<PAGE>

                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549


                                 FORM 10-KSB/A-1


                 ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE
                         SECURITIES EXCHANGE ACT OF 1934

                     FOR THE FISCAL YEAR ENDED JUNE 30, 2000

                         COMMISSION FILE NUMBER: 0-27673

                         EUROTELECOM COMMUNICATIONS, INC.
             (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)

        DELAWARE                                                 87-0409699
(STATE OR OTHER JURISDICTION OF                               (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION)                               IDENTIFICATION NO.)

                FARFIELD PARK, WATH UPON DEARNE, SOUTH YORKSHIRE
                                 ENGLAND S63 5BD
                    (ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)

     REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: 011 44 1709 874600

       SECURITIES REGISTERED UNDER SECTION 12(b) OF THE EXCHANGE ACT: NONE
         SECURITIES REGISTERED UNDER SECTION 12(g) OF THE EXCHANGE ACT:
                          COMMON STOCK PAR VALUE $0.01

         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 preceding
12 months (or for such shorter period that the registrant was required to file
such reports), and (2) has been subject to such filing requirements for the past
90 days:       Yes: [x]   No:  [ ]

         Check if there is no disclosure of delinquent filers pursuant to Item
405 of Regulation S-B contained in this form, and no disclosure will be
contained, to the best of the 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: $9,737,850.

         The aggregate market value of the voting and non-voting common equity
held by non-affiliates of the registrant computed by reference to the average
bid and asked price of the registrant's Common Stock and Class A Common Stock on
October 6, 2000: $ 34,331,102. The determination of market value of the Common
Stock is based on the last reported bid and asked price as reported by the
National Quotation Bureau, LLC, on the date indicated. The determination of
market value of the Class A Common Stock is based on the last reported bid and
asked price as reported by the Alternative Investment Market of the London Stock
Exchange. The British Sterling/U.S. Dollar exchange rate used throughout this
Form 10-KSB is (pound)1/$1.578.

              There were 17,946,222 shares of Common Stock and 12,055,118 shares
of Class A Common Stock of the registrant outstanding as of October 6, 2000.

              Transitional Small Business Disclosure Format (check one):
                                 Yes [ ] No [X]



<PAGE>

                         EUROTELECOM COMMUNICATIONS, INC.
                                      INDEX


                                                                            PAGE
                                                                            ----

                                     PART I

ITEM 1.      DESCRIPTION OF BUSINESS                                           3
ITEM 2.      DESCRIPTION OF PROPERTY                                          13
ITEM 3.      LEGAL PROCEEDINGS                                                13
ITEM 4.      SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS              13


                                     PART II

ITEM 5.      MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS         14
ITEM 6.      MANAGEMENT'S DISCUSSION AND ANALYSIS                             16
ITEM 7.      FINANCIAL STATEMENTS                                             20
ITEM 8.      CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
             AND FINANCIAL DISCLOSURE                                         20


                                    PART III

ITEM 9.      DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS;
             COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT                21
ITEM 10.     EXECUTIVE COMPENSATION                                           23
ITEM 11.     SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT   25
ITEM 12.     CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS                   26
ITEM 13.     EXHIBITS, LIST AND REPORTS ON FORM 8-K                           27

                                       2


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                                     PART I

This report contains certain "forward-looking statements" concerning EuroTelecom
Communications, Inc.'s operations, economic performance and financial condition,
which are subject to inherent uncertainties and risks. Actual results could
differ materially from those anticipated in this report. When used in this
report, the words "estimate," "plan," "project," "anticipate," "expect,"
"intend," "believe" and similar expressions are intended to identify
forward-looking statements.


ITEM 1. DESCRIPTION OF BUSINESS

GENERAL

The Company's strategy for the future is to build its business to design,
install, operate and manage fiber optic and microwave based technical
infrastructures for buildings and building complexes. The Company has identified
"application linking" (see description below) as the process of managing, under
one contract, a range of end user applications such as lighting, heating, air
conditioning, alarms and communications services within a single building
infrastructure. The Company's revenues to June 30, 2000, have been derived in
part from the installation of two such application linking projects but also
from providing facsimiles and laptop computers and consultancy services to the
U.K. defense sector, the sale of certain software products, the sale and
installation of air conditioning units and the provision of commercial security
services. These services and the revenues derived from them are explained in
detail below.

To make the narrative descriptions of the Company's business more understandable
the following definitions have been provided:

"A Shares"                 The shares of Class A Common Stock, par value US$0.01
                           each in the capital of the Company

"AIM"                      Alternative Investment Market of The London Stock
                           Exchange Limited

"application linking"      The provision and management of end user applications
                           within building structures and building complexes,
                           usually by means of an integrated fiber optic and or
                           wireless platform which is supplied under a single
                           service contract with the Company. The term "linking"
                           is an established technology term used to describe
                           the joining of a "path" between two nodes.
                           Application linking is used as a generic term to
                           describe the linking of end user applications on a
                           single path and node structure comprising the
                           "application linking platform"

"application linking       The term used by the Company to describe a means of
platform"                  providing a communication path between a series of
                           devices, or nodes, in a network linking together
                           different end user applications

"application service       A service that hosts business application
provider" or "ASP"         software for third parties to access over the
                           Internet

"CCTV"                     Closed circuit television

"connectivity solutions"   The ability to connect electronically to two or more
                           devices. An example is a telephone system where the
                           telephones are replaced with different types of
                           hardware (for example, mainframe computers, personal
                           computers or laptops). Software sold by the Company
                           provides a common language over this new telephone
                           system

"end user applications"    Products and services used in building structures
                           and building complexes such as telecommunications,
                           voice, data and video delivery services, buildings
                           access, control, monitoring and maintenance systems,
                           such as, CCTV, air conditioning and information
                           kiosks

"EuroTelecom" or "Company" EuroTelecom Communications, Inc.

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"intelligent building"     A building which utilizes self monitoring
                           and self supporting technology to control internal
                           building services such as lighting, heating, air
                           conditioning, alarms and communications

"Internet                  protocol suite" A standard set of rules to enable
                           Internet users to communicate with each other

"Internet service          A company which provides a service which enables a
provider" or "ISP"         user to access the Internet

"multiplexer"              A device that enables a number of signals to be
                           transmitted over a single line

"network file systems"     A file system is simply an electronic file cabinet.
                           There are two types of systems: 'Local' -- specific
                           to the user, and 'Remote' - which operates like a
                           public library. A network file system is like a
                           public library, which can be used locally

"node"                     A connection point of a network to enable electronic
                           data to be extracted for use by end user applications

"protocol"                 A set of rules that enable communications between
                           items of hardware, for example modem to personal
                           computer

"protocol converter"       A device which is used to translate one form of
                           digital information into another to enable the end
                           user application to function

"secure computer networks" In general, computer networks such as telephone
                           networks do not provide any form of privacy from
                           electronic eavesdropping. Secure networks, such as a
                           secure telephone system, provide a method of
                           encoding information so that an eavesdropper is
                           unable to interpret it

"SDH"                      Synchronous Digital Hierarchy - a recognized
                           transmission standard for telecommunications networks

"terminal emulation"       Terminals provide the facility to enter and view
                           data received from a mainframe computer. The old
                           expression for terminal was VDU (Visual Display
                           Unit). Different mainframes require different input
                           devices (VDUs). Terminal emulation software allows a
                           personal computer to "mimic" the functions of these
                           VDUs



<PAGE>

APPLICATION LINKING - THE COMPANY'S STRATEGY FOR THE FUTURE

Currently in the U.K., where the Company's operations are predominantly based,
end user applications are typically supplied from a variety of sources and are
operated through numerous technical platforms which are not always interlinked
or compatible without additional hardware being installed. An application
linking platform can accommodate and integrate with conventional wire, as well
as fiber optic or microwave based infrastructures. The market for application
linking includes the owners, developers and operators of large buildings, retail
centers, sporting stadia, science and technology parks, local authority and
government sites and residential developments.

An application linking platform comprises the fiber optic and/or wired and/or
wireless technical infrastructure of a building or building complex to provide
services such as lighting, heating, air conditioning, alarms and communications
services. It uses components, developed and supplied by third parties, to
provide a technical infrastructure and typically consists of a series of nodes
that are linked by either fiber optic cable, microwave signals, or a combination
of both. An application linking platform is also able to integrate with
traditional wire based building infrastructures. Microwave radio nodes can also
be installed within the application linking platform to complete a network ring
where it is impractical or uneconomic to lay a fiber optic cable. An application
linking platform can be installed throughout a building or building complex and
is designed to be directly linked to end user applications. The Company
considers that application linking has a number of features which distinguishes
it from conventional fiber optic or wire based systems or networks for building
complexes. These features include the following:

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(a)      Single service contract

         Typically each end user application is provided by a different service
         provider, whether it is CCTV, air conditioning or fire alarms, often
         necessitating a series of individual service contracts between the end
         user and the provider. The application linking platform provided by the
         Company provides end user applications from an integrated
         infrastructure which enables services to be provided under a single
         service contract.

(b)      Integrity

         The application linking platform uses two independent rings or paths
         which enhance the integrity of the infrastructure, as one path operates
         as a fail safe should the other become damaged or cease to operate. The
         network incorporates specialist software which is activated in the
         event that both the operating and protective loops are broken,
         bypassing the breach and creating the necessary connection within the
         node itself.

(c)      Reliability

         By streamlining the infrastructure, the active components of the
         application linking platform are expected to have a typical mean time
         before failure of over 11 years based on estimates made in accordance
         with standards laid down by professional bodies such as the Institute
         of Electrical and Electronic Engineers in the U.K.

 (d)     Flexibility

         End user applications can simply be added or removed from the
         application linking platform without the requirement for
         re-engineering, which differs from many traditional fiber optic or wire
         based communication infrastructure designs, where different end user
         applications require separate multiplexes and protocol converters for
         each particular end user application.

(e)      Management and hardware costs

         A typical conventional fiber optic or wire based network will usually
         employ at least two levels of multiplexes to extract the bandwidth
         required by the end user application to function. In addition, a
         typical conventional fiber optic or wire based network will also
         require protocol converters to transform this bandwidth into a digital
         signal that can then be used by the end user application. The
         application linking platform does not require this hardware since the
         technology within the node enables the digital signal to be extracted
         directly from the network ring to the end user application. The effect
         of simplifying the infrastructure can enhance not only the system's
         efficiency, but it can also reduce the cost of installing, operating
         and maintaining the platform.

THE POTENTIAL MARKET

Global deregulation of telecommunications, the resulting increased competition
and the rapid development and application of new technologies have stimulated a
growing demand for advanced telecommunications services. The Company believes
that corporate customers in commerce and industry (financial services,
entertainment and leisure industries, manufacturing, public utilities and other
sectors) have become aware of the ability of advanced information and
communications technology to bring competitive advantage by:

                                       5


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o        Extending their markets
o        Reducing costs
o        Speeding products to market
o        Improving standards of customer service
o        Developing new and innovative ways to approach the market

In particular, the Company believes that there will be a particular demand for
application linking in the entertainment and leisure industries. The single,
managed infrastructure provided by the Company offers additional sources of
revenue to end users as well as substantial cost reductions due to the use of
economic bandwidth management and the ability to avoid the costs of buying in
auxiliary equipment to the site developer and to the businesses on a site. The
Company has the ability to design and install networks that will handle
multi-media screen displays, site administration, security and access controls,
CCTV monitoring, fire and intruder alarms, advanced computer networking and
Internet access.

In addition to the impact that high-speed integrated computer networks is having
on private industry, governments are also seeing networked information systems
as a way to help reduce costs, improve public service and devolve and
decentralize the functions of government. The military is also continually
expanding the use of advanced telecommunications in operational, command and
control and administrative roles. The Company's application linking platforms
are also able to support e-commerce, cash-point dispensers, retail card systems,
"smart cards" for cashless transactions, information kiosks, video-walls and
distance training.


CORPORATE HISTORY OF THE COMPANY

The Company was incorporated on June 1, 1987, in Delaware under the name
American Telemedia Network, Inc. On June 25, 1987, American Telemedia Network,
Inc. and ATN, Inc., a corporation incorporated in Utah, merged. The merged
entity was called America Telemedia Network, Inc., a Delaware corporation. On
December 21, 1989, the name of American Telemedia Network, Inc. was changed to
ATNN, Inc. On August 1, 1997, ATNN, Inc. acquired by way of merger all of the
outstanding shares of EuroTelecom, Inc. and on August 11, 1997, changed its name
to EuroTelecom Communications, Inc.

EuroTelecom Corporation Limited ("ECL"), the U.K. holding company, was formed on
April 12, 1996.

On September 16, 1997 a wholly owned subsidiary of the Company, EuroTelecom
Secure Networks Limited ("Secure Networks"), was incorporated in the U.K. to
provide certain Internet technology and communication products and services.
This subsidiary was the only trading subsidiary until it was liquidated on
February 19, 1999. The activities performed by Secure Networks were similar to
the current activities of ECL and involved the design and installation of secure
computer networks at the U.K. Ministry of Defense using hardware sourced by ECL.

In the year to June 30, 1998, revenues were generated only through Secure
Networks. ECL was incurring costs in developing the business and was at an early
stage in developing the application linking business. All such costs were being
expensed in full.

In the year to June 30, 1999, a lower level of revenue was generated from Secure
Networks and this company was placed into liquidation. Revenues were generated
by ECL under a contract supplying consultants to design and install a secure
computer network with the U.K. Ministry of Defense. In addition, revenues were
generated by ECL from the supply of facsimile machines and laptop computers also
to the U.K. Ministry of Defense and in the supply of CCTV and manned security to
other customers.

On April 19, 1999, the Company acquired Easy IP Limited, ("Easy IP"), a software
distribution company for $586,050. The consideration for this acquisition
comprised $193,250 in cash, the issuance of 200,000 shares of the Company's
Common Stock valued at $331,250 and acquisition costs of $61,550.

                                       6


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In the year to June 30, 2000, the Company developed its businesses of defense
products, commercial security and software distribution, obtained its first two
application linking projects and continued to sell and install air-conditioning
units.

On April 5, 2000, the Company listed a new class of stock, called Class A Common
Stock, on the Alternative Investment Market, a regulated investment exchange
governed by The London Stock Exchange. The principal reason for such listing was
to provide the option to the Company of offering additional shares of its
capital stock in the U.K. to facilitate the raising of further capital or as
consideration for acquisitions. The background to and the reasons for the
Company's seeking this listing in London were set out in the Company's
Definitive Information Statement (on Form 14C) filed with the Securities and
Exchange Commission on February 7, 2000. As part of the listing, 11,220,118
shares of the Company's Class A Common Stock were sold in the U.K., raising
$26,938,283, before costs. This offering of a new class of the Company's shares
is described in more detail in Item 5. The proceeds of this offering are being
used to fund strategic acquisitions, marketing activities and working capital
requirements.

The Company has continued its programme of expansion through acquisition. On
April 12, 2000, the Company acquired the commercial security business of Wardell
Security Limited, a U.K. company based in the northwest of England, for
$197,225.

On April 18, 2000, the Company purchased the assets of Timtec International
Limited ("Timtec") for $1,041,000. Timtec undertakes interior contracting and
carpentry for the retail, leisure and hotel sectors in the U.K. Projects to date
have consisted of interior contracting and carpentry for shops and offices.

