,500
      8,750              5.00        December 2006                  8,750
      5,000              5.00        September 1999                 5,000
      5,000              8.00        September 1999                 5,000
     22,500             11.00        September 1999                22,500
     40,000              2.00        December 2001                 40,000
     25,000              5.00        December 2001                 25,000
     25,000              5.00        August 2001                   25,000
     12,500              7.00        December 2001                 12,500
     18,750              4.00        May 2000                      18,750
      9,375             10.00        May 2000                       9,375
     10,938              5.00        May 2000                      10,938


<PAGE>



Note 11 - Stock Option and Bonus Plans (continued)

Non-Qualified Stock Option Plan (continued)

The Company has the following stock options outstanding as of June 30, 1998:
                                                                 Currently
   Options         Exercise                                     Exercisable
 Outstanding           Price       Expiration Date               Options
  

     38,250              8.00    May 2000-July 2002                 38,250
  1,556,500              1.50    May 2003                        1,556,500
    372,500              2.00    January-June 2002                 372,500
    250,000              5.00    July 2002                         250,000
     16,500              8.00    May 2000                           16,500
    187,500              1.32    January 2002                      187,500
     50,000              1.00    February 2003                      50,000
     25,000               .80    December 2000                      25,000
     25,000              5.00    January 2003                       25,000
    -------              -----                                    --------
  3,207,563       $      2.91                                    3,207,563
  =========              ====                                    =========

The Company  accounts for stock based  compensation in accordance with Financial
Accounting  Standards  Board  Statement  No.  123,  "Accounting  for Stock Based
Compensation," ("FAS 123") which encourages,  but does not require, companies to
recognize  compensation  expense  for grants of stock,  stock  options and other
equity instruments to employees. FAS 123 requires the recognition of expense for
such  grants,   described   above,  to  acquire  goods  and  services  from  all
nonemployees.  Additionally,  although expense  recognition is not mandatory for
issuances to employees,  FAS 123 requires companies that choose not to adopt the
new fair value  accounting  rules to disclose  pro forma net income and earnings
per share information using the new method.

The Company has adopted the disclosure-only  provisions of FAS 123. Accordingly,
no  compensation  cost has been recognized for the issuances of stock options to
employees.  For the years ended June 30, 1998 and 1997, employees of the Company
were issued  options to purchase a total of 1,806,500 and 724,750  shares of the
Company's  common  stock,  respectively,  at rates ranging from $1.50 to $13 per
share expiring from September 1999 to December 2006.



<PAGE>



Note 11 - Stock Option and Bonus Plans (continued)

Non-Qualified Stock Option Plan (continued)

Had  compensation  cost for the Company's  issuances of stock options during the
years  ended June 30, 1998 and 1997 been  determined  based on the fair value at
the date of grant  consistent with the provisions of FAS 123, the Company's 1998
and 1997 net loss and loss per share would have been  increased to the pro forma
amounts indicated below:
                                                                June 30,
                                                         1998            1997
       Net loss - as reported                       $(7,109,748)    $(2,788,896)
       Net loss - pro forma                         $(9,227,346)    $(6,429,498)
       Net loss per share - as reported             $    (1.79)     $    (1.67)
       Net loss per share - pro forma               $    (2.33)     $    (3.86)

The Company utilizes the  Black-Scholes  options-pricing  model to calculate the
fair value of each individual issuance of options or warrants with the following
assumptions used for grants during the year ended June 30, 1998; dividends yield
of 0.0%; expected average annual volatility of 133.86%; average annual risk-free
interest rate of 5.5%; and expected terms averaging 2 years.

Stock Bonus Plan

Up to  1,500,000  shares of Common  Stock may be granted  under the Stock  Bonus
Plan.  Such shares may consist,  in whole or in part, of authorized but unissued
shares, or treasury shares. Under the Stock Bonus Plan, the Company's employees,
directors, officers, consultants and advisors are eligible to receive a grant of
the  Company's  shares;  provided,  however,  that  bona fide  services  must be
rendered by  consultants or advisors and such services must not be in connection
with the offer or sale of securities  in a  capital-raising  transaction.  As of
June 30, 1998,  749,625  shares of the  Company's  common stock have been issued
under the Stock Bonus Plan.

