U.S. SECURITIES AND EXCHANGE COMMISSION
                            Washington, D.C. 20549

                                FORM 10-KSB/A

[ X ]     Annual report under Section 13 or 15(d) of the Securities
          Exchange Act of 1934 [Fee Required] for the fiscal year ended:  
          May 31, 1996  
          ------------

[   ]     Transition report under Section 13 or 15(d) of the Securities
          Exchange Act of 1934 [No Fee Required] for the transition period
          from            to
               -----------   -----------

COMMISSION FILE NUMBER:   0 -24058 
                       ------------

                           TOUCH TONE AMERICA, INC.
                 --------------------------------------------
                (Name of small business issuer in its charter)

     California                                       33-0424087
-------------------------------                    -----------------
(State or other jurisdiction of                    (I.R.S. Employer
incorporation or organization)                    Identification No.)

                          4110 N. Scottsdale Road
                               Suite 170    
                         Scottsdale, Arizona  85251
             --------------------------------------------------
            (Address of principal executive offices) (Zip Code)

Issuer's telephone number:  (800) 535-2211
                           ---------------
Securities registered under Section 12(b) of the Act:  None
                                                      ------
Securities registered under Section 12(g) of the Act:
                                              Common Stock, no par value
                                              --------------------------

Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the 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 (2) has been subject to such filing requirements
for at least the past 90 days.  Yes   X   No      
                                    -----    -----

Check if there is no disclosure of delinquent filers pursuant to Item 405
of Regulation S-B 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-KSB or any amendment
to this Form 10-KSB.  [ X ]

Issuer's revenues for its most recent fiscal year:  $2,238,000
                                                   ------------

Aggregate market value of voting stock held by non-affiliates as of
September 5, 1996: $21,833,787
                   -----------
  
Shares of Common Stock, no par value, outstanding as of September 5, 1996:
3,319,300
---------

Documents incorporated by reference: Exhibits to Issuer's Registration
Statement on Form SB-2, No. 33-80131.

_____________________________________________________________________
<PAGE>


                                   PART IV

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

    (a)  The following documents are filed as a part of this Form
10-KSB/A:

    1.   Consolidated Financial Statements of Touch Tone America, Inc.:

         Independent Auditor's Report

         Consolidated Balance Sheet - May 31, 1996

         Consolidated Statement of Operations - Ten months ended May 31,
         1995 and year end May 31, 1996

         Consolidated Statement of Changes in Stockholders' Equity  - For
         the period from August 1, 1995 through May 31,1996

         Consolidated Statement of Cash Flows - Ten months ended May 31,
         1995 and year end May 31, 1996

         Notes to Consolidated Financial Statements

                                     -2-
________________________________________________________________________
<PAGE>


                   TOUCH TONE AMERICA, INC. AND SUBSIDIARY
                  INDEX TO CONSOLIDATED FINANCIAL STATEMENTS



                                                                 PAGE
                                                                 ----
INDEPENDENT AUDITOR'S REPORT . . . . . . . . . . . . . . . . . . F-2

CONSOLIDATED BALANCE SHEET - May 31, 1996  . . . . . . . . . . . F-3

CONSOLIDATED STATEMENTS OF OPERATIONS - For the Ten Months
     Ended May 31, 1995 and the Year Ended May 31, 1996. . . . . F-4

CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY - For
     the Period from August 1, 1994 through May 31, 1996 . . . . F-5

CONSOLIDATED STATEMENTS OF CASH FLOWS - For the Ten Months
     Ended May 31, 1995 and the Year Ended May 31, 1996. . . . . F-6

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS . . . . . . . . . . . F-7

































                                     F-1
_______________________________________________________________________
<PAGE>

                         INDEPENDENT AUDITOR'S REPORT





Board of Directors
Touch Tone America, Inc.
Phoenix, Arizona


We have audited the accompanying consolidated balance sheet of Touch Tone
America, Inc. as of May 31, 1996, and the related consolidated statements
of operations, stockholders' equity and cash flows for the ten months ended
May 31, 1995 and for the year ended May 31, 1996.  These consolidated
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 consolidated financial
statements are free of material misstatement.  An audit includes examining,
on a test basis, evidence supporting the amounts and disclosures in the
consolidated financial statements.  An audit also includes assessing the
accounting principles used and significant estimates made by management, as
well as evaluating the overall consolidated financial statement
presentation.  We believe that our audits provide a reasonable basis for
our opinion.

In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial
position of Touch Tone America, Inc. as of May 31, 1996, and the results of
their operations and their cash flows for the ten months ended May 31, 1995
and for the year ended May 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.  As discussed
in Note 2 to the consolidated financial statements, the Company has
incurred losses from operations and has entered into significant sales
volume commitments.  These factors raise substantial doubt about the
Company's ability to continue as a going concern.  Management's plans in
regard to these matters are also described in Note 2.  The financial
statements do not include any adjustments that might result from the
outcome of these uncertainties.