On May 12, 2000, the Company concluded a joint venture agreement with Amanda
Staveley in which it acquired in total, following both an acquisition and
subscription for new shares, 49 percent of the issued share capital of Q.ton
Limited ("Q.ton"), an English company, specializing in the development and
operation of conference center facilities. Under the terms of the transaction,
the Company acquired 29 percent of Q.ton previously owned by Amanda Staveley,
prior to these transactions its sole shareholder, in exchange for 794,000 shares
of Class A Common Stock of the Company. The agreement setting out the terms of
the acquisition in more detailis attached as Exhibit 10.14 and is incorporated
by reference herein. Q.Ton is a development stage company which was incorporated
in October 1998. The company leases two units in the newly-built Cambridge
Science Park from Trinity College Cambridge in the United Kingdom. One of these
units, known as the Q.Ton Forum, is being equipped with state of the art
conference facilities, restaurant facilities; the other unit is being equipped
with leisure facilities. Once operational the company's revenues will
principally be rental income and membership income from users of the units.

As of June 30, 2000, assets comprised mainly property and equipment of $993,000
and cash of $1,370,000 and liabilities comprised mainly of trade payables of
$744,000 with neither unit operational. Both facilities became operational in
September 2000.


DESCRIPTION OF THE COMPANY'S ACTIVITIES

The operations of the Company are based primarily in the U.K. The Directors have
developed the Group's activities through three segments described below. In the
period ended June 30, 1999, the individual activities were not grouped by the
Company into these main headings.

Projects - This segment comprises the following:

o        Applications linking - revenues to 6/30/00- $804,878
o        Defense services - sale of equipment- revenues to 6/30/00- $1,260,741

The Company considers both these areas of its business to be operating units,
not development units.

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Services - This segment comprises the following:

o        Defense services - consultancy services- revenues to 6/30/00 - $nil

This part of the Company's business, which is the installation of secure
computer networks at the U.K. Ministry of Defense facilities, is not considered
a development unit as the Company has the capability to perform in this area as
soon as contracts are signed. No contracts have yet been entered into by the
Company mainly due to the lack of U.K. government funding for investment by the
U.K. Ministry of Defense in this area.

o        Commercial security- revenues to 6/30/00- $1,869,991
o        Sale/installation of air conditioning units - revenues to 6/30/00 -
         $621,955
o        Interior contracting (see business of Timtec below) - revenues to
         6/30/00 - $1,422, 366

The Company considers that three areas above are all operating parts of the
Company's business.

Communications - This segment comprises the following:

o        Distribution of software products:
            Easy IP - revenues to 6/30/00 - $2,599,413

o        Sale of specialist communication products:
            RTC - revenues to 6/30/00 - $353,443

o        On-line telephony services - revenues to 6/30/00 - $nil

In the Communications segment, only on-line telephony services is considered by
the Company to be a development unit. There is a concentrated sales and
marketing effort to produce revenues derived from sales of on-line telephony
equipment within the next 12 months.

PROJECTS

Application linking

In the period to June 30, 2000, this segment concluded negotiations for the
design and supply of application linking platforms for the Q.ton Forum
development on the Cambridge Science Park, and the "Printworks" development in
Manchester, both in the U.K.

The Q.ton Forum is a video conferencing and leisure center. The total contract
value for the application linking platform installation is expected to be
$1,317,400. The installation and breakdown of revenue for the contract consists
of the following main elements: communications FibreTrax backbone (see
Intellectual property and proprietary rights later in this document) and
cabling, video and audio conferencing and distribution, CCTV, intruder detection
and building access control, telephone system and electronic point of sale
equipment. The Q.ton Forum project was 75 percent complete at June 30, 2000. The
project was completed on September 30, 2000. The Company has also signed a
facilities management agreement for building control at the Q.ton Forum worth
$75,700 per year.

The Printworks Development is a major urban entertainment center in Manchester
in the U.K. and is, the Company believes, Europe's largest entertainment center,
providing 350,000 square feet of retail and leisure facilities including a
proposed 3D IMAX Cinema and 20 screen cinema complex. The total contract value
for the application linking platform installation is expected to be $476,700.
The installation and breakdown of revenue for the Printworks contract consists
of network installation and backbone supply, together with fiber connections to
each tenant, and FibreTrax nodes and accessories including power supplies and
connections and design. The project was 25 percent complete on June 30, 2000. As
well as providing the design and supply of the application linking platform, the
Company is also to provide the ongoing facilities management to the tenants, as
well as the operators, of the Printworks site. To June 30, 2000, nine tenants
representing 50 percent of the available square footage have verbally indicated
that they require the Company's facility management but binding contracts have
not been entered into.

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Defense equipment

Since February 1999, Projects has supplied and maintained the U.K. Ministry of
Defense with a range of secure facsimiles and laptop computers, customized to
operate in harsh field environments. The sale of equipment by the company is
distinct from the provision of consultancy services noted below.


SERVICES

Defense Services

Defense services involves the provision of consultancy services by the Company
in connection with the design and installation of secure computer networks,
specifically for use in the U.K. defense industry. Defense services' main source
of revenue to June 30, 1999 was as a supplier of contracted labor to a third
party which was itself contracted by the U.K. Ministry of Defense. ECL supplied
between five and ten consultants on a weekly basis, as and when required, whose
main activity was the installation of secure computer networks at various
Ministry of Defense sites throughout the U.K. The Company charged consultants'
time on the number of hours worked in any one month, the average gross mark up
being approximately 20 percent. The contract has now been completed and no
further work in this area is anticipated for a number of months.

Commercial security

This aspect of the Company's business currently comprises CCTV systems,
maintenance and manned security guard services. Since November 1998, these
activities have operated from the Company's central monitoring CCTV station in
South Yorkshire on which capital expenditure of approximately $30,000 was spent
in the period to June 30, 1999 and $230,300 in the year ended June 30, 2000. The
business concentrated on the South Yorkshire area of the U.K. to June 30, 1999
and expanded to the whole of the U.K. in the year ended June 30, 2000. Revenues
were generated from CCTV sales provided to various different types of customer,
for example, local government authorities, car dealerships, factories and car
parks. The equipment supplied to these sites is purchased from a third party
supplier. The Company installs the systems and provides a 24-hour monitoring
service, if required by the client, from the Company's central monitoring
station. Personnel are employed on a shift basis to monitor each individual
site. Screens in the monitoring station are only activated if unauthorized
access is gained to any site. This enables the central monitoring station to
monitor at any one time up to 250 different locations. The monitoring station
has at any one time a maximum of three people in the station. Individual
installations on average create revenues of $30,000 with a gross margin of
approximately 30 per cent. The installations are typically sold with one year's
free maintenance and monitoring. Towards the end of the first year the Company
then typically seeks to sell a further maintenance and monitoring contract for
two years. The Company also provides security guards on sites where CCTV is not
required by the customer or is impractical. There are approximately 140 guards
at any one time employed by the Company protecting properties in the U.K.

Air-conditioning

Chunlan Limited ("Chunlan") was formed by the Company in February 1998 and began
operations in August 1999. Chunlan imports, distributes and installs air
conditioning units for industrial, commercial and domestic uses. The units are
acquired from third party suppliers. Projects completed to that date were small
fittings of air conditioning units in office space valued at approximately
$3,000 per project. The market area is predominately in the north of England.
Chunlan hopes to expand this market area to the whole of the U.K. Air
conditioning is typical of the type of "end user applications" which can be
connected within an application linking platform. The intention is to develop
Chunlan to source and manage the installation of building control products and
systems such as air conditioning and lighting.

                                       9


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Timtec

Timtec undertakes retail, leisure, and office interior contracting and carpentry
within the U.K. with materials purchased from third party suppliers. Since
acquisition and to June 30, 2000, Timtec has been contracted to work on three
projects.

The business engaged in by TimTec is interior fitting and joinery in the retail,
hotel and residential sectors. This work includes the installation of many
different types of fixtures and fittings including office furniture, carpets,
decorations, shop counters, suspended ceilings, light fittings and window and
door joinery.

COMMUNICATIONS

Software distribution

Easy IP is a distributor of third party developed software. With a base of over
300 ultimate customers (such as retailers, local municipalities and
universities) in the U.K., Easy IP holds the sole rights in the U.K. to
distribute to such customers Microplex software and is one of a select number of
U.K. software distributors of Attachmate, Netmanage and Netopia. These software
products specialize in providing connectivity solutions such as terminal
emulation or network file systems between personal computers and mainframes.
Easy IP is not involved in software design. The distribution function of Easy IP
comprises a sale of appropriate software to meet specific customer requirements
following consultation with the customer. Other than in relation to the sole
rights in the U.K. to Microplex, Easy IP does not have exclusive software
distribution rights. In respect of the Company's future business strategy, it is
planned that Easy IP distributed software will allow customers to use computer
systems which could be installed within an application linking platform provided
by the Company. The Company is targeting Easy IP customers who have a potential
intelligent building development requirement, e.g., retailers, local authorities
and universities.

Sale of specialist communication products

One of the Company's subsidiaries, RTC, Inc. ("RTC"), based in Maryland, finds
and sources specialist communication products on behalf of U.S. government
departments who engage the Company. Revenues are generated based on a commission
of the contract value of the products supplied. The intention of management is
to develop RTC as the U.S. supplier of the Company's application linking
platform. RTC entered into an agreement on November 1, 1999 with Intelect
Network Technologies Company ("Intelect") under which the Company has been
granted the non-exclusive rights to market and promote the sales of certain
Intelect software products including FibreTrax, a major component of the
application linking platform, in the states of Virginia, West Virginia,
Maryland, Georgia and the district of Washington, DC.


On-line telephony services

 One of the Company's subsidiaries, EuroTelecom Connect Limited, an English
limited company which was incorporated on September 16, 1999, was established as
an ASP in September, 1999 in order to deliver the following customer
applications:

o     teleconference center - the ability to establish and manage
      teleconferences over a public telephone network

o     presentation center - the ability to provide Internet-based presentations

o     message center - a unified messaging service that will enable subscribers
      to retrieve, manage and send voice mail, e-mail and fax messages that can
      be accessed from any Internet enabled PC or any standard touch tone
      telephone

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On September 22, 1999, the Company was appointed as a sales agent in the U.K.
for products of TelePost Limited ("Telepost"), a U.S. based supplier of
connectivity software to be used in telephony applications. The agreement is for
an initial period of three years and may be renewed for a further three years.
To June 30, 2000 this aspect of the Company's business has not generated any
revenues. It is anticipated that revenues will be generated from the
installation of telephony applications.

SOURCE AND AVAILABILITY OF MATERIALS AND THE NAMES OF PRINCIPAL SUPPLIERS

The Company sources its fax machines from Cryptek Communications Inc. in the
U.S. There is generally a lead time of two to three months for the delivery of
such items. The CCTV equipment used in Commercial security is typically
available within seven days of placing the order. The principal supplier is
Norbain Ltd. in the U.K. The FibreTrax product is sourced from Intelect Network
Technologies, Inc., in the U.S., with a lead time before supply of three to four
weeks.

GOVERNMENTAL APPROVAL/RESEARCH AND DEVELOPMENT

The Company does not require government approval for any of its principal
products and services. The Company has not incurred research and development
costs in the year ended December 31, 1998 or in the period to June 30, 1999. In
the year ended June 30, 2000, the Company incurred research and development
costs of $717,000 relating principally to the development of EuroTelecom Connect
Limited, the Company's ASP telephony services provider. None of the costs were
born by the Company's customers.

SIGNIFICANT CUSTOMERS

Customers accounting for in excess of ten percent of total consolidated revenues
are as follows. In the year to June 30, 2000, the Company had one customer, the
U.K. Ministry of Defense (sale of equipment), which accounted for 14 percent of
total consolidated revenues. In the six months to June 30, 1999, the Company had
two customers which each accounted for in excess of ten percent of total
consolidated revenues. These were Chelsfield plc (installation of CCTV facility
at Merryhill Shopping Center in Birmingham in the U.K.), which accounted for 20
percent, and the U.K. Ministry of Defense (sale of equipment and installation of
secure computer networks), which accounted for 14 percent, of total consolidated
revenues.

EFFECT OF EXISTING OR PROBABLE GOVERNMENT REGULATIONS ON THE BUSINESS

Continuing deregulation of the European telecommunications industry is creating
new opportunities for the Company. The effect of deregulation will be to open up
the broadband e-commerce networks in the U.K. and the rest of Europe.
EuroTelecom expects to be able to take advantage of these developments.

In addition, in the public sector, the U.K. government has continued the policy
of "Public Private Partnerships" initiated by the previous Conservative
government. This enables EuroTelecom to enter into such partnerships with
defense and local government agencies for the provision of integrated network
services. The successful bid by the Company for a contract to provide facilities
management at the Army Foundation College in the U.K. is an example of this type
of partnership the first of what are believed to be many such opportunities.

INTELLECTUAL PROPERTY AND PROPRIETARY RIGHTS

The Company is not a primary technology developer and manufacturer. The Company
is not dependent on any patents and/or other proprietary intellectual property
rights which the Company considers are of fundamental importance to the
Company's business.

The technology which is used for the application linking platform has been
provided under two main agreements. One is an exclusive U.K. supply agreement
with a US based supplier of fiber optic tracking (the "FibreTrax Agreement"- see
below) which is used as the backbone in the application linking platform for the

                                       11


<PAGE>

Company's intended core business. The agreement is exclusive in the U.K. and
non-exclusive in the rest of Europe. In addition, the Company has entered into a
non-exclusive supply agreement with the same U.S. based supplier for the
non-exclusive rights in certain U.S. states for the supply to the Company of the
same technology platform (the "SonetLYNX Agreement"- see below).

Under the FibreTrax agreement dated December 1, 1999, the Company acquired the
sole distribution rights to the fiber optic access product (known as FibreTrax)
in the U.K. The agreement is for an initial term of one year to November 30,
2000, and may be renewed for a further five years unless notice is given by
either party at least 30 days prior to the termination of the agreement. The
supplier is permitted to terminate the agreement for breach if the forecast
annual sales by the Company of FibreTrax software (currently $2 million) are not
reached. The Company expects this target will be met although there can be no
assurance in this regard. If the supply agreement is terminated then the Company
believes an appropriate alternative manufacturer and supplier for such product
could be found without a significant effect on the business or financial
position of the Company.

Under the SonetLYNX agreement, dated November 1, 1999, the Company acquired the
non-exclusive distribution rights to the products SonetLYNX, LANscape Video
Conferencing, FibreTrax and OmmLYNX for Virginia, West Virginia, Maryland,
Georgia and Washington D.C. The agreement is terminable on 90 days' notice at
any time. As of September 30, 2000, no written notice of termination had been
given or received and the agreement has therefore automatically been renewed for
one year to September 30, 2001. The Commpany is entitled to a commission on a
negotiated percentage of sales.

