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

                                FORM 10-K/A
                            (Amendment Number 2)

     [X]     ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
             SECURITIES EXCHANGE ACT OF 1934
             FOR THE FISCAL YEAR ENDED MARCH 31, 1998.
                                     or
     [ ]     TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
             OF THE SECURITIES EXCHANGE ACT OF 1934
             FOR THE TRANSITION PERIOD FROM ____________ TO ____________.

                       Commission file number 0-22520

                                AMTEC, INC.
           ------------------------------------------------------
           (Exact name of registrant as specified in its charter)

                  Delaware                                 52-1989122
       -------------------------------                 -------------------
       (State or Other Jurisdiction of                  (I.R.S. Employer
       Incorporation or Organization)                  Identification No.)

         599 Lexington Avenue, 44th Floor, New York, New York  10022
        -------------------------------------------------------------
        (Address of principal executive offices, including zip code)

                                212-319-9160
            ----------------------------------------------------
            (Registrant's telephone number, including area code)


       Securities registered under Section 12(b) of the Exchange Act:

                  Title of Each                      Name of Each Exchange
               Class so Registered                   On Which Registered
               -------------------                   ---------------------
    Common Stock, $0.001 par value per share        American Stock Exchange


       Securities registered under Section 12(g) of the Exchange Act:


Indicate by check mark whether the registrant: (i) filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act
of 1934 during the past 12 months (or for such shorter period that the
registrant was required to file such reports), and (ii) has been subject to
such filing requirements for the past 90 days. Yes X No

Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained,
to the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [X]

The issuer has no revenue for the fiscal year ended March 31, 1998.

The number of shares outstanding of the registrant's common stock as of
June 26, 1998 was 26,998,076 shares. The aggregate market value of the
common stock (26,346,996 shares) held by non-affiliates, based on the
closing price ($1.3125) of the common stock as of June 26, 1998 was
approximately $34.6 million.


Safe Harbor Statement under the Private Securities Litigation
Reform Act of 1995.

        Except for the historical information contained herein, the matters
discussed in this Annual Report are forward-looking statements which
involve risks and uncertainties, including but not limited to economic,
competitive, governmental, international and technological factors
affecting the Company's revenues, joint ventures, operations, markets and
prices, and other factors discussed in this Annual Report.


INTRODUCTORY NOTE

        This Second Amendment to the Company's annual report on Form 10-K
for the fiscal year ended March 31, 1998 amends such report, as amended by
Amendment No. 1 thereto filed on April 7, 1999 and is being filed to
reflect the restatement of the Registrant's Consolidated Balance Sheet,
Statements of Operations and Statement of Cash Flow ("the restatement").

        Subsequent to the issuance of the Registrant's financial statements
for the year ended March 31, 1998, the Registrant determined that the sale
of one of its subsidiary's ("ITV") businesses should have been accounted
for using accounting for discontinued operations. Previously, the result of
ITV's business was included in the financial statements as part of
continuing operations for the year ended March 31, 1996. As a result, the
Statement of Operations and Statement of Cash Flow for the year ended March
31, 1996, have been restated to show the effect of such discontinued
operations.

        The Registrant also determined that one of its subsidiaries should
have been accounted for under the equity method of accounting, as the
minority shareholders have substantive participating rights under the joint
venture contracts. Previously, its subsidiary had been consolidated. As a
result, the financial statements as of March 31, 1998 and 1997, and for the
two years ended March 31, 1998, have been restated from amounts previously
reported to account for its subsidiary under the equity method of
accounting.

        Unless otherwise noted, all information provided in this Annual
Report is current as of June 26, 1998, the original filing date of the Form
10-K. Information regarding recent events at the Registrant can be obtained
from reports filed by the Registrant with respect to its activities during
1998, including the Registrant's Quarterly Report on Form 10-Q for the
period ended June 30, 1998, September 30,1998 and December 31, 1998 and
Note 14, Note 15 and Note 16 to the consolidated financial statements of
the Registrant included herewith.


                                   PART I

ITEM 1. BUSINESS

AmTec, Inc. ("AmTec" or "the Company") is a telecommunications company with
investments in the People's Republic of China ( the "PRC" or "China"). The
Company has focused its investments on China because of China's large and
rapidly growing need for telecommunications services, China's requirement
for foreign capital and technology to meet that need, and the opportunity
to obtain cash flow sharing and technical services agreements with
operators who hold exclusive or semi-exclusive communications licenses. The
Company's joint venture operations primarily consist of a series of
cellular telephone networks in the northeastern province of Hebei, which
has 11 major cities and a population of approximately 65 million people. In
addition, the Company has interests in other projects and networks in
various stages of development, including a multimedia network for cable
television programming transmission. Developing existing network interests
and obtaining additional interests in communications networks in China in
the future are key components of the Company's business strategy.

CHINA TELECOMMUNICATIONS MARKET

Through the Company's interest in cellular telephone networks in Hebei
Province and relationships that the Company has developed with key policy
makers and decision makers in Chinese governmental agencies, AmTec has
focused its business to capitalize on the growth of the Chinese
telecommunications market, which is among the world's largest, fastest
growing, and most under-serviced telecommunications markets. Due to the
importance of a well-developed communications infrastructure to China's
continuing economic development, the PRC government has targeted
communications network development as a high priority in the country's
economic reform program. It is expected that before the year 2000, China
will surpass the United States as both the largest cellular telephone and
cable television markets in the world.

Since the establishment of China United Telecommunications, Incorporated
("UNICOM") in 1994, China has had only two licensed competitors for
cellular, fixed wire and long-distance telephony. The cable television
market in China is a monopoly run by the Ministry of Information Industry,
which also regulates telecommunications in China. While other
communications markets in China have experienced greater competition, most
notably paging and value-added services, communications licenses have
generally been limited to a small number of competitors relative to markets
in the United States. The Company believes that both the overall market
size and the environment of limited competition are attractive aspects of
the Chinese communications market.

Although Chinese regulations currently prohibit direct foreign ownership or
operation of communications networks, the regulatory environment has shown
recent indications of continuing a policy of partial deregulation. And
while there can be no assurance that this policy of partial deregulation
will continue, the Company believes that it is well-positioned to benefit
from deregulation permitting direct foreign ownership and operation of
communications networks, if such deregulation were to occur in the future.

JOINT VENTURES IN CHINA

AmTec holds a 70% interest in Hebei United Telecommunications Equipment
Company Limited ("Hebei Equipment"), a joint venture with a wholly owned
subsidiary of the Electronics Industry Department of Hebei Province. Hebei
Equipment, in turn, holds a 51% interest in Hebei United Telecommunications
Engineering Company Limited ("Hebei Engineering"), a joint venture with NTT
International ("NTTI") and Itochu Corp. Due to certain participating rights
held by the minority partners of each joint venture, the Company accounts
for its investment in Hebei Equipment, and Hebei Equipment accounts for its
investment in Hebei Engineering, by the equity method of accounting. Both
Hebei Equipment and Hebei Engineering are organized as Sino-foreign equity
joint ventures under the laws of China and are headquartered in
Shijiazhuang, the capital of Hebei Province.

CELLULAR TELEPHONE NETWORKS

Currently, legal restrictions in China prohibit foreign participation in
the operation and ownership of communications networks. Therefore, the
Company has established majority ownership in joint ventures with Chinese
and other partners to provide financing, network construction and
operational consulting services to licensed Chinese network operators.

Hebei Engineering, entered into an agreement (the "UNICOM Agreement") on
February 9, 1996 with UNICOM to (i) finance and assist UNICOM in the
construction of cellular networks (the "GSM Networks" or "GSM Project") in
the ten largest cities in Hebei Province and (ii) provide consulting and
management support services to UNICOM in its operation of the GSM Networks
in the 10 largest cities of Hebei Province. This GSM Project will have a
capacity of up to 70,000 subscribers. The first of these networks commenced
operations in February 1997. Hebei Engineering is entitled to 78% of the
distributable cash flow (defined as activation charges plus depreciation
plus net income) from the GSM Networks for a 15-year period commencing
February 9, 1996.

The construction and operational plan for the GSM Networks consists of a
"roll-out" across Hebei Province on a city-by-city basis. As of June 26,
1998 two cities, Shijiazhuang and Tangshan, were providing commercial
service, with approximately 11,000 subscribers; construction in five
additional cities was substantially completed, with commercial launch dates
scheduled during 1998 for these additional five cities.

As of March 31, 1998, construction of the GSM Networks had been financed by
Hebei Engineering with $3 million of equity capital, approximately $11
million of vendor financing guaranteed by NTTI, and a $20 million Term Loan
facility from Bank of Tokyo Mitsubishi also guaranteed by NTTI and ItoChu.
Of the $3 million of equity raised by Hebei Engineering, $1.17 million was
contributed by Hebei Equipment.

Realization of the Company's investment in its SFJVs is dependent upon
UNICOM's operation of the GSM Networks, among other factors. The
implementation of the GSM Networks involves systems design, site
procurement, construction, electronics installation, initial systems
optimization and receipt of necessary permits and business licenses prior
to commencing commercial service. Each stage can involve various risks and
contingencies, the outcome of which cannot be predicted with a high degree
of assurance as interconnection of the GSM Networks with the public
switched telephone network is sometimes difficult and time consuming, and
the successful completion of all planned sites of the GSM Networks will be
dependent, to a significant degree, upon the ability of the parties to
lease or acquire sites for the location of their base station equipment.
While no difficulties have been encountered to date in procuring such
sites, future site acquisition can not be assured.

COMPETITION

        UNICOM currently faces competition from China Telecom, which has
substantially more experience in operating cellular telephone networks,
greater financial resources, scientific and marketing personnel and
facilities. China Telecom is the operating organization of the former
Ministry of Posts and Telecommunications ("MPT"), previously the
telecommunications policy setting and regulatory arm of the Chinese
government.

        China Telecom has a dominant market share in all sectors of
telecommunications in China, and already has established a fixed-wire
network in the country. Formerly the MPT regulated and licensed all
telecommunications networks in China, including network access, and the
ability to make important regulatory decisions with respect to China
Telecom's competitors. Although the MPT has been abolished and succeeded by
the Ministry of Information Industry ("MII"), there can be no assurance
that the new regulatory structure for telecommunications operations in
China (i) will be more favorable to UNICOM or the Company or (ii) will not
be adverse to UNICOM's operations in Hebei. In addition, new competitors
may enter the market, including Code Division Multiple Access ("CDMA")
cellular service offered by the People's Liberation Army and China Telecom
through their joint venture, Great Wall Communications Group ("Great
Wall").

At present there are four small commercial CDMA cellular trial networks
being tested by Great Wall in China. None of these commercial trial
networks are in Hebei, but there can be no assurances in the future that
Great Wall will not enter the Hebei market.

CONSTRUCTION AND OPERATION OF TELECOMMUNICATIONS NETWORKS

The telecommunications networks in the PRC which the Company's joint
ventures are currently engaged in developing may experience difficulties
and delays relating to the construction and operation of such
telecommunications networks. While UNICOM has successfully commenced
commercial operation in two cities in Hebei, and although Hebei Engineering
has substantially completed network construction in five additional cities
in Hebei, there can be no assurance that such additional networks will be
completed and that commercial operations in these five cities will
commence. Currently, Hebei Engineering has no reason to believe that such
additional networks will not commence commercial operations.

ADDITIONAL FUNDING OF JOINT VENTURE PROJECTS

At present, all network construction for a 40,000 subscriber capacity
network in seven cities in Hebei has been funded. Expansion of network
capacity from 40,000 subscribers to 70,000 subscribers will require
additional capital. Since the UNICOM Agreement contains no specified
deadline for expansion of the GSM Network to 70,000 subscribers, these
future capital requirements for the GSM Network will depend largely on the
market acceptance of the UNICOM GSM Network cellular service, among other
factors. It is anticipated that debt or equity contributions made by the
Company and its partners to the joint ventures, as well as potential
investment from third parties, will be used to increase the capacity of the
GSM Network as required.

LEGAL & REGULATORY RISKS

        The PRC's legal system is a civil law system based on written
statutes and is a system in which decided legal cases have little
precedential value. The PRC Government began to promulgate a comprehensive
system of laws in 1979. Many laws and regulations governing economic
matters in general have been promulgated. The general effect of this
legislation has been to enhance the protection afforded to foreign invested
enterprises in the PRC. However, as these laws and regulations are
relatively new, their interpretation and enforcement involve significant
uncertainty.

        The current PRC regulations prohibit foreign investors and foreign
invested enterprises from operating or participating in the operation of
telecommunications networks in China. The relevant PRC laws and regulations
do not define what constitutes foreign operations or participation in
operations, and it is not clear what rights or actions would violate such
laws and regulations. Based on advice of its Chinese legal counsel,the
Company has structured its investments in China by establishing
Chinese-foreign joint ventures in the PRC to provide financing and
consultancy services to licensed telecommunications operators, i.e.,
utilizing the commonly-known Chinese-Chinese-Foreign ("CCF") structure. The
PRC Government is currently undertaking a review of the CCF structure used
by Unicom. It has been reported that Unicom has been instructed by the PRC
Government not to use the CCF structure in the future and that the PRC
Government is examining and evaluating the existing CCF contracts. It is
unclear if, and to what extent, the existing CCF contracts entered into by
Unicom will be required to be amended. It is also unclear whether foreign
entities involved in the CCF structures will be required to divest
themselves of their respective interests in the Chinese-foreign joint
venture companies. The evaluation of the CCF structure by the PRC
Government may have a material adverse impact on the contracts entered into
by Hebei Engineering and by the Company which utilize the CCF structure and
may have a material adverse effect on the Company's business, financial
condition and results of operations.

        In order to provide a uniform regulatory framework to encourage the
orderly development of the PRC telecommunications industry, the PRC
authorities are currently preparing a draft Telecommunications Law. Once
formulated, the draft law will be submitted to the National People's
Congress for review and adoption. It is unclear if and when the
Telecommunications Law will be adopted. The nature and the scope of the
regulation envisaged by the Telecommunications Law is not fully known but
the Company believes that, if adopted, the Telecommunications Law will have
a positive effect on the overall development of the telecommunications
industry in the PRC. However, the Telecommunications Law, if adopted, may
have an adverse effect on the Company's business, financial condition or
results of operations.

        The Chinese laws and regulations governing the telecommunications
industry may also be changed or applied in a manner which would have a
material adverse effect on the business, financial condition and results of
operations of the Company.

        It has recently come to the Company's attention that certain
procedural and technical matters relating to the establishment of Hebei
Equipment and investment in Hebei Engineering were not strictly complied
with and are currently being addressed by the Company. If these technical
and procedural matters are not resolved in a satisfactory manner, the
business, financial conditions and results of operations of the Company may
be materially adversely effected.

GOVERNMENT CONTROL OF CURRENCY CONVERSION AND EXCHANGE RATE RISKS

The PRC government imposes control over its foreign currency reserves, in
part through direct regulation of the conversion of Renminbi, the legal
tender currency of the PRC, into foreign exchange and through restrictions
on foreign trade.

UNICOM's revenues are denominated in Renminbi. The Company's joint ventures
will consequently receive almost all of their joint venture distributions
in Renminbi, which is freely convertible only for current accounts.
Approval of the State Administration of Foreign Exchange will be needed
under current regulations for conversion of Renminbi for foreign
currencies.

The Company believes that its SFJV will be able to obtain all required
approvals for the conversion and remittance abroad of foreign currency.
However, such approvals do not guarantee the availability of foreign
currency and no assurance can be given that the Company will be able to
convert sufficient amounts of foreign currencies in the PRC's foreign
exchange markets in the future at acceptable rates.

Although the Renminbi to US dollar exchange rate has been relatively stable
since January 1, 1994, there can be no assurance that exchange rates will
not again become volatile or that the Renminbi will not devalue
significantly against the US dollar.

During late 1997 and early 1998, there were a number of currency
devaluations in Asia and unstable and volatile capital markets and foreign
exchange markets. The PRC has not devalued the Renminbi. However, there can
be no assurances that the Renminbi will not be devalued in the future.


EMPLOYEES

        As of June 26, 1998, the Company had 13 full time employees in New
York and China. The Company intends to hire additional personnel as the
development of the Company's business continues and makes such action
appropriate.

The Company employs a policy of staffing and managing its joint-venture
subsidiaries and hiring PRC nationals for its China operations. As of June
26, 1998, the Company's subsidiaries had 6 employees in Hebei Equipment and
17 employees in Hebei Engineering. It is the intention of the Company to
add employees to its Chinese subsidiaries for operational purposes.

The Company's employees are not represented by a labor union and are not
covered by a collective bargaining agreement. The Company believes that its
relations with its employees are good.

FORWARD-LOOKING INFORMATION MAY PROVE INACCURATE

     This document contains certain forward-looking statements and
information relating to the Company that are based on the beliefs of the
Company's management as well as assumptions made by and information
currently available to the Company's management. When used in this
document, the words "anticipate," "believe," "estimate," "expect," "going
forward" and similar expressions, as they relate to the Company or Company
management, are intended to identify forward-looking statements. Such
statements reflect the current views of the Company with respect to future
events and are subject to certain risks, uncertainties and assumptions,
described in this Form 10-K. Should one or more of these risks or
uncertainties materialize, or should underlying assumptions prove
incorrect, actual results may vary materially from those described herein
as anticipated, believed, estimated or expected. The Company does not
intend to update these forward-looking statements.


ITEM 2.   PROPERTIES

        The Company leases a 7,600 square foot office located at 599
Lexington Avenue, 44th Floor, New York, New York 10022. The facility serves
as the Company's principal executive offices. The Company pays an annual
rent of $334,400 on a lease which expires in May 2000. The Company has
obtained an option to extend the lease for an additional five year term
based on the fair market value of the leased premises at or about the time
of the expiration of the initial term of the lease.

ITEM 3.   LEGAL PROCEEDINGS

        A first amended complaint, dated April 15, 1996, was filed against
the Company, ITV Communications, Inc., a subsidiary of the Company ("ITV"),
and other parties, including certain of the Company's officers, directors
and principal stockholders, by Jacqueline Brandwynne, a stockholder of the
Company, in a matter captioned "Jacqueline B. Brandwynne vs. AVIC Group
International, Inc., et al," civil action number BC145036. The complaint,
filed in the Superior Court of California, County of Los Angeles, alleges
fraud, misrepresentation and breach of contract with respect to the sale of
666,667 shares of ITV stock for $1,000,000 prior to the completion of the
Reorganization Agreement between the Company and ITV (the "Reorganization
Agreement") in February 1995, in connection with which the shares of ITV
were exchanged on a two for one basis for shares of the Company. The
complaint alleges that certain misrepresentations were made in connection
with the sale of the 666,667 shares and that the claimant was entitled to
receive 666,667 shares of the Company after the completion of the
Reorganization Agreement. The complaint seeks rescission of the transaction
and damages of no less than $1,000,000. The complaint also alleges a claim
in connection with an alleged oral employment agreement for 125,000 options
to purchase shares of the Company's Common Stock at an exercise price of
$0.35 per share and the right to purchase additional shares of Common Stock
at $1.00 per share, plus other benefits, including a salary of no less than
$130,000. Management of the Company believes that these claims are without
merit, that there are valid defenses to each claim and is in the process of
vigorously defending the matter. The matter is in the discovery phase and
it is not possible to predict with any degree of certainty the likely
outcome. The Company is represented by the law firm of Matthias & Berg LLP,
515 South Flower Street, Seventh Floor, Los Angeles, California 90071, on
this matter.

        The Company is not aware of any pending litigation that could have
a material adverse effect on the Company's business, financial condition or
results of operations.

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

        No matters were submitted to a vote of stockholders during the
quarter ended March 31, 1998.


                                  PART II

ITEM 5.   MARKET FOR THE COMPANY'S COMMON EQUITY AND
          RELATED STOCKHOLDER MATTERS

        As of June 26, 1998, the authorized capital stock of the Company
consisted of 100,000,000 shares of common stock, par value $0.001 per share
(the "Common Stock"), and 10,000,000 shares of preferred stock, par value
$0.001 per share (the "Preferred Stock"). As of June 26, 1998, there were
issued and outstanding 26,998,076 shares of Common Stock, options to
purchase 12,460,102 shares of Common Stock, 69 shares of Series E
Convertible Preferred Stock. Further, there were issued and outstanding
warrants to purchase 4,206,375 shares of Common Stock. As of June 26, 1998,
there were approximately 2,680 holders of record of the Common Stock.

        The Company's Common Stock was originally listed for trading in the
over-the-counter market on March 4, 1996 under the name AVIC Group
International, Inc. and was quoted on the NASDAQ Bulletin Board or in the
"pink sheets" maintained by the National Quotation Bureau, Inc. under the
symbol "AVIC." The Company changed its listing on November 20, 1996, when
its Common Stock was approved for listing on the American Stock Exchange
under the ticker symbol "AVI." On July 8, 1997, the Company changed its
name to AmTec, Inc. and it currently trades on the American Stock Exchange
under the symbol "ATC". The high and low sales prices of the Common Stock,
as quoted on the American Stock Exchange, on June 26, 1998 were $1.375 and
$1.250, respectively.

        No dividend has been declared or paid by the Company on its shares
of Common Stock since its inception. The payment of dividends by the
Company on its shares of Common Stock is within the discretion of the
Company's Board of Directors and will depend on the earnings, capital
requirements, restrictions in any future credit agreements and operating
and financial condition of the Company, among other factors. Except for
dividends which may be payable on and according to the terms of shares of
Preferred Stock, which may be issued from time to time, the Company does
not anticipate that any dividends will be declared or paid in the future.
There can be no assurance that the Company will ever pay a dividend on its
shares of Common Stock.

        The following table sets forth for the period indicated the high
and low sales price of the Company's Common Stock as reported on the
American Stock Exchange.

<TABLE>
<CAPTION>
                          1997                                     1998
COMMON          1ST Q     2ND Q    3RD Q    4TH Q       1ST Q      2ND Q     3RD Q    4TH Q
STOCK PRICE     -----     -----    -----    -----       -----      -----     -----    -----
<S>            <C>       <C>      <C>       <C>        <C>       <C>        <C>      <C>
High           $10.250   $5.2500  $3.7500   $6.2500    $5.1875   $3.4375    $2.4375  $1.1875
Low            $ 3.560   $1.4400  $1.4400   $2.1250    $2.8125   $1.8125    $0.5000  $0.5625
</TABLE>

---------------
(1)     High and low sales price as reported on the American Stock Exchange.

        The transfer agent for the Company is Chasemellon Shareholder
Services, LLC, 450 West 33rd Street, New York, New York, 10001. Its
telephone number is (800) 851-9677.

CERTAIN SALES OF UNREGISTERED SECURITIES

On October 22, 1997 the Company completed the sale of 74 shares of its
Series E Convertible Preferred Stock (the "Series E Stock" or "Series E
Shares") for gross proceeds of $7,400,000.

The Series E Shares were sold pursuant to Reg. D at $100,000 per share and
the holders of the Series E Stock have no rights to cash dividends but are
entitled to an 8% in-kind dividend. Conversion of the Series E Shares into
Common Stock is based on the lower of (i) a 10% premium to the market price
of the Company's Common Stock, as reported on the American Stock Exchange,
at the time of closing, or of a 10% premium to the 10 day average trading
price six months after the close or (ii) a discount to the lowest trade
during the five (5) trading days prior to the conversion. The discount,
which ranges from 15% to 20%, is based on the date of the shareholder's
conversion of the Series E shares, with the discount increasing as the
period the shares are held increases. The Conversion of the Series E Shares
is restricted by certain "lock-up" agreements between the Company and the
holders of the Series E Stock by which fifty shares of the Series E Shares
could not be converted prior to March 2, 1998, and the remaining twenty
four shares may not be converted prior to the first anniversary of the
close of the offering, October 22, 1998. In addition to the shares,
warrants were issued to five of the Series E Investors to purchase
1,236,346 shares of the Company's Common Stock at a price equal to 120% of
the market price of the Company's Common Stock at the time of closing based
on the amount invested by the shareholders and the length of the "lock-up"
agreed upon between the Company and certain investors. Holders of the
Series E Shares also had a registration right requiring the Company to file
a registration statement covering the Common Stock underlying the Series E
Preferred Shares and related warrants with the Securities and Exchange
Commission (the "SEC") no later than March 2, 1998. The shares were
registered on January 16, 1998.

Of the $7,400,000 gross proceeds from the sale of the Series E Shares,
approximately $641,000 was distributed as fees and expenses to a placement
agent for the offering, and the balance of approximately $6,759,000 was
held by the Company for working capital and possible investment in
additional projects. The Company also issued warrants to purchase 326,171
shares of the Company's Common Stock to the Placement Agent as fees for
services. These Warrants have an exercise price of $2.475 per share.


ITEM 6.  SELECTED FINANCIAL DATA

        The Company has focused its business solely on establishing
Sino-foreign joint ventures to develop telecommunications networks in the
PRC, following the sale of the assets of its subsidiary ITV Communications,
Inc. in January 1996. Accordingly, the following historical financial data
is not necessarily indicative of future results of operations. The selected
financial data set forth below should be read in conjunction with
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" included elsewhere herein.

<TABLE>
<CAPTION>
                              1998 (1)      1997 (1)      1996 (2)        1995          1994
                              --------      --------      --------        ----          ----

<S>                         <C>           <C>           <C>           <C>           <C>
 Net Sales                  $       -0-   $       -0-   $       -0-   $   345,276   $   194,885
 (Loss) from continuing
   operations                (4,282,613)   (3,563,568)   (3,380,633)          -0-           -0-
 (Loss) from discontinued
   operations                       -0-           -0-    (1,932,977)   (5,585,596)   (3,388,833)
 Gain on sale of
   discontinued operations          -0-           -0-        31,888           -0-           -0-
 Net (Loss)                  (5,403,368)   (4,064,885)   (5,281,730)   (5,538,303)   (3,737,542)
 Loss from continuing
   operation per
   common share                   (0.23)        (0.14)        (0.13)          -0-           -0-

 Loss from discontinued
 operation  per common
   share                            -0-           -0-         (0.08)        (0.32)    (7,475.08)
 Basic Loss per common
   share                          (0.23)        (0.14)        (0.21)        (0.32)    (7,475.08)
 Total Assets                 7,683,358     4,004,966     1,660,000     3,267,488     3,094,157
 Shareholders' Equity
   (Deficit)                  4,896,911       548,088    (2,421,606)   (1,255,412)    1,402,532
</TABLE>

(1)   As restated, see note 15 of notes to consolidated financial statements.
(2)   As restated, see note 14 of notes to consolidated financial statements.