Note 12 - Stockholders' Equity

Common Stock

The Company is authorized to issue 40,000,000  shares of $.0001 par value Common
Stock.



<PAGE>



Note 12 - Stockholders' Equity (continued)

Preferred Stock

The  Company  is  authorized  to issue up to  300,000  shares of $.001 par value
Preferred  Stock.  The  Board of  Directors  has the  authority  to  divide  the
Preferred  Stock into series and,  within the  certain  limitations,  to set the
relevant terms of such series created.

In April 1995, the Company's former directors established the Company's Series A
Preferred  Stock and authorized the issuance of up to 50,000 shares.  Each share
of series A  Preferred  Stock is entitled to a dividend at the rate of $1.60 per
share when, as and if declared by the Board of Directors. Dividends not declared
do not  cumulate.  Additionally,  each  share  of  Series A  Preferred  Stock is
convertible into .80 shares of the Company's Common Stock at any time after July
1, 1999.  Upon any liquidation or dissolution of the Company,  each  outstanding
share of Series A Preferred  Stock is entitled to  distribution of $20 per share
prior to any  distribution  to the holders of the Company's  common stock. As of
June 30, 1998, the Company has 25,250 shares of Series A Preferred  Stock issued
and outstanding.

In March 1996, the Company's former directors established the Company's Series B
Preferred Stock and authorized the issuance of up to 100,000 shares.  Each share
of series B  Preferred  Stock is  entitled to a dividend at the rate of $.15 per
share when, as and if declared by the Board of Directors. Dividends not declared
do not  cumulate.  Additionally,  each  share  of  Series B  Preferred  Stock is
convertible into one share of the Company's  Common Stock.  Upon any liquidation
or  dissolution  of the Company,  each  outstanding  share of Series B Preferred
Stock is entitled to distribution  of $1.00 per share prior to any  distribution
to the holders of the Company's  common stock.  As of June 30, 1998, the Company
has 100,000 shares of Series B Preferred Stock issued and outstanding.

In December  1997,  the Company's  former  directors  established  the Company's
Series C 8% Cumulative  Convertible Preferred Stock ("Series C Preferred Stock")
and  authorized  the  issuance of up to 500  shares.  Each share of the Series C
Preferred  Stock is entitled to a dividend at the rate of $.08 per share and has
a stated  value of $ 1,000 per  share.  Dividends  on all shares of the Series C
Preferred  Stock shall begin to accrue and  cumulate  from the date of issuance.
Additionally,  each share of Series C Preferred Stock is convertible into shares
of the  Company's  Common  Stock  at an  adjustable  conversion  rate.  Upon any
liquidation or dissolution of the Company,  each  outstanding  share of Series C
Preferred Stock is entitled to distribution of the stated amount per share prior
to any distribution to the holders of the Company's common stock. As of June 30,
1998, there were no shares of Series C Preferred Stock issued and outstanding.

For the years  ended June 30,  1998 and 1997,  the  Company  did not declare any
dividends payable.



<PAGE>



Note 12 - Stockholders' Equity (continued)

Warrants

In conjunction with the Company's  February,  1995 Public Offering,  the Company
issued 1,811,250 Series A Warrants and 1,811,250 Series B Warrants.  Every block
of five  Series A  warrants  entitles  the holder to  purchase  one share of the
Company's  Common Stock at a price of $ 35.00 per share until February 10, 1998.
Every block of five Series B warrants  entitles the holder to purchase one share
of the  Company's  Common  Stock for $ 45.00 per share until  February 10, 1998.
Under specific conditions, the Company may redeem both the Series A and Series B
Warrants. During the year ended June 30, 1998, these warrants expired.

Equity Transactions

During the year ended June 30, 1998, the following equity transactions occurred:

The Company acquired all of the outstanding stock of Vector Vision, Inc. and the
net assets of MovieBar  Company USA,  Inc.  valued at $1,100,000 in exchange for
550,000 shares of the Company's common stock (Note 3). Additionally, the Company
issued options to purchase 25,000 shares of the Company's common stock at $2.20.
These  options  expire  January  2003.  These  options have an imputed  value of
$26,714  that was  allocated  to the value of the assets as part of the purchase
price.