COMPETITION

In each of the sectors in which the Company operates it encounters varying
degrees of competitiveness. In the application linking business, the Company
believes that the barriers are sufficient to discourage competitors in the short
term. The technology used is not widely available although it is available to
some large U.K. companies such as British Telecommunications plc, Marconi,
Energis plc and Cable and Wireless plc. The Company is not aware of any
companies in the U.K. currently adopting the same approach as the Company to
applications linking. The Company believes with the first application linking
platform having been installed at "Printworks", it is establishing itself in a
leading position in the market place with few competitors having similar skills
and knowledge. In the defense computer consultancy business, the Company is
currently not providing services for the installation of secure computer
networks. This is a market dictated by the needs of very few customers, and the
workflow is dependent on their overall requirements. The commercial security
business is competitive with numerous competitors actively pursuing new
customers. The Company competes directly or indirectly for customers with the
following U.K. companies: The Shorock Group Ltd., Chubb Security Ltd., Group 4
Security Services Ltd., and Modern Alarms Limited. The Company believes that
there are very few companies offering one particular aspect of its own security
service as part of a security package and this is the Company's central
monitoring station. The air conditioning sector is highly competitive with
numerous companies specializing in this market. The Company provides an overall
service with commercial security and potential monitoring of the building from
an external location that, the Company believes, gives it a competitive
advantage. The Company couples this with a competitive pricing structure. The
on-line telephony business operates in a highly competitive sector. However,
with the Telepost agreement now signed, the Company considers that it has a
product to rival the conferencing facilities provided by British
Telecommunications plc, the Company's principal competitor in this area. In the
software distribution business, Easy IP operates in a very competitive market
with competitors like Unipalm Ltd., Open Computing Ltd., Unidirect Ltd. and
Computer 2000 Ltd. Computer 2000 Ltd. is a co-distributor of Attachmate
products. RTC operates in a highly competitive environment, with numerous
companies specializing in this market. RTC relies on providing a first class
response to clients' needs at a competitive price.

                                       12


<PAGE>

EMPLOYEES

At June 30, 2000, the Company had 319 full-time employees and 3 part-time
employees making a total of 322 employees. The Company also employs a number of
independent contractors and consultants as required from time to time. None of
the Company's employees, or its temporary workers, is represented by a
collective bargaining agreement.


ITEM 2. DESCRIPTION OF PROPERTY

The Company's principal place of business is Farfield Park, Wath Upon Dearne,
South Yorkshire, United Kingdom, S63 5BD.

The Company leases the following premises all of which are in good repair:

<TABLE>
<CAPTION>

                  PROPERTY                           TERM                       ANNUAL RENT

<S>                                  <C>                                          <C>
Mexborough Business Center           1 year from March 9, 1999, thereafter        $40,000
College Road                                     monthly lease
Mexborough
England

53 South Denes Road                         1 year from May 31,1999                $9,120
Great Yarmouth
Norfolk
England

Units 3 and 4                            6 years from October 5, 1999             $28,000
Uplands Industrial Park
Blanford House
Blanford
Dorset
England

9086 Junction Drive                       1 year from October 1, 1999              $9,811
Suite 1, Annapolis Junction
Maryland 20701

Farfield Park                             7 years from April 27, 2000             $54,400
Wath upon Dearne
South Yorkshire
England

King Lear House                           15 years from July 1, 2000             $142,000
Stratford Business & Technology Park
Stratford
England
                                         10 years from June 23, 2000             $157,780
Atlantic House
Lye
Stourbridge
England
                                         15 years from April 28, 2000             $48,000
North Wing, 1st Floor
The Kiln
Waterside
Newark on Trent
Nottinghamshire
England

</TABLE>


ITEM 3. LEGAL PROCEEDINGS

There are no legal actions pending against the Company nor is the Company aware
of the threat of any such legal actions.

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

There were none during the last quarter of the fiscal period ended June 30,
2000.

                                       13


<PAGE>

                                     PART II

ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

The Company has outstanding two classes of common equity: Common Stock and Class
A Common Stock. The Company's Common Stock was removed from the OTC Bulletin
Board on November 18, 1999 and is now quoted in the "Pink Sheets", the paper
quotation system of the National Quotation Bureau, LLC, which reports trades in
the "over-the counter" securities market.

The following table sets forth the range of high and low closing bid prices per
share of the Common Stock of the Company for the last two fiscal years as
reported by The OTC Bulletin Board or by the National Quotation Bureau, LLC, for
the relevant periods indicated. (These quotations reflect inter-dealer prices,
without retail mark-up, mark-down or commission, and may not represent actual
transactions.)

YEAR ENDED                          HIGH BID             LOW BID
DECEMBER 31, 1998
1st Quarter                         $0.50                $0.37
2nd Quarter                         $2.50                $2.25
3rd Quarter                         $0.94                $0.75
4th Quarter                         $0.28                $0.28

SIX MONTHS ENDED                    HIGH BID             LOW BID
JUNE 30, 1999
1st Quarter                         $1.72                $1.50
2nd Quarter                         $2.06                $1.75

YEAR ENDED
JUNE 30, 2000
1st Quarter                         $2.56                $2.28
2nd Quarter                         $2.00                $2.00
3rd Quarter                         $3.25                $3.10
4th Quarter                         $1.95                $1.95

The approximate number of holders of the Company's Common Stock is 2,018.


Since April 5, 2000, the Company's Class A Common Stock has been listed and
traded on The Alternative Investment Market ("AIM"), a regulated investment
exchange governed by The London Stock Exchange. The following table sets forth
the range of high and low closing bid prices per share converted from British
Sterling of the Class A Common Stock of the Company, as reported by AIM.

Class A Common Stock

YEAR ENDED                       HIGH BID             LOW BID
JUNE 30, 2000
4th Quarter                      $ 2.11               $ 1.80

The approximate number of holders of the Company's Class A Common Stock in the
U.K. is 415.

The Company has not paid any dividends on its Common Stock or on its Class A
Common Stock and does not expect to do so in the foreseeable future. The
Directors anticipate that earnings, if any, will be retained for development of
the Company's business and will not be distributed for the foreseeable future.
The declaration and payment by the Company of any future dividends and the
amount will depend upon the Company's results of operations, financial
condition, cash requirements, future prospects, profits available for
distribution and other factors deemed by the Directors to be relevant at the
time.

                                       14


<PAGE>

RECENT SALES OF UNREGISTERED SECURITIES

On April 5, 2000, the Company issued 11,220,118 of its Class A Common Stock to
numerous parties in the U.K. at a price of $2.40 per share, raising gross
proceeds of $ 26,938,283 of which $23,398,000 net proceeds were received by the
Company. The underwriters were Beeson Gregory. The total underwriting commission
paid to Beeson Gregory by the Company was $569,600 comprised of (i) a corporate
finance fee of $400,000 (of which $120,000 was satisfied by the issue of 50,000
Class A Common Stock to Beeson Gregory at $2.40 per share of Class A Common
Stock), (ii) a placing commission of $169,600, which was two percent on the
aggregate value of 3,533,333 of the shares of Class A Common Stock at $ 2.40 per
share of Class A Common Stock. The Company placed its securities of Class A
Common Stock with U.K. institutions in reliance on Regulation S under the
Securities Act of 1934 ("Securities Act") in an off-shore transaction made to
non-U.S. persons. The following matters, among others, were brought to the
attention of investors applying for the Company's Class A Common Stock who were
required to represent the same in applying for such securities: that the
securities offered were "restricted securities" as defined in Rule 144
promulgated under the Securities Act of 1933 and as such were offered on the
basis that they must not be offered, sold or delivered in the U.S. or to, or for
the account or benefit of, any U.S. person, that certificates relating to the
sold securities bear a legend to the effect that they may not be offered, sold,
pledged or otherwise transferred except (i) in an offshore transaction meeting
the requirements of Rule 903 or Rule 904 of Regulation S, (ii) pursuant to an
effective registration statement, or (iii) pursuant to an available exemption
from the registration requirements of the Securities Act, and that, in addition
to the restrictions applicable to such securities under the Securities Act, the
Company's Certificate of Designations, Powers, Preferences and Rights
designating the Company's Class A Common Stock prohibits the transfer of such
shares (i) to any U.S. Person and (ii) in any transaction other than an Offshore
Transaction (as such terms are defined under Regulation S).

The Company intended to use the proceeds to fund the following:

o    Strategic acquisitions

o    Marketing activities and brand development of the Group's products and
     services

o    The development of new business opportunities and joint ventures

o    The Company's working capital requirements, particularly with respect to
     major products.

To date the Company has used the proceeds to acquire the trade and assets of
Timtec and invest in Q.Ton Limited.

On May 12, 2000, the Company sold 794,000 shares of Class A Common Stock to
Amanda Staveley in exchange for 20 percent of the outstanding share capital of
Q.ton Limited, an English company. The Company's shares of Class A Common Stock
were sold in reliance on Regulation S under the Securities Act of 1934.

On March 28, 2000, the Company entered into a lease agreement in the U.K. with
the Farfield Syndicate for a lease of premises at Farfield Park, Manvers, South
Yorkshire in England, in exchange for an agreement to issue at a future date to
Farfield Syndicate 41,000 shares of the Company's Class A Common Stock at a
price of $2.51 per share, to be sold in reliance on Regulation S under the
Securities Act of 1934.

                                       15


<PAGE>

On April 19, 1999, the Company purchased the share capital of Easy IP from Ian
Reay and Jayne Holmes for $189,336, and the issue on April 19, 2000 of 200,000
shares of Common Stock in the Company and the issue of 20,000 shares of Class A
Common Stock on July 6, 2000 for $2.51 a share. The shares of Class A Common
Stock were sold in reliance on Regulation S under the Securities Act of 1934.

USE OF PROCEEDS FROM REGISTERED SECURITIES

The Company has not sold any registered securities which have not been
previously reported.

ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS

RESULTS OF OPERATIONS

The table below sets forth the results of operations for the two years ended
June 30, 2000. The Company changed its year end to June 30 from December 31. As
a result the previous audited periods were the six months June 30, 1999 and the
year ended December 31, 1998. To assist with a meaningful comparison the Company
has prepared an unaudited statement of operations for the year ended June 30,
1999.

<TABLE>
<CAPTION>

                                  YEAR ENDED JUNE 30, 2000      YEAR ENDED JUNE 30, 1999
                                  ------------------------      ------------------------
         <S>                        <C>                          <C>
         Revenues                   $     9,737,850              $      1,354,971
         Cost of revenues                 7,558,000                       803,178
         Net loss                        (7,069,000)                   (3,059,670)
         Net loss per share                   (0.37)                        (0.44)

</TABLE>

During the fiscal year ended June 30, 2000 ("Fiscal 2000"), the Company operated
three segments: Projects, Services and Communications.

Accordingly, the Company's results of operations are discussed on the basis of
these three segments.

Revenues

In Fiscal 2000, the Company's gross revenues from operations were $9,737,850, as
compared to $1,354,971 from operations for the fiscal year ended June 30, 1999
("Fiscal 1999"), an increase of $8,383,879 (618 percent).

Revenues for each segment were as follows:

                            Fiscal 2000 ($)   %     Fiscal 1999 ($)     %
                           ---------------    -     ---------------     -
Projects                     2,870,682        29         443,042        33
Services                     3,914,312        40         380,004        28
Communications               2,952,856        31         531,925        39
                           ------------      ---     ------------      ---
                             9,737,850       100       1,354,971       100
                           ============      ===     ============      ===

Of the increase in revenues from Projects $804,878 was generated from the design
and installation of application linking at Q.ton and Printworks, both of which
are new sources of revenue this year. $1,260,741 of the Projects increase was a
result of the profit from the sale of ninety-four facsimile machines against no
revenues from this source in Fiscal 1999. The remainder of the increase in
revenue in Fiscal 2000 of $362,021 was generated from the same source as in
Fiscal 1999.

Of the increase in Services revenues, $2,044,321, is attributable to the sale
and installation of air conditioning units, being a new business segment in
Fiscal 2000 compared to Fiscal 1999. The remainder of the increase of $1,489,987
arose from an increase in consultancy work undertaken in ECL.

                                       16


<PAGE>

Of revenues from Communications for Fiscal 2000, $353,443 was derived from the
RTC subsidiary and $2,599,413 was derived from the Easy IP subsidiary. No
revenues, as yet, have been derived from EuroTelecom Connect. All revenues from
Communications for Fiscal 1999 were derived from Easy IP, which in turn only
included three months of activity compared to a full year's activity. Cost of
Revenues

Costs incurred by the Company in producing revenues in Fiscal 2000 were
$7,558,459, compared with $803,178 in Fiscal 1999, an increase of 901 percent.

Costs of revenues for each segment were as follows:

                      Fiscal 2000 ($)         Fiscal 1999 ($)
                      ----------------        ---------------

Projects                     2,081,755                209,673
Services                     3,316,299                145,468
Communications               2,160,405                448,037
                        --------------            -----------
                             7,558,459                803,178
                        ==============            ===========

Gross Profit

For Fiscal 2000, the Company returned a gross profit of $2,180,391, compared
with a gross profit of $551,793 for Fiscal 1999, an increase of 295 percent. The
gross profit for each segment is as follows:


                  Fiscal 2000 ($)             %      Fiscal 1999 ($)           %
                  ---------------             -      ---------------           -

Projects                  789,927            36              233,369          42
Services                  598,013            27              234,536          43
Communications            792,451            37               83,888          15
                   --------------      --------          -----------     -------
                        2,180,391          100%              551,793        100%
                   --------------      --------          -----------     -------


Selling, General and Administrative Expenses

The Company's selling, general and administrative expenses increased $6,866,427,
from $2,148,395 in Fiscal 1999, to $9,014,822 in Fiscal 2000, an increase of 320
percent. Director's compensation increased in Fiscal 2000 to $984,140, compared
with $180,838 in Fiscal 1999, an increase of $803,302, or 444%. The increase is
due to additional directors being appointed in the period. Wages and salaries
increased in Fiscal 2000 to $3,948,341, compared with $396,951 in Fiscal 1999,
an increase of $3,551,390 or 895%. The increase is due to the hiring of
additional personnel to take account of the increased revenues and the potential
revenues in the future. No general increase in salary levels for existing
employees was made. Rent and rates increased in Fiscal 2000 to $260,917,
compared with $42,805 in Fiscal 1999, an increase of $218,112 or 509%. The
increase is due to the opening of additional offices in the period. Consultancy
charges decreased in Fiscal 2000 to $608,242, compared with $824,204 in Fiscal
1999, a decrease of $215,962 or 26%. The Company hired more personnel in the
period who had the relevant expertise required, thus negating the need to hire
consultants. The sales and marketing expense increased in Fiscal 2000 to
$512,513, compared with $47,889 for Fiscal 1999, an increase of $464,624, or
970%. The increase is due to the Company's decision to have a high profile in
the sales of its products and services. Telephone and office expenses increased
to $169,661 in Fiscal 2000, compared with $74,175 in Fiscal 1999, an increase of
$95,486 or 129%. The increase is due to the increased hiring of personnel in the
period. Selling, general and administrative expenses for the segments were as
follows:

                                       17


<PAGE>

                    Fiscal 2000 ($)           %       Fiscal 1999 ($)          %
                    ---------------           -       ---------------          -


Projects                  6,593,058          73             1,742,138         81
Services                  1,179,830          13               321,763         15
Communications            1,241,934          14                84,494          4
                     --------------    --------           -----------    -------
                          9,014,822        100%             2,148,395       100%
                     --------------    --------           -----------    -------


The increases in each segment were substantial as the Company continued to build
its technology infrastructure, hire more personnel, operate new companies and
acquire new distribution rights to the fiber optic access product (known as
FibreTrax) in the U.K. from Intelect Network Technologies Company (INT),
acquired through RTC the non-exclusive distribution rights to the products,
SonetLYNX, LANscape Video Conferencing, FibreTrax and Omnilynx.

The cost of revenues has in the year ended June 30, 2000 increased, primarily
due to the increased level of operations in all segments of the business,
together with the acquisitions completed in the period.

Costs of revenues comprise the direct cost associated with the revenues which
includes the purchase of equipment, air conditioning units, application linking
platforms, fiber optic cabling, CCTV units, software products and facsimile
machines.