Hein + Associates LLP


Denver, Colorado
August 9, 1996

                                     F-2
_______________________________________________________________________
<PAGE>

                   TOUCH TONE AMERICA, INC. AND SUBSIDIARY

                          CONSOLIDATED BALANCE SHEET
                                                             May 31,
                                                              1996
                                                             -------
                                    ASSETS
                                    ------
CURRENT ASSETS:
  Cash                                                    $5,278,000 
    Trade receivables, net allowance for
     doubtful accounts of $124,000                           264,000 
                                                          ---------- 
        Total current assets                               5,542,000 

EQUIPMENT, net of accumulated depreciation of $62,000        429,000 

OTHER:
  Intangibles, net of accumulated amortization of $97,000    738,000 
  Refundable deposits                                         76,000 
  Prepaid expenses                                           143,000 
                                                          ---------- 

TOTAL ASSETS                                              $6,928,000 
                                                          ========== 

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

CURRENT LIABILITIES:
  Accounts payable                                        $  477,000 
  Accrued liabilities                                      1,170,000 
  Deferred revenues                                           76,000 
  Notes payable to stockholders                              393,000 
  Current portion of capital lease obligations                61,000 
                                                          ---------- 
        Total current liabilities                          2,177,000 

DEFERRED REVENUE                                              25,000 

CAPITAL LEASE OBLIGATIONS, net of current portion            134,000 

COMMITMENTS (NOTE 5)

REDEEMABLE PREFERRED STOCK LIABILITY                         750,000 

COMMON STOCK AND OTHER STOCKHOLDERS' EQUITY:
  Preferred stock, no par value, 10,000,000 shares
    authorized; none outstanding                                 -   
  Common stock, no par value, 100,000,000 shares
    authorized, 3,204,300 shares issued and outstanding    7,195,000 
  Accumulated deficit                                     (3,353,000)
                                                          ---------- 
        Total stockholders' equity                         3,842,000 
                                                          ---------- 
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY                $6,928,000 
                                                          ========== 
      See accompanying notes to these consolidated financial statements.
                                     F-3
_______________________________________________________________________
<PAGE>

                   TOUCH TONE AMERICA, INC. AND SUBSIDIARY

                    CONSOLIDATED STATEMENTS OF OPERATIONS


                                              FOR THE
                                            TEN MONTHS     FOR THE
                                               ENDED     YEAR ENDED
                                              MAY 31,      MAY 31,
                                               1995         1996
                                             --------     --------
NET REVENUES:
 Long distance resell                      $ 1,952,000  $ 1,951,000 
 Internet access                                  -         287,000 
                                           -----------  ----------- 
                                             1,952,000    2,238,000 

COST OF SALES
 Long distance resell                       (1,310,000)  (1,284,000)
 Internet access                                  -        (122,000)
                                           -----------  ----------- 
                                            (1,310,000)  (1,406,000)
                                           -----------  ----------- 

GROSS MARGIN                                   642,000      832,000 

OPERATING EXPENSES:
 Selling                                       337,000      620,000 
 General and administrative                    507,000    1,853,000 
 Excess volume commitments                      32,000      871,000 
                                           -----------  ----------- 
                                               876,000    3,344,000 
                                           -----------  ----------- 
LOSS FROM OPERATIONS                          (234,000)  (2,512,000)

OTHER INCOME (EXPENSE):
 Interest expense, primarily stockholders      (12,000)    (172,000)
 Absorbed offering and acquisition costs       (48,000)    (118,000)
                                           -----------  ----------- 
                                               (60,000)    (290,000)
                                           -----------  ----------- 

NET LOSS                                   $  (294,000) $(2,802,000)
                                           ===========  =========== 

LOSS PER SHARE                             $      (.19) $     (1.81)
                                           ===========  =========== 
WEIGHTED AVERAGE COMMON SHARES
 AND EQUIVALENTS                             1,508,000    1,552,000 
                                           ===========  =========== 

      See accompanying notes to these consolidated financial statements.

                                     F-4
_______________________________________________________________________
<PAGE>
                    TOUCH TONE AMERICA, INC. AND SUBSIDIARY

           CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY

<TABLE>
<CAPTION>
                                COMMON STOCK      PREFERRED
                              ------------------    STOCK      ACCUM-
                               NUMBER             ISSUANCE     ULATED
                             OF SHARES    AMOUNT    COSTS      DEFICIT      TOTAL
                              --------   --------  --------    --------    --------
<S>                         <C>         <C>        <C>        <C>         <C>
BALANCE, August 1, 1994      2,785,000  $   2,000  $   -      $(257,000)  $(255,000)

 Surrender of common stock  (1,651,000)       -        -           -           -
 Grants of common stock
   by stockholders                -         16,000     -           -         16,000
 Common stock issued to
   officer/director for
   services                    160,000      40,000     -           -         40,000 
 Common stock issued
   for cash                     11,000      15,000     -           -         15,000 
 Issuance cost of redeemable
   preferred stock                -           -    (108,000)       -       (108,000)
 Net loss                         -           -        -       (294,000)   (294,000)
                             ---------   --------- ---------  ---------   ---------

BALANCE, May 31, 1995        1,305,000      73,000  (108,000)  (551,000)   (586,000)

 Issuance of common stock
   in a private placement,
   net of offering costs       350,000     600,000      -          -        600,000 
 Issuance of common stock
   for acquisition of GetNet   400,000     800,000      -          -        800,000
 Surrender of common stock    (763,200)       -         -          -           -
 Issuance of common stock
   and warrants in a public
   offering, net of
   offering costs            1,725,000   5,830,000      -          -       5,830,000
 Conversion of redeemable
   preferred stock to
   common stock                187,500   (108,000)   108,000       -            -
 Net loss                         -          -          -    (2,802,000)  (2,802,000)
                             ---------  --------- ---------- ----------   ---------- 

BALANCE, May 31, 1996        3,204,300 $7,195,000  $    -   $(3,353,000)  $3,842,000 
                             ========= ==========  ========= ==========   ==========

</TABLE>








       See accompanying notes to these consolidated financial statements.