        Financial information for the years 1994, 1995 and 1996, is not
comparable to the financial information provided for 1997 and 1998, because
prior to 1997 the Company was not engaged in the development of
telecommunications networks in the PRC.


ITEM 7.   MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
          AND RESULTS OF OPERATIONS

        The Company devotes substantially all of its efforts to financing
and developing Sino-foreign joint ventures to establish telecommunications
networks in the PRC.

        Subsequent to the issuance of the Company's financial statements
for the year ended March 31, 1998, the Company's management determined that
the sale of ITV's business should have been accounted for as a discontinued
operations. Previously, the result of ITV's business was included in the
financial statements as continuing operations for the year ended March 31,
1996. As a result, the Statement of Operations and Statement of Cash Flow
for the year ended March 31, 1996, have been restated to show the
discontinued operations.

        The Company's management also determined that Hebei Equipment
should have been accounted for under the equity method of accounting, as
the minority shareholders have substantive participating rights under the
joint venture contracts. Previously, Hebei Equipment had been consolidated.
As a result, the financial statements as of March 31, 1998 and 1997, and
for the two years ended March 31, 1998, have been restated from amounts
previously reported to account for its subsidiary under the equity method
of accounting.

LIQUIDITY AND CAPITAL RESOURCES

        The Company has financed its operations primarily through equity
investments.

        Approximately $3,924,000 of cash was used in the Company's
operations for the fiscal year ended March 31, 1998, compared to cash used
of approximately $3,382,000 for the year ended March 31, 1997. The cash
flow from operating activities relates to increased as a result of the
increased selling, general & administrative expenses. During the fiscal
year ended March 31, 1996, the Company used approximately $2,887,000 in its
operating activities.

        The Company used approximately $393,000 in its investing activities
in the year ended March 31, 1998, compared to approximately $760,000 in the
year ended March 31, 1997. These uses are related primarily to the
investment in the Company's subsidiaries in Hebei province, PRC.

        The cash inflows from financing activities during the year ended
March 31, 1998 were generated primarily from the sale of $9,900,000 of
Preferred Stock through two offerings: (1) On June 12, 1997, the Company
issued 250 shares of Series C Convertible Preferred Stock at a purchase
price of $10,000 per share in consideration of $2,500,000. Proceeds from
this offering were approximately $2,093,900, which is net of $406,100 of
the Series C Shares which were repurchased by the Company. (2) On October
22, 1997, the Company issued 74 shares of the Company's Series E
Convertible Preferred Stock, at a purchase price of $100,000 per share, for
which the Company received $6,759,000 after placement agent's fees.

        During fiscal year ended March 31, 1997, the Company issued 150
shares of the Company's Series D Convertible Preferred Stock at a purchase
price of $10,000 per share in consideration of $1,500,000.

        During fiscal 1996, the Company received approximately $2,934,000
from its financing activities through: (i) the sale of approximately
$2,194,000 in Common Stock, and (ii) the receipt of shareholder loans of
approximately $740,000.

        The Company anticipates that its cash and cash equivalents should
be adequate to finance the Company's operating requirements for the current
fiscal year.

EQUITY ISSUANCE AND SERVICE AGREEMENTS

Common Stock issued in connection with conversion of Preferred Stock:

        During fiscal 1998, the Company issued 2,236,507 shares of its
Common Stock upon conversion of all outstanding shares of the Company's
Series D Convertible Preferred Shares , 4,507,639 shares of its Common
Stock upon conversion of all shares of its Series C Convertible Preferred
Stock and 106,646 shares of its Common Stock upon conversion of 0.8 share
of the Company's Series E Preferred Stock.

        Common stock issued in connection with stock option plans and
services performed:

        During fiscal 1998 the Company issued (i) 10,000 shares of common
stock to a former employee of the Company, upon the exercise of an option
issued pursuant to the Company's 1996 Stock Option Plan. The option had an
exercise price of $0.35 per share, (ii) 10,000 shares of common stock to
each of its four outside directors as compensation for services. The shares
issued had a combined value of $85,000, which was expensed as directors
compensation, (iii) 8,500 shares of its common stock, at market, to its
legal firm in lieu of $25,500 of legal billings, and (iv) 14,734 shares in
connection with other services at a market value of $41,457.

        During the fiscal year, the Company issued 1,019,465 shares of its
Common Stock, net of cancellation, into escrow for Promethean Investment
Group, LLC ("Promethean") pursuant to a Common Stock Investment Agreement
entered into between the Company and Promethean. The shares will be issued
to Promethean if the Company draws on funds from Promethean pursuant to the
Common Stock Investment Agreement.

        On July 30, 1996, the Company entered into an agreement with
Merrill Lynch (Asia Pacific) Limited ("Merrill Lynch") pursuant to which
Merrill Lynch was to act as a financial advisor to the Company and was to
assist the Company with strategic financing alternatives with respect to
the Company's PRC projects. The agreement was terminated in accordance with
its terms in December 1997.

        In October 1996, the Company entered into an agreement with two of
its law firms, to settle a portion of their accrued fees through the
issuance of stock options. Accordingly, the Company converted accrued legal
fees in the aggregate of approximately $98,000 into options to purchase an
aggregate of 65,064 shares of the Company's Common Stock at an exercise
price of $1.50 per share, the market value of the Company's common stock at
that time. A portion of the accrued legal fees were credited against gains
made by actual resale price. In addition, one firm continues to hold
options to purchase 10,102 additional shares of Common Stock against future
legal fees. The Company also agreed to register the underlying shares with
the Commission on Form S-8. The registration statement relating to these
shares was filed with the Commission on or about November 11, 1996.

        On October 15, 1996, the Company agreed to issue warrants to an
individual to purchase 200,000 shares of the Company's Common Stock. These
warrants were issued for services related to advising the Company with
respect to its Sino-foreign joint ventures and marketing activities in the
PRC. The warrants issued have a three year term and an exercise price of
$1.50, which was the market value of the Company's Common Stock at the time
of issuance of the warrants.

        On December 10, 1996, the Company agreed to issue to a consultant
5,000 shares of the Company's Common Stock with a market value of $18,125
(based on the fair market value at the time of issuance), in addition to
5,000 shares issued to the consultant in May 1996, which had a market value
of $45,625 (based on the fair market value at the time of issuance), for
professional executive search consulting services the consultant has been
providing to the Company in developing the composition of its management
and Board of Directors.

        The Company agreed to register shares of Common Stock underlying
the warrants issued to the individual referenced above and shares of Common
Stock issued to the consultant for consulting services, and certain shares
of Common Stock issued to the Company's Chief Executive Officer in lieu of
cash compensation. On or about December 31, 1996, the Company filed a
registration statement on Form S-8. The total number of shares covered by
the registration statement was 397,500.

        On or about October 19, 1996, the Company entered into a twelve
month financial advisory services agreement with an investment bank. The
services provided under this agreement relate to financial advisory
services, including, but not limited to, the development of a financing
strategy for the Company and the Company's projects in the PRC. The
agreement called for a $50,000 retainer and the payment of success fees for
raising capital for the Company and its projects. In addition, the Company
issued a warrant to purchase up to 600,000 shares of the Company's Common
Stock to the investment bank. This warrant has an exercise price of $2.00
per share, which was the market value of the Company's Common Stock at the
time of the issuance of the warrant. 300,000 of the warrants are vested,
and the additional 300,000 warrants will vest only if the investment bank
has raised a minimum of ten million dollars in any form of financing for
the Company.

        Future sales of shares of Common Stock by the Company and its
stockholders could adversely affect the prevailing market price of the
Common Stock. Pursuant to its Certificate of Incorporation, the Company has
the authority to issue 73,001,924 additional shares of Common Stock and
8,475,248 additional shares of preferred stock. The issuance of such shares
could result in the dilution of the voting power and other rights of the
currently issued and outstanding shares of Common Stock.

RESULTS OF OPERATIONS FOR THE YEARS ENDED MARCH 31, 1998 AND MARCH 31, 1997

        The Company has a limited operating history and has incurred
cumulative net losses since its inception. To date, the Company has not
generated any income from its subsidiaries telecommunications operations
and it has experienced net losses of $5,403,368 and $4,064,885 during the
fiscal years ended March 31, 1998 and 1997, respectively.

        Selling, general and administrative expenses ("SG&A") increased
from $3,563,568 during the year ended March 31, 1997, to $4,282,613 during
the year ended March 31, 1998, due to increased levels of salaries paid to
employees and legal and professional expenses incurred during the past
year.

        The equity in losses of the Company's unconsolidated subsidiary of
$140,524 recorded during the year ended March 31, 1997 and $606,647 during
the year ended March 31, 1998 represents the Company's share of losses
reported by Hebei Equipment for the year ended December 31, 1996 and
December 31, 1997, during which period the Company owned a sixty point
eight percent (60.8%) equity interest Hebei Equipment.

        The Company issued to the Hebei Provincial Government three million
options to purchase an equal number of shares of the Company's Common Stock
at a price of $3.0625 per share. In accordance with generally accepted
accounting principles, the Company has recorded their value of $1,837,500
and has amortized approximately $459,000. The issuance of these options is
a non-cash expense.

         Loss from abandoned assets relates to the assets of Netmatics
which have been written off for the total amount of $87,441.

        Interest expense during the year ended March 31, 1998, decreased to
approximately $126,000 from approximately $129,000 during the year ended
March 31, 1997, due to a reduction in the outstanding balance of
shareholder loans payable.

        Other income (net) of approximately $158,000 during the year ending
March 31, 1998 was primarily related to a tax refund previously paid.

        The Company's net loss increased 33% from $4,064,885 during the
year ended March 31, 1997, to $5,403,368 during the year ended March 31,
1998. This increase in net loss was primarily due to the shares of equity
loss from Hebei Equipment, amortization of stock options issued to the
Hebei Provincial Government, as well as increases in selling, general &
administrative expenses.


RESULTS OF OPERATIONS FOR THE YEARS ENDED MARCH 31, 1997 AND MARCH 31, 1996

        Following the sale by the Company of the assets of its subsidiary
ITV in January 1996 (the "Asset Sale"), the Company has focused its
business solely on establishing Sino-foreign joint ventures to develop
telecommunications networks in the PRC. In light of this change in
operations, the result of operations of ITV up to the Asset Sale was
included in the Statement of Operations as Loss from Discounted Operations
of $1,932,977. No revenue was recorded during the years ended March 31,
1996 and 1997 as the Company has not generated any revenue from its
subsidiaries telecommunications operations at the development stage.

        Selling, general and administrative expenses increased from
$2,515,554 during the year ended March 31, 1996 to $3,563,568 during the
year ended March 31, 1997 due primarily to increased levels of salaries
paid to employees and legal and professional expenses incurred over the
past year.


        The equity in losses of unconsolidated subsidiary of $500,000
recorded during the year ended March 31, 1996 represents the Company's
share of losses reported by Netmatics between January 17, 1996 and March
31, 1996, during which period the Company owned thirty-three percent (33%)
of the issued and outstanding common shares of Netmatics. Through a series
of secured debentures issued by Netmatics to its shareholders, and the
conversion of a note in the amount of 2,250,000 to equity, the Company's
ownership in Netmatics increased to 39%. Further, the Company has written
off $198,538 of investments it has made in Netmatics.

        Interest expense during the year ended March 31, 1997 decreased to
approximately $129,000 from approximately $242,000 during the year ended
March 31, 1996 due to a reduction in outstanding balance of shareholder
loans payable during the year ended March 31, 1997.

        The loss from abandoned assets of $130,840 recorded during the year
ended March 31, 1996 represents a non-recurring "write-off" of certain
remaining assets of ITV that were not sold in the ITV Asset Sale. The
Company wrote off the $130,840 book value because these assets would not
contribute to the generation of revenues for the Company in the future and
thus were considered impaired assets.

        The Company's net loss decreased 23% from $5,281,730 during the
year ended March 31, 1996 to $4,064,885 during the year ended March 31,
1997. This decrease in net loss was due to reductions in losses and
"write-offs" associated with the operations of ITV, which were terminated
following the ITV Asset Sale.


ITEM 7A.   QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKS.

        Not applicable.

ITEM 8.   FINANCIAL STATEMENTS AND SUPPLEMENTAL DATA

        The financial statements required by this Item 8 are attached
hereto as "Exhibit (a)(1)".

ITEM 9.   CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
          FINANCIAL DISCLOSURE

        None.


                                  PART III

ITEM 10.  DIRECTORS, EXECUTIVE OFFICERS AND KEY EMPLOYEES OF THE COMPANY

        The directors of the Company currently have terms which will end at
the next annual meeting of the stockholders of the Company or until their
successors are elected and qualified, subject to their prior death,
resignation or removal. Officers are appointed by and serve at the
discretion of the Board of Directors, subject to the rights of the officers
under their respective employment agreements. There are no family
relationships among any of the Company's directors and executive officers.

            NAME             AGE                     POSITION
   ----------------------    ---     --------------------------------------
   Joseph R. Wright, Jr.      59     Chairman of the Board of Directors,
                                       Chief Executive Officer and President
   Richard T. McNamar         59     Vice Chairman of the Board of Directors
   Richard S. Braddock        56     Director
   Drew Lewis                 66     Director
   Liang Jiangli              59     Director
   James R. Lilley            70     Director
   Michael H. Wilson          60     Director
   Michael J. Lim             34     Executive Vice President
   Albert G. Pastino          56     Senior Vice President, Chief Financial
                                       Officer and Treasurer
   James F. O'Brien           52     Senior Vice President, General Counsel
                                       and Corporate Secretary
   Xiao Jun                   41     Executive Vice President - AVIC China

        Joseph R. Wright, Jr. has served as the Company's Chairman of the
Board of Directors since May 1995, Chief Executive Officer since March 1996
and President since May 1996. Mr. Wright also serves as Chairman and member
of the Board of GRC International, Inc. a U.S. public company that provides
technical support to government and private entities, Co-Chairman of Baker
& Taylor Holdings, Inc., an international book and video distribution
company, a member of the Board of Travelers Group, a public company, and
PanAm Sat, a public company. From 1989 to 1994, Mr. Wright served as
Executive Vice President and Vice Chairman of W. R. Grace & Co., an
international chemicals and health care company, President of Grace Energy
Corporation and Chairman of Grace Environmental Company. From 1982 to 1989,
Mr. Wright held the positions of Director and Deputy Director of the Office
of Management and Budget, The White House, and was a member of President
Reagan's cabinet. Prior to 1982, he served as Deputy Secretary, United
States Department of Commerce, President of Citicorp Retail Services and
Retail Consumer Services, held posts in the United States Department of
Agriculture and the United States Department of Commerce, and was Vice
President and Partner of Booz. Allen & Hamilton, a management consulting
firm. He is also currently a member of the Board of Advisors of Barington
Capital Corporation and Great Lakes Pulp and Fiber Corporation, and a
Trustee of Hampton University.

        Richard T. McNamar has served as the Company's Vice Chairman of the
Board of Directors since September 1996. He was the founder and Chairman of
International Franchise, Inc., a firm that specialized in international
financial transactions, from 1995 to 1997. He was a Managing Director of
Oppenheimer & Co. from 1991 to 1994. Formerly, he was the Vice-Chairman of
The Bank of New England Corporation and subsidiaries from 1990 to 1991. Mr.
McNamar served as Deputy Secretary of the United States Treasury from 1981
to 1985. He served in the Nixon and Ford Administrations from 1972 to 1977,
where he served as the Executive Director of the Federal Trade Commission
from 1973 through 1977. Mr. McNamar is also currently a member of the
Executive Board of the Bretton Woods Committee and the Board of the
Institute of the Americas.

        Richard S. Braddock has served as a Director of the Company since
August 1997. He has been the Chairman of True North Communications, Inc. (a
public company) since 1997. He has served as a principal of Clayton,
Dubilier & Rice, Inc. from 1994 to 1995 and as the Chief Executive Officer
of Medco Containment Services from January 1993 to December 1993. Mr.
Braddock held various positions at Citicorp from 1973 through 1992
including that of President and Chief Operating Officer of Citicorp and its
principal subsidiary, Citibank, N.A., from January 1990 to November 1992
and as sector executive for worldwide consumer activities from 1985 to
1990. Mr. Braddock served as a director of Citicorp from 1985 to 1992. Mr.
Braddock serves on the Board of Directors of E*Trade Group, Inc., Eastman
Kodak Company, Cadbury Schweppes plc adr and True North Communications,
Inc., all publicly-held companies, and of Lincoln Center for the Performing
Arts. He is a trustee of the Cancer Research Institute. Mr. Braddock
received his bachelors degree from Dartmouth College and his M.B.A from the
Harvard Graduate School of Business Administration.

        Drew Lewis has served as a Director of the Company since May 1997.
Mr. Lewis served as Chairman and Chief Executive Officer of Union Pacific
Corporation from October 1987 to January 1997, and served as the Chief
Operating Officer of Union Pacific Corporation from April 1986 to October
1987. Prior to his positions with Union Pacific Corporation, Mr. Lewis
served as Chairman and Chief Executive Officer of Union Pacific Railroad
Company from April to October 1986. From 1983 to 1986, Mr. Lewis was
Chairman and Chief Executive Officer of Warner Amex Cable Communications.
He served in the Reagan Administration from January 1981 to February 1983
as U.S. Secretary of Transportation. Mr. Lewis also serves as a director to
American Express Company, FPL Group, Inc., Gannett Co., Inc., Gulfstream
Aerospace Corporation, Lucent Technologies and Union Pacific Resources
Group, Inc., all of which are publicly held companies.

        Liang Jiangli has served as a Director of the Company since October
1997. He has served as the Director of Hebei Electronics Industry
Department since September 1993. Mr. Liang also serves as the Chairman of
the Board of Hebei United Telecommunications Equipment Company Limited, the
joint venture subsidiary of the Company. From 1987 to September 1993, Mr.
Liang served as the Director of Hebei Electronics Bureau and the Deputy
Director of Hebei Machinery and Electronics Industry Department. From 1983
to 1987, Mr. Liang served as the Deputy Director of Hebei Electronics
Industry Bureau. From 1963 to 1983, Mr. Liang worked in a state owned
institute, focusing on technology studies and management. Mr. Liang is a
graduate of the Beijing Post and Telecommunications Institute.

        James R. Lilley has served as a Director of the Company since May
1997. Ambassador Lilley is currently a resident director at the American
Enterprise Institute ("AEI") which he joined in January 1993, and has
directed the Institute for Global Chinese Affairs at the University of
Maryland since 1996. Prior to his joining AEI, Ambassador Lilley served in
President Bush's Administration as the Assistant Secretary of Defense for
International Security Affairs from November 1991 to January 1993.
Ambassador Lilley was U.S. Ambassador to the People's Republic of China
from April 1989 to May 1991, and to the Republic of Korea from 1986 to
1989. Ambassador Lilley is the co-editor of Beyond MFN: Trade with China
and American Interests and is the author of the forward for the AEI
publication, Chinese Military Modernization. He has represented Hunt Oil of
Texas and United Technologies of Hartford, Connecticut in 1979 to 1980.
Ambassador Lilley worked for Archer-Daniels-Midland Co. and Westinghouse as
a business consultant.

        Michael H. Wilson has served as a Director of the Company since May
1997. He has been Vice-Chairman of RBC Dominion Securities, Inc. in
Toronto, Canada since 1995. Prior to 1994, Mr. Wilson held senior Federal
Cabinet posts with the Government of Canada in Finance, Industry, Science
and Technology and International Trade. Prior to his career in public
service, Mr. Wilson was Executive Vice-President of Dominion Securities
Limited. Mr. Wilson also serves on the Board of Directors of Amoco
Corporation and Rio Algom Limited, both publicly held companies. He is also
active in a number of professional and community organizations, including
The Clarke Institute of Psychiatry, The Aspen Institute and The Institute
of the Americas.

        Michael J. Lim has served as the Executive Vice President of the
Company since November 1995 and as the Chief Financial Officer from May
1996 through June 1997. Prior to his joining the Company, Mr. Lim was an
investment banker with Bear, Stearns & Co., Inc. from 1986 to 1988 and from
1991 to 1995. During the two and a half years prior to his joining the
Company, Mr. Lim served as Vice President of Bear Stearns Asia Limited,
where he advised Asian enterprises on a wide variety of financing
transactions, with particular focus on telecommunications and
infrastructure financings. Mr. Lim also worked as an investment banker with
the Chase Manhattan Bank from 1990 to 1991. Mr. Lim received his A.B. from
Harvard College in English Literature in 1985 and his M.B.A. from the Amos
Tuck School of Business Administration at Dartmouth in 1990.

        Albert G. Pastino was appointed in June 1997 to serve as a Senior
Vice President and Chief Financial Officer of the Company and was appointed
Treasurer of the Company in December 1997. From 1993 to 1997, Mr. Pastino
served as the President of Kisco Capital Company, Inc., an affiliate of
Kohlberg & Company, a private equity investment company. He also served on
the boards of directors of a number of Kohlberg & Company's portfolio
companies. From 1989 through 1992, Mr. Pastino served as Senior Vice
President and Chief Operating Officer of Fortis Private Capital, Inc., a
private equity investment company investing in expansion financing and
management buyouts. Mr. Pastino began his business career at Deloitte &
Touche LLP where he served as partner, and gained his investment banking
experience at Alex Brown & Sons, Incorporated. Mr. Pastino received an
M.B.A. from Fairleigh Dikinson University and a B.S. from St. Joseph's
University.

        James F. O'Brien was appointed in June 1997 to serve as a Senior
Vice President and General Counsel of the Company and was appointed
Corporate Secretary of the Company in May 1998. Mr. O'Brien was a senior
litigation partner at the law firm of Goulston and Storrs in Boston,
Massachusetts where he founded the litigation practice in 1978 and
specialized in complex financial transactions. He has served as an advisor
to U.S. corporations seeking business opportunities in Southeast Asia. Mr.
O'Brien received a J.D. from Boston College Law School and an A.B. from St.
John's Seminary in Boston.

        Xiao Jun has served as Executive Vice President - AVIC China since
December 1995. He also served as a Director from February 1995 through
October 1997, the Company's Secretary from February 1995 to January 1996
and as Chief Financial Officer from June 1995 to May 1996. He has been the
President of Xiao Hua International, Inc., an international steel trading
business based in California since June 1993. He served as the Vice
President of ITV from December 1994 to January 1996. From March 1990 to May
1993, Mr. Xiao was the Vice President of Chong Qing Special Metals Industry
Co. From 1985 to 1990, Mr. Xiao served as an engineer and project manager
at the representative office of IBM China/HK Corp. (Beijing). Mr. Xiao
received a bachelor's degree in physics from the Beijing Polytechnic
University in 1982.

        Timothy P. F. Crowley joined the Company in May 1995 and has served
as the Assistant Secretary of the Company since May 1998, and served as the
Secretary of the Company from January 1996 though May 1998. Prior to
joining the Company, Mr. Crowley worked in Corporate Administration at
Travelers Group. Mr. Crowley received his B.A. from Connecticut College in
Anthropology and Art History, and was enrolled in a graduate program in the
History of Art at New York University's Institute of Fine Arts from 1993 to
1994.

        The Board of Directors currently has an Audit Committee and a
Compensation Committee. The members appointed to the Audit Committee of the
Board of Directors during the fiscal year ended March 31, 1998 were Michael
H. Wilson, Chairman of the Committee, James R. Lilley and Richard T.
McNamar. The members appointed to the Compensation Committee of the Board
of Directors during the fiscal year ended March 31, 1998 were Richard S.
Braddock, Chairman of the Committee, Drew Lewis and Joseph R. Wright, Jr.

        Section 16(a) Beneficial Ownership Reporting Compliance. Section
16(a) of the Securities Exchange Act of 1934, as amended, requires the
Company's directors and executive officers and beneficial holders of more
than 10% of any class of the Company's equity securities to file with the
Commission initial reports of ownership and reports of changes in ownership
of such equity securities of the Company. Based solely upon a review of
such forms furnished to the Company, and on written representations from
certain reporting persons that no other reports were required for such
persons, the Company believes that all reports required pursuant to Section
16(a) with respect to its executive officers, directors and 10% beneficial
stockholders for the fiscal year ended March 31, 1997 were timely filed.


ITEM 11. EXECUTIVE COMPENSATION

SUMMARY COMPENSATION

        The following tables set forth certain information concerning
compensation for the fiscal years ended March 31, 1998, 1997 and 1996 of
certain of the Company's executive officers, including the Company's Chief
Executive Officer and all executive officers whose total annual salary and
bonus exceeded $100,000, for the fiscal year ended March 31, 1998 (the
"Named Executive Offices").

<TABLE>
<CAPTION>
                                                                                        Long Term
                                                                                      Compensation
                                                                                -----------------------
                                               Annual Compensation                       Awards
                                    ----------------------------------------    -----------------------
Name and                                                        Other Annual        Stock      Options/
Principal Position           Year    Salary ($)    Bonus ($)    Compensation     Awards ($)    SARS (#)
------------------          ------  ------------  ----------   -------------    -----------   ---------
<S>                          <C>         <C>        <C>          <C>               <C>          <C>
Joseph R. Wright             1998        392,967    50,000       (2)$30,000
  Chief Executive            1997        256,250                 (2)$30,000         $281,250    3,000,000
  Officer(1)                 1996        143,750                 (2)$30,000                     3,000,000

R. T. McNamar                1998        100,000                 (4)$37,500
  Vice Chairman (3)          1997                                                                 500,000
                             1996

Michael J. Lim               1998        253,417    75,000                                        250,000
   Executive Vice            1997        167,333
   President (5)             1996         79,615                                                1,000,000

Albert G, Pastino            1998        125,000    50,000                                        467,500
  Senior Vice                1997
  President, Chief           1996
  Financial Officer &
  Treasurer (6)

James F. O'Brien             1998        125,000    50,000                                        467,500
  Senior Vice                1997
  President, General         1996
  Counsel &
  Corporate Secretary (7)

Xiao Jun                     1998        175,000
  Executive Vice             1997        123,958
  President-AVIC             1996         57,990                                                  400,000
  China (8)
</TABLE>

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

(1)     Mr. Wright has served as the Company's Chief Executive Officer
        since March 14, 1996. He joined the Company as the Chairman of the
        Board of Directors on May 1, 1995.
(2)     During fiscal 1996, 1997 and 1998, the Company paid approximately
        $30,000 per year on behalf of Mr. Wright for certain personal tax
        and accounting services rendered by third parties for Mr. Wright.
(3)     Mr. McNamar  joined the Company on September 3, 1996 as Vice
        Chairman of the Board of Directors.
(4)     Mr. McNamar received 25,000 shares of the Company's Common Stock
        pursuant to his terms of employment with the Company, such shares
        having a value of $37,500 at the time of issuance in September 1997.
(5)     Mr. Lim joined the Company as the Executive Vice President -
        Operations on November 7, 1995 and served as the Company's Chief
        Financial Officer from May 1996 through June 15, 1997.
(6)     Mr. Pastino joined the Company as the Senior Vice President and
        Chief Financial Officer on June 16, 1997. He became the Treasurer
        of the Company on December 8, 1997.
(7)     Mr. O'Brien joined the Company as Senior Vice President and General
        Counsel on June 16, 1997. He became the Secretary of the Company on
        May 14, 1998.
(8)     Mr. Xiao joined the Company in 1995 as the Executive Vice President
        of AVIC-China.