The Company expects the cost of revenues to grow in conjunction with the growth
of the overall business and accordingly expect these costs to increase in the
future.

Depreciation and Amortization Expense

Depreciation and amortization expense increased from $51,440 in Fiscal 1999 to
$318,516 in Fiscal 2000, which represents an increase of 519 percent. The
Company spent significant additional sums on capital expenditures together with
a full year's amortization of goodwill recorded on Easy IP compared to three
months in Fiscal 1999.

The depreciation and amortization expense for the segments were as follows:

                   Fiscal 2000 ($)             %      Fiscal 1999 ($)          %
                   ---------------             -      ---------------          -

Projects                   213,933            67               26,398         51
Services                    93,248            29               24,000         47
Communications              11,335             4                1,042          2
                    --------------      --------          -----------    -------
                          $318,516          100%               51,440       100%
                    --------------      --------          -----------    -------


Financial Items

Financial items resulted in an interest expense of $57,132 in Fiscal 2000,
compared to an interest expense of $34,970 in Fiscal 1999. Interest income was
$218,676 in Fiscal 2000, compared to $121 in Fiscal 1999. The increase in
interest income was attributable to the investment of net proceeds of $23 millon
from a private placement on the AIM Market in London in the fourth quarter of
Fiscal 2000.

                                       18


<PAGE>

A Loan Agreement dated February 11, 1999 was executed between the New Lenders,
the Company, ECL, Secure Networks, and Philip Derry and Jacqueline Derry. Each
of the New Lenders were entitled to convert any part of their loans made under
this Agreement into shares of Common Stock. The New Lenders exercised this right
and were issued 5,500,000 shares on July 1, 1999. The Company recorded a
beneficial conversion expense of $919,000 in Fiscal 1999 arising from the terms
of the loan.


LIQUIDITY AND CAPITAL RESOURCES

The Company's principal intention over the next twelve months and beyond is to
fund (i) acquisitions, (ii) additional working capital, (iii) capital
expenditure, (iv) marketing and (v) the development of its technology.

The Company does not currently have any commitments for capital expenditure
during the next fiscal year, although the Company may make such expenditures if
an opportunity consistent with the Company's business strategy presents itself.


Working Capital

At June 30, 2000, the Company had $20,165,938 in current assets of which cash
and cash equivalents amounted to $12,114,225. Current liabilities were
$4,979,546 at June 30, 2000. At June 30, 1999, the Company had $1,512,407 in
current assets, of which $Nil consisted of cash and cash equivalents. Working
Capital at the end of Fiscal 2000 was $15,186,391 as compared to ($245,369) at
the end of Fiscal 1999. The increase in working capital is attributable to the
Company's completion of a private placement of equity in the fourth quarter of
Fiscal 2000 resulting in net proceeds to the Company of $23 millon. The ratio of
current assets to current liabilities was 4.0 to 1.0 at the end of Fiscal 2000
as compared to 0.9 to 1.0 at the end of Fiscal 1999.

After the admission of the Company's Class A Common Stock and Common Stock to
the Alternative Investment Market of the London Stock Exchange, which raised
gross proceeds of $26,938,283,has no current requirements for any bank overdraft
or loans facilities.

Cashflow from Operations

For Fiscal 2000, the Company used net cash in operating activities of
$8,630,000. The main components were the net loss of $7,069,000 and adverse
movements in working capital balances of $2,949,000. Of this amount $2,323,000
related to unbilled amounts or uncompleted contracts.

Cashflow from Investing Activities

For Fiscal 2000, the Company had a net cash outflow from investing activities of
$4,417,000. The Company purchased fixed assets of $1,773,000, and also acquired
the trade and assets of Timtec for $1,041,000 together with its investment in
Q.Ton of $1,177,000 and the balance of the consideration of Easy IP. The Company
does not currently have any commitments for capital expenses during the next
fiscal year, but the Company may make such expenditures if an opportunity
consistent with the Company's business strategy presents itself.

Cashflow from Financing Activities

For Fiscal 2000, the Company had a net cash inflow from financing activities of
$25,042,000. The Company received total net proceeds of $25,304,000 from private
placement of shares including net proceeds of $23,398,000 arising from the
Company's listing on The Alternative Investment Market.

                                       19


<PAGE>

Recent Developments

The Company has recently been awarded a seven-year facilities management
contract by Jarvis Facilities Limited, part of Jarvis plc. The initial contact
is for approximately $395,000 per year for seven years, and may be extended up
to a total of 30 years. The Company is to provide facilities management services
together with IT and telecommunications services at the U.K. Army Foundation
College at Harrogate, North Yorkshire. The site is a new training campus to
accommodate 1,400 students for IT based academic courses. The Company will
provide an on site service team and will procure telephony and IT hardware.

Effects of Recent Accounting Pronouncements

In June 1998, the Financial Accounting Standards Board ("FASB") issued SFAS No.
133, as amended by SFAS No. 137 "Accounting for Derivative Instruments and
Hedging Activities," which requires the Company to value derivative financial
instruments, including those used for hedging foreign currency exposures, at
current market value with the impact of any change in market value being charged
against earnings in each period. SFAS No. 133 will be effective for and adopted
by the Company in the first quarter of the fiscal year ended June 30, 2001. The
Company has not in the past nor does it anticipate that it will engage in
transactions involving derivative instruments, and therefore does not expect
this pronouncement to have any effect on the financial statements.

In December 1999, the Securities Exchange Commission issued Staff Accounting
Bulletin ("SAB") No. 101, "Revenue Recognition". This bulletin summarizes views
of the Staff on applying generally accepted accounting principles to revenue
recognition in financial statements. The Company will be required to adopt SAB
No. 101, as amended by SAB 101B, in the fourth quarter of fiscal 2001.
Management believes that the current revenue recognition policy complies with
the guidelines in SAB No. 101B, and, therefore, does not believe the adoption of
SAB No. 101B will have a material impact on the financial position or results of
operations.

In March 2000, the FASB issued Financial Interpretation No. 44, "Accounting for
Certain Transactions involving Stock Compensation an interpretation of APB
Opinion 25." Interpretation No. 44 is effective July 1, 2000. Interpretation No.
44 clarifies the application of APB Opinion 25 for various matters,
specifically: the criteria for determining whether a plan qualifies as a
non-compensatory plan; the accounting consequence of various modifications of
the terms of a previously fixed stock option or award; and the accounting for an
exchange of stock compensation awards in a business combination. Management
believes that the adoption of Interpretation No. 44 will not have a material
impact on the Company's financial position or results of operations.

In March 2000, the FASB's Emerging Issue Task Force ("EITF") reached a consensus
on EITF 00-2, "Accounting for Web Site Development Costs." EITF 00-2 discusses
how an entity should account for costs incurred to develop a web site. The EITF
is effective in the first quarter of Fiscal 2001. Management believes that the
adoption of EITF 00-2 will not have a material impact on the Company's financial
position or results of operations.

ITEM 7. FINANCIAL STATEMENTS

The financial statements for the Company's fiscal year ended June 30, 2000 are
incorporated herein by reference to Exhibit 99.7.

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

On August 30, 2000, the Company dismissed its independent public accountants,
Crouch, Bierwolf & Chisholm. Crouch, Bierwolf & Chisholm's report on the
Company's financial statements for the past two fiscal years of the Company did
not contain an adverse opinion or a disclaimer of opinion and did not make any
qualifications or modification as to uncertainty, audit scope or accounting
principles. During such period and any subsequent interim period preceding such
dismissal the Company had no disagreement with its former independent public
accountants on any matter of accounting principals or practices, financial
statement disclosure or auditing scope or procedure, nor did there occur any
other matter that was an accounting, auditing or financial reporting issue
required to be disclosed under this Item 8. The decision to dismiss the
Company's independent public accountants was approved by the Board of the
Company on August 28, 2000. Pursuant to the recommendation of management and the
approval of the Board of Directors, the Company appointed BDO Stoy Hayward,
effective August 30, 2000, as the Company's independent accountants for the
fiscal year ended June 30, 2000.

                                       20


<PAGE>

                                    PART III

ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS; COMPLIANCE
        WITH SECTION 16(a) OF THE EXCHANGE ACT

Details of directors and executive officers as of June 30, 2000 are set out
below:

<TABLE>
<CAPTION>

NAME                        AGE      POSITION                                 DATE APPOINTED
----                        ---      --------                                 --------------
<S>                          <C>     <C>                                      <C>
Christopher Akers            35      Non Executive Chairman                   April 2000
Philip Derry                 53      President and Chief Executive Officer    August 1997
Dr John Spackman             68      Non Executive Deputy Chairman            October 1998
Andrew Krawchuk              54      Vice President, Marketing                October 1998
Graham Ford                  48      Chief Operating Officer                  September 1999
David Linell                 42      Chief Financial Officer                  April 2000
Amanda Staveley              27      Non Executive Director                   May 2000
Ray May                      67      Vice President, US Operations            August 1999
David Walton                 48      Director                                 September 1999

</TABLE>

There is no family relationship between or among the above directors and
officers. The Company's success will depend largely on the efforts and abilities
of the Company's senior management as listed above. In particular, the Company
is dependent upon Philip Derry, President and Chief Executive Officer. The loss
of services of senior management could have a substantial adverse effect on the
Company. The Company does not consider that any of its other employees qualify
as "significant employees" in the context of this Item 9.

The business experience of the above directors and executive officers over the
past five years and details of significant employees is set out below.

Philip Derry, age 53, President and Chief Executive Officer, has over 32 years
experience in the telecommunications industry. Mr. Derry joined the Company in
August 1997. He has set up and developed two private telecommunication
companies, Marlborough Communications Limited ("MCL") and Electronic Marketing
Solutions Limited ("EMSL"). MCL was set up in 1980 and became a leading Ministry
of Defense contractor in the early 1980's. He sold his interest in MCL in 1986
and in 1992 he established EMSL. This was acquired by Intelect Communications,
Inc. ("Intelect"), a NASDAQ quoted public company in 1995. From 1991 to 1996,
Mr. Derry was managing director of Intelect Europe Limited (formerly EMSL).
Between 1996 and 1997, Mr. Derry was involved in the process of establishing the
Company.

Christopher Akers, age 35, Non Executive Chairman. Mr. Akers is the founder and
executive director of Sports Internet Group plc, an AIM listed sports website
and bookmaking company, an executive director of In Technology plc the AIM
quoted business Internet company and managing director of Chris Akers Associates
Limited, a media and sports consultancy business. He is also non-executive
director of Sportsworld Media Group plc, a U.K. company. In August 1996 he was
instrumental in the acquisition of Leeds United Holdings plc (renamed Leeds
Sporting plc) of which he was Chairman and Chief Executive. Prior to this, he
was a founder investor in Freepages Group plc (renamed Scoot.com plc) and
orchestrated its admission to AIM in February 1996. Between July 1991 and May
1995 he was an executive director in the corporate finance department of Swiss
Bank Corporation specializing in media, entertainment and information technology
related mergers and acquisitions on a worldwide basis.

                                       21


<PAGE>

Dr. John Spackman, age 68, Non Executive Deputy Chairman, served for 32 years in
the British Army during which time he held many technical and computing
appointments including branch chief in the information systems division of
Supreme Headquarters Allied Powers Europe. He retired as a Brigadier, Director
of Supply Computer Services in 1983. As an under-secretary in the Department of
Health and Social Security, from 1983 to 1986, he was responsible for the
modernization and integration of the U.K.'s social security, unemployment,
National Insurance and pensions systems. He was Director of Information Systems
for BT plc from 1986 to 1990, and director of European Telecommunications
Informatics Services from 1990 to 1993. From 1993 to 1997 he was the senior
consultant in Informative Systems in the office of the Chairman of the
Management Systems Unit of the Government of Malta. Dr. Spackman joined the
Company in 1997.

Graham Ford, age 48, Chief Operating Officer, was a director of Hallam Corporate
Services Ltd. from 1991 to 1995. He also represented the South Yorkshire
Pensions Authority as a non-executive director of Doncaster Minerals Ltd from
1993 to 1995. He has held senior management positions at Amco Corporation plc
(1977 to 1984) including six years as Group Company Secretary. From 1993 to 1997
he held the post of Deputy Secretary and, from 1997 to 1999, the position of
Company Secretary at Marston, Thompson & Evershed plc. He is a Fellow of the
Institute of Chartered Secretaries and Administrators in the U.K.. Mr. Ford
joined the Company in late 1999.

Andrew Krawchuk, age 54, Vice President, Marketing, joined the Company in
October 1998. Mr. Krawchuk has extensive experience in the leisure industry and
in 1985 acted as a consultant in the marketing and sponsorship of the then
world's largest shopping center, in West Edmonton, Alberta, Canada. He moved to
the U.K. in 1988 to continue his consultancy work until 1992 and worked on the
Meadowhall Center in Sheffield, England, and Centro, Oberhausen in Germany.
Since 1992, prior to joining the Company, Mr. Krawchuk was chairman of Atlantic
Partnerships International Ltd., a U.K. Company.

Ray May, age 67, Vice President of US operations, is chief executive officer of
the Company's subsidiary, RTC, and has been President of RTC Inc. since 1992.
Mr. May has over 30 years of practical and sales engineering experience with
government agencies and the telecommunications community.

David Linell, age 42, Chief Financial Officer. In 1986 he set up his own
practice, DM Linell & Co. After three years, he moved into industry and then in
1991 moved back into private accountancy practice as a sole practitioner. In
1994 his practice merged with another to become Robinson Linell which has since
incorporated its business to become R. L. & Associates Limited, of what he is a
shareholder and non-executive director. He is a Fellow of the Institute of
Chartered Accountants in England and Wales.

Amanda Staveley, age 27, Non Executive Director of the Company, is Chief
Executive Officer of the Amanda Staveley group of companies. She is a director
of Lightwater Holdings Limited, R.K. Raper Limited and North Stainley Farms
Limited, all U.K. companies. In 1995, she became self-employed and formed Amanda
Staveley Limited, also a U.K. company. She formed Q.ton Limited, a conference
facility, in 1998 in a joint venture with Trinity College, Cambridge in England.
She sold 49 percent of her investment in Q.ton Limited to the Company in May
2000. She was voted U.K. Business Woman of the Year for 1996.

                                       22


<PAGE>

David Walton, age 48, Director, has experience within the telecommunications
industry. He was employed by British Telecom plc from 1991 until 1999 where he
was most recently in the management team responsible for the corporate clients.
Immediately prior to joining The Company in September 1999, he was business
development director of BT Corporate Business Solutions.

Except as set out in paragraphs (a) to (e) below, no director, executive officer
or significant employee of the Company has been a general partner or executive
officer of any business when a bankruptcy petition was filed against such
business or within two years of such filing:

(a)      Mr. Derry was a principal shareholder and director of Wherry Quay
         Marine Limited, a private company incorporated on October 14, 1986. The
         company became insolvent and was wound up by the Official Receiver by
         order of the court dated April 29, 1991.

(b)      Mr. Derry and Mr. Linell were formerly directors of EMSL. EMSL was
         acquired by Intelect Communications, Inc. in August 1995 from Mr.
         Derry, as a majority shareholder, and others. EMSL subsequently changed
         its name to Intellect Europe Limited (IEL). Mr. Derry was a director of
         IEL at the time of its acquisition and he remained on the Board. Mr.
         Linell joined the Board of IEL on March 28, 1996 and resigned from the
         board on May 8, 1996. Mr. Derry resigned from the Board of IEL on July
         17, 1996. IEL appointed a liquidator on January 30, 1997, under a
         creditors' voluntary winding-up. IEL has ceased operations and has now
         been liquidated.