                                      F-5
_______________________________________________________________________
<PAGE>

                   TOUCH TONE AMERICA, INC. AND SUBSIDIARY

                    CONSOLIDATED STATEMENTS OF CASH FLOWS

                                              FOR THE
                                            TEN MONTHS     FOR THE
                                               ENDED     YEAR ENDED
                                              MAY 31,      MAY 31,
                                               1995         1996
                                             --------     --------
CASH FLOWS FROM OPERATING ACTIVITIES:
 Net loss                                  $  (294,000) $(2,802,000)
 Adjustments to reconcile net loss to net
  cash from operating activities:
    Depreciation and amortization                2,000      129,000 
    Common stock for services                   56,000         -    
    Bad debt expense                            17,000      185,000 
    Absorbed acquisition costs                  48,000      118,000 
    Change in assets and liabilities:
       Decrease (increase) in:
          Trade receivables                   (311,000)     128,000 
          Other assets                            -        (214,000)
       Increase (decrease) in:
          Accounts payable                     274,000      (71,000)
          Accrued liabilities                  422,000      625,000 
          Deferred revenue and other            (8,000)      11,000 
                                           -----------  ----------- 
    Net cash provided by (used in)
     operating activities                      206,000   (1,891,000)

CASH FLOWS FROM INVESTING ACTIVITY:
 Acquisition costs incurred                    (95,000)     (25,000)
 Purchase of equipment                            -        (101,000)
                                           -----------  ----------- 
    Net cash used in investing activities      (95,000)    (126,000)

CASH FLOWS FROM FINANCING ACTIVITIES:
 Proceeds from note payable                     50,000         -    
 Payment of note payable                       (50,000)        -    
 Payment of capital lease obligations             -        (100,000)
 Proceeds from notes payable to stockholders      -         210,000 
 Payment of notes payable to stockholders      (24,000)        -    
 Proceeds from issuance of redeemable
  preferred stock                              637,000      113,000 
 Proceeds from issuance of common stock         15,000    7,816,000 
 Offering costs incurred                      (285,000)  (1,256,000)
                                           -----------  ----------- 
    Net cash provided by financing
     activities                                343,000    6,783,000 
                                           -----------  ----------- 

NET INCREASE IN CASH                           454,000    4,766,000 

CASH, beginning of period                       58,000      512,000 
                                           -----------  ----------- 

CASH, end of period                        $   512,000  $ 5,278,000 
                                           ===========  =========== 


      See accompanying notes to these consolidated financial statements.

                                     F-6
_______________________________________________________________________
<PAGE>

                   TOUCH TONE AMERICA, INC. AND SUBSIDIARY

                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


1.  NATURE OF OPERATIONS AND SIGNIFICANT ACCOUNTING POLICIES:
    --------------------------------------------------------

    NATURE OF OPERATIONS - The consolidated financial statements include
    the accounts of Touch Tone America, Inc. (Touch Tone) and from
    November 1, 1995, GetNet International, Inc. (GetNet) (collectively
    referred to as "the Company").  Touch Tone acquired the outstanding
    common stock of GetNet effective November 1, 1995 as more fully
    described in Note 3.

    Touch Tone is engaged in the reselling long distance
    telecommunications products and services primarily in the western and
    southwestern United States.  As a reseller of long distance services,
    Touch Tone offers its customers the use of routing equipment and phone
    lines of large carriers; in turn, the large carriers offer Touch Tone
    volume discounts based on the use of this equipment.  Touch Tone was
    incorporated as a California corporation in 1990.  Touch Tone
    previously had a July 31 year-end.  In fiscal 1995, Touch Tone changed
    its year-end to May 31.  Therefore, the 1995 financial statements only
    include the financial operations for the ten months ended May 31,
    1995.

    GetNet is a provider of Internet and World Wide Web access services to
    individuals and businesses in Arizona and other parts of the United
    States.  The Internet is a network of millions of computers around the
    world which are able to communicate with one another, as well as
    access the World Wide Web which is a system of documents on a
    multitude of subjects.

    PRINCIPLES OF CONSOLIDATION - The consolidated financial statements
    include the accounts of Touch Tone and its subsidiary, GetNet as
    described above.  All significant intercompany accounts and
    transactions have been eliminated in consolidation.

    BASIS OF ACCOUNTING - The accompanying consolidated financial
    statements have been prepared on the accrual basis of accounting. 
    Customer billings and collections for long distance services are
    performed by a third party service provider (Provider).  Accounts
    receivable represents the amount the Company's customers owe for
    actual usage.  However, the amount the Company will receive from the
    Provider will be offset by the payable due to the Provider for the
    cost of providing the service, which is included in accounts payable
    in the financial statements.  The net of the receivable and payable is
    the margin the Company receives.  The Provider is responsible for
    maintaining the Company's long distance accounts receivable and
    withholds payments to the Company for past due customer amounts.  Such
    amounts withheld from the Company are offset by the margin otherwise
    paid to the Company.  Bad debt expense is included with general and
    administrative expenses.

    EQUIPMENT - Equipment is recorded at cost.  Depreciation is computed
    using the straight-line method over the estimated useful life of the
    equipment, generally five years.  Repairs and maintenance are charged
    to expense as incurred.  Material expenditures, which increase the
    life of an asset, are capitalized and depreciated over the estimated
    remaining useful life of the asset.  The cost of equipment sold, or
    otherwise disposed of, and the related accumulated depreciation or
    amortization are removed from the accounts, and any gains or losses
    are reflected in current operations.

                                     F-7
_____________________________________________________________________
<PAGE>

                   TOUCH TONE AMERICA, INC. AND SUBSIDIARY

                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

    INCOME TAXES - The Company accounts for income taxes under the
    liability method of SFAS No. 109, whereby current and deferred tax
    assets and liabilities are determined based on tax rates and laws
    enacted as of the balance sheet date.  Deferred tax expense or benefit
    represents the change in the deferred tax asset/liability balance.