The Company  acquired all of the  outstanding  stock of One Medical Service Inc.
valued at $227,760 in exchange for 142,350 shares of the Company's  common stock
(Note 3). Additionally, the Company issued options to purchase 187,500 shares of
the  Company's  common  stock at $2.00.  These  options  expire May 2003.  These
options  have an imputed  value of $213,870  that was  allocated  as part of the
purchase price to goodwill.

The Company  issued  2,246,500  shares of the  Company's  common  stock at rates
ranging from $ .80 per share to $ 1.00 per share in private  placements  raising
$1,476,080 net of $254,546 in offering  related expenses and $407,657 of imputed
option  value.  Additionally,  the Company  issued  options to purchase  354,000
shares of the Company's common stock at rates ranging from $.80 to $2.00.  These
options expire May 2000 and January 2002. These options have an imputed value of
$407,657 that was included in offering expenses.

The Company sold $1,100,000 of convertible notes to investors in connection with
a Regulation S offering  raising  $937,044 net of $162,956 in related  expenses.
These notes were converted to 846,827 shares of the Company's common stock.



<PAGE>



Note 12 - Stockholders' Equity (continued)

Equity Transactions (continued)

During the year ended June 30, 1998, the following equity transactions  occurred
(continued):

The Company issued 1,015,749 shares of the Company's common stock for $1,696,236
of professional  services and consulting  received.  265,000 shares of the stock
issued has a two year vesting period. As such, $136,475 of unearned compensation
expense  has been  recorded  and will be  amortized  to expense  over a one-year
period.  Additionally,  the Company issued options to purchase 110,000 shares of
the Company's  common stock at rates ranging from $1.00 to $5.00.  These options
expire January 2003.  $127,661 of expense has been  recognized  based on imputed
values ranging from $.84 to $1.33 per option.

The Company converted  $707,089 of convertible debt and accrued interest payable
to 506,791 shares of the Company's stock at rates ranging from $.40 to $1.60 per
share.

The Company  issued  230,317  shares of its common  stock in repayment of former
officer notes and accrued salaries of $419,197.

The Company  issued  300,000  shares of its common  stock  valued at $309,300 in
connection with the litigation settlement with a former Instafone master license
holder (Note 16).

During the year ended June 30, 1997, the following equity transactions occurred:

The Company  acquired a 10% minority  interest in Smartphone  valued at $200,000
for 100,000 shares of the Company's common stock (Note 5).

The Company acquired Link Technologies, Inc. and Subsidiaries for 168,539 shares
of the Company's common stock with a value of $600,000 (Note 17).
The Company issued 223,150 shares of the Company's  common stock for $927,978 of
professional services received.

The Company  issued  200,000  shares and  348,143  shares at $2.00 per share and
$2.80 per share in private placements,  respectively,  raising $1,176,640 net of
$198,160  in  offering  costs.  The Company  also  issued  25,000  shares to the
underwriter in connection with these offerings.

The Company  converted  $125,000  of  convertible  debt to 48,215  shares of the
Company's stock at rates ranging from $2.00 to $2.80 per share.

The Company  issued  options to purchase  62,500 shares of the Company's  Common
Stock  at  rates  ranging  from  $5.00  to  $7.00  per  share  in  exchange  for
professional  consulting  services.  $325,578 of expense has been  recognized at
imputed values ranging from $1.23 to $1.38 per option. These options expire from
August 2001 to December 2001.


<PAGE>



Note 12 - Stockholders' Equity (continued)

Equity Transactions (continued)

During the year ended June 30, 1997, the following equity transactions  occurred
(continued):

The Company  issued  options to purchase  77,313 shares of the Company's  common
stock at rates ranging from $4.00 to $10.00 per share in connection  with the 8%
convertible notes payable. These options have an imputed value of $353,686 based
on rates  ranging from $1.01 to $1.29.  The amount was recorded as deferred loan
costs and is being  amortized  over the life of the loans.  As of June 30, 1998,
$353,686 has been expensed. These options expire from May 2000 to July 2002.

Note 13 - Stock Splits

In March 1998, the Company declared a 1 for 4 reverse stock split.  Accordingly,
all weighted  average  share,  per share and option  information  throughout the
consolidated financial statements has been restated to reflect these split.