(c)      Mr. Derry, Dr. Spackman and Mr. Krawchuck were on the Board of the
         Company, when EuroTelecom Secure Networks Limited, a subsidiary, went
         into creditors voluntary liquidation in March 1999. The company has
         ceased operations and has been liquidated.

(d)      Mr. Linell joined the Board of Alpha Estates plc on March 31, 1989. The
         company went into liquidation on October 1, 1991 and was dissolved on
         June 23, 1994. On July 20, 1994 the dissolution was declared void by
         order of the court.

(e)      Mr. Linell was a director of Tobytop Limited when it went into
         liquidation on February 17, 1998. A creditors voluntary arrangement was
         approved on November 11, 1998 to repay all creditors liabilities in
         full. Payment has been made in full to all creditors.

Section 16(a) Beneficial Ownership Reporting Compliance

Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
directors, executive officers and persons who own beneficially more than ten
percent of any class of the Company's equity securities to report beneficial
ownership and reports of changes in beneficial ownership of such securities.
None of such directors, executive officers or other persons own in excess of ten
percent of the Company's equity securities.

ITEM 10. EXECUTIVE COMPENSATION

The following table sets forth information for the year ended December 31, 1998,
six months ended June 30, 1999 and year ended June 30, 2000 with respect to the
compensation of the Company's Chief Executive Officer and any of its other
executive offices whose total salary exceeded $100,000 for the above periods.

                                       23


<PAGE>

                           SUMMARY COMPENSATION TABLE
                           --------------------------


NAME AND PRINCIPAL POSITION                             COMPENSATION

                                 YEAR          SALARY($)(2)         OTHER ANNUAL
                                                                    COMPENSATION

Philip Derry
Chief Executive Officer          2000            195,935               149,348
                                 1999  (1)        56,800
                                 1998             51,334

Graham Ford                      2000             72,768               102,812
Chief Operating Officer

David Walton                     2000            125,150               208,882
Director


(1)    Six months ended June 30, 1999.
(2)    Based upon an exchange rate of 1 pound sterling = $1.578


The aggregate remuneration paid to directors during the year ended June 30, 2000
was $984,140 and to June 30, 1999 was $116,713.


<TABLE>

                      OPTION GRANTS IN LAST FISCAL YEAR (1)
                      -------------------------------------
<CAPTION>

Name              No. of Securities        Percent of Total       Exercise of     Expiration
                 Underlying Options/        Options/SARs           Base Price        Date
                   SARs Granted (#)      Granted to Employees
                                            in Fiscal Year
<S>                   <C>                       <C>                   <C>        <C>
Philip Derry          50,000                    5.18%                 2.40       March 28, 2010

David Walton          20,000                    2.07%                 2.40       March 28, 2010

Graham Ford           50,000                    5.18%                 2.40       March 28, 2010

David Linell          50,000                    5.18%                 2.40       March 28, 2010

Andrew Krawchuk      150,000                   15.53%                 2.40       March 28, 2010

</TABLE>

(1) The Company approved on March 28, 2000, the EuroTelecom Communications, Inc.
Employee Stock Option Scheme ("Option Scheme") under which, at the discretion of
the Directors or the remuneration committee of the Board of Directors, options
may be granted to U.K. employees (including full-time directors) of the Company
or any subsidiary to acquire (by subscription or purchase) shares of the
Company's Class A Common Stock. On March 28, 2000, the Company granted options
to employees (excluding executive Directors) over 645,762 shares of the
Company's Class A Common. The option exercise price of each option share is the
fair market value of the Company's shares of Class A Common Stock at the date of
grant of the option as determined by the Directors of the Company. Options lapse
after ten years from date of grant or on the option holder ceasing to be either
an employee or director of the Company. Options are exercisable after three
years from the date of grant and subject to certain other specified conditions
which are set out in the Option Scheme, incorporated herein by reference to
Exhibit 10.16.

                                       24


<PAGE>

EMPLOYMENT CONTRACTS AND TERMINATION OF EMPLOYMENT; CHANGES-IN-CONTROL
ARRANGEMENTS

Mr. Akers entered into a letter of appointment with the Company dated March 9,
2000, which provides for him to act as Non Executive Chairman of the Company for
a fee of $78,000 per annum which may be terminated by either party giving not
less than three months notice in writing at any time.

Mr. Spackman entered into a letter of appointment with the Company dated March
9, 2000, which provides for him to act as Non Executive Deputy Chairman of the
Company for a fee of $78,000 per annum which may be terminated by either party
giving not less than three months notice in writing at any time.

Mr. Derry entered into an employment contract with the Company dated March 9,
2000, which provides for him to act as Chief Executive Officer of the Company at
an initial salary of $236,000 per annum, which may be terminated by either party
giving not less than 12 months notice in writing at any time.

Mr. Ford entered into an employment agreement with the Company dated March 9,
2000, which provides for him to act as Commercial Director, now amended to Chief
Operations Officer, of the Company at an initial salary of $110,000 per annum,
which may be terminated by either party giving not less than 12 months notice in
writing at any time.

Mr. Krawchuk entered into an employment agreement with the Company dated March
9, 2000, which provides for him to act as Vice President, Marketing, of the
Company at an initial salary of $189,000 per annum, which may be terminated by
either party giving not less than 12 months notice in writing at any time.

Mr. Linell entered into a employment agreement with the Company dated March 9,
2000, which provides for him to act as Chief Financial Officer of the Company at
an initial salary of $142,000 per annum, which may be terminated by either party
giving not less than 12 months notice in writing at any time.

Mr. Walton entered into an employment agreement with the Company dated March 9,
2000, which provides for him to act as Director of the Company at an initial
salary of $113,000 per annum, which may be terminated by either party giving not
less than 12 months notice in writing at any time.

Ms. Staveley does not have an employment agreement with the Company.

ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

MANAGEMENT

The total number of Shares of Common Stock and Class A Stock of the Company
beneficially owned by each of the officers and directors, and all of such
directors and executive officers as a group, and their percentage ownership of
such shares as of September 12, 2000, being the latest practical date prior to
the posting of this document, are as follows:

<TABLE>
<CAPTION>

                                 COMMON STOCK                        CLASS A STOCK
NAME AND ADDRESS (1)              BENEFICIALLY     PERCENT OF         BENEFICIALLY     PERCENT OF CLASS    PERCENT OF TOTAL
OF BENEFICIAL OWNER (2)               OWNED       COMMON STOCK           OWNED              A STOCK         ISSUED SHARES
-----------------------               -----       ------------           -----              -------         -------------
<S>                               <C>                <C>              <C>                     <C>               <C>
Christopher Akers                   500,000           2.8               350,000               2.9                2.83

John Spackman                        85,000           0.5                   Nil               Nil                0.28

Philip Derry (3)                  1,696,760           9.5                35,000               0.3                5.77

David Walton (4)                    112,700           0.6                   Nil               Nil                0.38

David Linell                        400,000           2.2                   Nil               Nil                1.33

Graham Ford                          50,000           0.3                   Nil               Nil                0.17

Andrew Krawchuk                     176,000           1.0                   Nil               Nil                0.59

Amanda Staveley                         Nil           Nil               754,000               6.2                2.51

All directors and executive       3,020,460          16.9             1,139,000               9.4               13.86
officers as a group (8
persons)

</TABLE>

                                       25


<PAGE>

Notes

(1)      The business mailing address for all management is c/o EuroTelecom
         Communications, Inc., Farfield Park, Wath Upon Dearne, South Yorkshire,
         England S63 5DB.

(2)      Except as otherwise noted, it is believed by the Company that all
         persons have full voting and investment power with respect to the
         Shares indicated. Under Rule 13d-3(d)(1) of the Securities Exchange Act
         of 1934, a person (or group of persons) is deemed to be a "beneficial
         owner" of a security if he or she, directly or indirectly, has or
         shares the power to vote or to direct the voting of such security, or
         the power to dispose of or to direct the disposition of such security.
         Accordingly, more than one person may be deemed to be a beneficial
         owner of the same security. A person is also deemed to be a beneficial
         owner of any security which that person has the right to acquire within
         sixty (60) days, such as options or warrants to purchase the Common
         Stock or Class A Stock of the Company.

(3)      25,000 Shares are held in the name of Mr. Derry's wife.

(4)      2,700 Shares are held by a broker, on behalf of Mr. Walton's wife.

PRINCIPAL STOCKHOLDERS

The following table sets forth information with respect to the beneficial
ownership of the Company's Common Stock and Class A Stock by each shareholder
who beneficially owns more than five percent (5 percent) of such shares in
aggregate, the number of shares beneficially owned by each and their percentage
ownership of such shares as of September 12, 2000, being the latest practical
date prior to mailing of this form. It is believed by the Company that all
persons listed have sole voting and investment power with respect to such
shares, except as otherwise indicated.

<TABLE>
<CAPTION>
                             COMMON STOCK                      CLASS A STOCK
NAME AND ADDRESS OF          BENEFICIALLY       PERCENT OF      BENEFICIALLY      PERCENT OF CLASS    PERCENT OF TOTAL
BENEFICIAL OWNER (1)             OWNED         COMMON STOCK          OWNED            A STOCK              ISSUED
--------------------             -----         ------------          -----            -------              ------
<S>                            <C>                 <C>              <C>               <C>                   <C>
Philip Derry (2)               1,696,760            9.5             35,000            0.3                   5.8

Scribe Investments SA (3)      2,475,000           13.8                Nil            Nil                   8.2
2 Sergeants Inn
London, England

Westbury Investments SA (4)    2,475,000           13.8                Nil            Nil                   8.2
2 Sergeants Inn
London, England

</TABLE>

Notes

(1)      See Note (2) in table above
(2)      See Note (1) in table above
(3)      Scribe Investments SA is controlled by Mark Sief, of Le George V, 14
         Av. De Grande-Bretagne, MC 98000 Monaco.
(4)      Westbury Investments SA is controlled by Mark Horrocks, of Le George V,
         14 Av. De Grande-Bretagne, MC 98000 Monaco.

In respect of voting powers, the shares of Class A common stock and the shares
of common stock rank equally in all respects.

ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

On May 12, 2000, the Company entered into a share purchase agreement to acquire
29 percent of the issued share capital of Q.ton Limited ("Q.ton"), an English
company, from Amanda Staveley, who as a result of the transaction became a non
executive director of the Company. As consideration, Ms. Staveley received
794,000 shares of Class A Common Stock of the Company. The agreement setting out
the terms of the acquisition in more detail is attached as Exhibit 10.14 and is
incorporated by reference herein.

                                       26


<PAGE>

For the period ended June 30, 2000, the Company paid R.L.Associates Limited the
sum of $390,000 for professional services. David Linell, who was appointed the
chief financial officer of the Company in April 2000, is also a director of R.L.
Associates Limited. The fees paid to R.L. Associates Limited relate to work
performed by Mr. Linell as a consultant to the Company from July 1996 to April
2000.

ITEM 13. EXHIBITS, LIST AND REPORTS ON FORM 8-K

Exhibits

Exhibit No.          Description of Exhibit
-----------          ----------------------

3(ii).1  By-Laws of ATN Inc. (2)
3(ii).2  By laws of American Telemedia Network Inc. (2)
3(ii).3  By-laws of EuroTelecom Communications, Inc. as amended through March
         28, 2000 (3)
4.1      Corporate Records of Wing Systems Inc. (2)
3(i).1   Certificate of Incorporation of American Telemedia Network Inc. (2)
3(i).2   Amended Certificate of Incorporation of Wing Systems Inc. (2)
3(i).3   Certificate of Incorporation of Wing Systems Inc. (2)
10.1     Share Sale Agreement among the Shareholders of Easy IP Ltd., Ian Stuart
         Reay, Jayne Elizabeth Holmes and EuroTelecom Corporation Limited dated
         April 19, 1999. (2)
10.2     Employment Agreement Ray May and EuroTelecom Communication, Inc. dated
         August 6, 1999. (2)
10.3     Agreement and Plan of Merger of ATN Inc and American Telemedia Network
         Inc. dated June 25, 1987. (2)
10.4     Agreement of Sale of Shares of RTC Inc. to EuroTelecom Communications
         dated August 6, 1999. (2)
10.5     Employment agreement among Ian Stuart Reay and EuroTelecom
         Communications, Inc. dated April 19, 1999. (2)
10.6     Letter of Appointment among Christopher Akers and EuroTelecom
         Comunications, Inc. dated March 9, 2000. (5)
10.7     Letter of Appointment among Dr. John Spackman and EuroTelecom
         Communications, Inc. dated March 9, 2000. (5)
10.8     Employment agreement among Philip Derry and EuroTelecom Communications,
         Inc. dated March 9, 2000. (5)
10.9     Employment agreement among Graham Ford and EuroTelecom Communications,
         Inc. dated March 9, 2000. (5)
10.10    Employment Agreement among David Linell and EuroTelecom Communications,
         Inc. dated March 9, 2000. (5)
10.11    Employment Agreement among David Walton and EuroTelecom Communications,
         Inc. dated March 9, 2000. (5)
10.12    Placing Agreement among Beeson Gregory and EuroTelecom Communications,
         Inc. dated March 29, 2000, in connection with the introduction of the
         Company's Class A Common Stock to The Alternative Investment Market of
         The London Stock Exchange. (5)
10.13    Timtec Acquisition Agreement between the Company's subsidiary Leadsmart
         Limited and TimtecInternational dated April 18, 1999. (5)
10.14    Share Sale and Shareholders Agreement dated May 10, 2000 among Amanda
         Louis Staveley, EuroTelecom Corporation Limited and Q. Ton Limited
         relating to the investment by EuroTelecom Communications, Inc. in Q.ton
         Limited.(5)
10.15    Asset Purchase Agreement dated April 12, 2000, among Wardell Security
         Limited (In Administration), Charles MacMillan, Dermot Power and
         EuroTelecom Corporation Limited for purchase by EuroTelecom
         Communications, Inc. of the assets of Wardell Security Limited. (5)
10.16    EuroTelecom Communications, Inc. Employee Share Option Scheme dated
         March 28, 2000 (5)
99.1     EuroTelecom Communications, Inc. and Subsidiaries consolidated
         financial statements ended December 31, 1998. (1)
99.2     Minutes of Special Meeting of Stockholders of American Telemedia
         Network Inc. (2)

                                       27


<PAGE>

99.3     EuroTelecom Communications, Inc and Subsidiaries consolidated financial
         statements for the fiscal period ended September 30, 1999. (4)
99.4     EuroTelecom Communications, Inc and Subsidiaries consolidated financial
         statements for the fiscal period ended June 30, 1999. (4)
99.5     Listing of issuances of EuroTelecom Communications, Inc.'s Common Stock
         between August 1, 1997 and December 31, 1999. (4)
99.6     Easy IP Limited financial statement for the fiscal period ended March
         31, 1999 (4)
99.7     Audited financial statements of EuroTelecom Communications, Inc. for
         the fiscal period ended June 30, 2000. (6)
27       Financial Data Schedule (6)

(b) No reports on Form 8-K were filed during the last quarter of the period
covered by this Report.