    REVENUE RECOGNITION - The Company recognizes revenue during the period
    of performance of the related services.  Deferred revenues consist of
    the following:  

    *    Funds paid by AT&T to Touch Tone at the initiation of a contract
         of $42,000, deferred initially and recognized as a reduction to
         cost of sales ratably over the life of the contract as earned. 
         A total of $1,000 and $16,000 was recognized during the ten
         months ended May 31, 1995 and the year ended May 31, 1996,
         respectively.

    *    Current month's advance billings by GetNet for subscriber
         services and revenue received in advance for services under
         contract.  This amount will be recognized as revenue when earned.

    INTANGIBLES - Intangibles represent the excess of the purchase price
    paid over the net liabilities acquired in the GetNet acquisition of
    $835,000.  This amount is being amortized over five years. 

    CONCENTRATION OF CREDIT RISK - Credit risk represents the accounting
    loss that would be recognized at the reporting date if counterparties
    failed completely to perform as contracted.  Concentrations of credit
    risk (whether on or off balance sheet) that arise from financial
    instruments exist for groups of customers or counterparties when they
    have similar economic characteristics that would cause their ability
    to meet contractual obligations to be similarly effected by changes in
    economic or other conditions.  The Company does not have a significant
    exposure to any individual customer or counterparty.

    At May 31, 1996, the Company's cash balance at one financial
    institution was in excess of FDIC insured limits by approximately
    $5,190,000.

    USE OF ESTIMATES - The preparation of the Company's consolidated
    financial statements in conformity with generally accepted accounting
    principles requires the Company's management to make estimates and
    assumptions that affect the amounts reported in these financial
    statements and accompanying notes.  Actual results could differ from
    those estimates.  The Company makes significant estimates as to the
    amortization period used for its intangibles.  Due to the
    uncertainties inherent in the life of intangibles, especially in light
    of increased competition and technology changes, it is reasonably
    possible that the estimated life of intangibles could materially
    change in the forthcoming year. 

    FAIR VALUE OF FINANCIAL INSTRUMENTS - The estimated fair values for
    financial instruments under SFAS No. 107, DISCLOSURES ABOUT FAIR VALUE
    OF FINANCIAL INSTRUMENTS, are determined at discrete points in time
    based on relevant market information.  These estimates involve
    uncertainties and cannot be determined with precision.  The estimated
    fair values of the Company's financial instruments, which includes
    cash and cash equivalents, trade receivables, accounts payable, and
    notes payable to stockholders, approximates the carrying value in the
    financial statements at May 31, 1996.

    LOSS PER SHARE - Loss per share is generally computed based on the
    weighted average number of shares outstanding.  However, for the
    periods presented, common and common equivalent shares including the

                                     F-8
_______________________________________________________________________
<PAGE>

                   TOUCH TONE AMERICA, INC. AND SUBSIDIARY

                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

    common stock underlying the redeemable preferred stock and common
    stock options (using the treasury stock method and the public offering
    price) have been included in the weighted average calculation, as if
    they were outstanding for the entire period through December 31, 1995.

    IMPACT OF RECENTLY ISSUED ACCOUNTING STANDARDS - In March 1995, the
    Financial Accounting Standards Board issued a new statement titled
    "Accounting for Impairment of Long-Lived Assets."  This new standard
    is effective for years beginning after December 15, 1995 and would
    change the Company's method of determining impairment of long-lived
    assets.  Although the Company has not performed a detailed analysis of
    the impact of this new standard on the Company's consolidated
    financial statements, the Company does not believe that adoption of
    the new standard will have a material effect on the consolidated
    financial statements. 

    In October 1995, the Financial Accounting Standards Board issued a new
    statement titled "Accounting for Stock-Based Compensation" (FAS 123). 
    The new statement is effective for fiscal years beginning after
    December 15, 1995.  FAS 123 encourages, but does not require,
    companies to recognize compensation expense for grants of stock, stock
    options, and other equity instruments to employees based on fair
    value.  Companies that do not adopt the fair value accounting rules
    must disclose the impact of adopting the new method in the notes to
    the financial statements.  Transactions in equity instruments with
    non-employees for goods or services must be accounted for on the fair
    value method.  The Company currently does not intend to adopt the fair
    value accounting prescribed by FAS 123, and will be subject only to
    the disclosure requirements prescribed by FAS 123.  However, the
    Company intends to continue its analysis of FAS 123 and may elect to
    adopt its provisions in the future.


2.  CONTINUED OPERATIONS:
    --------------------

    The accompanying consolidated financial statements have been prepared
    assuming that the Company will continue operating as a going concern,
    which contemplates the realization of assets and liquidation of
    liabilities in the normal course of business.  The Company has
    incurred significant losses since inception.  Furthermore, as
    discussed in Note 5, the Company has entered into sales volume
    commitments with service providers.

    The Company renegotiated two significant commitments under which it
    was experiencing substantial shortfalls.  Under the revised
    agreements, the Company's future commitment has been eliminated.  The
    Company, however, has a continuing service commitment with AT&T of
    $1,800,000 annually, which it was currently satisfactorily meeting at
    year-end.  However, as discussed in Note 5, subsequent to year-end,
    monthly revenues under this commitment have declined, and unless
    related revenues increase the Company will be unable to continue to
    meet this commitment.  Therefore, an additional loss accrual may be
    recorded in fiscal 1997.