OPTION AND SAR GRANTS DURING LAST FISCAL YEAR

        The Company issued 1,185,000 stock options and no SARs to its Named
Executive Officers during the fiscal year ended March 31, 1998.

OPTIONS EXERCISED IN LAST FISCAL YEAR AND FISCAL YEAR-END OPTION VALUES

        The following table sets forth certain information regarding option
exercises by the Named Executive Officers during the fiscal year 1998 and
options held by such Named Executive Officers on March 31, 1998:

<TABLE>
<CAPTION>
                                                   Number of Securities         Value of Unexercised
                                                  Underlying Unexercised         In-the-Money Options
                        Shares                  Options at Fiscal Year End      at Fiscal Year End(1)
                      Acquired on    Value      --------------------------    --------------------------
        Name           Exercise     Realized    Exercisable   Unexercisable   Exercisable   Unexercisable
        ----          -----------   --------    -----------   -------------   -----------   -------------
<S>                   <C>             <C>       <C>             <C>             <C>           <C>
Joseph R. Wright....                             6,000,000                    $5,775,000
R. T. McNamar.......                               250,000       250,000
Michael J. Lim......                             1,062,500       187,500         997,656       $105,469
Albert G. Pastino...                               300,625       166,875
James F. O'Brien....                               300,625       166,875
Xiao Jun............                               515,000                       495,113
</TABLE>

----------------
(1)     Based on a per share price of $1.3125, the closing price of the
        Common Stock as reported on the American Stock Exchange on June 26,
        1998, minus the exercise price of the option, multiplied by the
        number of shares underlying the Option.


EMPLOYMENT AGREEMENTS

        The Company has entered into employment agreements with six of its
executive officers, Messrs. Joseph R. Wright, Jr., Richard T. McNamar,
Michael J. Lim, Albert G. Pastino, James F. O'Brien and Xiao Jun.

        The Company entered into a five year employment agreement dated as
of April 15, 1995, and as amended on November 21, 1995 and September 6,
1996, with Joseph R. Wright, Jr., pursuant to which Mr. Wright agreed to
serve as the Company's Chairman of the Board of Directors, Chief Executive
Officer and President and to operate out of the Company's executive offices
located in New York, New York. The employment agreement initially provided
for an annual base salary of $50,000 during the year commencing April 15,
1995 and $300,000 during the year thereafter. The September 6, 1996
amendment to the employment agreement provides for the issuance of shares
of Common Stock in lieu of cash compensation as payment for the salary that
Mr. Wright had accrued from June 1995 through August 1996, at $1.50 per
share, the market price of the Common Stock on September 6, 1996. Further,
the amendment offers Mr. Wright an automatic extension of his contract of
one year on each April 14, unless the Board of Directors notifies Mr.
Wright 90 days prior to such date that such extension will not be made. The
Board of Directors also approved revising his salary for the first year
commencing on April 15, 1997 to $150,000, revising his salary for the
second year to $300,000, and increasing his salary in each year thereafter
by $100,000. The Board of Directors of the Company also approved the
issuance of an additional three million options to Mr. Wright on September
12, 1996. These options have an exercise price of $3.00 per share, the fair
market value on the date of grant, and vest with respect to fifty percent
of said options on each April 15, 1997 and April 15, 1998.

        In September 1996 the Company approved the issuance of 187,500
shares of the Company's Common Stock to Mr. Wright, paid in lieu of a
portion of cash compensation Mr. Wright had been accruing from June 1995
through October 15, 1996. The amount of salary accrued through October 15,
1996 was $281,250. The Common Stock was issued at $1.50 per share, the fair
market value of such shares at the time of the grant.

        Pursuant to the employment agreement, Mr. Wright was granted an
option to acquire 3,000,000 shares of Common Stock at an exercise price of
$0.35 per share, and an additional 3,000,000 shares at an exercise price of
$3.00 per share were granted on September 6, 1996. The option has vested
with respect to the 3,000,000 shares which have an exercise price of $0.35
per share, and with respect to 3,000,000 shares which have an exercise
price of $3.00 per share. The options issued to Mr. Wright have been issued
pursuant to the Company's 1996 Stock Option Plan and were based on the
market value of the Common Stock on the date of grant.

        On September 6, 1996, the Company entered into a one year verbal
employment agreement with Richard T. McNamar pursuant to which Mr. McNamar
will serve as Vice Chairman of the Company. He received 25,000 shares of
the Company's Common Stock upon commencing employment. Initially, Mr.
McNamar was part time, and negotiated to receive a contingent success fee
for financings he introduced or arranged for the Company. On October 1,
1996 Mr. McNamar became a full time employee and waived his rights to any
success fees. In his part time capacity, Mr. McNamar was issued an option
to purchase 250,000 shares of the Company's Common Stock at an exercise
price of $1.50 per share on September 6, 1996. He received an additional
option for 250,000 shares at an exercise price of $1.50 per share when he
became a full time employee on October 1, 1996. The exercise price of the
options were based on the market value of the Common Stock on the date of
grant. The Company and Mr. McNamar intend to sign a more definitive
employment agreement during the current fiscal year.

        On January 23, 1998, the Company entered into a five-year contract
with Mr. Lim, whereby Mr. Lim will serve as an Executive Vice President of
the Company. In his first year, Mr. Lim will receive an annual base salary
of $300,000 and stock options to acquire 250,000 shares of Common Stock at
an exercise price of $0.75 per share, the market price of the Company's
Common Stock, as reported on the American Stock Exchange, at the time the
grant was made. The base salary and additional option grants for subsequent
years of the contract will be determined by the Compensation Committee of
the Board of Directors.

        On October 15, 1997, the Company entered into five-year employment
agreements with each of Albert G. Pastino and James F. O'Brien. Mr. Pastino
will serve as a Senior Vice President and Chief Financial Officer of the
Company and will receive an annual base salary of $200,000 for the first
year and stock options to acquire 467,500 shares of Common Stock at an
exercise price of $2.125 per share. Mr. O'Brien will serve as a Senior Vice
President and General Counsel of the Company and will receive an annual
base salary of $200,000 for the first year and stock options to acquire
467,500 shares of Common Stock at an exercise price of $2.125 per share.
The exercise price of the options for Mr. Pastino and Mr. O'Brien was based
on the market price of the Company's Common Stock, as reported on the
American Stock Exchange, at the time the grants were made

EMPLOYEE STOCK OPTION PLANS

        As of February 8, 1995, the Company's Board of Directors and
stockholders approved the Company's 1995 Stock Option Plan (the "1995 Stock
Option Plan") in connection with the closing of the transactions
contemplated by the Reorganization Agreement. The Company has reserved up
to 500,000 shares of Common Stock for issuance under the 1995 Stock Option
Plan. The Company has granted options to purchase up to 321,800 shares of
Common Stock under the 1995 Stock Option Plan, 185,000 of which have been
exercised as of June 26, 1998.

The 1996 Stock Option Plan (the "1996 Stock Option Plan" and together with
the 1995 Stock Option Plan, the "Stock Option Plans") was adopted by the
Board of Directors on March 14, 1996 and by the Company's stockholders on
May 7, 1996. The Company has reserved for issuance thereunder an aggregate
of 12,000,000 shares of Common Stock. The Company has granted options to
purchase up to 9,350,000 shares of Common Stock under the 1996 Stock Option
Plan, 10,000 of which have been exercised. Of the 9,350,000 options granted
as of the date of this Report, 8,578,750 options have vested, and the
remaining 771,250 options may vest subject to certain schedules. The Board
of Directors has approved a provision in the 1996 Stock Option Plan which
will place a 6,000,000 share limit on the number of options that may be
granted under the 1996 Stock Option Plan to an employee in the fiscal year
ended March 31, 1996, and a 1,500,000 share limit in each fiscal year
thereafter.

        A description of each of the Company's Stock Option Plans is set
forth below. The description is intended to be a summary of the material
provisions of the Company's Stock Option Plans and does not purport to be
complete.

        Administration of and Eligibility Under Stock Option Plans. Each of
the Stock Option Plans, as adopted, provides for the issuance of options to
purchase shares of Common Stock to officers, directors, employees,
independent contractors and consultants of the Company and its
subsidiaries. The Stock Option Plans authorize the issuance of incentive
stock options ("ISOs"), and non-qualified stock options ("NSOs") and stock
appreciation rights ("SARs") to be granted by a committee (the "Committee")
to be established by the Board of Directors to administer the Stock Option
Plans.

        Subject to the terms and conditions of the Stock Option Plans, the
Committee will have the sole authority to determine: (a) the persons
("optionees") to whom options to purchase shares of Common Stock and SARs
will be granted, (b) the number of options and SARs to be granted to each
such optionee, (c) the price to be paid for each share of Common Stock upon
the exercise of such option, (d) the period within which each option and
SAR will be exercised and any extensions thereof, and (e) the terms and
conditions of each such stock option agreement and SAR agreement which may
be entered into between the Company and any such optionee.

        All officers, directors and employees of the Company and its
subsidiaries and certain consultants and other persons providing
significant services to the Company and its subsidiaries will be eligible
to receive grants of options and SARs under the Stock Option Plans.
However, only employees of the Company and its subsidiaries are eligible to
be granted ISOs.

        Stock Option Agreements. All options granted under the Stock Option
Plans will be evidenced by an option agreement or SAR agreement between the
Company and the optionee receiving such option or SAR. Provisions of such
agreements entered into under the Stock Option Plans need not be identical
and may include any term or condition which is not inconsistent with the
respective Stock Option Plan and which the Committee deems appropriate for
inclusion.

        Incentive Stock Options. Except for ISOs granted to stockholders
possessing more than ten percent (10%) of the total combined voting power
of all classes of the securities of the Company or its subsidiaries to whom
such ownership is attributed on the date of grant ("Ten Percent
Stockholders"), the exercise price of each ISO must be at least 100% of the
fair market value of the Company's Common Stock as determined on the date
of grant. ISOs granted to Ten Percent Stockholders must be at an exercise
price of not less than 110% of such fair market value.

        Each ISO must be exercised, if at all, within ten (10) years from
the date of grant, but, within five (5) years of the date of grant in the
case of ISOs granted to Ten Percent Stockholders.

        An optionee of an ISO may not exercise an ISO granted under the
Stock Option Plans so long as such person holds a previously granted and
unexercised ISO.

        The aggregate fair market value (determined as of time of the grant
of the ISO) of the Common Stock with respect to which the ISOs are
exercisable for the first time by the optionee during any calendar year
shall not exceed $100,000.

        As of the date of this Report, ISOs have been granted under the
1995 Stock Option Plan, subject to certain vesting schedules, to purchase
up to 300,000 shares of Common Stock, 185,000 of which have been exercised.
The 300,000 ISOs have an exercise price of $0.3555 per share.

        Further, as of the date of the Report, ISOs have been granted under
the 1996 Stock Option Plan, subject to certain vesting schedules, to
purchase up to 622,380 shares of Common Stock. These options have the
following per share exercise prices: 285,714 shares ($0.35), 250,000 shares
($0.75), 76,666 shares ($3.00) and 10,000 shares ($1.50).

        Non-Qualified Stock Options. The exercise price of each NSO will be
determined by the Committee on the date of grant. However, the exercise
price for the NSOs under the 1995 Stock Option Plan will in no event be
less than 85% of the fair market value of the Common Stock on the date the
option is granted, or not less than 110% of the fair market value of the
Common Stock on the date such option is granted in the case of an option
granted to a Ten Percent Stockholder. No such restriction exists with
respect to the exercise prices of NSOs granted under the 1996 Stock Option
Plan.

        The exercise period for each NSO will be determined by the
Committee at the time such option is granted, but in no event will such
exercise period exceed ten (10) years from the date of the grant.

        As of the date of this Report, NSOs have been granted under the
1995 Stock Option Plan, subject to certain vesting schedules, to purchase
up to 20,000 shares of Common Stock at an exercise price of $0.15 per share
and up to 1,800 shares of Common Stock at an exercise price of $5.00 per
share.

        As of the date of this Report, NSOs have been granted under the
1996 Stock Option Plan to purchase up to 8,727,620 shares of Common Stock,
subject to certain vesting schedules. These options have the following per
share exercise prices: 2,966,667 shares ($3.00), 935,000 shares ($2.125),
515,000 shares ($1.50) and 4,310,953 shares ($0.35).

        Stock Appreciation Rights. Each SAR granted under the Stock Option
Plans will entitle the holder thereof, upon exercise of the SAR, to receive
from the Company, in exchange therefor, an amount equal in value to the
excess of the fair market value on the date of exercise of one share of
Common Stock over its fair market value on the date of grant (or in the
case of an SAR granted in connection with an option, the excess of the fair
market value of one share of Common Stock at the time of exercise over the
option exercise price per share under the option to which the SAR relates),
multiplied by the number of shares of Common Stock covered by the SAR or
the option, or portion thereof, that is surrendered.

        SARs will be exercisable only at the time or times established by
the Committee. If an SAR is granted in connection with an option, the SAR
will be exercisable only to the extent and on the same conditions that the
related option could be exercised. The Committee may withdraw any SAR
granted under the Stock Option Plans at any time and may impose any
conditions upon the exercise of an SAR or adopt rules and regulations from
time to time affecting the rights of holders of SARs.

        As of the date of this Report, no SARs have been granted pursuant
to the 1995 Stock Option Plan, as part of the issuance of the 20,000 NSOs
and no SARs have been granted under the 1996 Stock Option Plan.

        Termination of Option and Transferability. In general, any
unexpired options or SARs granted under the Stock Option Plans will
terminate: (a) in the event of death or disability, pursuant to the terms
of the option agreement or SAR agreement, but not less than six (6) months
or more than twelve (12) months after the applicable date of such event,
(b) in the event of retirement, pursuant to the terms of the option
agreement or SAR agreement, but no less than thirty (30) days or more than
three (3) months after such retirement date, or (c) in the event of
termination of such person other than for death, disability or retirement,
until thirty (30) days after the date of such termination. However, the
Committee may in its sole discretion accelerate the exercisability of any
or all options or SARs upon termination of employment or cessation of
services.

        The options and SARs granted under the Stock Option Plans generally
will be non-transferable, except by will or the laws of descent and
distribution.

        Adjustments Resulting from Changes in Capitalization. The number of
shares of Common Stock reserved under the Stock Option Plans and the number
and price of Common Stock covered by each outstanding option or SAR under
the Stock Option Plans will be proportionately adjusted by the Committee
for any increase or decrease in the number of issued and outstanding shares
of Common Stock resulting from any stock dividends, split-ups,
consolidations, recapitalizations, reorganizations or like event.

        Amendment or Discontinuance of Stock Option Plan. The Board of
Directors has the right to amend, suspend or terminate the Stock Option
Plans at any time. Unless sooner terminated by the Board of Directors, the
1995 Stock Option Plan and the 1996 Stock Option Plan will terminate on
February 8, 2005 and May 7, 2006, respectively, the tenth anniversary date
of the effectiveness of each such Stock Option Plan.

        Directors and Officers Liability Insurance. The Company has
obtained directors' and officers' liability insurance with an aggregate
liability for the policy year, inclusive of costs of defense, in the amount
of $3,000,000. The insurance policy ending April 3, 1998, was renewed as of
April 4, 1998 and will expire April 3, 1999.

        Indemnification of Officers and Directors. The Company's
Certificate of Incorporation and Bylaws designate the relative duties and
responsibilities of the Company's officers, establish procedures for
actions by directors and stockholders and other items. The Company's
Certificate of Incorporation and Bylaws also contain extensive
indemnification provisions that will permit the Company to indemnify its
officers and directors to the maximum extent provided by Delaware law.

        In addition, the Company has adopted a form of indemnification
agreement (the "Indemnification Agreement") which provides the indemnitee
with the maximum indemnification allowed under applicable law. The Company
has not entered into Indemnification Agreements with any of its directors,
executives, employees or consultants as of the date of this Report. Since
the Delaware statute is non-exclusive, it is possible that certain claims
beyond the scope of the statute may be indemnifiable. The Indemnification
Agreements provide a scheme of indemnification which may be broader than
that specifically provided by Delaware law. It has not yet been determined,
however, to what extent the indemnification expressly permitted by Delaware
law may be expanded, and therefore the scope of indemnification provided by
the Indemnification Agreements may be subject to future judicial
interpretation.

        The Indemnification Agreement provides, in pertinent part, that the
Company shall indemnify an indemnitee who is or was a party or is
threatened, pending or completed action or proceeding whether civil,
criminal, administrative or investigative by reason of the fact that the
indemnitee is or was a director, officer, key employee or agent of the
Company or any subsidiary of the Company. The Company shall advance all
expenses, judgments, fines, penalties and amounts paid in settlement
(including taxes imposed on indemnitee on account of receipt of such
payouts) incurred by the indemnitee in connection with the investigation,
defense, settlement or appeal of any civil or criminal action or proceeding
as described above. The indemnitee shall repay such amounts advanced only
if it shall be ultimately determined that he or she is not entitled to be
indemnified by the Company. The advances paid to the indemnitee by the
Company shall be delivered within 20 days following a written request by
the indemnitee. Any award of indemnification to an indemnitee, if not
covered by insurance, would come directly from assets of the Company,
thereby affecting a stockholder's investment.

        Termination of Employment and Change of Control Agreements. Except
as set forth in employment agreements and stock option agreements of
certain employees of the Company and its subsidiaries, the Company has no
compensatory plans or arrangements which relate to the resignation,
retirement or any other termination of an executive officer or key employee
with the Company or a change in control of the Company or a change in such
executive officer's or key employee's responsibilities following a change
in control.


ITEM 12.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

        The following table sets forth the beneficial ownership of Common
Stock as of June 26, 1998 by: (i) each person known by the Company to
beneficially own 5% or more of the outstanding shares of Common Stock, (ii)
each director of the Company, (iii) each Named Executive Officer of the
Company and (iv) all directors and executive officers of the Company as a
group. Unless otherwise indicated below, to the knowledge of the Company,
all persons listed below have sole voting and investment power with respect
to their shares of Common Stock, except to the extent authority is shared
by spouses under applicable law. The information set forth in the table and
accompanying footnotes has been furnished by the named beneficial owners:

                 NAME OF                         NO. OF
             BENEFICIAL OWNER                   SHARES(1)      PERCENT(1)
             ----------------                   ---------      ----------
Polmont Investments Limited(2) ........          2,450,000            9.10
Jenny Sun(3) ..........................          2,450,000            9.10
Max Chian Yi Sun(4)....................          2,798,191           10.40
Joseph R. Wright, Jr.(5)...............          6,237,700           18.90
Richard T. McNamar(6)..................            275,000            1.01
Richard S. Braddock(7).................            208,592               *
Drew Lewis(8)..........................            197,518               *
Liang Jiangli..........................                  0               *
James R. Lilley(9).....................             61,074               *
Michael H. Wilson(10)..................            103,222               *
Michael J. Lim(11).....................          1,069,400            3.81
Albert G. Pastino(12) .................            359,199            1.31
James F. O'Brien(13) ..................            338,125            1.24
Xiao Jun(14)...........................            525,000            1.91
All executive officers and                       9,474,830           26.52
  Directors as a group (12 persons)(15)

--------------
*       Less than 1%.
(1)     Beneficial ownership is determined in accordance with the rules of
        the Securities and Exchange Commission and generally includes
        voting or investment power with respect to securities. Shares of
        Common Stock subject to options currently exercisable, or
        exercisable within 60 days of June 26, 1998, are deemed outstanding
        for computing the percentage of the person holding such options but
        are not deemed outstanding for computing the percentage of any
        other person.
(2)     The address of Polmont Investments Limited is c/o Havelet Trust
        Company, PO Box 3136, Road Town, Tortola, British Virgin Islands.
(3)     Includes 2,450,000 shares of Common Stock held by Polmont
        Investments Limited, of which Ms. Sun purports to have voting
        power. The address of Ms. Sun is 1052 North Beverly Drive, Beverly
        Hills, CA, 90210.
(4)     Includes 2,797,691 shares of Common Stock held by Occidental
        Worldwide Corporation of which Mr. Sun purports to have sole voting
        and investment power. The address of Mr. Sun is 126 JLN DEDAP,
        Taman Ampang Jaya, Trima Jaya, 68000 Ampang, Selangor, Malyasia.
(5)     Includes options to purchase 6,000,000 shares of Common Stock. The
        address of Mr. Wright is c/o AmTec, Inc., 599 Lexington Avenue,
        44th Floor, New York, New York 10022.
(6)     Includes options to purchase 250,000 shares of Common Stock.
(7)     Includes options to purchase 30,000 shares of Common Stock.
(8)     Includes options to purchase 30,000 shares of Common Stock.
(9)     Includes options to purchase 30,000 shares of Common Stock.
(10)    Includes options to purchase 30,000 shares of Common Stock.
(11)    Includes options to purchase 1,062,500 shares of Common Stock.
(12)    Includes options to purchase 338,125 shares of Common Stock.
(13)    Includes options to purchase 338,125 shares of Common Stock.
(14)    Includes options to purchase 515,000 shares of Common Stock.
(15)    Includes options to purchase 8,723,750 shares of Common Stock of
        the Company.


ITEM 13.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

See Footnote 12 to the Consolidated Financial Statements - "Related Party
Transactions."


                                  PART IV

ITEM 14.  EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K

(A)(1) FINANCIAL STATEMENTS:  The following financial statements and
supplemental  data are filed:

        Report of Independent Auditors
        Consolidated Balance Sheets
        Consolidated Statements of Operations
        Consolidated Statements of Stockholders' Equity
        Consolidated Statements of Cash Flows
        Notes to Consolidated Financial Statements

   (2) FINANCIAL STATEMENT SCHEDULES: All applicable financial statement
schedules have been omitted because the required information is included in
the consolidated financial statements and notes thereto filed as Exhibit
(a) (1).

(B) REPORTS ON FORM 8-K. No Reports on Form 8-K were filed by the Company
during the fourth quarter of the fiscal year ending March 31, 1998.

(C)   EXHIBITS

        The following exhibits, which are furnished with this Annual Report
or incorporated herein by reference, are filed as part of this Annual
Report:

EXHIBIT
NUMBER                           EXHIBIT DESCRIPTION
-------                          -------------------
  2.1     Agreement for Sale of Assets by and between ITV Communications,
          Inc. and Netmatics, Inc., dated January 11, 1996, and Promissory
          Note and Security Agreement dated January 16, 1996(1)
  2.2     Agreement of Merger between AVIC Group International, Inc., a
          Colorado corporation, with and into AVIC Group International,
          Inc., a Delaware corporation dated July 10, 1996(8)
  3.1     Amendments  to Articles of  Incorporation  of the Company dated
          June 7, 1996 and June 10, 1996(5)
  3.2     Restated Certificate of Incorporation of the Company(7)
  3.3     Certificate of Ownership and Merger Merging China
          Telecommunications and Technologies, Inc. into the Company(9)
  3.4     Certificate of Designations of Preferences of Series C Convertible
          Preferred Stock of the Company(9)
  3.5     Certificate of Designations of Preferences of Series D Convertible
          Preferred Stock of the Company(7)
  3.6     Certificate of Designations of Preferences of Series E Convertible
          Preferred Stock of the Company(10)
  3.7     Restated Bylaws of the Company
  4.1     Specimen Common Stock Certificate(9)
 10.1     1995 Stock Option Plan(2)
 10.2     1996 Stock Option Plan(2)
 10.3     Real Property lease between Lexreal Associates and the Company
          dated May 8, 1995(2)
 10.4     Employment  Agreement between Joseph R. Wright, Jr. and the
          Company dated as of April 15, 1995(3), and amendments thereto
          dated as of November 21 1995(4) and September 12, 1996(6)
 10.5     Employment Agreement between Michael J. Lim and the Company dated
          as of November 6, 1995(4)
 10.6     Employment Agreement between Xiao Jun and the Company dated as of
          January 1, 1996(4)
 10.7     Employment Agreement between Albert G. Pastino and the Company
          dated as of October 15, 1997(12)
 10.8     Employment Agreement between James F. O'Brien and the Company
          dated as of October 15, 1997(12)
  10.9    Employment Agreement between Michael J. Lim and the Company dated
          January 23, 1998
  10.10   Form of Indemnification Agreement for directors and officers of
          the Company(8)
  10.11   Common Stock Investment Agreement between Promethean Investment
          Group L.L.C. and the Company dated March 31, 1997, as amended on
          April 29, 1997(9)
  10.12   China Paging Networks Preliminary Agreement between Beijing CATCH
          Communications Group Co. and the Company dated April 1995(3)
  10.13   Mobile Telephone Network Preliminary Agreement between Beijing
          CATCH Communications Group Co. and the Company dated April 27,
          1995(3)
  10.14   Cellular Telephone Network Preliminary Agreement between Beijing
          CATCH Communications Group Co., Tweedia International Limited and
          the Company dated April 1995(3)
  10.15   Memorandum of Understanding between Hebei United Communications
          Equipment Company and the Company dated May 1, 1995(3)
  10.16   Letter of Intent between Hebei United Communications Equipment
          Company and the Company dated October 10, 1995(4)
  10.17   Joint Venture Contract between Hebei United Communications
          Equipment Company and NTTI dated December 22, 1995(5)
  10.18   Agreement between Hebei United Communications Equipment Company
          and the Company dated March 22, 1996(5)
  10.19   Joint Venture Contract between Hebei United Telecommunications
          Development Company, Beijing CATCH Communications Group Co. and
          the Company dated September 20, 1996(9)
  10.20   Project Cooperation Contract between China United
          Telecommunications Co. and Hebei United Telecommunications
          Engineering Company Limited dated February 9, 1996(9)
  10.21   Term Loan Agreement between Hebei United Telecommunications
          Engineering Company Limited and Bank of Tokyo-Mitsubishi, Ltd.
          dated August 5, 1996(9)
  10.22   Project Cooperation Contract between Hebei Cable Television
          Station and Hebei United Communications Equipment Company Limited
          dated April 8, 1997(9)
 21.1     Subsidiaries of the Company
 23.1     Consent of Deloitte & Touche LLP
 23.2     Consent of Singer, Lewak, Greenbaum & Goldstein
 27       Financial Data Schedule

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

(1)  Previously filed as part of the Company's Current Report on Form 8-K
     dated January 19, 1996.
(2)  Previously filed as part of the Company's Transition Report on Form
     10-KSB for the transition period from October 1, 1994 to March 31,
     1995.
(3)  Previously filed as part of the Company's Current Report on Form 8-K
     dated May 1, 1995. (4) Previously filed as part of the Company's
     Current Report on Form 8-K dated December 22, 1995.
(5)  Previously filed as part of the Company's Annual Report on Form 10-KSB
     for the fiscal year ended March 31, 1996.
(6)  Previously filed as part of the Company's Registration Statement on
     Form S-8 filed on January 31, 1997.
(7)  Previously filed as part of the Company's Current Report on Form 8-K
     dated March 6, 1997.
(8)  Previously filed as part of the Company's Definitive Proxy Statement
     dated April 18, 1996.
(9)  Previously filed as part of the Company's Annual Report on Form 10-KSB
     for the fiscal year ended March 31, 1997.
(10) Previously filed as part of the Company's Quarterly Report on Form
     10-Q/A dated September 30, 1997.
(11) Previously filed as part of the Company's Current Report on Form 8-K
     dated December 8, 1997.
(12) Previously filed as part of the Company's Quarterly Report on Form
     10-Q dated December 31, 1997.