Note 14 - Significant Customers

As of June 30, 1998, a franchise and stockholder  accounts for $724,264 (89%) of
the franchise and customer deposits liability.

As of June 30, 1997, one corporation accounted for approximately $500,000 (100%)
of licensing revenue. One Corporation  accounted for $985,000 (79%) of equipment
and other  revenue.  Another  franchisee and  stockholder  accounts for $724,264
(85%) of the franchise and customer deposits.



<PAGE>



Note 15 - Business Segments

The  Company  has  four  reportable  segments:   telecommunications,   financial
processing,  automated  movie rentals and medical  transaction  processing.  The
telecommunications  segment  is  responsible  for the  sales and  processing  of
cellular  telephone  activations and rentals,  prepaid  cellular phone cards and
other telecommunications  related services. The financial processing segment has
developed,  in conjunction with the Company's intelligent "Debit Link" system, a
monetary transaction processing platform that eliminates the need for ATM's used
primarily in major fast food chains.  The automated  movie rentals segment rents
videocassettes  through automated dispensing units in hotels,  primarily located
in the states of Florida  and  California.  The medical  transaction  processing
segment has developed,  in  conjunction  with the Company's  intelligent  "Debit
Link" system, a communications and transaction  processing platform which allows
pharmacies to access on-line credit card and medical reimbursement  approval and
automated product ordering and payment.  The accounting policies of the segments
are the  same as  those  described  in the  summary  of  significant  accounting
policies.  The Company's  reportable  segments are strategic business units that
offer different products and services.  They are managed separately because each
business requires different technology and marketing strategies.

Operating results and other financial data are presented for the four reportable
segments of the Company for the years ended June 30, 1998 and 1997.  Net revenue
includes  sales  to  external  customers  within  that  segment.  There  are  no
significant  transfers  between  segments.  Cost of goods  sold  includes  costs
associated with net revenue within the segments.  Depreciation  and amortization
includes expenses related to depreciation and amortization directly allocated to
the segment.  Segment income (loss) does not include general and  administrative
expenses, other income (expense) items or income taxes.  Identifiable assets are
those  assets  used in segment  operations,  which  consist  primarily  of cash,
receivables, inventory, prepaid expenses, machinery, equipment and goodwill.
Corporate assets are principally patents and other assets.


                                                                             
                Tele-               Automated     Medical    Corporate
               Communi-   Financial   Movie     Transaction    And     Consoli-
               cation    Processing  Rental     Processing     Other     dated

 June 30,1998:

 Net revenues $446,524  $ 147,533   $ 371,416  $ 15,478   $   -    $  980,951

 Cost of      $245,468  $ 128,133   $ 145,040  $  4,838  $    -    $  523,479
goods sold                                                                 

 Depreciation
  and         $245,700  $    -      $  94,058  $     -   $  34,614  $ 474,372
  amortization

 Segment
profit        $(44,644) $  19,400   $ 132,318  $ 10,640  $(134,614) $ 16,900)
  (loss)

 Identi-
fiable      $ 2,224,685  $467,962   $1,450,122 $1,058,714  $401,268 $5,602,751
  assets


<PAGE>




Note 15 - Business Segments (continued)
                Tele-               Automated     Medical    Corporate
               Communi-   Financial   Movie     Transaction    And     Consoli-
               cation    Processing  Rental     Processing     Other     dated

                                                             Medical
                   

 June 30, 1997:

 Net revenues $ 2,923,532  $   -     $    -     $    -     $     -   $2,923,532

 Cost of good $ 1,608,572  $   -     $    -     $    -     $     -   $1,608,572
  sold

 Depreciation
  and         $   190,612  $   -     $    -     $    -     $ 57,378  $ 247,990
  amortization

 Segment profit $1,124,348  $  -     $    -     $    -   $ (57,378) $1,066,970
  (loss)

 Identifiable  $ 5,069,232  $        $          $        $  474,941 $5,544,173
  assets


Note 16 - Commitments and Contingencies

Operating Leases

The  Company  leases  administrative   offices  and  warehouse  locations  under
noncancelable  operating  leases in  California,  Florida  and New  Jersey.  The
minimum  annual rent  generally  increases  each year by an amount  based in the
Consumer Price Index.  The Company is also generally  responsible for paying its
portion  of the  common  area  maintenance,  real  estate  taxes  and  insurance
expenses.  Additionally,  the Company also leases various office equipment under
noncancelable  operating leases with terms up to 5 years. Rental expense for the
years ended June 30, 1998 and 1997 was $113,275 and $101,039, respectively.