    The Company's ability to continue as a going concern is dependent upon
    several factors, including meeting its future carrier commitments, and
    ultimately achieving and maintaining profitable operations.  The
    Company is also aggressively working to increase revenues, which it
    believes will ultimately lead to profitable operations and enable the
    Company to meet its continuing service commitments.  The accompanying
    consolidated financial statements do not include any adjustments that
    might result from the outcome of these uncertainties.


                                     F-9
_______________________________________________________________________
<PAGE>

                   TOUCH TONE AMERICA, INC. AND SUBSIDIARY

                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


3.  ACQUISITIONS
    ------------

    In August 1996, the Company entered into a letter of intent to merge
    with Arcada Communications Inc. (Arcada), based in Seattle,
    Washington, whereby the Company would issue to Arcada a $1,500,000
    promissory note and 12,500,000 shares of the Company's common stock. 
    As a result, Arcada would acquire control of both management and the
    board of directors of the Company.  The completion of the merger is
    subject to completion of a merger agreement and approval by the board
    of directors and shareholders of both companies.

    In November 1995, the Company acquired the outstanding common stock of
    GetNet through the issuance of 400,000 shares of its common stock,
    which was valued at $800,000.  This acquisition was accounted for
    under purchase method of accounting.  The excess of the purchase price
    over the net liabilities acquired of approximately $835,000 will be
    amortized over a period not to exceed five years.  All other assets
    and liabilities were recorded at book values, which approximated fair
    value.  Unaudited pro-forma financial information is provided below:


                                           FISCAL YEAR   FISCAL YEAR
                                              1995          1996
                                           -----------   -----------

        Net Revenues                       $ 2,067,000  $ 2,388,000 
                                           ===========  =========== 

        Net Loss                           $  (724,000) $(2,823,000)
                                           ===========  =========== 

        Net Loss per Share                 $      (.24) $     (1.88)
                                           ===========  =========== 


    The above pro-forma financial information assumes the acquisition
    occurred at the beginning of the period presented.  This information
    is not necessarily indicative of the financial results which would
    have resulted if the acquisition had occurred at such earlier date nor
    of future financial operating results.

    In August 1995, the Company entered into an acquisition agreement with
    National Telcom Management, Inc. (NTM) to purchase NTM's long distance
    customer base (Telcom).  In January 1996, the Company terminated the
    contract with NTM and forfeited a $90,000 deposit previously paid. 
    Accordingly, this amount and other costs associated with the
    acquisition of approximately $25,000 has been shown as an expense in
    the accompanying financial statements.

                                     F-10
_______________________________________________________________________
<PAGE>

                   TOUCH TONE AMERICA, INC. AND SUBSIDIARY

                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

4.  NOTES PAYABLE TO STOCKHOLDERS:
    -----------------------------

    Notes payable to stockholders consist of the following:


         Notes payable to stockholder with a stated interest
         rate of 30% per annum, unsecured which was repaid
         subsequent to year-end through the issuance of
         70,000 shares of common stock.  As a result, the
         Company will record interest and finance charges
         totaling $250,000, based upon the value of the shares
         issued, of which $125,000 is included in accrued
         liabilities based on the period the note was
         outstanding.  The balance will be expensed in fiscal
         1997.
                                                                      $210,000

         Notes payable to stockholders with interest at 10% and
         12%, principal and interest was paid after year end.
                                                                       183,000
                                                                      --------
         Total                                                        $393,000
                                                                      ========


    Interest expense to stockholders for the ten months ended May 31, 1995
    and for the year ended May 31, 1996 totaled $12,000 and $172,000,
    respectively.  Accrued interest of $127,000 was included in accrued
    liabilities at May 31, 1996.

5.  COMMITMENTS:
    -----------

    OPERATING LEASES - The Company leases its office facilities and
    certain equipment under non-cancelable operating leases.  Rent expense
    for the ten months ended May 31, 1995 and for the year ended May 31,
    1996 was $26,000 and $63,000, respectively.  At May 31, 1996, future
    lease obligations under leases with lease terms in excess of one year
    are as follows:


      For the Year Ended May 31,
      --------------------------
                 1997                                  $ 118,000
                 1998                                    121,000
                 1999                                     78,000
                 2000                                     37,000
                 2001                                     37,000
              Thereafter                                   3,000
                                                       ---------
                                                       $ 394,000
                                                       =========
                                     F-11
_______________________________________________________________________
<PAGE>

                   TOUCH TONE AMERICA, INC. AND SUBSIDIARY

                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

    CAPITAL LEASES - The Company leases certain equipment which have been
    recorded as capital leases. Obligations under these capital leases
    have been recorded at the present value of future minimum lease
    payments, discounted at rates ranging from approximately 20% to 23%. 
    The capitalized cost of $231,000 less accumulated amortization of
    $31,000, are included in property and equipment at May 31, 1996.  The
    following is a schedule of future minimum lease payments under capital
    leases at May 31, 1996: 


      For the Year Ended May 31,
      --------------------------
                 1997                                 $  95,000 
                 1998                                    80,000 
                 1999                                    44,000 
                 2000                                    30,000 
                 2001                                    15,000 
                                                      --------- 

      Future minimum lease payment                      264,000 

      Less amount representing interest                 (69,000)
                                                      --------- 

      Present value of net minimum lease payments       195,000 

      Less current portion                              (61,000)
                                                      --------- 

                                                      $ 134,000 
                                                      ========= 

    TELECOMMUNICATIONS CIRCUIT LEASES - The Company leases certain
    telecommunication circuits, primarily in connection with its Internet
    backbone, under non-cancelable operating leases.  Lease expense for
    both the ten months ended May 31, 1995 and for the year ended May 31,
    1996 was nominal as most of these leases were entered into subsequent
    to May 31, 1996.  As of August 9, 1996, future minimum lease
    obligations under leases with lease terms in excess of one year are as
    follows:


      For the Year Ended May 31,
      --------------------------
                 1997                                 $  647,000
                 1998                                  1,129,000
                 1999                                  1,129,000
                 2000                                    549,000
                 2001                                     43,000
              Thereafter                                 205,000
                                                      ----------

                                                      $3,702,000
                                                      ==========

    Included in the above amounts is a three-year commitment beginning in
    January 1997 with WilTel, whereby the Company is required to lease a
    minimum of $70,000 per month of telecommunication circuits.  Under
    this agreement, all costs incurred are not only applied dollar-for-
    dollar against this commitment, but are also concurrently credited 1-
    1/2 times actual usage against the Company's long distance service
    commitment described below.