                                 SIGNATURES

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

                                       AMTEC, INC.

                                       By  /s/ Joseph R. Wright, Jr.
                                         --------------------------------
                                         Joseph R. Wright, Jr.
                                         Chairman of the Board,
                                         Chief Executive Officer and
                                             President

Date:  July 14, 1999


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


         SIGNATURE                      TITLE                      DATE
         ---------                      -----                      ----

/s/ Joseph R. Wright, Jr.      Chairman of the Board of        July 14, 1999
---------------------------    Directors, Chief Executive
Joseph R. Wright, Jr.          Officer and President
                               (Principal Executive Officer)


/s/ Richard T. McNamar         Vice Chairman of the Board      July 14, 1999
---------------------------    of Directors
Richard T. McNamar


/s/ Richard S. Braddock        Director                        July 14, 1999
---------------------------
Richard S. Braddock


/s/ Drew Lewis                 Director                        July 14, 1999
---------------------------
Drew Lewis


/s/ Liang Jiangli              Director                        July 14, 1999
---------------------------
Liang Jiangli


/s/ James R. Lilley            Director                        July 14, 1999
---------------------------
James R. Lilley


/s/ Michael H. Wilson          Director                        July 14, 1999
---------------------------
Michael H. Wilson


/s/ Albert G. Pastino         Senior Vice President, Chief     July 14, 1999
---------------------------   Financial Officer and
Albert G. Pastino             Treasurer (Principal Financial
                              and Accounting Officer)






TABLE OF CONTENTS
-----------------------------------------------------------------------------

                                                                      PAGE

AMTEC, INC. AND SUBSIDIARIES

INDEPENDENT AUDITORS' REPORT                                           F-1

REPORT OF INDEPENDENT CERTIFIED ACCOUNTANTS                            F-2

FINANCIAL STATEMENTS FOR THE YEARS ENDED
  MARCH 31, 1998 (Restated),
  1997 (Restated) AND 1996 (Restated):

  Consolidated Balance Sheets                                          F-3
  Consolidated Statements of Operations                                F-4
  Consolidated Statements of
    Stockholders' Equity (Deficiency)                                  F-5
  Consolidated Statements of Cash Flows                            F-6 - F-7
  Notes to Consolidated Financial Statements                       F-8 - F-29



HEBEI UNITED TELECOMMUNICATIONS EQUIPMENT CO., LTD.


INDEPENDENT AUDITORS' REPORT                                          F-30

FINANCIAL STATEMENTS FOR THE PERIOD
FROM APRIL 29, 1997 (COMMENCEMENT OF
  OPERATIONS) TO DECEMBER, 1997:

  Balance Sheets                                                      F-31
  Statement of Operations                                             F-32
  Statement of Investors' Equity                                      F-33
  Statement of Cash Flows                                             F-34
  Notes to Financial Statements                                    F-35 - F-40

HEBEI UNITED TELECOMMUNICATIONS ENGINEERING CO., LTD.


INDEPENDENT AUDITORS' REPORT                                          F-41

FINANCIAL STATEMENTS FOR THE YEAR ENDED
 DECEMBER 31, 1997 AND  PERIOD FROM
 JANUARY 31, 1996 (COMMENCEMENT OF OPERATIONS)
 TO DECEMBER, 1996:

  Balance Sheets                                                      F-42
  statements of Operations                                            F-43
  Statements of Investors' Equity                                     F-44
  Statements of Cash Flows                                            F-45
  Notes to Financial Statements                                    F-46 - F-53





INDEPENDENT AUDITORS' REPORT


To the Board of Directors and Stockholders
AmTec Inc. (formerly AVIC
Group International Inc. and Subsidiaries)

We have audited the accompanying consolidated balance sheets of AmTec Inc.
and subsidiaries (formerly AVIC Group International Inc. and Subsidiaries)
as of March 31, 1998 and 1997, and the related consolidated statements of
operations, stockholders' equity and cash flows for the years then ended.
These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these
consolidated financial statements based on our audits.

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

In our opinion, such consolidated financial statements present fairly, in
all material respects, the financial position of the Company as of March
31, 1998 and 1997, and the results of its operations and its cash flows for
the years then ended, in conformity with generally accepted accounting
principles.

As discussed in Note 15, the accompanying 1998 and 1997 financial
statements have been restated.



DELOITTE & TOUCHE LLP

New York, New York
June 11, 1998 (May 25, 1999, as to matters discussed in Note 15)





REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS

Board of Directors and Stockholders
AmTec Inc.

We have audited the accompanying consolidated statements of operations,
stockholders' equity, and cash flows of AmTec Inc. and subsidiaries
(formerly AVIC Group International, Inc., and Subsidiaries) for the year
ended March 31, 1996. These financial statements are the responsibility of
the Company's management. Our responsibility is to express an opinion on
these financial statements based on our audit.

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

In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated results of
operations and cash flows of AmTec Inc. and subsidiaries (formerly AVIC
Group International, Inc., and Subsidiaries) for the year ended March 31,
1996, in conformity with generally accepted accounting principles.

The accompanying consolidated financial statements have been prepared
assuming that the Company will continue as a going concern. During the year
ended March 31, 1996, the Company had a net loss of $5,281,730. Recovery of
the Company's assets is dependent upon future events, the outcome of which
is indeterminable. In addition, successful completion of the Company's
development program and its transition, ultimately, to the attainment of
profitable operations is dependent upon obtaining adequate financing to
fulfill its development activities and achieving a level of sales adequate
to support to Company's cost structure. These factors, among others, as
discussed in Note 1 to the financial statements, raise substantial doubt
about the Company's ability to continue as a going concern. The
consolidated financial statements do not include any adjustments that might
result from the outcome of the uncertainty.

As discussed in Note 14, the accompanying 1996 financial statements have
been restated.



SINGER LEWAK GREENBAUM & GOLDSTEIN LLP

Los Angeles, California
June 18, 1996 (May 25, 1999, as to matters discussed in Note 14)





<TABLE>
<CAPTION>

AMTEC INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS
MARCH 31, 1998 AND 1997
---------------------------------------------------------------------------------------------
                                                                    1998           1997
ASSETS                                                          (AS RESTATED; SEE NOTE 15)
<S>                                                                <C>            <C>
CURRENT ASSETS:
  Cash                                                             $2,134,662     $1,346,713
  Accounts receivable                                                 114,661              -
  Prepaid expenses and other current assets                           108,082        171,921
                                                                   -----------    ----------
           Total current assets                                     2,357,405      1,518,634

  Investments in and advances to unconsolidated subsidiary          5,074,217      2,221,476
  Property, plant and equipment, net                                  139,136        153,356
  Office lease deposit                                                112,600        111,500
                                                                   -----------    ----------
           Total assets                                            $7,683,358     $4,004,966
                                                                   ===========    ==========

LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
  Accounts payable                                                 $  541,888     $  261,193
  Accrued expenses                                                    792,006        782,132
  Loans payable - shareholders                                      1,452,553      2,413,553
                                                                   -----------    ----------
          Total current liabilities                                 2,786,447      3,456,878
                                                                   -----------    ----------
COMMITMENT AND CONTINGENCY
STOCKHOLDERS' EQUITY:
  Preferred Stock: authorized 10,000,000 shares:
    Series A Convertible Preferred Stock: $.001 par value; 0
    and 1,524,178 shares issued and outstanding in 1998 and 1997,
    respectively                                                            -          1,524

    Series D Convertible Preferred Stock: $.001 par value; 0
    and 150 shares issued and outstanding in 1998 and 1997,
    respectively                                                            -              1

    Series E Convertible Preferred Stock: $.001 par value; 73
    and 0 shares issued and outstanding in 1998 and 1997,
    respectively                                                            1              -

  Common stock:  $.001 par value, authorized 100,000,000
  shares; 26,532,502 and 31,257,921 issued and outstanding
  in 1998 and 1997, respectively                                       26,533         31,258
  Additional paid-in capital                                       33,149,142     25,200,877
  Accumulated deficit                                             (27,394,590)   (20,592,536)
  Nonrefundable equipment purchase deposit                                   -    (4,572,536)
  Nonemployee deferred option cost, net                            (1,378,125)             -
  Warrants                                                            493,950        479,500
                                                                   -----------    ----------
TOTAL STOCKHOLDERS' EQUITY                                          4,896,911        548,088
                                                                   ----------     ----------
TOTAL LIABILITIES & STOCKHOLDERS' EQUITY                           $7,683,358     $4,004,966
                                                                   ===========    ==========
</TABLE>
See notes to consolidated financial statements.



<TABLE>
<CAPTION>
AMTEC INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS
YEARS ENDED MARCH 31, 1998, 1997 AND 1996
-----------------------------------------------------------------------------------------------------
                                                             1998           1997            1996
                                                                                        (AS RESTATED;
                                                           (AS RESTATED; SEE NOTE15)      SEE NOTE 14)

<S>                                                       <C>            <C>            <C>
REVENUES                                                  $   -          $   -          $   -
                                                          ------------   ------------   ------------
EXPENSES
  Selling, general and administrative                      4,282,613      3,563,568      2,515,554
                                                          ------------   ------------   ------------
LOSS FROM CONTINUING OPERATIONS                           (4,282,613)    (3,563,568)    (2,515,554)
                                                          ------------   ------------   ------------
OTHER INCOME (EXPENSE):
  Amortization of stock options granted
    to non employees                                        (459,375)             -              -
  Loss from abandoned assets                                 (87,441)             -       (130,840)
  Interest expense                                          (125,586)      (129,039)      (241,856)
  Other - net                                                158,294        (33,216)         7,617
  Write off of investment in affiliate                              -      (198,538)             -
                                                          ------------    ------------  ------------
           Total other expense                              (514,108)      (360,793)      (365,079)
                                                          ------------    ------------  ------------
LOSS FROM CONTINUING OPERATIONS
   BEFORE EQUITY IN LOSSES OF
   UNCONSOLIDATED SUBSIDIARY                               (4,796,721)    (3,924,361)   (2,880,633)
Equity in losses of unconsolidated subsidiary                (606,647)      (140,524)     (500,000)
                                                          ------------    ------------  ------------
LOSS FROM CONTINUING OPERATIONS                            (5,403,368)    (4,064,885)   (3,380,633)
                                                          ------------    ------------  ------------
DISCONTINUED OPERATIONS:
  Loss from discontinued operations                                  -              -   (1,932,977)
  Gain on sale of discontinued operations                            -              -       31,880
                                                          ------------    ------------  ------------
LOSS FROM DISCONTINUED OPERATIONS                                    -              -   (1,901,097)
                                                          ------------    ------------  ------------
NET LOSS                                                   (5,403,368)    (4,064,885)   (5,281,730)
PREFERRED STOCK DIVIDEND
                                                            1,398,686         10,000         -
                                                          ------------    ------------  ------------
LOSS APPLICABLE TO COMMON SHAREHOLDERS                    $(6,802,054)   $(4,074,885)  $(5,281,730)
                                                         =============   =============  ============
BASIC LOSS PER SHARE:
     Loss from continuing operations                        $   (0.23)     $   (0.14)    $   (0.13)
     Loss from discontinued operations
                                                              -              -               (0.08)
                                                          ------------    ------------  ------------
BASIC LOSS PER COMMON SHARE                                 $   (0.23)     $   (0.14)    $   (0.21)
                                                          ============   =============  =============
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING                 29,843,712     29,102,347    25,651,045
                                                          ============   =============  =============
</TABLE>

See notes to consolidated financial statements.


<TABLE>
<CAPTION>

AMTEC INC. AND SUBSIDIARIES
YEARS ENDED MARCH 31, 1998,1997 AND 1996
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY/(DEFICIENCY)
-------------------------------------------------------------------------------------------------------------------------------

                                                        SERIES A           SERIES B           SERIES C            SERIES D
                                 COMMON STOCK        PREFERRED STOCK     PREFERRED STOCK    PREFERRED STOCK    PREFERRED STOCK
                           ----------------------  -------------------   ---------------    ----------------   ---------------
                             SHARES        AMOUNT   SHARES      AMOUNT   SHARES    AMOUNT   SHARES    AMOUNT   SHARES    AMOUNT
<S>                        <C>           <C>        <C>         <C>       <C>      <C>       <C>      <C>       <C>      <C>
BALANCE, April 1, 1995     25,243,409      25,244       -            -        -         -        -         -        -         -

Issuance of Series A
  preferred stock for
  interest in deposit,
  December 1995                   -            -   1,524,178     1,524        -         -        -         -        -         -
Sale of common stock
  for cash                  1,302,020       1,302        -           -        -         -        -         -        -         -
Conversion of
  stockholders' loans
  to common stock,
  February 1996             1,891,553       1,891        -           -        -         -        -         -        -         -
Equipment purchase
  deposit                         -            -         -           -        -         -        -         -        -         -
Net loss                          -            -         -           -        -         -        -         -        -         -
                           ----------    --------  ---------  --------   -------  -------  --------  -------   -------  -------

BALANCE, March 31, 1996    28,436,982      28,437  1,524,178    1,524         -         -        -         -        -         -

Issuances of Series B
  preferred stock                 -            -         -           -        -       100        1         -        -         -
Conversion of
  Series B shares           1,507,477       1,507        -           -        -      (100)      (1)        -        -         -
Issuance of Series D
  preferred stock                 -            -         -           -        -         -        -         -      150         1
Common shares issued
  for services rendered        90,962          91        -           -        -         -        -         -        -         -
Common shares issued
  to employees as
  compensation                212,500         213        -           -        -         -        -         -        -         -
Common shares issued
  for directors fees           10,000          10        -           -        -         -        -         -        -         -
Sale of common shares       1,000,000       1,000        -           -        -         -        -         -        -         -
Cumulative foreign
  currency exchange loss          -            -         -           -        -         -        -         -        -         -
Preferred dividends               -            -         -           -        -         -        -         -        -         -
Warrants                          -            -         -           -        -         -        -         -        -         -
Net loss                          -            -         -           -        -         -        -         -        -         -
                           ----------    --------  ---------  --------   -------  -------  --------  -------   -------  -------

BALANCE, March 31, 1997
  (As Restated, see
   note 15)                31,257,921      31,258  1,524,178    1,524         -        -         -        -       150         1

Exercise of employee
  stock options                69,000          69        -           -        -         -        -         -        -         -
Issuance of Series C
  preferred stock                 -            -         -           -        -         -        -         -        -         -
Common shares issued
  for services rendered        23,233          23        -           -        -         -        -         -        -         -
Conversion of Series D
  shares to common
  stock                     2,236,507       2,237        -           -        -         -        -         -        -         -
Common stock investment
  agreement - net of
  cancellation              1,019,465       1,019        -           -        -         -        -         -        -         -
Common shares issued
  for directors fees           40,000          40        -           -        -         -        -         -        -         -
Cancellation of
  Series A preferred              -            -  (1,524,178)  (1,524)        -         -        -         -        -         -
Cancellation of common
  stock                   (12,727,909)    (12,728)       -           -        -         -        -         -        -         -
Tweedia loan
  cancellation                    -            -         -           -        -         -        -         -        -         -
Allocation of
  non-refundable
  deposit from former
  affiliate                       -            -         -           -        -         -        -         -        -         -
Other                             -            -         -           -        -         -        -         -        -         -
Conversion of Series C
  shares to common
  stock                     4,507,639       4,508        -           -        -         -        -         -        -         -
Issuance of Series E
  preferred stock                 -            -         -           -        -         -        -         -        -         -
Conversion of Series E
  shares to common
  stock                       106,646         107        -           -        -         -        -         -        -         -
Buyback of Series C
  preferred stock                 -            -         -           -        -         -        -         -        -         -
Deferred financing
  costs, net of
  amortization                    -            -         -           -        -         -        -         -        -         -
Stock options issued
  to third party                  -            -         -           -        -         -        -         -        -         -
Cumulative foreign
  currency exchange
  loss                            -            -         -           -        -         -        -         -        -         -
Advance to joint
  venture partner                 -            -         -           -        -         -        -         -        -         -
Preferred stock
  dividends                       -            -         -           -        -         -        -         -        -         -
Cancellation of
  Warrants                        -            -         -           -        -         -        -         -        -         -
Net loss                          -            -         -           -        -         -        -         -        -         -
                           ----------    --------  ---------  --------   -------  -------  --------  -------   -------  -------

BALANCE, March 31, 1998
  (As Restated, see
  note 15)                 26,532,502    $ 26,533         -        $0         -       $0         -       $0         -        $0
                           ==========    ========  =========  ========   =======  =======  ========  =======   =======  =======

<CAPTION>
-------------------------------------------------------------------------------------------------------------------------------
                                    SERIES E
                                PREFERRED STOCK                ADDITIONAL                  EQUIPMENT       DEFERRED
                             --------------------               PAID-IN     ACCUMULATED    PURCHASE         OPTION
                             SHARES        AMOUNT   WARRANTS    CAPITAL       DEFICIT       DEPOSIT          COSTS       TOTAL

<S>                            <C>         <C>       <C>       <C>          <C>              <C>           <C>          <C>
BALANCE, April 1, 1995            -            -          -    9,995,265    (11,245,921)          -              -     (1,225,412)

Issuance of Series A
  preferred stock for
  interest in deposit,
  December 1995                   -            -          -    4,571,012              -           -              -      4,572,536
Sale of common stock
  for cash                        -            -          -    2,192,681              -           -              -      2,193,983
Conversion of
  stockholders' loans
  to common stock,
  February 1996                   -            -          -    1,889,662              -           -              -      1,891,553
Equipment purchase
  deposit                         -            -          -           -               -    (4,572,536)           -     (4,572,536)
Net loss                          -            -          -           -      (5,281,730)          -              -     (5,281,730)
                             ---------  ---------  --------  -----------   ------------   -----------  ------------   -----------

BALANCE, March 31, 1996           -            -          -   18,648,620    (16,527,651)   (4,572,536)           -     (2,421,606)

Issuances of Series B
  preferred stock                 -            -          -    2,341,218              -            -             -      2,341,219
Conversion of
  Series B shares                 -            -          -       (1,506)             -            -             -             -
Issuance of Series D
  preferred stock                 -            -          -    1,499,999              -            -             -      1,500,000
Common shares issued
  for services rendered           -            -          -      316,249              -            -             -        316,340
Common shares issued
  to employees as
  compensation                    -            -          -      318,538              -            -             -        318,751
Common shares issued
  for directors fees              -            -          -       89,990              -            -             -         90,000
Sale of common shares             -            -          -    1,999,000              -            -             -      2,000,000
Cumulative foreign
  currency exchange loss          -            -          -       (1,231)             -            -             -         (1,231)
Preferred dividends               -            -          -      (10,000)             -            -             -        (10,000)
Warrants                          -            -    479,500           -               -            -             -        479,500
Net loss                          -            -          -           -      (4,064,885)           -             -     (4,064,885)
                             ---------  ---------  --------  -----------   ------------   -----------  ------------   -----------

BALANCE, March 31, 1997
  (As Restated, see
   note 15)                       -            -    479,500   25,200,877    (20,592,536)   (4,572,536)           -        548,088

Exercise of employee
  stock options                   -            -          -       34,681              -            -             -         34,750
Issuance of Series C
  preferred stock                 -            -          -    2,499,999              -            -             -      2,500,000
Common shares issued
  for services rendered           -            -          -       66,934              -            -             -         66,958
Conversion of Series D
  shares to common
  stock                           -            -          -      129,673              -            -             -        131,909
Common stock investment
  agreement - net of
  cancellation                    -            -          -       (1,019)             -            -             -              0
Common shares issued
  for directors fees              -            -          -       84,960              -            -             -         85,000
Cancellation of
  Series A preferred              -            -          -   (4,571,012)             -     4,572,536            -              0
Cancellation of common
  stock                           -            -          -       12,728              -            -             -              0
Tweedia loan
  cancellation                    -            -          -       25,000              -            -             -         25,000
Allocation of
  non-refundable
  deposit from former
  affiliate                       -            -          -      850,000              -            -             -        850,000
Other                             -            -          -         (580)             -            -             -           (580)
Conversion of Series C
  shares to common
  stock                           -            -          -       (4,508)             -            -             -             (1)
Issuance of Series E
  preferred stock                    74        1          -    6,759,000              -            -             -      6,759,001
Conversion of Series E
  shares to common
  stock                              (1)       -          -         (107)             -            -             -              0
Buyback of Series C
  preferred stock                 -            -          -     (406,100)             -            -             -       (406,100)
Deferred financing
  costs, net of
  amortization                    -            -    161,450     (229,415)             -            -             -        (67,965)
Stock options issued
  to third party                  -            -          -    1,837,500              -            -    ($1,378,125)      459,375
Cumulative foreign
  currency exchange
  loss                            -            -          -        1,844              -            -             -          1,844
Advance to joint
  venture partner                 -            -          -     (540,000)             -            -             -       (540,000)
Preferred stock
  dividends                       -            -          -    1,398,686     (1,398,686)           -             -              0
Cancellation of
  Warrants                        -            -   (147,000)          -               -            -             -       (147,000)
Net loss                          -            -          -           -      (5,403,368)           -             -     (5,403,368)
                             ---------  ---------  --------  -----------   ------------   -----------  ------------   -----------

BALANCE, March 31, 1998
  (As Restated, see
  note 15)                         73         $1  $ 493,950  $33,149,142   ($27,394,590)           $0  ($ 1,378,125)  $ 4,896,911
                             =========  ========= =========  ===========   =============  ===========  =============  ===========
</TABLE>


See notes to consolidated financial statements



<TABLE>
<CAPTION>

AMTEC INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED MARCH 31, 1998, 1997 AND 1996
---------------------------------------------------------------------------------------------------------
                                                            1998         1997          1996
                                                                                   (AS RESTATED;
                                                      (AS RESTATED; SEE NOTE 15)   SEE NOTE 14)

CASH FLOWS FROM OPERATING ACTIVITIES:
<S>                                                        <C>             <C>             <C>
  Net loss                                                 $ (5,403,368)   $  (4,064,885)  $  (5,281,730)
  Less: Loss of discontinued operations                             -                -         1,901,097
                                                           -------------   --------------  --------------
  Loss from continuing operations                            (5,403,368)      (4,064,885)     (3,380,633)
  Adjustments to reconcile net loss to net cash used in
   continuing operating activities:
    Amortization of deferred option cost                        459,375              -               -
    Depreciation                                                 43,432           28,905          19,404
    Loss from abandoned assets                                   87,441              -           130,840
    Issuance of warrants for services rendered                      -            479,500             -
    Issuance of common stock and options for directors'
      fees and professional services rendered                   151,957          725,091             -
    Equity in losses of unconsolidated subsidiary               606,647          140,524         500,000
    (Increase) decrease in:
      Accounts receivable                                      (114,661)             -               -
      Inventories                                                   -                -               -
      Prepaid expenses and other current assets                  63,839         (111,243)        (41,813)
      Office lease deposit                                       (1,100)          55,700        (167,200)
    Increase (decrease) in:
      Accounts payable and accrued expenses                     293,027         (485,959)      1,251,464
      Loans payable - stockholders                             (111,000)        (150,000)        136,982
                                                           -------------   --------------  --------------
        Net cash used in continuing operations               (3,924,411)      (3,382,367)     (1,550,956)
        Net cash used in discontinued operations                    -                -        (1,336,396)
                                                           -------------   --------------  --------------
          Net cash used in operating activities              (3,924,411)      (3,382,367)     (2,887,352)

CASH FLOWS FROM INVESTING ACTIVITIES:
    Investment in Netmatics                                     (87,441)             -               -
    Purchase of property and equipment                          (29,212)        (106,028)       (119,592)
    Investment in unconsolidated subsidiary                    (276,000)        (654,000)     (1,170,000)
    Proceeds from sale of assets                                    -                -           250,000
                                                           -------------   --------------  --------------
           Net cash used in investing activities               (392,653)        (760,028)     (1,039,592)
                                                           -------------   --------------  --------------
CASH FLOWS FROM FINANCING ACTIVITIES:
   Warrants issued for services rendered - net of
    charges to APIC                                            (215,546)             -               -
   Borrowings                                                       -                -           739,952
   Loans payable to stockholders                                 25,000              -               -
   Advance to joint venture partner                          (3,724,000)        (538,000)            -
   Proceeds from sale of common stock                           166,659        2,000,000       2,193,983
   Proceeds from sale of Series B convertible preferred stock       -          2,341,219             -
   Proceeds from sale of Series D convertible preferred stock       -          1,500,000             -
   Proceeds from sale of Series C convertible preferred
    stock - net                                               2,093,900              -               -
   Proceeds from sale of Series E convertible preferred stock 6,759,000              -               -
                                                           -------------   --------------  --------------

           Net cash provided by financing activities          5,105,013        5,303,219       2,933,935
                                                           -------------   --------------  --------------

NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS            787,949        1,160,824        (993,009)

CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR                  1,346,713          185,889       1,178,898
                                                           -------------   --------------  --------------

CASH AND CASH EQUIVALENTS, END OF YEAR                     $  2,134,662    $   1,346,713   $     185,889
                                                           =============   ==============  ==============
</TABLE>

See notes to consolidated financial statements.



AMTEC INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF CASH FLOWS
YEARS ENDED MARCH 31, 1998, 1997 AND 1996
-----------------------------------------------------------------------------


1.   SUPPLEMENTAL CASH INFORMATION:

     No interest or income taxes were paid during fiscal 1998, 1997 and
     1996.