Future minimum lease commitments at June 30, 1998 are as follows:

        Year Ending June 30,

              1999                                       $  287,000
              2000                                          238,000
              2001                                          236,000
              2002                                          192,000
              2003                                          119,000
              Thereafter                                    105,000

                                                         $1,177,000



<PAGE>



Note 16 - Commitments and Contingencies (continued)

Employment Agreements

The Company has entered into two year  employment  agreements  with its two most
senior  officers.  The agreements  entitle the officers to an annual salary of $
144,000 and $ 120,000,  respectively and options to purchase 560,500 and 457,000
shares of the  Company's  common  stock,  respectively.  The options have stated
exercise  prices  of $1.50  per share  and are  exercisable  until May 2003.  As
additional compensation,  each officer is entitled to receive an incentive bonus
computed based upon annual Company  revenues from  operations and is entitled to
other benefits, including such items as an automobile allowance, health and life
insurance, vacation and sick pay benefits.

The Company has also  entered  into a three year  employment  agreement  with an
officer of a subsidiary of the Company  commencing on June 1, 1998.  The officer
is entitled to a salary of $96,000 per year.  As  additional  compensation,  the
officer is entitled to receive incentive bonus stock options computed based upon
annual  performance  criteria and is entitled to other benefits,  including such
items as an automobile allowance,  health and life insurance,  vacation and sick
pay benefits.

Additionally, the Company has entered into three year employment agreements with
another officer and three key employees.  These agreements  amount to a total of
$259,000 in base  compensation.  In  connection  with these  agreements,  43,274
shares of the Company's common stock and options to purchase up to 44,000 shares
of the Company's  common stock at rates ranging from $1.00 to $2.00 were issued.
These agreements are automatically renewable for a period of two years after the
third anniversary date. As additional compensation,  each individual is entitled
to receive an incentive bonus computed based upon annual performance criteria as
determined  in the  applicable  agreements  and is  entitled  to  certain  other
benefits,  including  such  items as an  automobile  allowance,  health and life
insurance,  vacation and sick pay benefits.  Two of the  agreements  entitle the
individual  to  additional  compensation  of $ 92.50  for each  POS  transaction
automation terminal placed in service or sold.

Royalty Agreement

The Company has entered into an agreement  with Telemac,  Inc., the developer of
the software for real time billing.  This agreement  provides for the Company to
pay Telemac 7% of gross receipts based on cellular telephone rentals.

Additionally, the Company has an agreement with an individual requiring payments
based  upon the net  profits of Cellex  Communications,  Inc.  (Cellex).  20% of
Cellex's net profits are to be remitted to this individual pursuant to the terms
of the  agreement.  As of June 30, 1998,  Cellex has remitted  $22,818 in profit
participation payments to this individual.  Effective December 1997, the Company
discontinued the operations of Cellex (Note 18).


<PAGE>



Note 16 - Commitments and Contingencies (continued)

Consulting Agreements

The  Company  has  entered  into  various  consulting  agreements  with  outside
consultants.  These  agreements  entitle the  consultant  to issuances of common
stock and  options  as well as cash  compensation  in  exchange  for  consulting
services relating to such things as raising  additional debt and equity capital,
sales development,  investor and public relations and general strategic business
consulting.  For the year ended June 30,  1998,  the Company has issued  483,551
shares of common stock and options to acquire  100,000 shares of common stock at
rates  ranging from 1.00 to 5.00 per share in exchange for  consulting  services
valued at $ 1,029,412.  As of June 30, 1998, $ 20,000 remained  payable pursuant
to the  terms  of  one  of  the  consulting  agreements.  No  other  outstanding
obligations  existed as of June 30, 1998  pursuant to the terms of the remaining
consulting agreements.