                                     F-12
_______________________________________________________________________
<PAGE>

                   TOUCH TONE AMERICA, INC. AND SUBSIDIARY

                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

    The Company, however, is obligated to pay for actual monthly usage of
    telecommunication circuits, which for August 1996 approximated $70,000
    (unaudited), irrespective of the related usage by the Company's
    Internet customers which was nominal for August 1996.

    SERVICE COMMITMENTS - The Company signed the following commitments:

         *    A commitment which commenced in November 1994 (as revised)
              with AT&T to sell $1,200,000 of "800" service annually,
              which will be terminated with the payment to AT&T of
              $586,000 with no minimum commitments thereafter.  

         *    Five-year commitment beginning August 1994 with AT&T
              Software Defined Network (SDN) to sell $1.8 million
              annually.

         *    Two-year commitment beginning October 1995 with WilTel to be
              a reseller of its long distance services.  Minimum
              commitments of $50,000 per month to commence in August 1996.

         *    Three-year commitment beginning September 1995 with Paging
              Network of Arizona, Inc. to be a reseller of paging
              services.  The Company is required to resell a minimum
              number of paging service agreements by various dates or
              otherwise risk termination of its agreement.  The Company
              does not consider this commitment to be significant to
              future operations.

    The Company was not meeting its "800" service agreement commitment
    with AT&T, and consequently, in April 1996, the Company entered into
    a revised agreement with AT&T, which provided for the repayment in
    June 1996 of $186,000 paid by AT&T on the signing of the initial
    agreement and $400,000 over twelve months beginning in June 1996.  If
    the Company does not make the payments as required, the Company will
    be obligated to pay $1,027,000, less amounts previously paid.  During
    the year ended May 31, 1996, the Company has recorded $400,000 of
    expense in connection with settlement of this commitment.  As of
    August 9, 1996, the Company is current in its payments to AT&T.

    The Company also has a continuing commitment with AT&T to provide long
    distance service of $1,800,000 annually, which as of May 31, 1996, it
    was satisfactorily meeting.  However, subsequent to year-end, monthly
    revenues have declined and unless related revenues increase the
    Company will be unable to continue to meet the minimum amount of this
    commitment (which is 80% of the total commitment).  Therefore, an
    additional loss accrual may be recorded in fiscal 1997, however, an
    estimate of such loss, if any, cannot be made at this time.  The
    Company is hopeful it will be able to renegotiate its contract with
    AT&T to obtain a more favorable rate per minute and commitment level
    and replace its existing SDN contract.  However, there is no assurance
    that the Company will be able to ultimately renegotiate its existing
    contract. 

    The Company has a commitment with WilTel which commenced in August
    1996 to sell $50,000 per month of long distance services.  This
    substantially exceeds the Company's current level of service.  The
    Company will effectively meet this commitment as a result of its
    telecommunication circuit leases.

    The Company has an agreement with ICG Access Services, which was
    revised in March 1996.  Under the old agreement, the Company was
    required to utilize ICG services or  pay ICG the difference between
    the amount utilized and the minimum monthly commitment.  During the
    periods ended May 31, 1996 and May 31, 1995, the Company has recorded

                                     F-13
__________________________________________________________________________
<PAGE>

                   TOUCH TONE AMERICA, INC. AND SUBSIDIARY

                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

    $462,000 and $32,000, respectively, of expense under this initial
    agreement. In March 1996, the Company renegotiated its agreement with
    ICG whereby it agreed to pay its then current obligation of
    approximately $430,000 with $250,000 from proceeds of public offering
    and the issuance of 45,000 shares valued at $180,000.  At May 31,
    1996, the Company has an accrued liability to ICG of approximately
    $180,000 which represents the 45,000 shares which were issued
    subsequent to year-end.  There has been relatively insignificant
    revenue associated with this expense as the Company has only began
    marketing services under the ICG agreement on a very limited basis.  

    EMPLOYMENT AGREEMENTS - During the year ended May 31, 1996, the
    Company entered into employment agreements with various individuals. 
    As of May 31, 1996, the base salary under these agreements aggregate
    approximately $480,000 in fiscal 1997 and $225,000 in fiscal 1998. 
    The Company may terminate the agreements for cause.  If terminated for
    any other reason, the Company will pay six months salary and benefit
    allowance if termination occurs in the first year of the agreement and
    nine months salary and benefit allowance if after the first year. In
    connection with the employment agreements, certain options were
    granted as discussed in Note 6.  In April 1996, two of the Company's
    officers resigned and terminated their employment agreements and the
    Company hired a new president/chief executive officer.  Furthermore,
    in July 1996, two employees were terminated without cause, but agreed
    to terminate their employment agreements for a total of $36,000 in
    compensation which will be expensed in fiscal 1997.  The above
    commitments have been revised to reflect these changes. 