2.   NONCASH FINANCING ACTIVITIES:

     In fiscal 1998, preferred stock dividends of $1,398,686 were paid upon
     determination of the first eligible conversion date of the Convertible
     Preferred Series C, D, and E.

     In fiscal 1998, 150 shares of Series D Convertible Preferred Stock
     were converted into 2,236,507 shares of common stock (inclusive of
     conversions of preferred dividends and related warrants).

     In fiscal 1998, 219 shares of Series C Convertible Preferred Stock
     were converted into 4,507,639 shares of common stock.

     In fiscal 1998, 0.8 share of Series E Convertible Preferred Stock was
     converted into 106,646 shares of common stock.

     In fiscal 1998, 12,727,909 shares of common stock were canceled upon
     determination that the full purchase price for such shares was not
     paid.

     In fiscal 1998, $850,000 Loans Payable related to a nonrefundable
     deposit received from a former affiliate was credited to Additional
     Paid in Capital.

     In fiscal 1998, 1,524,178 shares of the Company's Series A Convertible
     Preferred Shares were canceled in accordance with the terms of a
     subscription agreement.

     In fiscal 1998, the Company issued stock options valued at $1,837,500
     to the Hebei provincial government in exchange for a long term
     cooperation agreement.

     In fiscal 1997, 100 shares of Series B Preferred Stock were converted
     into 1,507,477 shares of common stock.

     In fiscal 1996, loans from stockholders of $1,891,553 were converted
     into 1,891,553 shares of common stock.

     In fiscal 1996, 1,524,178 shares of Series A Preferred Stock were
     issued in exchange for the rights to a deposit totaling $4,572,536.

     In fiscal 1996, a deposit from a stockholder of $850,000 was converted
     to a note payable.


See notes to consolidated financial statements.



AMTEC INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED MARCH 31, 1998, 1997 AND 1996
-----------------------------------------------------------------------------


1.   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

     ORGANIZATION AND LINE OF BUSINESS - AmTec Inc. (the "Company" or
     "AmTec") through its majority-owned subsidiary (accounted for under
     the equity method of accounting) in the People's Republic of China
     ("PRC") is involved in providing financing and assistance in building
     telecommunications networks for third parties in the PRC. The Company,
     through its wholly-owned subsidiary ITV Communications, Inc. ("ITV")
     was engaged in the design, manufacture and sale of technologically
     advanced communication devices. In January 1996, the Company sold all
     of the business and operating assets of ITV and is no longer involved
     in the business that ITV was engaged in (See Note 14).

     On July 8, 1997, the Company changed its name from AVIC Group
     International, Inc. to AmTec, Inc.

     During fiscal 1998 the Company organized two wholly-owned
     subsidiaries, one a Bermuda company and the other a British Virgin
     Island company. There was no activity in either company during the
     year ended March 31, 1998.

     PRINCIPLES OF CONSOLIDATION - The consolidated financial statements
     include the Company's wholly- owned subsidiary, ITV Communications,
     Inc. All significant intercompany accounts and transactions are
     eliminated in consolidation.

     EQUITY METHOD OF ACCOUNTING - The Company accounts for its subsidiary
     Hebei United Telecommunications Equipment Co., Ltd. and subsidiary
     ("Hebei Equipment") (a limited life Sino-foreign joint venture) using
     the equity method of accounting, as minority Shareholders of Hebei
     Equipment have substantive participating rights under the joint
     venture contracts. The Company reports its investment in Hebei
     Equipment under the caption Investment in and advances to
     unconsolidated subsidiary. Under the equity method, the investment is
     carried at cost of acquisition, plus the Company's equity in
     undistributed earnings or losses since acquisition. Equity in the
     losses of the unconsolidated subsidiary is recognized according to the
     Company's percentage ownership in the unconsolidated subsidiary until
     the Company contributed capital has been fully depleted. Reserves are
     provided where management determines that the investment or equity in
     earnings is not realizable. For the period ending March 31, 1998, the
     Company used an ownership percentage of 60.8% for purposes of
     calculating the share of earnings of its unconsolidated subsidiary
     since it did not increase its ownership percentage in Hebei Equipment
     to 70% until after the close of Hebei Equipment's fiscal year-end
     (December 31, 1997). Hebei Equipment owns 51% of Hebei United
     Telecommunications Engineering Company, Ltd. ("Hebei Engineering").
     Hebei Equipment also accounts for its investment using equity method
     of accounting as minority Shareholders of Hebei Engineering have
     substantive participating rights under the joint venture contracts.

     DIFFERENCE IN YEAR END - The Company's share of equity in losses of
     Hebei Equipment included in the consolidated financial statements are
     as of and for the periods ended December 31, 1997 and 1996, Hebei
     Equipment's year-end. Since inception the Company has had a March 31
     year-end. The Company kept this year-end even though its subsidiaries
     have a calendar year-end so that delays in receiving information from
     China would not cause problems for the Company in meeting its
     reporting deadlines. However, the Company does monitor events in the
     lag period and, where appropriate, would disclose the occurrence of
     any significant event during the lag period. All companies established
     under PRC law are required to have a December 31 fiscal year-end date.
     Hebei Equipment and Hebei Engineering are equity joint venture
     companies established under PRC law.

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

     CASH EQUIVALENTS - For purposes of the statements of cash flows, the
     Company considers all highly liquid investments purchased with
     original maturities of three months or less to be cash equivalents.

     PROPERTY AND EQUIPMENT - Property and equipment are recorded at cost.

     Depreciation is provided using the straight-line method, to write off
     the cost of property and equipment over their estimated useful lives,
     after deducting the estimated salvage value of the assets as follows:

       Furniture, fixtures and equipment          5  years
       Leasehold improvements                     5  years
       Computer software                          3  years

     LONG-LIVED ASSETS - The Company evaluates long-lived assets and
     identifiable intangibles for impairment whenever events or changes in
     circumstances indicate that the net carrying amount may not be
     recoverable. When such events occur, the Company measures impairment
     by comparing the carrying value of the long-lived asset to the
     estimated undiscounted future cash flows expected to result from the
     use of the assets and their eventual disposition. If the sum of the
     expected undiscounted future cash flows is less than the carrying
     amount of the assets, the Company would recognize an impairment loss.
     The impairment loss, if determined, would be measured as the amount by
     which the carrying amount of the asset exceeds the fair value of the
     asset. The Company determined that, as of March 31, 1998 and 1997,
     there had been no impairment in the carrying value of the long-lived
     assets.

     REVENUE RECOGNITION - Revenue related to the Company's former
     operations of ITV was derived primarily from product sales, and was
     recognized upon shipment of the products.

     RESEARCH AND DEVELOPMENT COSTS - Research and development costs of ITV
     were charged to expense as incurred. These costs consisted primarily
     of salaries and consulting fees.

     INCOME TAX - Deferred income taxes are provided for using the
     liability method. Under the liability method, deferred income taxes
     are recognized for all significant temporary differences between the
     tax and financial statement bases of assets and liabilities. The tax
     consequences of those differences are classified as current or
     non-current based upon the classification of the related assets or
     liabilities in the financial statements. A valuation allowance is
     provided to reduce the amount of deferred tax assets if it is
     considered more likely than not that some portion of, or all of, the
     deferred tax assets will not be realized.

     DISCLOSURE OF FAIR VALUE OF FINANCIAL INSTRUMENTS - The carrying
     amount reported in the balance sheets for cash and cash equivalents,
     accounts receivable, accounts payable and accrued expenses
     approximates fair value because of the immediate short-term maturity
     of these financial instruments.

     LOSS PER SHARE - Basic loss per common share is based on the weighted
     average number of common shares outstanding during the year. The
     effect of shares issuable upon exercise of warrants and stock options
     is anti-dilutive, therefore diluted earnings per share is not
     presented. The Company adopted the provisions of FASB 128 during the
     fiscal year ended March 31, 1998. Adoption of such statement did not
     have a material effect on results of operations and financial
     condition.

     RECLASSIFICATION - Certain amounts for the fiscal years ended March
     31, 1997 and 1996 have been reclassified to conform to the current
     year's presentation.

     RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS

     Comprehensive Income - In June 1997, the Financial Accounting
     Standards Board ("FASB") issued SFAS No. 130, "Reporting Comprehensive
     Income." This statement is effective for financial statements issued
     for periods beginning after December 15, 1997. Management is
     evaluating the effect on its financial reporting of the adoption of
     this statement.

     Segments of an Enterprise and Related Information - In June 1997, the
     FASB issued SFAS No. 131, "Disclosure about Segments of an Enterprise
     and Related Information." This statement is effective for fiscal years
     beginning after December 15, 1997. SFAS No. 131 requires the reporting
     of profit and loss, specific revenue and expense items, and assets for
     reportable segments. It also requires the reconciliation of total
     segment revenues, total segment profit or loss, total segment assets,
     and other amounts disclosed for segments, in each case to the
     corresponding amounts in the general purpose financial statements. The
     Company has not yet determined what additional disclosures may be
     required in connection with adopting SFAS 131.

     Derivative Instruments and Hedging Activities - In June 1998, the FASB
     has issued a new standard SFAS No. 133 "Derivative Instruments and
     Hedging Activities", which is effective for fiscal years beginning
     after June 15, 1999. Management has not yet completed the analysis of
     the impact this would have on the financial statements of the Company
     and has not adopted this standard.

2.   INVESTMENT IN AND ADVANCE TO UNCONSOLIDATED SUBSIDIARY

     The Company determined that it should conduct its operations in the
     PRC through a Sino Foreign Joint Venture ("SFJV"), Hebei Equipment. In
     March 1996, the Company invested $1,170,000 in a PRC joint venture,
     advanced $540,000 to its joint venture partner and requested from the
     Hebei Provincial government approval for conversion of such company to
     an SFJV. On September 24, 1996, preliminary regulatory approval for
     Hebei Equipment was granted and the SFJV was formed with the Company
     holding a 60.8% interest in the entity. In April 1997, the Company
     received final PRC regulatory approval for the SFJV. The Company
     invested an additional $276,000 in Hebei Equipment during the
     fiscal-year ended March 31, 1998, resulting in an increase in its
     holding to 70%. An additional $3,724,000 was advanced as a loan to the
     joint venture during the fiscal year March 31, 1998.

     Hebei Equipment holds a 51% interest in Hebei Engineering, which is
     developing Global System for Mobile Telecommunications networks (the
     "GSM networks") in the ten largest cities in Hebei Province, PRC.
     Nippon Telegraph and Telephone International, Inc. ("NTTI") and Itochu
     Corporation hold the remaining 49% interest in Hebei Engineering.

     The Company's investments in the joint venture were accounted for by
     the equity method of accounting because minority shareholders of Hebei
     Equipment and Hebei Engineering have substantive participating rights
     under the provision of the Joint Venture contracts. (See Note 4 and
     15)

     The following summarized the major activities of Hebei Equipment and
     its subsidiary:

     A.  HEBEI ENGINEERING'S INVESTMENT IN GSM NETWORKS

     Hebei Equipment, through its 51%-owned subsidiary, Hebei Engineering
     has funded approximately $30,650,000 in the construction of the GSM
     networks in Hebei Province of the PRC and has received the right to
     receive future cash flow. The GSM networks are being built pursuant to
     a 15-year Project Cooperation Contract with China United
     Communications Company ("UNICOM"). Terms of the Project Cooperation
     contract include the following:

     Initially, UNICOM will own 30% of the assets while Hebei Engineering
     will own 70% of the assets.

     Both parties agree to distribute the profit according to the
     "Distributable Cash Flow" (as defined) with 22% going to UNICOM and
     78% going to Hebei Engineering.

     Each year, Hebei Engineering will transfer ownership of assets to
     UNICOM equal in value to the Distributable Cash Flow received up to
     60% of the assets. The maximum amount of assets transferred will not
     exceed 90% of the assets until termination of the Project Cooperation
     Contract.

     Upon the termination of the contract the remaining 10% of the network
     assets shall be assigned to UNICOM without any further consideration.

     Hebei Engineering will continue to receive 78% of the Distributable
     Cash Flow after transfer of all the assets for the remainder of the
     15-year period.

     Under PRC law, foreign investment entities, such as Hebei Engineering,
     are not permitted to own or operate telecommunications networks.
     Substantially all of the Hebei Engineering's revenues are derived from
     contractual arrangements for the sharing of cash flow from network
     operations rather than from ownership or operation of the networks.
     Hebei Engineering has recorded its investment (GSM Construction Costs)
     as a right to receive future cash flow at cost and is amortizing it
     over the remaining life of the project beginning with the fiscal-year
     ending March 31, 1998. Income from the GSM networks is recognized at
     the time when Hebei Engineering can estimate or calculate the portion
     of its Distributable Cash Flow from the networks. UNICOM commenced
     operation of the GSM networks in February 1997.

     The investment in the GSM networks is depreciated on a straight-line
     basis over the remaining life of the Project Cooperation Contract from
     the year the network began to operate. Amortization of the Investment
     in GSM Networks for the year ended March 31, 1998 amounted to
     approximately $2,183,000.

     B. SUMMARY FINANCIAL INFORMATION FOR THE UNCONSOLIDATED SUBSIDIARY

     For the year ended December 31, 1996, Hebei Equipment did not exist
     and the Company recorded its equity of losses in Hebei Engineering
     directly. The following tables represent summary financial information
     for the Joint Venture (Hebei Equipment) as of and for the years ended
     December 31, 1997 and summary financial information for Hebei
     Engineering and its related projects in China as of and for the year
     ended December 31, 1996:


                                                HEBEI           HEBEI
                                              EQUIPMENT      ENGINEERING
                                                1997            1996
                                                 RMB             RMB

     Revenues                                         -                -
                                             ===========     ============
     Net (loss) income                      (10,284,529)         127,482
                                             ===========     ============
     Total assets                            45,480,245      220,197,914
                                             ===========     ============
     Total liabilities                       30,841,556      195,111,932
                                             ===========     ============

3.   PROPERTY AND EQUIPMENT

     Property and equipment consist of the following:

                                                 1998            1997

     Furniture, fixtures and equipment        $ 201,258      $   176,962
     Leasehold improvements                      17,498           12,581
     Computer software                           12,273           12,274
                                              ---------      -----------
                                                231,029          201,817
     Less accumulated depreciation               91,893           48,461
                                              ---------      -----------
                                              $ 139,136      $   153,356
                                              =========      ===========

     Depreciation  expense for fiscal 1998, 1997 and 1996 was $43,432; $28,905
     and $19,404, respectively.

4.   LOANS PAYABLE - SHAREHOLDERS

     Certain shareholders of the Company advanced funds to ITV, a wholly
     owned subsidiary of the Company. These amounts are payable on demand
     by ITV and bear interest at 8.5% per annum. There is no recourse to
     AmTec for these loans.

5.   COMMITMENTS AND CONTINGENCIES

     LEASES - The Company leases a facility for its corporate and
     operations offices under a long-term lease agreement. Minimum annual
     rental commitments under this lease are as follows:

          MARCH 31,
          1999                                  $ 334,400
          2000                                    334,400
          2001                                     55,733
                                                ---------
                                                $ 724,533
                                                =========

     Rent expense for fiscal  1998,  1997 and 1996 was  $337,763,  $369,969
     and $399,992 respectively.

     EMPLOYMENT AGREEMENTS - The Company has entered into employment
     agreements with officers expiring through April 2002 with aggregate
     annual salaries of $1,475,000.

     LITIGATION - The Company and its subsidiaries are involved in
     litigation matters which involve certain claims which arise in the
     normal course of business, none of which, in the opinion of
     management, is expected to have a materially adverse effect on the
     Company's consolidated financial statements.

     REGULATION - The PRC's legal system is a civil law system based on
     written statutes and is a system in which decided legal cases have
     little precedential value. The PRC Government began to promulgate a
     comprehensive system of laws in 1979. Many laws and regulations
     governing economic matters in general have been promulgated. The
     general effect of this legislation has been to enhance the protection
     afforded to foreign invested enterprises in the PRC. However, as these
     laws and regulations are relatively new, their interpretation and
     enforcement involve significant uncertainty.(See Note 17)

     FOREIGN CURRENCY EXCHANGE - The Company's joint ventures will receive
     nearly all of their revenue in Renminbi, which will need to be
     converted to other currencies, primarily U.S. dollars, and remitted
     outside of the PRC. Although the Renminbi is not a freely convertible
     currency at present, effective July 1, 1996, foreign currency "current
     account" transactions by foreign investment enterprises, including
     Sino-foreign joint ventures, are no longer subject to the approval of
     State Administration of Foreign Exchange ("SAFE", formerly, "State
     Administration of Exchange Control"). These transactions need only a
     ministerial review, according to the Administration of the Settlement,
     Sale and Payment of Foreign Exchange Provisions promulgated in 1996.
     "Current account" items include international commercial transactions,
     which occur on a regular basis, such as those relating to trade and
     provision of services. Distributions to joint venture parties also are
     considered a "current account transaction." Other noncurrent account
     items, known as "capital account" items, remain subject to SAFE
     approval.

6.   STOCKHOLDERS' EQUITY

     CANCELLATION OF SERIES A CONVERTIBLE PREFERRED STOCK - On August 19,
     1997, upon determination that the entire amount of a nonrefundable
     deposit had been forfeited by a former affiliate, the Company canceled
     all of the outstanding Series A Convertible Preferred Stock (the
     "Series A Shares"). On December 19, 1995, the Company had issued
     1,524,178 shares of the Company's Series A Shares in consideration of
     the transfer of a $4,572,536 nonrefundable equipment purchase deposit
     to the Company from a former affiliate. The Subscription Agreement for
     the Series A Convertible Preferred Stock provided that, if all or any
     portion of the deposit should be forfeited at any time and for any
     reason whatsoever by the former affiliate an equivalent number of the
     Series A Shares issued to it would be canceled.

     CANCELLATION OF CERTAIN SHARES OF COMMON STOCK - On December 8, 1997,
     the Company reduced its outstanding common stock and credited its
     Additional Paid in Capital $12,728 as a result of canceling 12,727,909
     shares of its common stock and 318,182 options to purchase its common
     stock issued to Tweedia International, Ltd. The cancellation was based
     on a determination that the full purchase price for the shares was
     never paid. The 12,727,909 canceled shares represented approximately
     thirty-eight percent of the total number of the Company's common
     shares outstanding prior to the cancellation of such shares.

     In addition, the Company canceled an agreement with a former
     affiliate, which gave the Company a right of first refusal on certain
     investment opportunities in the Peoples Republic of China. (See Note
     12-"Related Party Transactions".)

     CONVERSION OF LOANS PAYABLE - In December 1995, loans payable and
     accrued interest in the amount of $1,891,553 were converted to common
     stock at a price per share of $1.00 (based on other market sales at
     the time).

     SALE OF COMMON STOCK - In September and November 1995, and February
     1996, the Company sold an aggregate of 976,000 shares of common stock
     for $976,000. In March 1996, the Company entered into a stock purchase
     agreement to sell 191,020 shares of common stock for $1,170,000, a
     price of $6.125 per share.

     In November 1996, the Company sold 1,000,000 shares of the Company's
     common stock through subscription agreements. The Company received $2
     million in proceeds with respect to these subscriptions. The price per
     share reflected the quoted market value of the common shares at the
     time of the transactions.

     During fiscal 1998, 69,000 common shares were sold in connection with
     the exercise of certain employee stock options. Proceeds from these
     sales aggregated $34,750.

     SERIES B CONVERTIBLE PREFERRED STOCK - In June 1996, the Company
     completed a $2,500,000 offering of its Series B Convertible Preferred
     Stock ("Series B Preferred"). The net proceeds the Company received
     were approximately $2,341,000. The offering consisted of 100 shares of
     Series B Preferred at $25,000 per share and warrants to purchase
     common stock of the Company. Each warrant entitled the holder to
     purchase one share of common stock at a fixed conversion price. During
     fiscal 1997, all outstanding Series B shares were converted to
     1,507,477 common shares.

     SERIES D CONVERTIBLE PREFERRED STOCK - In March 1997, the Company
     completed a $1,500,000 offering of its Series D Convertible Preferred
     Stock ("Series D Preferred"). The offering consisted of 150 shares of
     Series D Preferred at $10,000 per share and warrants to purchase
     common stock of the Company. The holder was entitled to cumulative
     dividends at the annual rate of 8% per annum per share, payable
     quarterly in shares of Common Stock or, in cash in connection with any
     payment pursuant to a Conversion Default at the election of the
     Company's board of directors. During fiscal 1998, the Series D
     Preferred was converted into common stock of the Company at a
     conversion rate equal to the lowest trading price of the Company's
     common stock during the 30 days preceding each conversion date. In
     addition, the Series D Preferred shareholders converted their warrants
     into common stock at prices aggregating $131,909. Such Series D
     Preferred and warrants conversions aggregated 2,236,507 shares. In
     connection with the discount for the above conversion, the Company
     credited Additional Paid in Capital $48,677 and charged preferred
     dividends in an equal amount.

     SERIES C CONVERTIBLE PREFERRED STOCK - In June 1997, the Company
     completed a $2,500,000 offering of its Series C Convertible Preferred
     Stock ("Series C Preferred"). The offering consisted of 250 shares of
     Series C Preferred at $10,000 per share and entitled the holder to
     cumulative dividends at an annual rate of 8% per annum per share. The
     dividends were payable quarterly in shares of Common Stock or, in cash
     in connection with any payment pursuant to a Conversion Default at the
     election of the Company's board of directors. Such Series C shares
     were converted at conversion rates equal to the lowest trading price
     of the Company's common stock during the 30 business days immediately
     preceding each conversion date. During fiscal 1998, 219 outstanding
     Series C shares were converted into 4,507,639 common shares. In
     addition, the Company repurchased for consideration of $406,100 and
     retired 31 Series C shares. In connection with the discount for the
     above conversion, the Company credited Additional Paid in Capital
     $260,784 and charged preferred dividends in an equal amount.

     SERIES E CONVERTIBLE PREFERRED STOCK - On October 22, 1997, the
     Company issued 74 shares of its Series E Convertible Preferred Stock,
     par value $.001 per share (the "Series E Preferred Shares") at a price
     of $100,000 per share and paying an 8% in-kind dividend. The net
     proceeds the Company received were approximately $6,759,000. The
     holders of Series E Preferred Stock have no voting rights except with
     respect to certain matters that affect the rights related to the
     Series E Preferred Stock.

     Conversion of the Series E Shares into Common Stock, which are
     restricted by certain "lock-up" agreements, is based on the lower of:
     (i) the lesser of a 10% premium to the market price of the Company's
     Common Stock, as reported on the American Stock Exchange, at the time
     of the investment's closing or of a 10% premium to the 10 day average
     trading price six months after the close or (ii) a discount to the
     lowest trade during the five (5) trading days prior to each
     conversion. The discount, which ranges from 15% to 20%, depends upon
     the date of the shareholders' conversion of the Series E shares, with
     the discount increasing as the period the shares are held increases.
     Warrants were issued to five of the Series E Investors to purchase up
     to 1,236,364 shares of the Company's Common Stock at a price equal to
     120% of the market price of the Company's Common Stock at the time of
     the investment's closing. The number of warrants issued to each
     investor depended upon the amount invested and the length of the
     "lock-up" agreed upon between the Company and investor.

     The Company registered 13,832,792 shares of common stock on January
     16, 1998, to cover the common stock issuable to the Series E Holders
     upon conversion of their Series E shares and exercise of their
     warrants. As of March 31, 1998, 0.8 share of the Series E Preferred
     Stock was converted into 106,646 shares of the Company's common stock.
     In connection with the discount for the above conversion, the Company
     credited Additional Paid in Capital $1,089,225 and charged preferred
     dividends in an equal amount.

     STOCK WARRANTS - During fiscal 1998, the Company issued warrants to
     purchase 326,171 shares of the Company's Common Stock to the Placement
     Agent as fees for services in connection with the placement of the
     Series E Convertible Preferred Stock described above. These warrants,
     which are exercisable one year from the closing date, have an exercise
     price of $2.475 per share and expire on October 22, 2002. The Company
     has assigned a value of $161,450 to these warrants.

     During fiscal 1998, the Company rescinded an agreement it entered into
     in July 1996 with an investment banking firm in which such firm was to
     act as a financial advisor to the Company. As part of this rescission
     the Company canceled warrants to purchase 200,000 shares of the
     Company's common stock. Professional fees and Warrants were reduced by
     $147,000 to reflect this cancellation.

     During fiscal 1997, the Company issued 186,111 warrants to purchase
     the Company's common stock at a conversion price of 110% of the quoted
     market value at the time of grant. The warrants were issued in
     connection with the Company's issuance of Series B Preferred Shares
     (see Series B Convertible Preferred Stock).

     On October 15, 1996, the Company agreed to issue warrants to purchase
     200,000 shares of the Company's Common Stock to an advisor for
     services related to advising the Company with respect to its
     Sino-foreign joint ventures and marketing activities in the PRC. The
     warrants issued have a three year term and an exercise price of $1.50,
     which was the market value of the Company's Common Stock the warrants
     were issued. In connection with this agreement, the Company recorded
     $110,000 in professional fees which management determined to be the
     fair value of the warrants.

     In connection with a financial services agreement which has since been
     canceled, the Company issued 600,000 warrants to an investment banking
     firm, 300,000 of which vested at the time the agreement was entered
     into and 300,000 which were to vest when such firm had raised a
     minimum of $10 million. With respect to the vested 300,000 warrants,
     the Company recorded $222,500 in professional fees which management
     determined to be the fair value of the warrants.

     ISSUANCE OF COMMON STOCK FOR SERVICES - During the year ended March
     31, 1998 the Company issued shares of its common stock for services
     rendered. The number of shares issued in each case was based upon the
     quoted market value of the stock at the issue date and the value of
     the services rendered. Total shares issued in connection with these
     services amounted to 63,233 covering the $151,957 of expenses which
     are included in the accompanying financial statements.

     In April 1996, two outside directors each received 5,000 shares of
     common stock for a total value of $90,000 which was recorded as
     compensation expense. The number of shares issued was based on the
     quoted market value of the common stock at the time of issuance.

     In May 1996, 5,000 shares of the Company's common stock were issued as
     payment for $45,625 of services rendered. In December 1996, 5,000
     shares of the Company's common stock were issued as payment for
     $18,125 for services rendered. Both issuance have been recorded as
     professional fees at a value of the quoted market price of the common
     stock at the time of the transaction.

     In October 1996, the Company entered into agreements to settle $98,000
     of outstanding professional fees through the issuance of options to
     purchase 44,962 common shares. The number of shares was determined
     based upon the quoted market value of the shares at the time of
     issuance.