Exhibit No.              Description of Exhibit
-----------              ----------------------

(1)      Filed as an Exhibit to the Registrant's Form 10SB12G, filed with the
         Securities and Exchange Commission on January 25, 2000, and
         incorporated herein by reference.
(2)      Filed as an Exhibit to the Registrant's Form 10SB12G, filed with the
         Securities and Exchange Commission on November 5, 1999 and incorporated
         herein by reference.
(3)      Filed as an Exhibit to the Registrant's Form 10QSB, filed with the
         Securities and Exchange Commission on May 19, 2000 and incorporated by
         reference herein.
(4)      Filed as an Exhibit to Amendment No.4 to the Registrant's Form 10-SB on
         September 26, 2000.
(5)      Filed as an Exhibit to the Registrant's Form 10KSB, filed with the
         Securities Exchange Commission on October 13, 2000 and incorporated
         therein by reference.
(6)      Filed herewith.

                                       28


<PAGE>

                                   SIGNATURES

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



EUROTELECOM COMMUNICATIONS, INC.
(Registrant)

By: /s/ David Linell
    --------------------------
Title: Chief Financial Officer
Dated: December 21, 2000

In accordance with the requirements of the Securities and 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.

<TABLE>
<CAPTION>



Signature                          Title                                             Date
---------                          -----                                             ----

<S>                                <C>                                          <C>
/s/ Philip Saun Derry              President and Chief Executive Officer        December 21, 2000
-------------------------


/s/ Christopher Akers              Non Executive Director and Chairman          December 21, 2000
-------------------------


/s/ Graham Ford                    Chief Operating Officer                      December 21, 2000
-------------------------


/s/ Dr. John Spackman              Non Executive Director and Deputy            December 21, 2000
-------------------------          Chairman



/s/ Andrew Krawchuck               Vice President, Marketing                    December 21, 2000
-------------------------


/s/ Philip Sean Derry              President and Chief Executive Officer        December 21, 2000
-------------------------

</TABLE>

                                       29


<PAGE>

                          AUDITED FINANCIAL STATEMENTS



EUROTELECOM COMMUNICATIONS, INC.

FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

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

                                                                           PAGE:

Report of BDO Stoy Hayward, Independent Accountants                        F-1

Report of Crouch, Bierwolf & Chisholm, Independent
Certified Public Accountants                                               F-2

Consolidated balance sheet as of June 30, 2000                             F-3

Consolidated statement of operations for the year
ended June 30, 2000, six months ended June 30, 1999
and year ended December 31, 1998                                           F-5

Consolidated statements of stockholders' equity for the year
ended June 30, 2000, six months ended June 30, 1999 and
year ended December 31, 1998                                               F-6

Consolidated statements of cash flows
for the year ended June 30, 2000, six months
ended June 30, 1999 and year ended December 31, 1998                       F-9

Notes to consolidated financial statements                                 F-11

                                      -----



<PAGE>

EUROTELECOM COMMUNICATIONS, INC.

INDEPENDENT ACCOUNTANTS' REPORT

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

THE BOARD OF DIRECTORS AND STOCKHOLDERS
EUROTELECOM COMMUNICATIONS, INC.


         We have audited the accompanying consolidated balance sheet of
         EuroTelecom Communications, Inc. and subsidiaries as of June 30, 2000
         and the related statement of operations, stockholders' equity, and cash
         flows for the year then ended. 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 audit.

         We conducted our audit in accordance with generally accepted auditing
         standards in the United States. Those standards require that we plan
         and perform the audit to obtain reasonable assurance about whether the
         consolidated financial statements are free from 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 audit provides 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 EuroTelecom Communications, Inc. and subsidiaries as of
         June 30, 2000 and the related results of operations, stockholders'
         equity and cash flows for the year then ended in accordance with
         generally accepted accounting principles applied in the United States.


         /S/: BDO Stoy Hayward

         BDO Stoy Hayward
         London, England
         October 12, 2000



<PAGE>

EUROTELECOM COMMUNICATIONS, INC.

INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS' REPORT

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

THE BOARD OF DIRECTORS AND STOCKHOLDERS
EUROTELECOM COMMUNICATIONS, INC.


         We have audited the accompanying consolidated statements of operations
         of EuroTelecom Communications, Inc. and subsidiaries and related
         statements of stockholders' deficit, comprehensive loss and cash flows
         for the six months ended June 30, 1999 and the year ended December 31,
         1998. 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 audits
         to obtain reasonable assurance about whether the financial statements
         are free of material misstatement. An audit includes examining, on a
         test basis, evidence supporting the amounts and disclosures in the
         financial statements. An audit also includes assessing the accounting
         principles used and significant estimates made by management, as well
         as evaluating the overall financial statement presentation. We believe
         that our audits provide a reasonable basis for our opinion.

         In our opinion, the consolidated financial statements referred to above
         present fairly, in all material respects, the results of operations of
         EuroTelecom Communications, Inc. and subsidiaries and cash flows for
         the six months ended June 30, 1999 and the year ended December 31,
         1998, 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 10 to the consolidated financial statements, the
         Company's recurring operating losses and lack of working capital raise
         substantial doubt about its ability to continue as a going concern.
         Management's plans in regard to these matters are also described in
         Note 10. The consolidated financial statements do not include any
         adjustments that might result from the outcome of this uncertainty.


         /s/: Crouch, Bierworlf & Chisholm

         Crouch, Bierwolf & Chisholm
         Salt Lake City, Utah
         October 20, 1999



<PAGE>
<TABLE>

EUROTELECOM COMMUNICATIONS, INC.

CONSOLIDATED BALANCE SHEET

------------------------------------------------------------------------------------------------
<CAPTION>

                                                                                     JUNE 30,
                                                                                       2000
                                                                                  (IN THOUSANDS)
<S>                                                                               <C>
ASSETS

CURRENT ASSETS
   Cash and cash equivalents                                                      $      12,114
   Accounts receivable, net of provision for doubtful accounts of $8,000                  2,869
   Inventories                                                                              898
   Unearned compensation                                                                    170
   Prepaid expenses and other current assets                                              1,792
   Costs and estimated earnings in excess of billings on uncompleted contracts            2,323
                                                                                  --------------

TOTAL CURRENT ASSETS                                                                     20,166
                                                                                  --------------

NON-CURRENT ASSETS
   Property, plant and equipment, net of accumulated depreciation of $263,000             2,374
   Goodwill, net of accumulated amortization of $145,000                                  1,051
   Investment in affiliated company                                                       2,560
                                                                                  --------------

TOTAL NON-CURRENT ASSETS                                                                  5,985
                                                                                  --------------

TOTAL ASSETS                                                                      $      26,151
                                                                                  ==============

</TABLE>

               See accompanying summary of accounting policies and notes to
                            consolidated financial statements.

                                            F-3



<PAGE>
<TABLE>

EUROTELECOM COMMUNICATIONS, INC.

CONSOLIDATED BALANCE SHEET (CONTINUED)

------------------------------------------------------------------------------------------------
<CAPTION>

                                                                                     JUNE 30,
                                                                                       2000
                                                                                  (IN THOUSANDS)
<S>                                                                               <C>
LIABILITIES AND STOCKHOLDERS' EQUITY

CURRENT LIABILITIES
   Bank line of credit                                                            $         168
   Accounts payable                                                                       2,827
   Accrued liabilities                                                                    1,150
   Other current liabilities                                                                153
   Other taxes payable                                                                      627
   Current maturities of long-term obligations                                               55
                                                                                  --------------

TOTAL CURRENT LIABILITIES                                                                 4,980
                                                                                  --------------

NON-CURRENT LIABILITIES
   Notes payable                                                                            149
   Less: current maturities of long-term obligations                                        (55)
                                                                                  --------------

TOTAL NON-CURRENT LIABILITIES                                                                94
                                                                                  --------------

TOTAL LIABILITIES                                                                         5,074
                                                                                  --------------

STOCKHOLDERS' EQUITY
   Preferred stock, par value $0.01, 10,000,000 authorized, none issued - 'A'
   common stock shares $0.01 par value, authorized
    50,000,000;  12,055,118 issued and outstanding                                          120
   Common stock, $0.01 par value, 50,000,000 authorized shares;
    17,946,222 issued and outstanding                                                       180
   Additional paid in capital                                                            51,933
   Less: subscriptions receivable                                                          (132)
   Accumulated deficit                                                                  (31,148)
   Accumulated other comprehensive income                                                   124
                                                                                  --------------

TOTAL STOCKHOLDERS' EQUITY                                                               21,077
                                                                                  --------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY                                        $      26,151
                                                                                  ==============
</TABLE>

               See accompanying summary of accounting policies and notes to
                            consolidated financial statements.

                                            F-4


<PAGE>
<TABLE>

EUROTELECOM COMMUNICATIONS, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

------------------------------------------------------------------------------------------------
<CAPTION>

                                                    YEAR ENDED      SIX MONTHS      YEAR ENDED
                                                      JUNE 30,        JUNE 30,     DECEMBER 31,
                                                       2000            1999            1998
                                                       ----            ----            ----
                                                      (IN THOUSANDS, EXCEPT LOSS PER SHARE)
<S>                                               <C>             <C>             <C>
REVENUES
Sale of goods sold                                $       4,548   $         975   $           -
Sale of services                                          3,123             348              64
Contract revenues earned                                  2,067               -               -
                                                  --------------  --------------  --------------

                                                          9,738           1,323              64
COST OF REVENUES

Cost of goods sold                                        3,328             658               -
Cost of services                                          2,299             145               -
Cost of contract revenues earned                          1,931               -               -
                                                  --------------  --------------  --------------

GROSS PROFIT                                              2,180             520              64

Selling, general and administrative
 expenses                                                (9,015)         (1,639)         (1,174)
Depreciation and amortization                              (319)            (40)            (23)
Loss from closed subsidiary                                   -            (124)           (292)
                                                  --------------  --------------  --------------

LOSS FROM OPERATIONS                                     (7,154)         (1,283)         (1,425)

Share of loss from affiliated company                       (76)              -               -
Interest income (expense), net                              161             (35)            (54)
Loan stock beneficial conversion expense                      -            (919)              -
                                                  --------------  --------------  --------------

LOSS BEFORE INCOME TAX                                   (7,069)         (2,237)         (1,479)

Income taxes                                                  -               -               -
                                                  --------------  --------------  --------------

NET LOSS                                          $      (7,069)  $      (2,237)  $      (1,479)
                                                  ==============  ==============  ==============

Loss per share
   Basic and diluted                              $       (0.37)  $       (0.29)  $       (0.26)
                                                  ==============  ==============  ==============

Weighted average number of common shares             19,097,390       7,748,049       5,777,816
                                                  ==============  ==============  ==============
</TABLE>

               See accompanying summary of accounting policies and notes to
                            consolidated financial statements.

                                            F-5


<PAGE>

<TABLE>

EUROTELECOM COMMUNICATIONS, INC.

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY

---------------------------------------------------------------------------------------------------------------
<CAPTION>

                                                     NUMBER OF                        NUMBER
                                                    'A' COMMON      'A' COMMON       OF COMMON        COMMON
                                                      SHARES          STOCK           SHARES           STOCK
                                                      ------          -----           ------           -----
                                                             (IN THOUSANDS, EXCEPT NUMBER OF SHARES)
<S>                                                           <C> <C>                 <C>         <C>
Balance as of January 1, 1998                                 -   $           -       5,036,616   $          50

Share issues
   Consulting services                                        -               -       1,280,000              13
   Employee bonuses                                           -               -         151,200               2
   Cash                                                       -               -          51,200               -
Net loss                                                      -               -               -               -

Comprehensive loss
                                                  --------------  --------------  --------------  --------------

Balance as of December 31, 1998                               -   $           -       6,519,016   $          65

(CONTINUED)
</TABLE>

<TABLE>
<CAPTION>
                                                                    ACCUMULATED
                                                    ADDITIONAL         OTHER
                                                     PAID-IN       COMPREHENSIVE   ACCUMULATED
                                                     CAPITAL       INCOME (LOSS)     DEFICIT          TOTAL
                                                     -------       -------------     -------          -----
                                                             (IN THOUSANDS, EXCEPT NUMBER OF SHARES)
<S>                                               <C>             <C>             <C>             <C>
Balance as of January 1, 1998                     $      20,205   $          (6)  $     (20,363)  $        (114)

Share issues
   Consulting services                                      485               -               -             498
   Employee bonuses                                          44               -               -              46
   Cash                                                      51               -               -              51
Net loss                                                      -               -          (1,479)         (1,479)
                                                  --------------  --------------  --------------  --------------

Comprehensive loss                                                                                       (1,479)
                                                  --------------  --------------  --------------  --------------

Balance as of December 31, 1998                   $      20,785   $          (6)  $     (21,842)  $        (998)
</TABLE>

                                                     F-6


<PAGE>
<TABLE>

EUROTELECOM COMMUNICATIONS, INC.

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (CONTINUED)

---------------------------------------------------------------------------------------------------------------
<CAPTION>

                                                     NUMBER OF                        NUMBER
                                                    'A' COMMON      'A' COMMON       OF COMMON        COMMON
                                                      SHARES          STOCK           SHARES           STOCK
                                                      ------          -----           ------           -----
                                                             (IN THOUSANDS, EXCEPT NUMBER OF SHARES)
<S>                                                           <C> <C>                 <C>         <C>
Balance as of December 31, 1998                               -   $           -       6,519,016   $          65

Share issues
   Cash                                                       -               -       1,381,666              14
   Consulting services                                        -               -         764,000               8
   Employee bonuses                                           -               -          96,000               1
   Subscriptions                                              -               -          27,420               -
   Acquisition of Easy IP                                     -               -         200,000               2
Net loss                                                      -               -               -               -
Effect of foreign currency translation                        -               -               -               -

Comprehensive loss

Loan stock beneficial conversion                              -               -               -               -
Forgiveness of debt                                           -               -               -               -
                                                  --------------  --------------  --------------  --------------

Balance as of June 30, 1999                                   -   $           -       8,988,102   $          90

</TABLE>

(CONTINUED)
<TABLE>
<CAPTION>

                                                                    ACCUMULATED
                                                    ADDITIONAL         OTHER
                                                     PAID-IN       COMPREHENSIVE   ACCUMULATED
                                                     CAPITAL       INCOME (LOSS)     DEFICIT          TOTAL
                                                     -------       -------------     -------          -----
                                                             (IN THOUSANDS, EXCEPT NUMBER OF SHARES)
<S>                                               <C>             <C>             <C>             <C>
Balance as of December 31, 1998                   $      20,785   $          (6)  $     (21,842)  $        (998)

Share issues
   Cash                                                     884               -               -             898
   Consulting services                                      296               -               -             304
   Employee bonuses                                         158               -               -             159
   Subscriptions                                             39               -               -              39
   Acquisition of Easy IP                                   329               -               -             331
Net loss                                                      -               -          (2,237)         (2,237)
Effect of foreign currency translation                        -              11               -              11
                                                  --------------  --------------  --------------  --------------

Comprehensive loss                                                                                       (2,226)
                                                  --------------  --------------  --------------  --------------

Loan stock beneficial conversion                            919               -               -             919
Forgiveness of debt                                         146               -               -             146
                                                  --------------  --------------  --------------  --------------

Balance as of June 30, 1999                       $      23,556   $           5   $     (24,079)  $        (428)

</TABLE>

                                                     F-7


<PAGE>
<TABLE>

EUROTELECOM COMMUNICATIONS, INC.