Litigation

During the year ended June 30, 1998, an action was brought  against  subsidiary,
Vector  Vision,  Inc.  The  litigation  alleged  the  former  employee  was owed
approximately  $80,000 in  un-reimbursed  expenses  and monies  advanced  to the
company.  The Company settled the matter for approximately  $50,000. As security
for the settlement,  the Company gave the individual a collateral  assignment of
revenue  generated  from a location using the Company's  automated  movie rental
system as well as related  equipment  and  agreed to have a judgment  of $80,000
entered against them should they default in payment. The Company has the $50,000
liability accrued in accounts payable at June 30, 1998.

During  February  1998,  the Company  reached a settlement  with a former master
license  holder for Holland,  Belgium and Germany.  The Company  issued  300,000
shares of common stock valued at $309,300 and agreed to pay $135,000 in cash. As
of June 30,  1998,  the  remaining  cash  payment  due of $90,000 is recorded in
accrued expenses.

Additionally,  a  franchisee  has  demanded  that  the  Company  repurchase  his
franchises  for  approximately  $1,000,000 or a suit for breach of the franchise
agreement  will be filed.  The Company is  currently  attempting  to negotiate a
settlement and has approximately $724,000 accrued relating to this obligation.

The Company is also involved in various claims and legal actions  arising in the
ordinary  course  of  business.  In the  opinion  of  management,  the  ultimate
disposition  of these  matters  will not have a material  adverse  effect on the
Company's financial position, results of operations, or liquidity.


<PAGE>



Note 17 - Statements of Cash Flows

During the fiscal year ended June 30, 1998:

The Company acquired $44,096 of fixed assets through capital leases.

The Company  converted  $707,089 of  convertible  notes and interest  payable to
506,791 shares of common stock. The Company converted  $419,197 of officer notes
payable and salaries to 230,317 shares of common stock.
The Company  incurred  various  noncash  transactions  related to their business
acquisitions (Note 3).

The Company  transferred  $603,652 of ACDC units and equipment from inventory to
fixed assets in anticipation of placing these units at Company owned sites.

The Company terminated a licensing and equipment agreement which resulted in the
return of  $441,000  of ACDC  units and  equipment  into  fixed  assets  and the
reversal of $105,000 of deferred revenue.

During the fiscal year ended June 30, 1997:

The Company bought back franchisees by entering into debt  obligations  totaling
$135,000 and $147,000, respectively, equal amounts of inventory and other assets
were received by the Company.

The  Company  issued  100,000  shares of  common  stock  for a 10%  interest  in
Smartphone  which was  valued at  $200,000.  The  Company  converted  an account
receivable to a note receivable in the amount of $150,000.

The Company  acquired Link  Technologies,  Inc.,  and  Subsidiaries  for 168,539
shares of common stock, with a value of $600,000.

The Company acquired fixed assets of $45,535 through a capital lease.

The Company converted  $125,000 of convertible notes payable to 48,215 shares of
common stock.

The Company purchased  $30,600 of prepaid calling card dispensing  machines from
officers of the Company and was recorded as a notes payable to officers.



<PAGE>



Note 17 - Statements of Cash Flows (continued)

During the fiscal year ended June 30, 1997 (continued):

The Company  issued stock  options to  individuals  as an  inducement to provide
financing  pursuant  to the 8%  convertible  notes  payable.  The options had an
imputed value of $353,686.  As of June 30, 1997,  $178,185 has been amortized to
expense with the remaining $175,501 recorded as deferred loan costs and included
in prepaids and other current assets (Note 12).

Note 18 - Discontinued Operations

Effective  December 1997, the Company  decided to discontinue  the operations of
Cellex  communications  Inc.,  which  provided  cellular  activation and prepaid
cellular time services.  The Company expects no additional  revenues or expenses
and has no material remaining assets or liabilities. For the year ended June 30,
1997,  there was no loss on the  disposal of the  segment  and the  discontinued
operations resulted in a loss of $63,737. The prior year statement of operations
has been reclassified to present the operating results of Cellex Communications,
Inc. as a  discontinued  operation with income from  discontinued  operations of
$553,731 for the year ended June 30, 1997.

Note 19 - Subsequent Event

In July 1998, the Company issued  1,402,500  shares of its common stock at $1.00
per share raising $1,172,125 net of $230,375 in offering related expenses.





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