     THE PROMETHEAN COMMON STOCK EQUITY AGREEMENT - On March 31, 1997 the
     Company entered into a Common Stock Investment Agreement with
     Promethean Investment Group L.L.C. ("Promethean") pursuant to which
     Promethean will provide a $10 million equity line to the Company. The
     agreement, which is cancelable, by either party, was amended on April
     29, 1997 to increase the equity line to $25 million. Pursuant to the
     Common Stock Investment Agreement, the Company may sell from time to
     time shares of Common Stock to Promethean by providing a notice (the
     "Put Notice") containing the dollar amount (the "Required Dollar
     Amount") of the shares of Common Stock to be sold during the thirteen
     business day period commencing after the date of the Put Notice (the
     "Purchase Period"). Promethean shall be obligated to purchase the
     shares of Common Stock in the Required Dollar Amount specified in the
     Put Notice with the election to purchase an additional 30% of the
     Required Dollar Amount during the Purchase Period. Each of the shares
     of Common Stock covered by the Required Dollar Amount (and any
     additional amount of the shares of Common Stock to be sold during the
     Purchase Period) shall be sold at 90% of the lowest of the daily low
     trading price of the Common Stock, as quoted on the American Stock
     Exchange, during the three trading days preceding the date of the Put
     Notice. The Required Dollar Amount for each Put Notice shall be in
     increments of $250,000 and shall not exceed the lesser of (i)
     $1,500,000, subject to reductions of $75,000 for each trading day
     during the Purchase Period in which the average per share dollar value
     of the Common Stock traded on the American Stock Exchange is less than
     $2.50, and (ii) 10% of the dollar value of the Common Stock traded on
     the American Stock Exchange during the first ten trading days of the
     Purchase Period if the average per share of such dollar value is equal
     to or greater than $2.50 (subject to certain adjustment to account for
     stock splits, stock dividends and other similar transactions). The
     Company may not deliver a Put Notice to sell the shares of Common
     Stock if the closing price of the Common Stock on the date prior to
     the date of the intended Put Notice as reported on the American Stock
     Exchange is less than $2.50 or if certain other conditions exist. The
     Company has agreed to provide a minimum of $4,000,000 in Put Notices
     to Promethean within two years following the effective date of a
     registration statement covering the shares to be sold pursuant to the
     Common Stock Investment Agreement.

     Initially, 1,570,998 shares were issued into escrow on behalf of
     Promethean. During the year ended March 31, 1998, none of the shares
     issued under this agreement were released from escrow. As of March 31,
     1998, this agreement has not been utilized, no shares have been issued
     and no monies have been received under this agreement. 551,533 of the
     shares issued into escrow were canceled.

     STOCK OPTIONS - The Company has adopted two stock option plans (the
     AmTec, Inc. 1995 Stock Plan and the AmTec, Inc. 1996 Stock Option
     Plan). Incentive and nonqualified options and stock appreciation
     rights may be granted to employees, officers, directors, and
     consultants of the Company. There are 12,500,000 shares of common
     stock reserved for issuance under these plans. The exercise price of
     the options are determined by the board of directors, but in the case
     of an incentive stock option, the exercise price may not be less than
     100% of the fair market value on the date of grant. Options vest over
     periods not to exceed ten years.


     A summary of the status of all of the Company's stock options issued
     as of March 31, 1998, 1997 and 1996 and changes during the years then
     ended is presented below:

<TABLE>
<CAPTION>
                         MARCH 31, 1998         MARCH 31, 1997        MARCH 31, 1996
                       --------------------   -------------------   -------------------

                                   WEIGHTED              WEIGHTED              WEIGHTED
                                   AVERAGE               AVERAGE               AVERAGE
                                   EXERCISE              EXERCISE              EXERCISE
                         NUMBER     PRICE       NUMBER    PRICE       NUMBER    PRICE

<S>                      <C>         <C>       <C>         <C>         <C>       <C>
Outstanding at
  beginning of year      7,905,000   $1.40     7,635,000   $1.39       350,000   $0.36
Granted                  4,624,102    2.55       280,000    1.74     7,520,000    1.41
Exercised                  (69,000)                                   (185,000)   0.36
Cancelled                                        (10,000)   8.25
Forefeited                                                             (50,000)   0.36
Expired
Outstanding at end      ----------   -----     ---------   -----     ---------   -----
 of year                12,460,102   $1.42     7,905,000   $1.40     7,635,000   $1.39
                        ==========   =====     =========   =====     =========   =====

Options exercisable
at end of year           7,671,102   $1.28     4,155,000   $0.42     3,135,000   $0.35
                         =========   =====     =========   =====     =========   =====

Weighted average fair
  value of options
  granted during
  the year              $     0.53             $    0.69             $    0.44
                        ==========             =========             =========
</TABLE>


     The above options include options granted to the Hebei Provincial
     Government to acquire 3,000,000 shares of the Company's common stock
     at a price of $3.0625 per share. These options vest 25% every six
     months from the date of grant. In connection with granting these
     options, $1,837,500 was recorded as a charge to Deferred Option Cost
     and a corresponding credit was made to Additional Paid in Capital.
     During fiscal 1998, Deferred Option Cost was amortized by $459,375.

     The above options do not include 318,182 options granted and
     subsequently canceled to Tweedia, a former affiliate.

     The Company followed the guidelines under SFAS No. 123 to determine
     the fair value of options at the date of grant. The value was
     determined using an adjusted Black-Scholes option pricing model. The
     Black-Scholes model is generally accepted as appropriate primarily for
     short-term, exchange-traded options. For longer term options that do
     not have the liquidity of an exchange traded option or where the
     underlying common stock is not highly liquid, the Black-Scholes
     formula needs to be adjusted, especially in reference to the
     volatility measurement used. The Company's stock is thinly traded,
     averaging around 100,000 shares per day, and cannot be considered
     highly liquid. For the purpose of valuing the Company's options, which
     have a ten year life, the following assumptions were used, where the
     volatility measurement was based on management's expectations and
     judgement:

       Risk-free rate       5.64%
       Volatility           20-23%
       Expected Life        5 years
       Expected Dividends   0%


     The following table summarizes information about options outstanding
     at March 31, 1998:

     <TABLE>
     <CAPTION>

                                 WEIGHTED                  NUMBER
       RANGE          NUMBER       AVERAGE                  EXERCISABE
         OF         OUTSTANDING   REMAINING     AVERAGE      OPTIONS       AVERAGE
      EXERCISE          AT       CONTRACTUAL    EXERCISE        AT         EXERCISE
       PRICES     MARCH 31, 1998  LIFE (YEARS)   PRICE    MARCH 31, 1998    PRICE

      <S>            <C>             <C>        <C>        <C>             <C>
     $0.35-0.355     4,625,000       8.11       0.350      4,625,000       0.350
        0.75           250,000      10.00       0.750        125,000       0.750
        1.5            520,102       9.00       1.500        145,102       1.500
        2.125        1,055,000      10.00       2.125        523,500       2.125
        3.000        3,010,000       9.00       3.000      1,502,500       3.000
     3.05-3.10       3,000,000       9.00       3.0625       750,000       3.063
                     ----------                             ---------
                     12,460,102                             7,671,102
                     ==========                             =========
     </TABLE>


     The Company applies APB Opinion No. 25 and related Interpretations in
     accounting for its plans. Accordingly, no compensation cost has been
     recognized with respect to the plans. Had compensation cost for the
     Company's stock option plans been determined consistent with Statement
     of Financial Accounting Standards No. 123 "Accounting for Stock-Based
     Compensation" ("SFAS 123"), the Company's net earnings and earnings
     per share would have approximated the pro forma amounts indicated
     below:

     <TABLE>
     <CAPTION>

                                                          1998           1997
     <S>                                              <C>            <C>
     Net loss applicable to common shares -
       as reported                                    $(6,802,054)   $(4,074,885)
                                                     ==============  ============
     Net loss - pro forma                             $(8,635,367)   $(4,268,970)
                                                     ==============  ============
     Loss per common share - as reported              $     (0.23)   $     (0.14)
                                                     ==============  ============
     Loss per common share share - pro forma            $   (0.29)     $   (0.15)
                                                     ==============  ============
     </TABLE>

7.   NONREFUNDABLE DEPOSIT

     On March 31, 1998, the Company reduced loans payable of $850,000
     related to a nonrefundable deposit it received from a former
     affiliate. Additional paid in capital was credited for an equal
     amount.

8.   INCOME TAXES

     The  Company  had net losses for 1998,  1997 and 1996 and,  therefore,
     no income taxes have been provided.

     As of March 31, 1998, the Company has federal net operating loss carry
     forwards of approximately $13,848,606 through 2012.

     Significant components of the Company's deferred assets and tax
     liabilities for federal income taxes consist of the following:

     <TABLE>
     <CAPTION>
                                                         1998           1997
     <S>                                            <C>            <C>
     Deferred tax assets:
     Net operating loss carryforwards               $   6,394,688  $   5,085,404
     Start-up and other costs                           3,027,575      2,360,307
     Research credit                                      266,000        266,000
                                                    -------------  -------------
     Total deferred tax assets                          9,688,263      7,711,711
     Valuation allowance for deferred tax assets       (9,688,263)    (7,711,711)
                                                    -------------  -------------
     Net deferred tax assets                        $         -    $         -
                                                    =============  =============
     </TABLE>


     The net change in the valuation allowance for the years ended March
     31, 1998 and 1997 was an increase of $1,976,552 and $3,249,171,
     respectively.

9.   MAJOR CUSTOMERS

     During the year ended March 31, 1996, the Company's wholly-owned
     subsidiary, ITV, conducted business with two customers whose sales
     comprised substantially all of the Company's revenues. In January
     1996, the Company sold substantially all of the assets related to that
     business.

10.  SALE OF BUSINESS

     In January 1996, the Company sold the business and the related
     operating assets ("Asset Sale") in which its wholly-owned subsidiary,
     ITV, was engaged. The sale price was $2,500,000 (which consisted of
     $250,000 in cash and $2,250,000 in the form of a note receivable). In
     addition, the Company received an equity interest in another company,
     which was valued at $500,000. Due to the uncertainty of the collection
     of the $2,250,000 note receivable, the amount of the note has not been
     recognized. The gain associated with the note will be recognized when
     the note receivable is collected. The sale of the assets resulted in a
     gain from sale of the assets of $31,880. (See Note 14)

     The Company recorded $130,840 loss from abandoned assets during the
     year ended March 31, 1996 which was a non-recurring "write-off" of
     certain remaining assets of ITV that were not sold in the ITV Asset
     Sale. The Company wrote off the $130,840 book value because these
     assets would not contribute to the generation of revenues for the
     Company in the future and thus were considered impaired assets.

11.  INVESTMENT IN NETMATICS

     The Company held a 39% (as of March 31, 1997) ownership interest in
     Netmatics, Inc. ("Netmatics"), which it acquired in January 1996 in
     connection with the sale by the Company of the ITV business and
     operating assets. In fiscal 1996, the Company suspended the equity
     method of accounting for its investment in Netmatics when the
     Company's share of losses equaled the carrying amount of the
     investment. In fiscal 1996, the Company's share of Netmatics' loss
     charged to operations was $500,000. During fiscal 1997, the Company
     advanced $12,000 to and purchased $186,538 of debentures from
     Netmatics. Such amounts were written-off as of March 31, 1997.

     The Company is not required either contractually or otherwise to fund
     any additional losses of Netmatics or make any additional capital
     investments. In addition, the Company has not guaranteed any of
     Netmatics debt. Due to its poor operating results, huge accumulated
     losses and lack of financing, Netmatics Inc. ceased operation as of
     March 31, 1997. The Company considered its receivable from Netmatics
     Inc. not recoverable and wrote off the advance and debentures due from
     Netmatics.

12.  RELATED PARTY TRANSACTIONS (SEE NOTE 6 REGARDING THE CANCELLATION OF
     THE 12,727,909 SHARES OF COMMON STOCK AND THE MASTER AGREEMENT)

     GENERAL - In February 1995, pursuant to a Reorganization Agreement,
     Tweedia International, Ltd. became the owner of approximately
     12,727,909 shares, or 41%, of the Company's issued and outstanding
     Common Stock. The Company was informed that Beijing CATCH
     Communications Group Co. ("Beijing CATCH") has an option to acquire
     100% of the outstanding capital stock of Tweedia. However, this option
     may not be exercised without the receipt by Beijing CATCH of all PRC
     regulatory approvals applicable to such exercise. After discussions
     with PRC counsel, management believes that these approvals to own
     securities listed on nonPRC stock exchanges are substantive in nature
     and are not normally readily obtained in the PRC.

     As of December 21, 1995, pursuant to the terms of a Master Agreement
     and Right of First Refusal (the "Master Agreement"), Beijing CATCH
     agreed to grant the Company a right of first refusal to participate as
     a majority investor and provide financial, operating and technical
     consulting services with respect to all rights granted, sold,
     licensed, or otherwise transferred to Beijing CATCH, directly or
     indirectly, that relate to the construction, operation or acquisition
     of any type of telephony, telecommunications, equipment, paging
     equipment or related forms of communication in the PRC. As
     consideration for this right of first refusal, the Company agreed to
     issue up to 50,000,000 shares of Common Stock to Tweedia based on the
     receipt of certain agreed upon amounts of net income by the Company
     relating to prospective Sino-foreign joint ventures involving the
     Company and Beijing CATCH. The Master Agreement supersedes certain
     terms of other prior agreements between the Company and Beijing CATCH
     concerning cooperation on telecommunications projects. The Company has
     not entered into, and management has no current intent of entering
     into, any Sino-foreign joint ventures with Beijing CATCH under the
     terms of the Master Agreement. As a result, no obligation for future
     issuances of Common Stock to Beijing CATCH under the Master Agreement
     exist or are contemplated.

     At the time of the Company's acquisition of the majority stake, Hebei
     Development held a 30% ownership of Hebei Equipment and Beijing CATCH
     held subscription rights to 9.2% ownership of Hebei Equipment.
     Subsequent to Hebei Equipment's conversion to a Sino-Foreign joint
     venture company, Beijing CATCH defaulted on its required capital
     contribution. On April 22, 1997, the Board of Directors of Hebei
     Equipment resolved to terminate Beijing CATCH's ownership
     participation in Hebei Equipment, and the Company and Hebei
     Development agreed to provide to Hebei Equipment the amount defaulted
     on by Beijing CATCH. (See Note 2 as to the Company's acquisition of
     Beijing Catch's interest.)

13.  ITEMS RECORDED IN THE FOURTH QUARTER

     The Company recorded the following noncash items in the fourth quarter:

     Preferred  stock  dividends  payable  in  the  form  of  common  stock
     of $1,399,000;

     A value of stock options awarded to non employees of $1,837,500 was
     recognized and $459,375 of such value was amortized, and

     Professional fees were reduced by $147,000 as a result of the
     cancellation of 200,000 warrants issued to an investment-banking firm.

14.  RESTATEMENT OF CONSOLIDATED FINANCIAL STATEMENTS FOR FISCAL YEAR 1996

     In January 1996, the Company sold all of the business and operating
     assets of ITV. Prior to sale, ITV was engaged in the design,
     manufacture and sale of technologically advanced communication
     devices. Subsequent to the issuance of the Company's financial
     statements for the year ended March 31, 1998, the Company's management
     determined that the sale of ITV's business should have been accounted
     for using accounting for discontinued operations. Previously, the
     result of ITV's business was included in the financial statements as
     part of continuing operations for the year ended March 31, 1996. As a
     result, the Statement of Operations and Statement of Cash Flow for the
     year ended March 31, 1996, have been restated to show the discontinued
     operations.

     A summary of the significant effects of the restatement is as follows:

<TABLE>
<CAPTION>

CONSOLIDATED STATEMENTS OF OPERATIONS
                                                         FOR YEAR ENDED MARCH 31,
                                                          1996              1996
                                                          ----              ----
                                                     AS PREVIOUSLY           AS
                                                        REPORTED          RESTATED

<S>                                                <C>               <C>
REVENUES                                           $       683,733   $           -
                                                   ---------------   ---------------
EXPENSES:

  Cost of revenues                                         637,065               -
  Selling, general and administrative                    3,207,570         2,515,554
  Research and development                               1,287,629               -
                                                   ---------------   ---------------
   Total expenses                                        5,132,264         2,515,554
                                                   ---------------   ---------------
LOSS FROM CONTINUING OPERATIONS                         (4,448,531)       (2,515,554)
                                                   ---------------   ---------------
OTHER INCOME (EXPENSE):
  Gain from sale of assets                                  31,880               -
  Loss from abandoned assets                              (130,840)         (130,840)
  Interest expense                                        (241,856)         (241,856)
  Other - net                                                7,617             7,617
                                                   ---------------   ---------------
           Total other expense                            (333,199)         (365,079)
                                                   ---------------   ---------------
LOSS FROM CONTINUING OPERATIONS
   BEFORE EQUITY IN LOSSES OF
   UNCONSOLIDATED SUBSIDIARY                            (4,781,730)       (2,880,633)
Equity in losses of unconsolidated subsidiary             (500,000)         (500,000)
                                                   ----------------   --------------
LOSS FROM CONTINUING OPERATIONS                         (5,281,730)       (3,380,633)
                                                   ----------------   ---------------
DISCONTINUED OPERATIONS:
  Loss from discontinued operations                            -          (1,932,977)
  Gain on sale of discontinued operations                      -              31,880
                                                   ---------------   ---------------
LOSS FROM DISCONTINUED OPERATIONS
                                                               -          (1,901,097)
                                                   ---------------   ---------------
NET LOSS                                                (5,281,730)       (5,281,730)
PREFERRED STOCK DIVIDEND                                       -                 -
                                                   ---------------   ---------------
LOSS APPLICABLE TO COMMON SHAREHOLDERS             $    (5,281,730)  $    (5,281,730)
                                                   ===============   ===============
BASIC LOSS PER SHARE:
     Loss from continuing operations               $         (0.21)  $         (0.13)
     Loss from discontinued operations                         -               (0.08)
                                                   ---------------   ---------------
BASIC LOSS PER COMMON SHARE                        $         (0.21)  $         (0.21)
                                                   ===============   ===============
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING              25,651,045        25,651,045
                                                   ===============   ===============
</TABLE>



<TABLE>
<CAPTION>

CONSOLIDATED STATEMENTS OF CASH FLOWS
                                                         FOR YEAR ENDED MARCH 31,
                                                          1996              1996
                                                          ----              ----
                                                     AS PREVIOUSLY           AS
                                                        REPORTED          RESTATED

<S>                                                <C>               <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
  Net loss                                         $    (5,281,730)  $  (5,281,730)
  Add: Loss from discontinued operations                       -         1,932,977
  Less: Gain from sales of discontiued operations              -           (31,880)
                                                   ---------------   ---------------
  Net loss from continuing operations                   (5,281,730)     (3,380,633)
  Adjustments to reconcile net loss to net cash
    used in Continuing operating activities:
    Amortization of capitalized software development
    cost                                                   281,250               -
    Depreciation                                           346,005          19,404
    Loss from abandoned assets                             130,840         130,840
    Gain from sale of assets                               (31,880)              -
    Equity in losses of unconsolidated subsidiary          500,000         500,000
    (Increase) decrease in:
      Accounts receivable                                   98,895               -
      Inventories                                          (96,091)              -
      Prepaid expenses and other current assets            (91,200)        (41,813)
      Office lease deposit                                     -          (167,200)
      Other assets                                        (131,887)              -
    Increase (decrease) in:
      Accounts payable and accrued expenses              1,251,464       1,251,464
      Loans payable - stockholders                         136,982         136,982
                                                   ---------------   ---------------

        Net cash used in continuing operations          (2,887,352)     (1,550,956)
        Net cash used in discontinued operations               -        (1,336,396)
                                                   ---------------   ---------------
          Net cash used in operating activities         (2,887,352)     (2,887,352)

CASH FLOWS FROM INVESTING ACTIVITIES:
    Purchase of property and equipment                    (119,592)       (119,592)
    Investment in unconsolidated subsidiary             (1,170,000)     (1,170,000)
    Proceeds from sale of assets                           250,000         250,000
                                                   ---------------   ---------------
           Net cash used in investing activities        (1,039,592)     (1,039,592)
                                                   ---------------   ---------------
CASH FLOWS FROM FINANCING ACTIVITIES:
   Borrowings                                              739,952         739,952
   Proceeds from sale of common stock                    2,193,983       2,193,983
                                                   ---------------   ---------------
           Net cash provided by financing activities     2,933,935       2,933,935
                                                   ---------------   ---------------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS      (993,009)       (993,009)

CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR             1,178,898       1,178,898
                                                   ---------------   ---------------
CASH AND CASH EQUIVALENTS, END OF YEAR             $       185,889   $     185,889
                                                   ===============   ===============
</TABLE>


15.  RESTATEMENT OF CONSOLIDATED FINANCIAL STATEMENTS FOR FISCAL YEARS 1998
     AND 1997

     Subsequent to the issuance of the Company's financial statements for
     the year ended March 31, 1998, the Company's management determined
     that Hebei Equipment, should have been accounted for under the equity
     method of accounting, as the minority shareholders have substantive
     participating rights under the joint venture contracts. Previously,
     Hebei Equipment had been consolidated. As a result, the financial
     statements as of March 31, 1998 and 1997, and for the two years ended
     March 31, 1998, have been restated from amounts previously reported to
     account for Hebei Equipment under the equity method of accounting. A
     summary of the significant effects of the restatement is as follows:

<TABLE>
<CAPTION>

CONSOLIDATED BALANCE SHEETS                                        AS OF MARCH 31,
                                                     1998         1998          1997         1997
                                                     ----         ----          ----         ----
                                                      AS                         AS
                                                  PREVIOUSLY       AS        PREVIOUSLY       AS
                                                   REPORTED     RESTATED      REPORTED     RESTATED
ASSETS
CURRENT ASSETS
<S>                                               <C>           <C>           <C>           <C>
  Cash                                            $10,442,334   $2,134,662    $5,390,871    $1,346,713
  Accounts receivable                                 114,661      114,661             -             -
  Prepaid expenses and other current assets           356,554      108,082       182,090       171,921
                                                  -----------   ----------    -----------    ---------
     TOTAL CURRENT ASSETS                          10,913,549    2,357,405     5,572,961     1,518,634

  Investment in unconsolidated subsidiary                   -    5,074,217     1,192,000     2,221,476
  Property, plant & equipment, net                    897,265      139,136       518,020       153,356
  Investment in GSM network, net of amortization   28,461,810            -    22,017,869             -
  Office lease deposit                                113,180      112,600       111,500       111,500
  Deferred expenses                                     6,916            -         5,853             -
                                                  -----------   ----------    -----------    ---------
TOTAL ASSETS                                      $40,392,720   $7,683,358   $29,418,203    $4,004,966
                                                  ===========   ==========   ============   ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
  Accounts payable                                   $551,705     $541,888      $991,194      $261,193
  Accrued expenses                                    798,376      792,006       780,902       782,132
  Loans payable - shareholders                      1,452,553    1,452,553     2,413,553     2,413,553
  Other current payables                           10,234,872            -       450,685             -
                                                  -----------   ----------    -----------    ---------
      TOTAL CURRENT LIABILITIES                   $13,037,506   $2,786,447     4,636,334    $3,456,878

  Loans payable                                    20,028,602            -    11,956,486             -
  Other payables                                    1,487,727            -    10,290,128             -
  Minority interest                                   941,974            -     1,987,167             -
                                                  -----------   ----------    -----------    ---------
TOTAL LIABILITIES                                  35,495,809    2,786,447    28,870,115     3,456,878

STOCKHOLDERS' EQUITY
  Preferred Stock: authorized 10,000,000 shares:
    Series A Convertible Preferred Stock: $.001
    par value; 0 and 1,524,178 shares issued and
    outstanding in 1998 and 1997, respectively              -            -         1,524         1,524
    Series D Convertible Preferred Stock: $.001
    par value; 0 and 150 shares issued
    and outstanding in 1998 and 1997, respectively          -            -             1             1
    Series E Convertible Preferred Stock: $.001
    par value; 73 and 0 shares issued and outstanding
    in 1998 and 1997, respectively                          1            1             -             -

  Common stock:  $.001 par value, authorized
    100,000,000 shares; 26,532,502 and
    31,257,921 issued and outstanding in 1998
    and 1997, respectively                             26,533       26,533        31,258        31,258

  Additional paid-in capital                       33,148,529   33,149,142    25,202,108    25,200,877
  Accumulated deficit                             (27,394,590) (27,394,590)  (20,592,536)  (20,592,536)
  Cumulative foreign currency exchange loss               613            -        (1,231)            -
  Non-refundable equipment purchase deposit                 -            -    (4,572,536)   (4,572,536)
  Non employee deferred option cost, net           (1,378,125)  (1,378,125)            -             -
  Warrants                                            493,950      493,950       479,500       479,500
                                                  -----------   ----------    -----------    ---------
TOTAL STOCKHOLDERS' EQUITY
                                                    4,896,911    4,896,911       548,088       548,088
                                                  -----------   ----------   -----------     ---------
TOTAL LIABILITIES & STOCKHOLDERS' EQUITY          $40,392,720   $7,683,358   $29,418,203    $4,004,966
                                                  ===========   ==========   ===========    ==========
</TABLE>


<TABLE>
<CAPTION>

CONSOLIDATED STATEMENT OF OPERATIONS

                                                       FOR THE YEAR ENDED MARCH 31,
                                              1998          1998          1997           1997
                                              ----          ----          ----           ----
                                               AS                          AS
                                           PREVIOUSLY        AS        PREVIOUSLY         AS
                                            REPORTED      RESTATED       REPORTED      RESTATED

<S>                                      <C>            <C>           <C>             <C>
Revenues                                 $     216,348  $          -  $          -    $       -
                                         -------------- ------------- -------------   ---------
Expenses:
  Cost of revenues
  Selling, general and administrative        4,254,009     4,282,613     3,996,151    3,563,568
  Amortization of GSM networks               2,183,068             -            -             -
                                         -------------- ------------- -------------   ---------
                                             6,437,077     4,282,613     3,996,151    3,563,568
                                         -------------- ------------- -------------   ---------
Loss from operations                        (6,220,729)   (4,282,613)   (3,996,151)  (3,563,568)
                                         -------------- ------------- -------------   ---------
Other income (expense)
  Rental income                                 95,667             -        42,420            -
  Interest income                              239,067             -       152,824            -
  Amortization stock options granted
    non employees                             (459,375)     (459,375)           -             -
  Loss from abandoned assets                   (87,441)            -            -             -
  Interest expense                            (125,586)     (125,586)     (129,039)    (129,039)
  Exchange loss                                 (3,484)            -       (19,490)           -
  Other - net                                  113,320        70,853             -      (33,216)
  Write off investment in affiliate                  -             -      (198,538)    (198,538)
                                         -------------- ------------- -------------   ---------
Total other income (expense)                  (227,832)     (514,108)     (151,823)    (360,793)
                                         -------------- ------------- -------------   ---------
Loss before minority interest and
  equity interest                           (6,448,561)   (4,796,721)   (4,147,974)  (3,924,361)
Equity in losses of unconsolidated
  subsidiary                                         -      (606,647)            -     (140,524)
Minority interest in loss of
  subsidiaries                               1,045,193             -        83,089            -
                                         -------------- ------------- -------------   ---------