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (CONTINUED)

---------------------------------------------------------------------------------------------------------------
<CAPTION>

                                                     NUMBER OF                        NUMBER
                                                    'A' COMMON      'A' COMMON       OF COMMON        COMMON
                                                      SHARES          STOCK           SHARES           STOCK
                                                      ------          -----           ------           -----
                                                             (IN THOUSANDS, EXCEPT NUMBER OF SHARES)
<S>                                                  <C>          <C>                <C>          <C>
Share issues
   Cash                                                       -               -       2,310,000              23
   Loan stock conversion                                      -               -       5,500,000              56
   Shares issued for services                            41,000               -         780,000               8
   Unearned compensation                                      -               -         150,000               1
   Remuneration of directors                                  -               -         218,120               2
   Cash                                              11,220,118             112               -               -
   Acquisition of Q.Ton Limited                         794,000               8               -               -
Share issue costs relating to the 'A'
 common stock shares                                          -               -               -               -
Net loss                                                      -               -               -               -
Effect of foreign currency translation                        -               -               -               -

Comprehensive loss
                                                  --------------  --------------  --------------  --------------

Balance as of June 30, 2000                          12,055,118   $         120      17,946,222   $         180
                                                  --------------  --------------  --------------  --------------
</TABLE>

(CONTINUED)
<TABLE>
<CAPTION>

                                                                    ACCUMULATED
                                                    ADDITIONAL         OTHER
                                                     PAID-IN       COMPREHENSIVE   ACCUMULATED
                                                     CAPITAL       INCOME (LOSS)     DEFICIT          TOTAL
                                                     -------       -------------     -------          -----
                                                             (IN THOUSANDS, EXCEPT NUMBER OF SHARES)
<S>                                               <C>             <C>             <C>             <C>
Share issues
   Cash                                                   1,883               -               -           1,906
   Loan stock conversion                                    745               -               -             801
   Shares issued for services                               329               -               -             337
   Unearned compensation                                    249               -               -             250
   Remuneration of directors                                434               -               -             436
   Cash                                                  26,826               -               -          26,938
   Acquisition of Q.Ton Limited                           1,451               -               -           1,459
Share issue costs relating to the 'A'
 common stock shares                                     (3,540)              -               -          (3,540)
Net loss                                                      -               -          (7,069)         (7,069)
Effect of foreign currency translation                        -             119               -             119
                                                  --------------  --------------  --------------  --------------

Comprehensive loss                                                                                        6,950
                                                  --------------  --------------  --------------  --------------

Balance as of June 30, 2000                       $      51,933   $         124   $     (31,148)  $      21,209
                                                  --------------  --------------  --------------  --------------

                           See accompanying summary of accounting policies and notes
                                     to consolidated financial statements.
</TABLE>
                                                     F-8


<PAGE>
<TABLE>

EUROTELECOM COMMUNICATIONS, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

------------------------------------------------------------------------------------------------------------------
<CAPTION>

                                                                    YEAR ENDED      SIX MONTHS      YEAR ENDED
                                                                     JUNE 30,        JUNE 30,      DECEMBER 31,
                                                                      2000            1999             1998
                                                                      ----            ----             ----
                                                                                  (IN THOUSANDS)
<S>                                                               <C>             <C>             <C>
CASH FLOWS FROM OPERATING ACTIVITIES
   Net loss                                                       $      (7,069)  $      (2,237)  $      (1,479)

ADJUSTMENTS TO RECONCILE NET LOSS TO NET CASH
 USED IN OPERATING ACTIVITIES
   Depreciation  and amortization                                           319              40              23
   Stock issued for services                                                773             463             544
   Amortization of unearned compensation                                     80               -               -
   Share of loss of affiliate                                                76               -               -
   Loan stock beneficial conversion                                           -             919               -
   Provision against investment                                              44               -               -

CHANGES IN ASSETS AND LIABILITIES, NET OF EFFECTS
 FROM PURCHASE OF EASY IP
   Accounts payable                                                       2,074            (138)           (338)
   Accrued liabilities                                                    1,039             160            (207)
   Other current liabilities                                                372             274            (292)
   Accounts receivable                                                   (1,911)           (443)            442
   Costs in excess of billings on uncompleted contracts                  (2,323)              -               -
   Inventories                                                             (508)           (213)             77
   Prepaid expenses and other current assets                             (1,596)           (100)            276
                                                                  --------------  --------------  --------------

NET CASH USED IN OPERATING ACTIVITIES                                    (8,630)         (1,275)           (954)
                                                                  --------------  --------------  --------------

CASH FLOWS FROM INVESTING ACTIVITIES
   Acquisition of Easy IP                                                   (96)            (97)              -
   Acquisition of TimTec                                                 (1,041)              -               -
   Acquisition of Q.Ton                                                  (1,177)              -               -
   Other acquisitions                                                      (330)              -               -
   Net cash paid on fixed assets                                         (1,654)            (43)             (3)
   Cash acquired with subsidiary                                              -             129               -
                                                                  --------------  --------------  --------------

NET CASH USED IN INVESTING ACTIVITIES                                    (4,298)            (11)             (3)
                                                                  --------------  --------------  --------------
</TABLE>

                                                     F-9



<PAGE>
<TABLE>

EUROTELECOM COMMUNICATIONS, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)

------------------------------------------------------------------------------------------------------------------
<CAPTION>

                                                                    YEAR ENDED      SIX MONTHS      YEAR ENDED
                                                                     JUNE 30,        JUNE 30,      DECEMBER 31,
                                                                      2000            1999             1998
                                                                      ----            ----             ----
                                                                                  (IN THOUSANDS)
<S>                                                               <C>             <C>             <C>
CASH FLOWS FROM FINANCING ACTIVITIES
   Proceeds received from issuance of common stock, net                  25,304             898               -
   Proceeds from issuance of debt                                             -             440             870
   Short-term bank line of credit                                          (207)            309              66
   Repayment of debt                                                          -            (372)            (48)
   Payments under financing arrangement                                     (55)              -               -
                                                                  --------------  --------------  --------------

NET CASH PROVIDED BY FINANCING ACTIVITIES                                25,042           1,275             888
                                                                  --------------  --------------  --------------

Effects of exchange rate changes on cash                                       -              11               -
                                                                  --------------  --------------  --------------

NET INCREASE/(DECREASE) IN CASH AND CASH EQUIVALENTS                     12,114               -             (69)

Cash and cash equivalents at beginning of period                              -               -              69
                                                                  --------------  --------------  --------------

Cash and cash equivalents at end of period                        $      12,114   $           -   $           -
                                                                  ==============  ==============  ==============


SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION

   Cash paid during the year for:
     Interest                                                     $          57   $          35   $          54
   Non cash investing and financing transactions
     Acquisition of assets by financing arrangements              $         135   $           -   $          53
   Acquisition of subsidiary and affiliate for stock:
     Easy IP                                                      $           -   $         331   $           -
     Q.Ton                                                        $       1,459   $           -   $           -
</TABLE>

                                                     F-10


<PAGE>

EUROTELECOM COMMUNICATIONS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

1     THE COMPANY

      EuroTelecom Communications, Inc. ("the Company" or "EuroTelecom") was
      incorporated under the laws of the State of Delaware in December 1996. The
      Company trades principally in the UK through its wholly owned subsidiary,
      EuroTelecom Corporation Limited, and in the US through its wholly owned
      subsidiary, RTC, Inc.

      EuroTelecom carries out its varied businesses under three segments:
      Projects, Services and Communications. The individual lines of business
      under each segment are set out below:

      Projects          -  design and installation of application linking
                           platforms
                        -  supply of computer equipment to the defense
                           industry
      Services          -  provision of consultancy services for the design
                           and installation of secure computer networks to
                           the defense industry
                        -  provision of security services
                        -  contracted fit-outs
                        -  sale and installation of air-conditioning units
      Communications    -  distribution of software products

      As of June 30, 2000, the Company had the following principal subsidiaries:

<TABLE>
<CAPTION>
                                                                                                        COUNTRY OF
                                                                                                       INCORPORATION
            NAME OF COMPANY                                 NATURE OF BUSINESS                         AND OPERATION
            ---------------                                 ------------------                         -------------

            <S>                                   <C>                                                      <C>
            EuroTelecom Corporation               Application linking, security, sale of
             Limited ("ECL")                       equipment and consultancy                                UK

            SUBSIDIARIES OF ECL
              Chunlan Limited                     Supplier of air conditioning units                        UK
              Timtec International Limited        Shop fitting and interior fitting out construction        UK
              Easy IP Limited                     Software distribution                                     UK
              EuroTelecom Connect Limited         Internet application service provider                     UK
              Universal Communications            Design and installation of telecommunication
              Solutions Limited                   infrastructure to the oil and gas industry                UK

            RTC, Inc.                             Technical marketing, sales and consulting
                                                   services                                                USA
</TABLE>

      Timtec International Limited is wholly owned by Chunlan Limited.

                                      F-11



<PAGE>

EUROTELECOM COMMUNICATIONS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

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

2     SIGNIFICANT ACCOUNTING POLICIES

      (a)   PRINCIPLES OF CONSOLIDATION

            The consolidated financial statements include the financial
            statements of EuroTelecom and its subsidiaries and affiliate.
            EuroTelecom Secure Networks Limited is recorded as a closed
            subsidiary in the period ended June 30, 1999 since it ceased
            operations on February 19. All significant intercompany transactions
            have been eliminated in consolidation. Investments in affiliates are
            accounted for using the equity method when the Company owns at least
            20% but no more than 50% of such affiliates. Under the equity method
            the Company records its proportionate share of profits and losses
            based on its percentage interest in those affiliates.

      (b)   GOODWILL

            The excess of cost of investments over the fair value of net assets
            acquired which is not otherwise allocated is determined to be
            goodwill and is amortized on a straight-line basis over a period of
            5 years.

      (c)   LONG-LIVED ASSETS

            Long-lived assets, such as property, plant and equipment, goodwill
            and investments in affiliates, are evaluated for impairment when
            events or changes in circumstances indicate that the carrying amount
            of the assets may not be recoverable through the estimated
            undiscounted future cash flows from the use of these assets. When
            any such impairment exists, the related assets will be written down
            to fair value. An impairment write-down related to an investment of
            $44,000 was necessary for fiscal 2000, $Nil for the six months ended
            June 30, 1999 and $Nil for fiscal 1998.

      (d)   PROPERTY, PLANT AND EQUIPMENT

            Property, plant and equipment are stated at cost less accumulated
            depreciation. Depreciation is calculated using the straight-line
            method over estimated useful life of up to seven years.

      (e)   INCOME TAXES

            The Company recognises deferred tax liabilities and assets for the
            expected future tax consequences of events that have been included
            in the financial statements or tax returns. Accordingly, deferred
            tax liabilities and assets are determined based on the difference
            between the financial statement and tax basis of assets and
            liabilities using enacted rates in effect for the year in which the
            differences are expected to reverse. The effect on deferred tax
            assets and liabilities of a change in tax rates is recognised in
            income in the period that includes the enactment date.

            A valuation allowance is established to reduce the deferred tax
            assets when management determines it is more likely than not that
            the related tax benefits will not be realised.

                                      F-12



<PAGE>

EUROTELECOM COMMUNICATIONS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

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

2     SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

      (f)   REVENUE RECOGNITION

            Revenues comprise:

              i)    Sale of equipment and software which is recognised when
                    shipped.

              ii)   Provision of consultancy and security services is recognised
                    as services are performed.

              iii)  Provision of maintenance and monitoring services is
                    recognised on a straight line basis over the period of the
                    contract.

              iv)   The Company recognizes revenues from fixed-price and
                    modified fixed-price application linking and fit-out
                    contracts on the percentage of completion method, measured
                    by the percentage of cost incurred to date to estimated
                    total cost for each contract. That method is used because
                    management considers total cost to be the best available
                    measure of progress on the contracts. Because of inherent
                    uncertainties in estimating costs, it is at least reasonably
                    possible that the estimates used will change within the near
                    term.

                    Contract costs include all direct material and labor costs
                    and in the case of fit-out costs an element of indirect
                    costs are included. Selling, general and administrative
                    costs are charged to expense as incurred. Provisions for
                    estimated losses on uncompleted contracts are made in the
                    period in which such losses are determined. Changes in job
                    performance, job conditions, and estimated profitability may
                    result in revisions to costs and income, which are
                    recognized in the period in which the revisions are
                    determined. Changes in estimated job profitability are
                    accounted for as changes in estimates in the current period.

                    The asset "Costs and estimated earnings in excess of
                    billings on uncompleted contracts," represents revenues
                    recognized in excess of amounts billed. The liability,
                    "Billings in excess of costs and estimated earnings on
                    uncompleted contracts," represents billings in excess of
                    revenues recognized.

      (g)   FOREIGN CURRENCIES

            The reporting currency of the Company is the United States dollar.
            The Company's functional currency is the United Kingdom pound
            sterling for the majority of its business.

            For consolidation purposes, the assets and liabilities of overseas
            subsidiaries are translated at the closing exchange rates.
            Consolidated statements of income of such subsidiaries are
            consolidated at the average rates of exchange during the period.
            Exchange differences arising on the translation of subsidiaries'
            financial statements are recorded in the cumulative foreign currency
            translation adjustment account as a component of stockholders'
            equity.

      (h)   CASH EQUIVALENTS

            For purposes of the statements of cash flows, the Company considers
            all investments with an original maturity of three months or less to
            be a cash equivalent.

                                      F-13



<PAGE>

EUROTELECOM COMMUNICATIONS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

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

2     SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

      (i)   INVENTORY

            Inventories are stated at lower of cost using the first in first out
            method, or market.

      (j)   USE OF ESTIMATES

            In preparing the consolidated financial statements in conformity
            with generally accepted accounting principles, management is
            required to make estimates and assumptions that affect the reported
            amounts of assets and liabilities and the disclosure of contingent
            liabilities at the date of the consolidated financial statements and
            revenues and expenses during the reported period. Actual results
            could differ from these estimates.

      (k)   FINANCIAL INSTRUMENTS

            Financial instruments held by the Company include cash and cash
            equivalents, accounts receivable and payable, notes payable and
            approximated fair value as of June 30, 2000 due to either short
            maturity or terms similar to those available to similar companies in
            the open market. The investment in affiliated company approximated
            fair value as of June 30, 2000 due to the fact that it was recently
            acquired.

      (l)   ADVERTISING COSTS

            The company expenses advertising costs as incurred. Advertising
            costs in fiscal 2000, six months ended June 30, 1999 and fiscal 1998
            were $129,000, $10,000 and $Nil respectively.

      (m)   COMPREHENSIVE INCOME

            The Company adopted Statement of Financial Accounting Standard
            ("SFAS") No.130, "Reporting Comprehensive Income", which establishes
            standards for reporting and display of comprehensive income, its
            components and accumulated balances. Comprehensive income is defined
            to include all changes in equity except those resulting from
            investments by owners and distributions to owners. Among other
            disclosures, SFAS No.130 requires that all items that are required
            to be recognized under current accounting standards as components of
            comprehensive income be reported in a financial statement that is
            displayed with the same prominence as other financial statements.
            The only item of comprehensive income is foreign currency exchange
            translation adjustments.

      (n)   RESEARCH AND DEVELOPMENT

            The Company incurred research and development costs of $717,000,
            $Nil and $Nil for fiscal 2000, six months ended June 30, 1999 and
            fiscal 1998 respectively.