    In April 1996, the Company entered a consulting agreement with the
    former chief executive officer of the Company to assist the Company in
    mergers and acquisitions.  Under this agreement, the Company will pay
    a base compensation of approximately $15,000 per month, which under an
    amended agreement in June 1996 has been extended through October 1997,
    plus additional compensation based on the level of success of future
    endeavors. 


6.  CAPITAL STOCK:
    -------------

    PREFERRED STOCK - In June 1995, the Company completed a private
    placement of the Company's Series A Convertible Preferred Stock.  The
    Company received $642,000, net of offering costs of $108,000, from
    issuing 150,000 shares of convertible preferred stock.  The shares
    were redeemed from $750,000 proceeds received in the Company's public
    offering plus 187,500 shares of common stock. (The common stock was
    effectively issued at the time of the public offering; but the
    preferred stock liability was paid in June 1996.)

    The Company has authorized, but unissued 10,000,000 shares of
    preferred stock, which may be issued in such series and with such
    preferences as determined by the Company's Board of Directors.

    COMMON STOCK - In March 1995, the Company restructured its capital
    accounts, whereby it revised its articles to increase the authorized
    shares and changed its common stock to a "no par value."  Furthermore,
    the Company declared an approximate 1 for 185 reverse stock split. 
    For financial statement presentation purposes, shares outstanding and
    all common shares references have been restated to reflect this split,
    as if it occurred at the beginning of the period presented. 

    During the ten months ended May 31, 1995, a prior shareholder
    surrendered 1,393,000 shares of common stock when the Company repaid
    a then outstanding $23,000 debt.  Another shareholder also surrendered

                                     F-14
_________________________________________________________________________
<PAGE>

                   TOUCH TONE AMERICA, INC. AND SUBSIDIARY

                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

    258,000 shares of common stock for an agreement to repay an
    outstanding debt plus accrued interest totaling $41,000.  The
    surrendered shares were canceled by the Company.

    During the ten months ended May 31, 1995 the founding shareholders
    transferred 62,300 of their shares of common stock to persons who in
    the past provided certain limited consulting assistance to the
    Company.  For financial statement presentation purposes, the value of
    such services has been reflected as an expense in the financial
    statement with an offset to capital, as if such shares had been issued
    directly by the Company.  

    The Company also issued 60,000 and 100,000 shares of common stock for
    services in February and May 1995 to an officer/director.  For
    financial statement presentation purposes, such shares have been
    recorded based on the estimated value of the services rendered
    (aggregating $40,000), which approximated the value of the common
    stock at the time of issuance, as determined by the Company's Board of
    Directors.

    In April 1995, the Company sold 11,000 shares of common stock to an
    unrelated party based on a prior agreement to issue common stock at a
    price 50% of an initial public offering price.  

    In November 1995, the Company completed a private placement of its
    common stock whereby it sold 350,000 shares of common stock for
    $700,000.  The Company incurred costs associated with this offering of
    approximately $100,000.  

    Pursuant to an understanding with the Company's Representative, in
    November 1995 and March 1996, the founding shareholders surrendered an
    aggregate of 763,200 shares of common stock back to the Company.  

    In May 1996, the Company completed a public offering of its common
    stock and warrants whereby it sold 1,725,000 shares of common stock at
    $4 per share and 1,725,000 warrants at $.125 per warrant.  Net
    proceeds, after offering costs, was approximately $5,830,000.  Each
    warrant enables the holder to purchase one share of common stock at
    the public offering price of $4 per share through May 1997.  The
    Company may redeem the warrants at $.25 per warrant, under certain
    circumstances.  The Representative to the offering also received a
    warrant for the purchase of 150,000 shares of common stock and
    150,000 warrants exercisable at $4.80 per share for four years
    commencing May 1997.  At the closing of the public offering, the
    Company engaged the Representative as a financial advisor to the
    Company for a fee of $108,000 which is reflected as an other asset and
    will be amortized over three years. 

    Also, see Note 3 for the common stock issued in connection with the
    GetNet acquisition.

    COMMON STOCK OPTIONS AND DIRECTOR WARRANTS - In April 1995, the
    Company issued common stock options to certain persons who had
    previously loaned funds to the Company.  The options, which are
    currently exercisable, entitle these persons to purchase an aggregate
    15,900 shares of common stock for $3.00 per share for five years.  As
    of May 31, 1996, no options have been exercised. 


                                     F-15
_________________________________________________________________________
<PAGE>

                   TOUCH TONE AMERICA, INC. AND SUBSIDIARY

                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


    In April 1996, the Company issued common stock options to an
    independent significant sales agent (see Note 8).  These options,
    which are currently exercisable, entitle this sales agent to purchase
    an aggregate of 60,000 shares of common stock for $2.00 per share over
    five years.  As of May 31, 1996, no options have been exercised. 

    As part of the various employment agreements, stock options were
    granted to purchase a total of 540,000 shares.  At May 31, 1996, no
    options are exercisable.  Options for 270,000 shares become
    exercisable during fiscal 1997, with the remainder becoming
    exercisable in fiscal 1998, at prices ranging from $4 to $6 per share
    and generally expire one year after becoming exercisable.  As
    discussed in Note 5, in July 1996, two employees with employment
    agreements were terminated.  Under their termination agreements, the
    terms of their options, previously issued, were amended and have been
    reflected in the above figures.

    During fiscal 1996, the Company issued 600,000 warrants to new
    directors and 100,000 warrants to a member of the Company's
    compensation committee to purchase common stock.  The warrants have an
    exercise price of $4.00 per share for a period of five years, with
    125,000 warrants currently exercisable, 225,000 warrants vesting in
    six months, and the balance vesting in one year.  One of the new
    directors became president of the Company in April 1996.  As of
    May 31, 1996, no options have been exercised. 