Net loss                                    (5,403,368)   (5,403,368)   (4,064,885)  (4,064,885)

Preferred stock dividend                     1,398,686     1,398,686        10,000       10,000
                                         -------------- ------------- -------------   ---------

Loss applicable to common shareholders   $  (6,802,054) $ (6,802,054) $ (4,074,885) $(4,074,885)
                                         ==============  ============ ============= ============

Basic loss per common share              $       (0.23) $      (0.23) $      (0.14) $     (0.14)
                                         ==============  ============ ============= ============
Weighted average common shares
  outstanding                               29,843,712    29,843,712    29,102,347   29,102,347
                                         ==============  ============ ============= ============
</TABLE>



<TABLE>
<CAPTION>

CONSOLIDATED STATEMENTS OF CASH FLOWS                                FOR YEAR ENDED MARCH 31,

                                                            1998             1998         1997            1997
                                                            ----             ----         ----            ----
                                                        As previously         As      As preivously        As
                                                             Reported      Restated     Reported        Restated

CASH FLOWS FROM OPERATING ACTIVITIES:
<S>                                                      <C>           <C>           <C>              <C>
  Net loss                                               $(5,403,368)  $(5,403,368)  $ (4,064,885)    $(4,064,885)
  Adjustments to reconcile net loss to net cash
      used in operating activities:
    Amortization of deferred option cost                     459,375       459,375              -               -
    Depreciation and amortization of GSM investment        2,274,443        43,432         43,193          28,905
    Loss from abandoned assets                                87,441        87,441              -               -
    Minority interest in net loss                                  -             -         83,089               -
    Issuance of warrants for services rendered                     -             -        479,500         479,500
    Issuance of common stock and options for directors'
      fees and professional services rendered                151,957       151,957        725,091         725,091
    Equity in losses of unconsolidated subsidiary                  -       606,647              -         140,524
    (Increase) decrease in:
      Accounts receivable                                   (114,661)     (114,661)             -               -
      Inventories                                                  -             -              -               -
      Prepaid expenses and other current assets             (174,464)       63,839      5,948,801        (111,243)
      Office lease deposit                                    (1,680)       (1,100)        55,700          55,700
      Other assets                                                 -             -              -               -
      Deferred expenses                                       (1,063)            -         59,412               -
    Increase (decrease) in:
      Accounts payable and accrued expenses                 (422,015)      293,027         98,221        (485,959)
      Other current payable                                9,784,187             -              -               -
      Loans payable - stockholders                          (111,000)     (111,000)       129,839        (150,000)
      Minority interest                                   (1,045,193)            -              -               -
                                                         ------------   -----------    ----------        ---------
           Net cash provided by (used in) operating
             activities                                    5,483,959    (3,924,411)     3,557,961      (3,382,367)
                                                         ------------   -----------    ----------        ---------

CASH FLOWS FROM INVESTING ACTIVITIES:
    Investment in Netmatics                                  (87,441)      (87,441)             -               -
    Purchase of property and equipment                      (470,620)      (29,212)      (362,417)       (106,028)
    Investment in unconsolidated subsidiary                        -      (276,000)     1,170,000        (654,000)
    GSM construction cost                                 (8,627,007)            -    (21,880,584)              -
    Joint venture's net liabilities assumed                        -             -      6,549,703               -
    Timing reversal of investment in unconsolidated        1,192,000             -     (1,192,000)              -
                                                         ------------   -----------    ----------        ---------

           Net cash used in investing activities          (7,993,068)     (392,653)   (15,715,298)       (760,028)
                                                         ------------   -----------    ----------        ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
   Warrants issued for services rendered - net of
    charges to APIC Borrowings                              (215,546)     (215,546)             -               -
   Borrowings                                              8,072,116             -     11,521,100               -
   Other long-term payables                               (8,802,401)            -              -               -
   Loans payable to stockholders                              25,000        25,000              -               -
   Advance to joint venture partner                         (540,000)   (3,724,000)             -        (538,000)
   Proceeds from sale of common stock                        166,659       166,659      2,000,000       2,000,000
   Proceeds from sale of Series B convertible preferred
     stock                                                         -             -      2,341,219       2,341,219
   Proceeds from sale of Series D convertible preferred
     stock                                                         -             -      1,500,000       1,500,000
   Proceeds from sale of Series C convertible preferred
     stock - net                                           2,093,900     2,093,900              -               -
   Proceeds from sale of Series E convertible preferred
     stock                                                 6,759,000     6,759,000              -               -
                                                         ------------   -----------    ----------        ---------
NET CASH PROVIDED BY FINANCING ACTIVITIES                  7,558,728     5,105,013     17,362,319       5,303,219
                                                         ------------   -----------    ----------        ---------

EFFECT OF EXCHANGE RATE CHANGES ON CASH                        1,844             -              -               -
                                                         ------------   -----------    ----------        ---------

NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS       5,051,463       787,949      5,204,982       1,160,824

CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR               5,390,871     1,346,713        185,889         185,889
                                                         ------------   -----------    ----------        ---------
CASH AND CASH EQUIVALENTS, END OF YEAR                   $10,442,334    $2,134,662     $5,390,871      $1,346,713
                                                         ============   ===========    ==========      ===========
</TABLE>


16.    SELECTED QUARTERLY DATA (UNAUDITED)

     The following table sets forth selected quarterly financial
     information beginning October 1,1996 (the period when AmTec first
     started consolidating the operating results of its Hebei Investments)
     through March 31, 1998:


<TABLE>
<CAPTION>

                                                 Three Months Ended            Three Months Ended
                                                  December 31, 1996              March 31, 1997
                                             ---------------------------    ---------------------------
                                                  As                            As
                                              Previously        As          Previously        As
                                               Reported      Restated        Reported      Restated
<S>                                           <C>           <C>             <C>            <C>
Revenue                                       $         -   $         -     $         -    $        -
Expenses                                          999,947       845,324       1,133,023     1,099,429
Loss from Operations                             (999,947)     (845,324)     (1,133,023)   (1,099,429)
Other Income(Expense)                            (504,153)       (3,313)        534,164      (230,998)
Equity in Loss of Unconsolidated Subsidiaries    (115,061)     (347,163)              -       226,845
Minority Interest in Loss of Subsidiaries         423,361             -        (504,723)            -
Net Loss                                       (1,195,800)   (1,195,800)     (1,103,582)   (1,103,582)
Preferred Stock Dividend                                -             -          10,000        10,000
Loss Applicable to Common Share                (1,195,800)   (1,195,800)     (1,113,582)   (1,113,582)
Basic Loss per Common Share                         (0.04)        (0.04)          (0.04)        (0.04)
</TABLE>


<TABLE>
<CAPTION>
                                                 Three Months Ended            Three Months Ended
                                                   June 30, 1997                September 30, 1997
                                             ---------------------------    ---------------------------
                                                  As                            As
                                              Previously        As          Previously        As
                                               Reported      Restated        Reported      Restated
<S>                                           <C>            <C>            <C>            <C>
Revenue                                       $         -    $        -     $         -    $        -
Expenses                                        2,369,632     1,100,148         553,147     1,279,350
Loss from Operations                           (2,369,632)   (1,100,148)       (553,147)   (1,279,350)
Other Income(Expense)                             (21,017)      (30,200)       (169,484)     (118,174)
Equity in Loss of Unconsolidated Subsidiaries           -      (461,879)              -       198,172
Minority Interest in Loss of Subsidiaries         798,422             -        (476,721)            -
Net Loss                                       (1,592,227)   (1,592,227)     (1,199,352)   (1,199,352)
Preferred Stock Dividend                          108,000       108,000               -             -
Loss Applicable to Common Share                (1,700,227)   (1,700,227)     (1,199,352)   (1,199,352)
Basic Loss per Common Share                         (0.05)        (0.05)          (0.04)        (0.04)
</TABLE>


<TABLE>
<CAPTION>
                                                 Three Months Ended            Three Months Ended
                                                  December 31, 1997              March 31, 1998
                                             ---------------------------    ---------------------------
                                                  As                            As
                                              Previously        As          Previously        As
                                               Reported      Restated        Reported      Restated

<S>                                           <C>            <C>            <C>            <C>
Revenue                                       $         -    $        -     $   216,348    $        -
Expenses                                        1,207,104       911,314       2,307,194     1,451,176
Loss from Operations                           (1,207,104)     (911,314)     (2,090,846)   (1,451,176)
Other Income(Expense)                              21,339        54,487         (58,670)       39,154
Equity in Loss of Unconsolidated Subsidiaries           -       (56,567)              -      (286,374)
Minority Interest in Loss of Subsidiaries         272,371             -         451,120             -
Net Loss                                         (913,394)     (913,394)     (1,698,396)   (1,698,396)
Preferred Stock Dividend                          114,891       114,891       1,175,795     1,175,795
Loss Applicable to Common Share                (1,028,285)   (1,028,285)     (2,874,191)   (2,874,191)
Basic Loss per Common Share                         (0.04)        (0.04)          (0.10)        (0.10)
</TABLE>


17.  CHINA CONTINGENCY (UNAUDITED)

     The current PRC regulations prohibit foreign investors and foreign
     invested enterprises from operating or participating in the operation
     of telecommunications networks in China. The relevant PRC laws and
     regulations do not define what constitutes foreign operations or
     participation in operations, and it is not clear what rights or
     actions would violate such laws and regulations. Based on advice of
     its Chinese legal counsel, the Company has structured its investments
     in China by establishing Chinese-foreign joint ventures in the PRC to
     provide financing and consultancy services to licensed
     telecommunications operators, i.e., utilizing the commonly-known
     Chinese-Chinese-Foreign ("CCF") structure. The PRC Government is
     currently undertaking a review of the CCF structure used by Unicom. It
     has been reported that Unicom has been instructed by the PRC
     Government not to use the CCF structure in the future and that the PRC
     Government is examining and evaluating the existing CCF contracts. It
     is unclear if, and to what extent, the existing CCF contracts entered
     into by Unicom will be required to be amended. It is also unclear
     whether foreign entities involved in the CCF structures will be
     required to divest themselves of their respective interests in the
     Chinese-foreign joint venture companies. The evaluation of the CCF
     structure by the PRC Government may have a material adverse impact on
     the contracts entered into by Hebei Engineering and by the Company
     which utilize the CCF structure and may have a material adverse effect
     on the Company's business, financial condition and results of
     operations.

     In order to provide a uniform regulatory framework to encourage the
     orderly development of the PRC telecommunications industry, the PRC
     authorities are currently preparing a draft Telecommunications Law.
     Once formulated, the draft law will be submitted to the National
     People's Congress for review and adoption. It is unclear if and when
     the Telecommunications Law will be adopted. The nature and the scope
     of the regulation envisaged by the Telecommunications Law is not fully
     known but the Company believes that, if adopted, the
     Telecommunications Law will have a positive effect on the overall
     development of the telecommunications industry in the PRC. However,
     the Telecommunications Law, if adopted, may have an adverse effect on
     the Company's business, financial condition or results of operations.

     The Chinese laws and regulations governing the telecommunications
     industry may also be changed or applied in a manner which would have a
     material adverse effect on the business, financial condition and
     results of operations of the Company.

     Each of the Company's joint ventures, Hebei Equipment and Hebei
     Engineering, is organized under the laws of the PRC as a Sino-foreign
     equity joint venture enterprise, a distinct legal entity with limited
     liability. Such entities are governed by the Law of the PRC on Joint
     Ventures Using Chinese and Foreign Investments, and implementing
     regulations related thereto. The parties to an equity joint venture
     have rights to the financial returns of the joint venture in
     proportion to the joint venture interests that they hold. The
     operation of equity joint ventures is subject to an extensive body of
     law governing such matters as formation registration, capital
     contribution, capital distributions, accounting, taxation, foreign
     exchange, labor and liquidation. The transfer or increase of an
     interest in a Sino-foreign equity joint venture enterprise requires
     agreement among the parties to the venture and is effective upon
     approval of relevant government agencies. (See Note 2)

     It has recently come to the Company's attention that certain
     procedural and technical matters relating to the establishment of
     Hebei Equipment and its investment in Hebei Engineering were not
     strictly complied with and are currently being addressed by the
     Company. If these technical and procedural matters are not resolved in
     a satisfactory manner, the business, financial conditions and results
     of operations of the Company may be materially adversely effected.



                          INDEPENDENT AUDITORS' REPORT


TO THE BOARD OF DIRECTORS OF
HEBEI UNITED TELECOMMUNICATIONS EQUIPMENT CO., LTD.


We have audited the accompanying balance sheets of Hebei United
Telecommunications Equipment Co., Ltd. as of December 31, 1997 and the
related statements of operations, investors' equity and cash flows for the
period from April 29, 1997 (commencement of operations) to December 31,
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 audit.

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

In our opinion, such financial statements present fairly, in all material
respects, the financial position of Hebei United Telecommunications
Equipment Co., Ltd. as of December 31, 1997 and the results of its
operations and its cash flows for the period from April 29, 1997
(commencement of operations) to December 31, 1997 in conformity with
accounting principles generally accepted in the United States of America.



Deloitte Touche Tohmatsu
Beijing, People's Republic of China
June 11, 1998



HEBEI UNITED TELECOMMUNICATIONS EQUIPMENT CO., LTD.
BALANCE SHEET
DECEMBER 31, 1997

                                                              December 31,
                                                             ---------------
                                                                  1997
                                                             ---------------
                                                                  RMB
ASSETS
Current Assets:
        Cash and cash equivalents                                39,500,312
        Other receivables                                         1,102,753
                                                             ---------------
                Total current assets                             40,603,065
Property and equipment, net                                         493,430
Investment in  Joint Venture                                      4,383,750
                                                             ---------------
Total Assets                                                     45,480,245
                                                             ===============
LIABILITIES AND
    INVESTORS' EQUITY
Current Liabilities:
        Amount due to an investor                                30,808,631
        Other payables                                               32,925
                                                             ---------------
          Total current liabilities                              30,841,556
                                                             ---------------
Total Liabilities                                                30,841,556
                                                             ---------------
Commitment and Contingency
Investors' equity:
        Capital contribution                                     24,923,218
        Accumulated deficit                                    (10,284,529)
                                                             ---------------
                Total Investors' equity                          14,638,689
                                                             ---------------
Total Liabilities and Investors' Equity                          45,480,245
                                                             ===============

     See notes to financial statements



HEBEI UNITED TELECOMMUNICATIONS EQUIPMENT CO., LTD.
STATEMENT OF OPERATIONS
FOR THE PERIOD FROM APRIL 29, 1997 (COMMENCEMENT OF OPERATIONS)
TO DECEMBER 31, 1997

                                                           April 29, 1997
                                                          (commencement of
                                                            operation) to
                                                          December 31, 1997
                                                          ------------------
                                                                 RMB

General and administrative expenses                               (758,658)
Other (expense) income:
     Operation set up expense                                   (2,000,000)
     Equity in losses of  Joint  Venture                        (8,347,533)
     Exchange loss                                                 (24,680)
     Interest income                                               846,342
                                                          ------------------
Net loss                                                       (10,284,529)
                                                          ==================


See notes to financial statements



HEBEI UNITED TELECOMMUNICATIONS EQUIPMENT CO., LTD.
STATEMENTS OF INVESTORS' EQUITY
AT DECEMBER 31, 1997


<TABLE>
<CAPTION>

                                        Capital         Accumulated
                                      Contribution        Deficit          Total
                                     ---------------   --------------   -------------
                                          RMB               RMB             RMB
<S>                                      <C>               <C>            <C>
Balance, April 29, 1997                    -                 -               -
Capital contribution                     24,923,218          -            24,923,218
Net loss                                   -            (10,284,529)     (10,284,529)
                                     ---------------   --------------   -------------
Balance, December 31, 1997               24,923,218     (10,284,529)      14,638,689
                                     ===============   ==============   =============
</TABLE>


See notes to financial statements




HEBEI UNITED TELECOMMUNICATIONS EQUIPMENT CO., LTD.
STATEMENTS OF CASH FLOWS
FOR THE PERIOD FROM APRIL 29, 1997 (COMMENCEMENT OF OPERATIONS) TO DECEMBER
31, 1997


                                                            April 29.1997
                                                            (commencement
                                                            of operations)
                                                           to December 31,
                                                                 1997
                                                           -----------------
                                                                 RMB

Cash flows from operating activities:
   Net loss                                                    (10,284,529)
   Adjustments to reconcile net loss to net cash
      provided by operating activities:
   Depreciation                                                      37,928
   Equity in losses of  Joint Venture                             8,347,533
   Changes in assets and liabilities:
     Other receivables                                          (1,102,753)
     Amount due to an investor                                   30,808,631
     Other payables                                                  32,925
                                                           -----------------
  Net cash provided by operating activities                      27,839,735
                                                           -----------------
Cash flows from investing activities:
   Additions of property and equipment                            (531,358)
                                                           -----------------
  Net cash used in investing activities                           (531,358)
                                                           -----------------
Cash flow from financing activities:
   Capital contribution                                          12,191,935
                                                           -----------------
Net cash provided by financing activities                        12,191,935
                                                           -----------------
Net increase in cash and cash equivalents                        39,500,312
Cash and cash equivalents, beginning of period                       -
                                                           -----------------
Cash and cash equivalents, end of period                         39,500,312
                                                           =================


Non-cash transactions:

During the period ended December 31, 1997, DEVELOPMENT CO. and CATCH
contributed their interest in a Joint Venture valued at RMB 12,731,283 into
the Company as capital contribution.

See notes to financial statements



HEBEI UNITED TELECOMMUNICATIONS EQUIPMENT CO., LTD.
NOTES TO FINANCIAL STATEMENTS

1.     ORGANIZATION

       The Company was established on April 29, 1997 as a limited liability
       joint venture company in the People's Republic of China ("PRC"). The
       period of operation is twenty years. The registered capital of the
       Company was US$3 million, of which 60.8% (US$ 1.824 million) was
       contributed by AmTec, Inc. (formerly known as AVIC Group
       International, Inc.), 9.2% (US$ 276,000) by CATCH Telecommunication
       Co., Ltd. (the "CATCH") and 30% (US$ 900,000) by Hebei United
       Telecommunications Development Co., Ltd. (the "DEVELOPMENT CO."). On
       November 7, 1997, CATCH agreed to transfer its interest in the
       Company to AmTec, Inc. Subsequent to the transfer (which occurred
       after December 31, 1997), AmTec, Inc. owns 70% (US$ 2.1 million) and
       DEVELOPMENT CO. owns 30% (US$900,000) of the Company's registered
       capital. The Company's major activity to date is an investment in a
       Chinese joint venture which is mainly engaged in the development and
       construction of telecommunication systems, and providing related
       technical consulting and repair services.

2.     BASIS OF PREPARATION OF FINANCIAL STATEMENTS

       The financial statements were prepared in accordance with accounting
       principles generally accepted in the United States of America ("US
       GAAP"). This basis of accounting differs from that used in the
       statutory financial statements of the Company, which are required to
       be prepared in accordance with the accounting principles and
       relevant financial regulations as established by the Ministry of
       Finance of the PRC.

       The principal adjustments made to conform the statutory financial
       statements of the Company to US GAAP included the following:
         -  Adjustment to write off organization and operation set up expenses.
         -  Adjustment to write off exchange loss.

3.     SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

       The principal accounting policies which have been adopted in
       preparing the financial statements set out in this report, and which
       conform with accounting principles generally accepted in the United
       States of America are as follows:

       Cash and cash equivalents - Cash and cash equivalents include cash
       on hand, demand deposits and highly liquid instruments with a
       maturity of three months or less at the time of purchase.

       Property and equipment - Property and equipment is stated at cost
       less accumulated depreciation. Depreciation is provided using the
       straight-line method to write off the cost of property and
       equipment, net of the estimated residual value of 10% of cost, over
       their estimated useful lives as follows:

                 Furniture, fixture and  equipment             5 years
                 Motor vehicles                                5 years


       Long lived assets - The Company evaluates long-lived assets for
       impairment whenever events or changes in circumstances indicate that
       the net carrying amount may not be recoverable. When such events
       occur, the Company measures impairment by comparing the carrying
       value of the long-lived asset to the estimated undiscounted future
       cash flows expected to result from the use of the assets and their
       eventual disposition. If the sum of the expected undiscounted future
       cash flows is less than the carrying amount of the assets, the
       Company would recognize an impairment loss. The impairment loss, if
       determined, would be measured as the amount by which the carrying
       amount of the asset exceeds the fair value of the asset.

       Investment in Joint Venture - Hebei Equipment owns 51% of Hebei
       United Telecommunications Engineering Company, Ltd. ("Hebei
       Engineering"). Hebei Equipment accounts for its investment using
       equity method of accounting as minority shareholders of Hebei
       Engineering have substantive participating rights under the joint
       venture contracts. Under the equity method, the investment is
       carried at cost of acquisition, plus Hebei Equipment's equity in
       undistributed earnings or losses since acquisition. Equity in the
       losses of the unconsolidated subsidiary is recognized according to
       the Company's percentage ownership in the unconsolidated subsidiary
       until the Company contributed capital has been fully depleted.

       Income tax - Deferred income taxes are provided for using the
       liability method. Under the liability method, deferred income taxes
       are recognized for all significant temporary differences between the
       tax and financial statement bases of assets and liabilities. The tax
       consequences of those differences are classified as current or
       non-current based upon the classification of the related assets or
       liabilities in the financial statements. A valuation allowance is
       provided to reduce the amount of deferred tax assets if it is
       considered more likely than not that some portion of, or all of, the
       deferred tax assets will not be realized.

       Foreign currency translation - The Company's financial statements
       are prepared using Renminbi as the reporting currency. Foreign
       currency transactions are translated at the rates ruling on the
       dates of the transactions. Monetary assets and liabilities
       denominated in foreign currencies are translated at the rates ruling
       on the balance sheet date. Exchange gains and losses are reported in
       the statement of operation.

       Concentration of credit risk - Financial instruments that
       potentially subject the Company to concentrations of credit risk
       consist principally of temporary cash investments.

       The Company places its temporary cash investments with various
       financial institutions in the PRC. The Company believes that no
       significant credit risk exists as these investments are made with
       high-credit, quality financial institutions.

       Use of estimates - The preparation of financial statements in
       conformity with generally accepted accounting principles requires
       management to make estimates and assumptions that affect the
       recorded amounts of assets and liabilities and disclosures of
       contingent assets and liabilities in the financial statements and
       recorded amounts of revenue and expenses during the period . Actual
       results could differ from these estimates.

       Fair value of financial instruments - The carrying values of cash
       and cash equivalents, other receivables, other payables, and amount
       due to an investor approximate fair value because of the short
       maturity of these instruments.

       Comprehensive Income - In June 1997, the Financial Accounting
       Standards Board ("FASB") issued SFAS No. 130, "Reporting
       Comprehensive Income." This statement is effective for financial
       statements issued for periods beginning after December 15, 1997.
       Management is evaluating the effect on its financial reporting of
       the adoption of this statement.

       Segments of an Enterprise and Related Information - In June 1997,
       the FASB issued SFAS No. 131, "Disclosure about Segments of an
       Enterprise and Related Information." This statement is effective for
       fiscal years beginning after December 15, 1997. SFAS No. 131
       requires the reporting of profit and loss, specific revenue and
       expense items, and assets for reportable segments. It also requires
       the reconciliation of total segment revenues, total segment profit
       or loss, total segment assets, and other amounts disclosed for
       segments, in each case to the corresponding amounts in the general
       purpose financial statements. The Company has not yet determined
       what additional disclosures may be required in connection with
       adopting SFAS 131.

       New accounting standard not yet adopted - The Financial Accounting
       Standards Board has issued a new standard SFAS No. 133 "Derivative
       Instruments and Hedging Activities", which is effective for fiscal
       years beginning after June 15, 1999. Management has not yet
       completed the analysis of the impact this would have on the
       financial statements of the Company and has not adopted this
       standard.

4.    OPERATION SET UP EXPENSE

      Amount represents payment to CATCH for services provided in
      connection with the formation of the Company.

5.    INCOME TAX

      The statutory income tax rate of the Company is 33%. There is no
      provision for the income taxes during the period from April 29, 1997
      (commencement of operation) to December 31, 1997 as the Company
      incurred losses during the relevant periods. Deferred tax assets of
      RMB639,209 existed as at the end of 1997, arising from a temporary
      difference. A valuation allowance has been fully provided against the
      deferred tax assets since it is considered more likely than not that
      all of the deferred assets will not be realized.

      Deferred tax assets are composed of the following:
                                                             December 31,
                                                             --------------
                                                                 1997
                                                            ---------------
                                                                 RMB

         Operation set up expense                                  660,000
         Organization expenses                                     (60,980)
         Exchange gain/loss                                          8,144
         Other deferred assets written off                          32,045
         Valuation allowance                                      (639,209)
                                                            ---------------
                                                                      -
                                                            ===============

6.      PROPERTY AND EQUIPMENT

       Property and equipment consists of the following:
                                                             December 31,
                                                             --------------
                                                                 1997
                                                            ---------------
                                                                 RMB

         At cost:
         Furniture, fixtures and equipment                         233,958
         Motor vehicles                                            297,400
                                                            ---------------
                                                                   531,358
         Less: Accumulated depreciation                             37,928
                                                            ---------------
                                                                   493,430
                                                            ===============

     All assets are located in the PRC.

7.     INVESTMENT IN A JOINT VENTURE

     Hebei Equipment holds a 51% interest in Hebei Engineering, which is
     developing GSM networks in the ten largest cities in Hebei Province,
     PRC. Nippon Telegraph and Telephone International, Inc. ("NTT") and
     Itochu Corporation hold the remaining 49% interest in Hebei
     Engineering.

     Hebei Equipment's investment in the joint venture were accounted for
     by the equity method of accounting because minority shareholders of
     Hebei Engineering have substantive participating rights under the
     provision of the Joint Venture contracts.(See Note 3)

                                                         December 31,
                                                         --------------
                                                             1997
                                                         --------------
                                                              RMB

         Cost                                               12,731,283

         Less: Share of losses                              (8,347,533)
                                                         ---------------
                                                             4,383,750
                                                         ==============

      Hebei Engineering is a Sino-foreign equity joint venture established
      on January 31, 1996 in the PRC. The period of operation is
      twenty-five years. The registered capital of the Company is US$ 3
      million. The Company is mainly engaged in the development and
      construction of telecommunication systems, and providing related
      technical consulting services.


      The summarized balance sheet of Hebei Engineering as of December 31,
      1997 and its summarized statement of operations for the year ended
      December 31, 1997 are as follows:

      Balance Sheet
                                                       December 31,
                                                           1997
                                                      ---------------
                                                           RMB
      ASSETS
      Current Assets                                      30,233,253
      Other assets                                         5,840,362
      Investment in GSM networks                         235,635,325
                                                      ---------------
      Total Assets                                       271,708,940
                                                      ===============
      LIABILITIES AND INVESTORS'  EQUITY
      Current liabilities                                 85,938,393
      Long-term Liabilities:                             177,052,277
                                                      ---------------
      Total Liabilities                                  262,990,670
                                                      ---------------
      Investors' equity                                    8,718,270
                                                      ---------------
      Total Liabilities and Investors' Equity            271,708,940
                                                      ===============
      Statement of operations

                                                        Year ended
                                                       December 31,
                                                           1997
                                                      ---------------
                                                           RMB

      Net revenue from GSM networks                       1,706,499
      Total expenses                                    (20,348,240)
                                                      ---------------
      Net loss from operations                          (18,641,741)
      Total other income, net                             2,274,029
                                                      ---------------
      Net loss                                          (16,367,712)
                                                      ===============

8.    AMOUNT DUE TO AN INVESTOR

      Amount represents funds advanced to Hebei Equipment by AmTec, Inc.
      These amounts are payable on demand and bear no interest.

9.    CAPITAL CONTRIBUTION

                                                December 31, 1997
                                        ----------------------------------
                                           Ownership            RMB
      Capital contributed by:

      DEVELOPMENT CO.                               30%          7,480,150
      AmTec Inc.                                    70%         17,443,068
                                        ---------------   ----------------
                                                   100%         24,923,218
                                        ===============   ================

10.    COMMITMENTS

       The Company leases certain buildings under operating leases, which
       expire through March 1999. Rental expense under operating leases was
       RMB 62,580 in 1997.

       The aggregate annual minimum operating lease commitments under all
       non-cancellable leases at December 31, 1997 is as follows:

                                                        December 31,
                                                       ---------------
                                                            1997
                                                       ---------------
                                                            RMB

         1998                                                 100,100
         1999                                                  16,700
                                                       ---------------
                                                              116,800
                                                       ===============

11.    RETIREMENT BENEFITS

       The Company's retired employees are entitled to a retirement pension
       calculated with reference to their basic salaries on retirement and
       their length of service in accordance with a government managed
       pension plan. The PRC government is responsible for the pension
       liability to these retired employees. The Company is required to
       make contributions to the state retirement plan at rates ranging
       from 18% to 20% of the adjusted monthly basic salaries of the
       current employees. The expense of such arrangements to the Company
       was insignificant for the period presented. The Company is not
       obligated under any other post-retirement plans and post-employment
       benefits are not material.





                        INDEPENDENT AUDITORS' REPORT

TO THE BOARD OF DIRECTORS OF
HEBEI UNITED TELECOMMUNICATIONS ENGINEERING CO., LTD.


We have audited the accompanying balance sheets of Hebei United
Telecommunications Engineering Co., Ltd. as of December 31, 1997 and 1996
and the related statements of operations, investors' equity and cash flows
for the years ended December 31, 1997 and the period from January 31, 1996
(commencement of operations) to December 31, 1996. 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 auditing standards generally
accepted in the United States of America. Those standards require that we
plan and perform the audits to obtain reasonable assurance about whether
the financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. An audit also includes assessing
the accounting principles used and significant estimates made by the
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, such financial statements present fairly, in all material
respects, the financial position of Hebei United Telecommunications
Engineering Co., Ltd. as of December 31, 1997 and 1996 and the results of
its operations and its cash flows for the year ended December 31, 1997 and
the period from January 31, 1996 (commencement of operations) to December
31, 1996 in conformity with accounting principles generally accepted in the
United States of America.



Deloitte Touche Tohmatsu
Beijing, People's Republic of China
June 11, 1998



HEBEI UNITED TELECOMMUNICATIONS ENGINEERING CO., LTD.
BALANCE SHEETS
DECEMBER 31, 1996 AND 1997

                                                       December 31
                                              ------------------------------
                                                  1997             1996
                                              -------------    -------------
                                                   RMB             RMB
ASSETS

Current Assets:
        Cash and cash equivalents               29,278,905       33,383,491
        Short-term investment                      -                270,300
        Other receivables                          954,348           84,694
                                              -------------    -------------
                Total current assets            30,233,253       33,738,485

Property and equipment, net                      5,783,117        3,037,067

Deferred assets                                     57,245           48,744

Investment in GSM networks                     235,635,325      183,373,618
                                              -------------    -------------

Total Assets                                   271,708,940      220,197,914
                                              =============    =============


LIABILITIES AND INVESTORS' EQUITY

Current Liabilities:
        Amount due to investors                    997,597          -
        Other payables                          84,888,076        9,808,654
        Accrued expenses                            52,720           24,560
                                              -------------    -------------
          Total current liabilities             85,938,393        9,833,214
                                              -------------    -------------

Long-term Liabilities:
        Long-term loans                        165,816,800       99,578,400
        Other payables                          11,235,477       85,700,318
                                              -------------    -------------
                                               177,052,277      185,278,718
                                              -------------    -------------

Total Liabilities                              262,990,670      195,111,932
                                              -------------    -------------

Commitment and Contingency

Investors' equity:
        Capital contribution                    24,963,300       24,963,300
        Capital reserve                             (4,800)          (4,800)
        (Accumulated deficit) retained
        earnings                               (16,240,230)         127,482
                                              -------------    -------------
                Total investors' equity          8,718,270       25,085,982
                                              -------------    -------------

Total Liabilities and Investors' Equity        271,708,940      220,197,914
                                              =============    =============

See notes to financial statements



HEBEI UNITED TELECOMMUNICATIONS ENGINEERING CO., LTD.
STATEMENTS OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1997 AND THE PERIOD FROM JANUARY 31, 1996
(COMMENCEMENT OF OPERATIONS) TO DECEMBER 31, 1996


                                                              January 31,
                                                                 1996
                                            Year ended       (commencement
                                           December 31,     of operations)
                                               1997           to December
                                                               31, 1996
                                           --------------   ----------------
                                                RMB               RMB

Net revenue from GSM networks                  1,706,499           -
                                           --------------   ----------------

Expenses:
    General and administrative expenses      (2,222,446)        (1,340,568)
    Amortization of GSM networks            (18,125,794)               -
                                           --------------   ----------------
Total expenses                              (20,348,240)        (1,340,568)
                                           --------------   ----------------

Net loss from operations                    (18,641,741)        (1,340,568)
                                           --------------   ----------------

Other income (expense) :
    Rental income, net                           736,965            352,724
    Other income, net                            250,000           -
    Interest income                            1,328,727          1,277,390
    Exchange loss                                (41,663)          (162,064)
                                           --------------   ----------------
Total other income (expense)                   2,274,029          1,468,050
                                           --------------   ----------------

Net (loss)  income                          (16,367,712)            127,482
                                           ==============   ================


See notes to financial statements




HEBEI UNITED TELECOMMUNICATIONS ENGINEERING CO., LTD.
STATEMENTS OF INVESTORS' EQUITY
AT DECEMBER 31, 1996 AND 1997

<TABLE>
<CAPTION>
                                                               (Accumulated
                                    Capital       Capital        deficit)
                                  contribution    reserve        retained         Total
                                                                 earnings
                                  ------------- ------------- --------------- ---------------
                                      RMB           RMB            RMB             RMB

<S>                               <C>           <C>           <C>             <C>
Balance, January 31, 1996              -             -              -               -

Capital contribution                24,963,300       -              -             24,963,300
Exchange difference on capital
contribution                           -             (4,800)        -                 (4,800)
Net income                             -             -               127,482         127,482
                                  ------------- ------------- --------------- ---------------

Balance, December 31, 1996          24,963,300       (4,800)         127,482      25,085,982

Net loss                               -             -           (16,367,712)    (16,367,712)
                                  ------------- ------------- --------------- ---------------
Balance, December 31, 1997          24,963,300       (4,800)     (16,240,230)      8,718,270
                                  ============= ============= =============== ===============
</TABLE>


See notes to financial statements



HEBEI UNITED TELECOMMUNICATIONS ENGINEERING CO., LTD.
STATEMENTS OF CASH FLOWS
FOR THE YEAR ENDED DECEMBER 31, 1997 AND THE PERIOD FROM JANUARY 31, 1996
(COMMENCEMENT OF OPERATIONS) TO DECEMBER 31, 1996

<TABLE>
<CAPTION>
                                                                             January 31,
                                                                            1996(commencement
                                                              Year ended          of
                                                             December 31,    operations)
                                                                 1997        to December
                                                                               31, 1996
                                                             -------------- ---------------
                                                                  RMB            RMB

Cash flows from operating activities:
<S>                                                           <C>                  <C>
   Net (loss) income                                           (16,367,712)        127,482
   Adjustments to reconcile net (loss)
     income to net cash provided by
     operating activities:
   Loss on disposals of equipment                                    9,407        -
   Depreciation                                                    358,278         119,003
   Amortization of investment in GSM networks                   18,125,794        -
   Changes in assets and liabilities:
     Other receivables                                            (869,654)        (84,694)
     Other payables                                                369,218         324,892
     Accrued expenses                                               28,160          24,560
                                                             -------------- ---------------
Net cash provided by operating activities                        1,653,491         511,243
                                                             -------------- ---------------

Cash flows from investing activities:
   Short-term investment                                           270,300        (270,300)
   Additions of property and equipment                          (3,113,736)     (3,156,070)
   Increase in deferred assets                                      (8,500)        (48,744)
   Investment in GSM networks                                  (69,144,541)    (88,189,538)
                                                             -------------- ---------------
Net cash used in investing activities                          (71,996,477)    (91,664,652)
                                                             -------------- ---------------

Cash flow from financing activities:
   Proceeds from loans                                          66,238,400     161,997,650
   Repayment of loans                                              -           (62,419,250)
   Capital contribution                                            -            24,958,500
                                                             -------------- ---------------
Net cash provided by financing activities                       66,238,400     124,536,900
                                                             -------------- ---------------

(Decrease) increase in cash and cash equivalents                (4,104,586)     33,383,491

Cash and cash equivalents, beginning of period                  33,383,491        -
                                                             -------------- ---------------

Cash and cash equivalents, end of period                        29,278,905      33,383,491
                                                             ============== ===============

Supplemental disclosures of cash flow information:
   Interest paid                                                 8,144,426        -
                                                             ============== ===============
</TABLE>

See notes to financial statements



HEBEI UNITED TELECOMMUNICATIONS ENGINEERING CO., LTD.
NOTES TO FINANCIAL STATEMENTS


1.     GENERAL

       The Company was established on January 31, 1996 as a limited
       liability joint venture company in the People's Republic of China
       ("PRC"). The period of operation is twenty-five years. The
       registered capital of the Company is US$3 million, of which 51%
       (US$1.53 million) was contributed by Hebei United Telecommunications
       Equipment Co., Ltd.("EQUIPMENT CO."), and 49% (US$ 1.47 million) by
       NTT International, Inc. ("NTT"). On October 18, 1996, NTT agreed to
       transfer 19.6% of the capital in the Company to Itochu Corporation
       ("ITOCHU") with effect from December 27, 1996. Subsequent to the
       transfer, EQUIPMENT CO. owns 51% (US$1.53 million), NTT owns 29.4%
       (US$882,000) and ITOCHU owns 19.6% (US$588,000) of the Company's
       registered capital. The Company is mainly engaged in developing and
       assisting in construction of telecommunication systems, and
       providing related technical consulting services. Hebei Engineering
       was considered a developmental stage entity at December 31, 1996.
       Hebei Engineering is no longer a development stage entity.

       Hebei Engineering has invested approximately RMB 253 million in the
       construction of GSM telecommunications networks (the "GSM networks")
       in Hebei Province of the PRC. The GSM networks are being built
       pursuant to a 15-year Project Cooperation Contract with China United
       Communications Company ("UNICOM"), the operator of the GSM Networks.
       Terms of the contract include the following:

       Initially, UNICOM will own 30% of the assets while Hebei Engineering
       will own 70% of the assets. Both parties agree to distribute the
       profit according to the "Distributable Cash Flow" (as defined) with
       22% going to UNICOM and 78% going to Hebei Engineering. Each year,
       Hebei Engineering will transfer ownership of assets to UNICOM equal
       in value to the Distributable Cash Flow received up to 60% of the
       assets. The maximum amount of assets transferred will not exceed 90%
       of the assets until termination of the Project Cooperation
       Contract.. Upon the termination of the contract the remaining 10% of
       the network assets shall be assigned to UNICOM without any further
       consideration. Hebei Engineering will continue to receive 78% of the
       Distributable Cash Flow after transfer of all the assets for the
       remainder of the 15-year period.

       Under PRC law, foreign investment enterprises, such as Hebei
       Engineering, are not permitted to own or operate telecommunications
       networks. Substantially all of the Hebei Engineering's revenues are
       derived from contractual arrangements for the sharing of cash flow
       from network operations rather than from ownership or operation of
       the networks. Hebei Engineering has recorded its investment (GSM
       Construction Costs) as a right to receive future cash flow at cost
       and is amortizing it over the remaining life of the project. Income
       from the GSM networks is recognized at the time when Hebei
       Engineering can estimate or calculate the portion of its
       Distributable Cash Flow from the network. UNICOM commenced operation
       of the GSM networks in February 1997.

2.     BASIS OF PREPARATION OF FINANCIAL STATEMENTS

       The financial statements have been prepared in accordance with
       accounting principles generally accepted in the United States of
       America ("US GAAP"). This basis of accounting differs from that used
       in the statutory financial statements of the Company, which are
       required to be prepared in accordance with the accounting principles
       and relevant financial regulations as established by the Ministry of
       Finance of the PRC.

       The principal adjustments made to conform the statutory financial
       statements of the Company to US GAAP mainly included the following:

       -  Adjustment to write off organization expenses.
       -  Adjustment to write off exchange loss.

3.     SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

       The principal accounting policies which have been adopted in
       preparing the financial statements set out in this report, and which
       conform with accounting principles generally accepted in the United
       States of America are as follows:

       Cash and cash equivalents - Cash and cash equivalents include cash
       on hand, demand deposits and highly liquid instruments with a
       maturity of three months or less at the time of purchase.

       Property and equipment - Property and equipment is stated at cost
       less accumulated depreciation. Depreciation is provided using the
       straight-line method to write off the cost of property and
       equipment, net of the estimated residual value of 10% of cost, over
       their estimated useful lives as follows:

       Land and buildings                                            20 years
       Furniture, fixtures and equipment                              5 years
       Motor vehicles                                                 5 years

       Long lived assets - The Company evaluates long-lived assets for
       impairment whenever events or changes in circumstances indicate that
       the net carrying amount may not be recoverable. When such events
       occur, the Company measures impairment by comparing the carrying
       value of the long-lived asset to the estimated undiscounted future
       cash flows expected to result from the use of the assets and their
       eventual disposition. If the sum of the expected undiscounted future
       cash flows is less than the carrying amount of the assets, the
       Company would recognize an impairment loss. The impairment loss, if
       determined, would be measured as the amount by which the carrying
       amount of the asset exceeds the fair value of the asset.

       Investment in GSM networks - Investment in GSM networks is stated at
       cost less accumulated amortization. The investment in GSM networks
       is amortized on a straight-line basis over the remaining life of the
       Project Cooperation Contract between the Company and UNICOM.

       Capitalization of borrowing costs - Borrowing costs directly
       attributable to the acquisition, construction or production of
       qualifying assets, i.e. assets that necessarily take a substantial
       period of time to get ready for their intended use or sale, are
       capitalized as part of the cost of those assets. Capitalization of
       such borrowing costs ceases when the assets are substantially ready
       for their intended use or sale. Interest capitalized at December 31,
       1997 was RMB8,144,426.

       Revenue recognition - Revenue related to the GSM networks is
       recognized at the time when the Company can estimate or calculate
       the portion of its distributable cash flow from the network.

       Income tax - Deferred income taxes are provided for using the
       liability method. Under the liability method, deferred income taxes
       are recognized for all significant temporary differences between the
       tax and financial statement bases of assets and liabilities. The tax
       consequences of those differences are classified as current or
       non-current based upon the classification of the related assets or
       liabilities in the financial statements. A valuation allowance is
       provided to reduce the amount of deferred tax assets if it is
       considered more likely than not that some portion of, or all of, the
       deferred tax assets will not be realized.

       Foreign currency translation - The Company's financial statements
       are prepared using Renminbi as the reporting currency. Foreign
       currency transactions are translated at the rates ruling on the
       dates of the transactions. Monetary assets and liabilities
       denominated in foreign currencies are translated at the rates ruling
       on the balance sheet date. Exchange gains and losses are taken to
       the statement of operations.

       Fair value of financial instruments - The carrying values of cash
       and cash equivalents, short-term investments, accounts receivable,
       other receivables, other payables, and amount due to investors
       approximate fair value because of the short maturity of these
       instruments.

       Concentration of credit risk - Financial instruments which
       potentially subject the Company to concentrations of credit risk
       consist principally of temporary cash investments and trade accounts
       receivable.

       The Company places its temporary cash investments with various
       financial institutions in the PRC. The Company believes that no
       significant credit risk exists as these investments are made with
       high-credit, quality financial institutions.

       Use of estimates - The preparation of financial statements in
       conformity with generally accepted accounting principles requires
       management to make estimates and assumptions that affect the
       recorded amounts of assets and liabilities and disclosures of
       contingent assets and liabilities in the financial statements and
       recorded amounts of revenue and expenses during the period. Actual
       results could differ from these estimates.

       Comprehensive Income - In June 1997, the Financial Accounting
       Standards Board ("FASB") issued SFAS No. 130, "Reporting
       Comprehensive Income." This statement is effective for financial
       statements issued for periods beginning after December 15, 1997.
       Management is evaluating the effect on its financial reporting of
       the adoption of
       this statement.

       Segments of an Enterprise and Related Information - In June 1997,
       the FASB issued SFAS No. 131, "Disclosure about Segments of an
       Enterprise and Related Information." This statement is effective for
       fiscal years beginning after December 15, 1997. SFAS No. 131
       requires the reporting of profit and loss, specific revenue and
       expense items, and assets for reportable segments. It also requires
       the reconciliation of total segment revenues, total segment profit
       or loss, total segment assets, and other amounts disclosed for
       segments, in each case to the corresponding amounts in the general
       purpose financial statements. The Company has not yet determined
       what additional disclosures may be required in connection with
       adopting SFAS 131.

4.    INCOME TAX

      The statutory income tax rate of the Company is 33%. There is no
      provision for income taxes during the year ended December 31, 1997
      and the period from January 31, 1996 (commencement of operations) to
      December 31, 1996 as the Company did not have any assessable income
      for the relevant periods.

      No provision for deferred taxation has been made in the financial
      statements for the period from January 31, 1996 (commencement of
      operations) to December 31, 1996 as no significant temporary
      differences arose during period and no significant deferred tax
      assets and liabilities existed at the relevant balance sheet date.

      Deferred tax assets of RMB5,359,276 existed as at the end of 1997
      arising from temporary differences. A valuation allowance has been
      established for the full amount of the deferred tax assets since it
      is considered more likely than not that all of the deferred assets
      will not be realized.

      Deferred tax assets are composed of the following:

                                                           December 31,
                                                           --------------
                                                               1997
                                                          ---------------
                                                               RMB

         Amortization of GSM networks                          5,981,512
         Exchange gain/loss                                       67,230
         Organization expenses                                  (126,321)
         GSM networks revenue                                   (563,145)
         Valuation allowance                                  (5,359,276)
                                                          ---------------
                                                                -
                                                          ===============

5.      SHORT-TERM INVESTMENT

      The short-term investment of RMB 270,300 at December 31, 1996
      represents an investment in negotiable Chinese Government bonds which
      approximates market value.

6.      PROPERTY AND EQUIPMENT

<TABLE>
<CAPTION>

       Property and equipment consist of the following:
                                                                  December 31,
                                                          ------------------------------
                                                              1997             1996
                                                          --------------    ------------
                                                               RMB              RMB

         <S>                                                  <C>             <C>
         At cost:
         Land and buildings                                   4,629,909       1,626,952
         Furniture, fixtures and equipment                      656,751         602,180
         Motor vehicles                                         973,738         926,938
                                                          --------------    ------------
                                                              6,260,398       3,156,070
         Less: accumulated depreciation                        (477,281)       (119,003)
                                                          --------------    ------------
                                                              5,783,117       3,037,067
                                                          ==============    ============
</TABLE>

       All assets are located in the PRC.


7.     INVESTMENT IN GSM NETWORKS

<TABLE>
<CAPTION>
                                                                December 31,
                                                         ----------------------------
                                                            1997           1996
                                                        -------------   -------------
                                                            RMB             RMB
<S>                                                       <C>             <C>
         Cost of investment                               253,761,119     183,373,618

         Less:  accumulated amortization                  (18,125,794)        -
                                                        -------------   -------------
                                                          235,635,325     183,373,618
                                                        =============   =============
</TABLE>

      The investment represents the investment in a GSM telecommunication
      networks in Hebei Province, PRC. The GSM networks were built pursuant
      to a 15-year agreement with UNICOM commencing in February, 1996.
      UNICOM commenced operation of the GSM networks in February 1997. The
      investment is being amortized on a straight-line basis over the
      remaining 13-year life of the agreement commencing from the operation
      of the networks.

8.    RELATED PARTY TRANSACTIONS

                                                   December 31,
                                            ----------------------------
      Company Name                             1997            1996
      ------------------------------        ------------  -------------
                                                RMB            RMB

      Amount due to NTT                         729,014         -
      Amount due to ITOCHU                      268,583         -
                                            ------------   -------------
                  Total                         997,597         -
                                            ============   =============

       Guarantee fees paid and payable to NTT and ITOCHU are as follows:


                                                              January 31,
                                                                 1996
                                             Year ended      (commencement
      Company Name                              1997       of operations) to
                                                             December 31,
                                                                 1996
      ------------------------------         ------------   --------------
                                                 RMB             RMB

      Amount paid and payable to
      NTT                                      2,167,260          -
      Amount paid and payable to
      ITOCHU                                     467,482          -
                                             ------------   --------------
                  Total                        2,634,742          -
                                             ============   ==============

9.     OTHER PAYABLES

       The Company has acquired a digital microwave system and a GSM mobile
       phone system under deferred payment terms with the final
       installments payable in 2001 and 1998, respectively. The liabilities
       are guaranteed by NTT and are payable as follows:

                                                    December 31,
                                             ----------------------------
                                                1997            1996
                                             ------------   -------------
                                                 RMB            RMB
    Liabilities payable:
      1997                                             -       3,753,482
      1998                                    73,619,849      74,439,872
      1999                                     3,745,159       3,753,482
      2000                                     3,745,159       3,753,482
      2001                                     3,745,159       3,753,482
                                             ------------   -------------
                                              84,855,326      89,453,800
    Less:  Liabilities  due within one
    year (included in other payables)         73,619,849       3,753,482
                                             ------------   -------------

    Long-term payables                        11,235,477      85,700,318
                                             ============   =============

10. LONG-TERM LOANS

    Scheduled repayments for the long-term loans are as follows:
                                                   December 31,
                                           ------------------------------
                                               1997             1996
                                           --------------    ------------
                                                RMB              RMB
    Liabilities payable:
      1999                                    33,163,360      33,192,800
      2000                                    66,326,720      66,385,600
      2001                                    66,326,720          -
                                           --------------    ------------
                                             165,816,800      99,578,400
    Less:  Liabilities due within
    one year                                     -                -
                                           --------------    ------------
                                             165,816,800      99,578,400
                                           ==============    ============

      On August 5, 1996, the Company was granted a long-term loan facility
      of US$ 20,000,000 by the Bank of Tokyo-Mitsubishi, Ltd. Beijing
      Branch at an annual interest rate of 6.82%. Interest is payable on
      the outstanding balance six months after the date of the agreement,
      every six months thereafter, and at maturity.

      All the obligations of the Company under the above agreements are
      guaranteed 60% by NTT and 40% by Itochu.

11.   CAPITAL CONTRIBUTION

                                        December 31, 1997 and 1996
                                 ------------------------------------------
                                    Ownership                  RMB
                                 -----------------     --------------------
     Capital contributed by:

     EQUIPMENT CO.                         51.00%               12,731,283
     NTT                                   29.40%                7,339,210
     Itochu                                19.60%                4,892,807
                                 -----------------     --------------------
                                             100%               24,963,300
                                 =================     ====================

12.   COMMITMENTS

      The Company leases certain buildings under operating leases, which
      expire through March 1999. Rental expense under these operating
      leases was RMB 319,200 and RMB 267,250 in 1997 and the period from
      January 31, 1996 (commencement of operations) to December 31,1996
      respectively.

      The aggregate annual minimum operating lease commitments under all
      non-cancellable leases at December 31, 1997 are as follows:

                                                     December 31
                                                    ---------------
                                                         1997
                                                    ---------------
                                                         RMB

        1998                                               319,200
        1999                                                79,800
                                                    ---------------
                                                           399,000
                                                    ===============


      The Company has entered into a Project Cooperation Agreement with
      UNICOM relating to the construction of a telecommunication network in
      Hebei Province, PRC. The total estimated investment under the terms
      of this agreement is RMB320 million for the first phase and RMB254
      million has been incurred up to December 31, 1997. The term of this
      agreement is fifteen years.

13.   EMPLOYEE RETIREMENT BENEFITS AND POST-RETIREMENT BENEFIT

      The Company's retired employees are entitled to a retirement pension
      calculated with reference to their basic salaries on retirement and
      their length of service in accordance with a government managed
      pension plan. The PRC government is responsible for the pension
      liability to these retired employees. The Company is required to make
      contributions to the state retirement plan at rates ranging from 18%
      to 20% of the adjusted monthly basic salaries of the current
      employees. The expense of such arrangements to the Company was
      immaterial in all the periods presented. The Company is not obligated
      under any other post-retirement plans and post-employment benefits
      are not material.