7.  INCOME TAXES:
    ------------

    As of May 31, 1996, the Company has a net operating loss (NOL)
    carryforward for tax reporting purposes of approximately $3,200,000,
    however, a substantial portion may be limited due to changes in
    ownership of the Company in fiscal 1995 and 1996, pursuant to Section
    382 of the Internal Revenue Code, stemming primarily from the
    issuances of common stock in its public and private offerings and the
    acquisition of GetNet.  This NOL expires in the years 2009 through
    2011. 

    Deferred income taxes are provided for differences between the tax and
    book basis of assets and liabilities as a result of temporary
    differences in the recognition of revenues or expenses for tax and
    financial reporting purposes, which relates primarily to certain items
    not currently deductible for tax purposes until paid.

    Deferred tax assets resulting from these differences consist of the
    following:

         Net operating loss carryforward                $ 1,248,000 
         Other                                               72,000 
                                                        ----------- 
              Total                                       1,320,000 


         Less valuation allowance                        (1,320,000)
                                                         ---------- 
              Net deferred tax asset                     $     -    
                                                         ========== 

    The valuation allowance for deferred tax assets increased from
    $195,000 at May 31, 1995 to $1,320,000  at May 31, 1996, due primarily
    to an increase in the Company NOL carryforwards.

                                     F-16
_________________________________________________________________________
<PAGE>

                   TOUCH TONE AMERICA, INC. AND SUBSIDIARY

                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

8.  SIGNIFICANT SALES AGENT RELATIONSHIP:
    ------------------------------------

    The Company has an agreement with an independent sales agent, whereby
    the agent receives maximum  commissions of approximately 32% on sales
    it originates.  At current sales levels, the Company does not realize
    a direct profit from the sales generated by the agent.  Indirectly,
    however, the Company realizes more profit on its other monthly usage
    as a result of the increased discounts resulting from the increased
    usage received from the Company's provider.  Also, if the Company
    successfully renegotiates its contract with its provider, the Company
    believes it will then directly realize additional profit on sales
    originated by the agent, if a greater discount can be obtained from
    the provider.  Payment of the commissions to the agent is secured by
    the customer base generated by the sales agent.  For the ten months
    ended May 31, 1995 and the year ended May 31, 1996, the sales
    originated by the agent have accounted for 42% and 36%, respectively,
    of company sales.  During these periods, the Company has recorded a
    related expense to the agent of approximately $265,000 and $299,000,
    respectively, which includes $75,000 paid in fiscal 1996 to settle
    past misunderstandings between the parties. 


9.  SUPPLEMENTAL CASH FLOW INFORMATION:
    ----------------------------------

    The supplemental cash flow information is as follows:

                                               FOR THE
                                             TEN MONTHS      FOR THE
                                                ENDED      YEAR ENDED
                                               MAY 31,       MAY 31,
                                                1995          1996
                                              --------      --------

       Equipment acquired through capital
        leases                                $  24,000    $ 265,000
                                              =========    =========

       Issuance of preferred stock for
        receivables                           $ 113,000    $    -   
                                              =========    =========

       Issuance of common stock for GetNet
        acquisition                           $    -       $ 800,000
                                              =========    =========











                                     F-17
__________________________________________________________________________
<PAGE>

                   TOUCH TONE AMERICA, INC. AND SUBSIDIARY

                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


10. SEGMENT INFORMATION:
    -------------------

    The Company's principal operations are in the long distance resell and
    Internet access industries.  The following is selected information for
    fiscal 1996 about the Company's industry segments.  Since GetNet was
    acquired in November 1995, segment information is not included for the
    ten months ended May 31, 1995.

                                Long
                              Distance       Internet
    Year Ended May 31, 1996    Resell         Access      Consolidated
    -----------------------  -----------    -----------    -----------

    Revenue                $ 1,951,000      $  287,000      $ 2,238,000 
    Loss from operations    (2,092,000)       (420,000)      (2,512,000)
    Depreciation and
     amortization               11,000         119,000          130,000 
    Capital expenditures       106,000         260,000          366,000 
    Identifiable assets      5,832,000       1,096,000        6,928,000 


11. SUBSEQUENT EVENTS (UNAUDITED):
    -----------------------------

    Subsequent to year-end, an unknown party fraudulently charged over
    $1,000,000 in long distance charges on the Company's account.  The
    Company is currently investigating the matter and has contacted the
    carrier, AT&T, who denies any responsibility.  The Company believes it
    has recourse in the matter, and will not be held responsible for these
    charges, but the outcome of this matter cannot be predicted at this
    time.

                                     F-18
_________________________________________________________________________
<PAGE>

                                  SIGNATURES
                                  ----------

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

Date:  October 31, 1996           TOUCH TONE AMERICA, INC.



                                  By /s/ Michael J. Canney
                                    -----------------------------
                                    Michael J. Canney, President

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

       Signature                   Title                   Date



 /s/ Michael J. Canney     President, Principal        October 31, 1996
------------------------   Executive Officer
Michael J. Canney



 /s/ David J. Smith        Principal Financial         October 31, 1996
------------------------   and Accounting Officer
David J. Smith



 /s/ Mathew J. Barletta    Director                    October 31, 1996
------------------------
Mathew J. Barletta



-----------------------    Director                    October ___, 1996
Stephen P. Shearin



 /s/ Norman B. Walko       Director                    October 31, 1996
------------------------
Norman B. Walko


 /s/ Benjamin W. Bronston  Director                    October 31, 1996
------------------------
Benjamin W. Bronston