      (o)   STOCK COMPENSATION

            The Company applies the recognition and measurement provisions of
            Accounting Principles Board (APB) Opinion No. 25, "Accounting for
            Stock Issued to Employees" and the disclosure provisions of SFAS No.
            123, "Accounting for Stock-Based Compensation" in accounting for
            stock options issued to employees. The Company follows the fair
            value method of accounting prescribed by SFAS No. 123 for stock
            issued in exchange for services.

                                      F-14


<PAGE>

EUROTELECOM COMMUNICATIONS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

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

2     SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

      (p)   EARNING PER SHARE

            The Company follows SFAS No. 128, "Earnings per share," which
            requires presentation of basic earnings per share and diluted
            earnings per share by all entities that have publicly traded common
            stock or potential common stock (options, warrants, convertible
            securities or contingent stock arrangements). Basic earnings per
            share is computed by dividing income available to common
            stockholders by the weighted average number of common shares
            outstanding during the period. Diluted earnings per share gives
            effect to dilutive potential common shares outstanding during the
            year. Assumed exercise of options and warrants has not been included
            in the calculation of diluted loss per share since the effect would
            be anti-dilutive. Accordingly, basic and diluted net loss per share
            do not differ for any period presented. At June 30, 2000 there were
            223,600 warrants and 965,762 options outstanding. The shares related
            to these options and warrants are excluded from the earnings per
            share due to the anti-dilutive affect.

      (q)   EFFECT OF RECENT ACCOUNTING PRONOUNCEMENTS

            In June 1998, the Financial Accounting Standards Board ("FASB")
            issued SFAS No. 133, as amended by SFAS No. 137 "Accounting for
            Derivative Instruments and Hedging Activities," which requires the
            Company to value derivative financial instruments, including those
            used for hedging foreign currency exposures, at current market value
            with the impact of any change in market value being charged against
            earnings in each period. SFAS No. 133 will be effective for and
            adopted by the Company in the first quarter of the fiscal year ended
            June 30, 2001. The Company has not in the past nor does it
            anticipate that it will engage in transactions involving derivative
            instruments, and therefore does not expect this pronouncement to
            have any effect on the financial statements.

            In December 1999, the Securities Exchange Commission issued Staff
            Accounting Bulletin ("SAB") No. 101, "Revenue Recognition". This
            bulletin summarizes views of the Staff on applying generally
            accepted accounting principles to revenue recognition in financial
            statements. The Company will be required to adopt SAB No. 101, as
            amended by SAB 101B, in the fourth quarter of fiscal 2001.
            Management believes that the current revenue recognition policy
            complies with the guidelines in SAB No. 101 and, therefore, does not
            believe the adoption of SAB No. 101B will have a material impact on
            the financial position or results of operations.

            In March 2000, the FASB issued Financial Interpretation No. 44,
            "Accounting for Certain Transactions involving Stock Compensation an
            interpretation of APB Opinion 25". Interpretation No. 44 is
            effective July 1, 2000. Interpretation No. 44 clarifies the
            application of APB Opinion 25 for various matters, specifically: the
            criteria for determining whether a plan qualifies as a
            non-compensatory plan; the accounting consequence of various
            modifications to the terms of a previously fixed stock option or
            award; and the accounting for an exchange of stock compensation
            awards in a business combination. Management believes that the
            adoption of Interpretation No. 44 note will not have a material
            impact on the Company's financial position or results of operations.

            In March 2000, the FASB's Emerging Issue Task Force ("EITF") reached
            a consensus on EITF 00-2, "Accounting for Web Site Development
            Costs". EITF 00-2 discusses how an entity should account for costs
            incurred to develop a web site. The EITF is effective in the first
            quarter of fiscal 2001. Management believes that the adoption of
            EITF 00-2 will not have a material impact on the Company's financial
            position or results of operations.

                                      F-15


<PAGE>

EUROTELECOM COMMUNICATIONS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

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

3     INVENTORIES

         Inventories consist of the following:
                                                                     JUNE 30,
                                                                       2000
                                                                       ----
                                                                  (IN THOUSANDS)

            Finished goods                                        $         643
            Raw materials                                                   255
                                                                  --------------

                                                                  $         898
                                                                  ==============


4     PROPERTY, PLANT AND EQUIPMENT, NET

         Major classes of property, plant and equipment consist of the
         following:
                                                                     JUNE 30,
                                                                       2000
                                                                       ----
                                                                  (IN THOUSANDS)

            Leasehold improvements                                $         283
            Plant and equipment                                           2,354
                                                                  --------------

                                                                           2,637
            Less: accumulated depreciation                                 (263)
                                                                  --------------

                                                                  $       2,374
                                                                  ==============


         Depreciation expense was approximately $200,000, $14,000 and $23,000
         for fiscal 2000, six months ended June 30, 1999 and fiscal 1998
         respectively

                                      F-16



<PAGE>

EUROTELECOM COMMUNICATIONS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

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

5     UNCOMPLETED CONTRACTS

         Costs, estimated earnings, and billings on uncompleted contracts are
         summarized as follows:

                                                                     JUNE 30,
                                                                       2000
                                                                       ----
                                                                  (IN THOUSANDS)

            Costs incurred on uncompleted contracts               $       2,299
            Estimated earnings*                                              24
                                                                  --------------

                                                                           2,323
            Billings to date                                                  -
                                                                  --------------
            Costs and estimated earnings in excess of
             billings on uncompleted contracts                    $       2,323
                                                                  ==============



         *   Does not include the 49% of estimated earnings on the contract with
             Q.Ton, the Company's affiliated company - Refer also to Note 15.


6     ACQUISITIONS

      (a)   EASY IP

            On April 19, 1999 the Company acquired a software distribution
            business known as Easy IP Limited. The transaction has been
            accounted for as a purchase.

            The consideration for the business and assets, including acquisition
            costs, was $586,050, payable as to $193,200 in cash of which $96,625
            was deferred and 200,000 shares of common stock valued at $331,250.
            The Company acquired net assets of $178,300 resulting in goodwill of
            $407,750.

            The results for Easy IP have been included in the consolidated
            financial statements from April 19, 1999.

                                      F-17



<PAGE>

EUROTELECOM COMMUNICATIONS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

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

6     ACQUISITIONS (CONTINUED)

      (a)   EASY IP (CONTINUED)

            The unaudited pro forma statement for the Company as if the
            acquisition had occurred on January 1, 1998 and January 1, 1999, is
            set out below:
                                                    SIX MONTHS      YEAR ENDED
                                                     JUNE 30,      DECEMBER 31,
                                                       1999            1998
                                                       ----            ----
                                                          (IN THOUSANDS)

            Revenues                              $       1,860   $       2,027
                                                  ==============  ==============

            Loss from operations                         (1,269)         (1,361)
                                                  ==============  ==============

            Net loss                                     (2,231)         (1,457)
                                                  ==============  ==============

            Loss per share                        $       (0.29)  $       (0.24)
                                                  ==============  ==============

      (b)   TIMTEC

            On April 18, 2000, a newly incorporated wholly owned subsidiary of
            Chunlan Limited purchased the trade and assets of Timtec
            International Limited ("Timtec") for a total consideration of
            $1,041,000. The purchase consideration was allocated $583,000 to
            equipment acquired and the balance of $458,000 attributed to
            goodwill which will be amortized over 5 years. Timtec was in
            administration at the time of the acquisition and following the sale
            changed its name. The company which acquired the trade and assets
            then changed its name to Timtec International Limited. The
            transaction has been accounted for as a purchase.

            The results of Timtec have been included in the consolidated
            financial statements from April 18, 2000.

                                      F-18



<PAGE>

EUROTELECOM COMMUNICATIONS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

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

6     ACQUISITIONS (CONTINUED)

      (b)   TIMTEC (CONTINUED)

            The unaudited pro-forma results of operations for the Company as if
            the acquisition had occurred on January 1, 1998, January 1, 1999 and
            July 1, 1999 is set out below:

<TABLE>
<CAPTION>
                                        YEAR ENDED       SIX MONTHS      YEAR ENDED
                                         JUNE 30,         JUNE 30,      DECEMBER 31,
                                           2000             1999            1998
                                           ----             ----            ----
                                                       (IN THOUSANDS)

            <S>                               <C>             <C>             <C>
            Revenues                          11,020           6,498          10,752
                                       ==============  ==============  ==============

            Loss from operations              (7,374)         (1,397)         (1,704)
                                       ==============  ==============  ==============

            Net loss                          (7,300)         (2,410)         (1,835)
                                       ==============  ==============  ==============

            Loss per share                     (0.38)          (0.31)          (0.32)
                                       ==============  ==============  ==============
</TABLE>

7     INVESTMENT IN AFFILIATED COMPANY

      (a)   On May 10, 2000 ECL acquired 49% of Q.Ton Limited in exchange for
            794,000 shares of Class 'A' Common Stock of EuroTelecom and
            $1,139,025 payable in cash. The fair value of the 794,000 shares
            issued was $1,459,076. Total consideration paid, including
            acquisition costs, was $2,635,953.

            The fair value of the net assets acquired was $1,948,000 resulting
            in a premium of $1,688,000 which is being amortized over a 5 year
            period.

                                                                     JUNE 30,
                                                                       2000
                                                                       ----
                                                                  (IN THOUSANDS)

            Investment at cost                                            2,636

            Share of loss for the period                                    (51)
            Amortization of premium on acquisition in the period            (25)
                                                                  --------------

                                                                  $       2,560
                                                                  ==============

                                      F-19



<PAGE>

EUROTELECOM COMMUNICATIONS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

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

7     INVESTMENT IN AFFILIATED COMPANY (CONTINUED)

      (b)   Summarised financial information on Q.Ton Limited as of June 30,
            2000 and for the year ended June 30, 2000
                                                                     JUNE 30,
                                                                      2000
                                                                      ----
                                                                  (IN THOUSANDS)

            Current assets                                        $       1,615
            Non-current assets                                              993
                                                                  --------------

                                                                  $       2,608
                                                                  ==============

            Current liabilities                                   $         777
                                                                  ==============

            Revenues                                              $           -
                                                                  ==============

            Loss from operations                                  $        (194)
                                                                  ==============

            Net loss                                              $        (160)
                                                                  ==============


8     STOCKHOLDERS' EQUITY


         In the year ended December 31, 1998 the Company issued 1,280,000 shares
         for services, 151,200 shares to employees (101,200) and a director
         (50,000) and 51,200 shares for cash.

         In the six months ended June 30, 1999, the Company issued 1,381,666
         shares for cash, 764,000 shares for services, 123,420 shares in respect
         of employee bonuses and subscriptions, and 200,000 shares for the
         acquisition of Easy IP.

         In the year ended June 30, 2000 the Company had the following stock
         transactions:

         (a)  issued 2,310,000 shares of common stock shares for cash;

         (b)  convertible notes previously categorised as debt in the amounts of
              $80,000, $360,000 and $360,000 were converted into 550,000,
              2,475,000 and 2,475,000 restricted common stock shares
              respectively at $0.145 per share. Conversion terms were agreed
              prior to June 30, 1999 with the shares being issued on July 1,
              1999. The beneficial conversion terms of $918,750 was reflected in
              finance costs in the six months to June 30,1999;

                                      F-20



<PAGE>

EUROTELECOM COMMUNICATIONS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

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

8     STOCKHOLDERS' EQUITY (CONTINUED)

         (c)  issued 821,000 shares of common stock for services;

         (d)  issued 150,000 shares of common stock in consideration for an
              employment agreement entered into on August 16, 1999 covering a
              period of three years. The value of these shares is being
              amortized over the period of the employment agreement;

         (e)  issued 218,120 common stock shares to directors of the Company;

         (f)  on April 5, 2000 the Company listed a new class of Class 'A'
              common stock on the Alternative Investment Market of The London
              Stock Exchange. A total of 11,220,118 Class 'A' common stock
              shares were sold raising $26,938,283 before costs; and

         (g)  issued 794,000 shares of common stock in connection with the
              acquisition of Q.Ton Limited.

          Shares were valued at the prevailing market price at the date of grant
          in the case of those issued to employees and directors, and at the
          date the parties entered into the settlement agreement to satisfy
          invoiced amounts in the case of professional services and for
          acquisitions at the date of closing the transaction. The shares of
          Class A Common Stock are restricted securities under Regulation S of
          the Securities Act of 1933. In addition, the Company's Certificate of
          Incorporation permanently prohibits holders of the shares of the
          Company's Class A Common Stock from selling such shares into the U.S.
          or to a U.S. person.


9     WARRANTS AND SHARE OPTIONS

         As of June 30, 2000 the Company had 223,600 warrants outstanding
         convertible into common stock shares.

         The warrants are exercisable on the day two years from the first
         effective date of a registration statement being filed by the Company
         in respect of the warrants. No such registration statement has been
         filed and the warrants presently have an indefinite exercise period.
         The exercise price is $2.00 per share.

         On March 28, 2000 the Company approved an Employee Share Option Scheme
         ("Option Scheme") which provided for the grant of options over the
         Company's 'A' class common stock shares of $0.01. As of June 30, 2000
         the Company had granted 965,762 options, of which 210,000 were granted
         to directors of the Company. The options generally will vest after
         three years and will expire ten years after the grant date. None were
         forfeited.

         The number of options which can be issued is restricted based on a
         certain percentage ceilings dependent upon the number of shares in
         issue.

         Exercise price is the higher of market value at the date of grant,
         determined by reference to the average of mid-market quotations on the
         three dealing days preceding the date of grant, and par value. Options
         cannot be exercised, subject to certain specified procedures in the
         Option Scheme, until the expiry of three years from the date of grant.
         The weighted average exercise price is $2.40.

         The option exercise price at each option share is the fair market value
         of the Company's shares of Class A Common stock. Options lapse on the
         option holder ceasing to be either an employee or director of the
         Company.
                                      F-21



<PAGE>

EUROTELECOM COMMUNICATIONS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

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

9     WARRANTS AND SHARE OPTIONS (CONTINUED)

         The Company applies APB Opinion No. 25 and accordingly no compensation
         expense has been recognized for its employee stock options. Had the
         Company determined compensation expense based on the fair value at the
         grant date in accordance with SFAS 123, the Company's net loss would
         have been increased to the pro forma amount indicated below:

                                                                    YEAR ENDED
                                                                      JUNE 30,
                                                                        2000
                                                                        ----
                                                                   (IN THOUSANDS
                                                                    EXCEPT LOSS
                                                                    PER SHARE)
            Net loss
             - As reported                                        $      (7,069)
             - Pro forma                                                 (7,229)
                                                                  ==============

            Loss per share
             - As reported                                        $       (0.37)
             - Pro forma                                                  (0.38)
                                                                  ==============


         The fair value of the options granted was estimated using the
         Black-Scholes option pricing model assuming no expected dividends, a
         vesting period of three years, risk free rate of 6.4% and volatility of
         93%.


10    LOSS FROM CLOSED SUBSIDIARY

         On September 16, 1997 a wholly owned subsidiary company, Eurotelecom
         Secure Networks Limited (Secure Networks), was incorporated in the UK
         to provide certain internet technology and communication products and
         services. On February 19, 1999, Secure Networks was placed into
         voluntary liquidation in response to the loss of key employees and
         contracts and continuing losses of customers. As a result, the assets
         of Secure Networks were written down to their fair value less the cost
         of their sale in accordance with the provisions of Statement of
         Financial Accounting Standards ("SFAS") No. 121. The full amount of the
         impairment has been classified within operating loss as a loss from
         closed subsidiary in the consolidated statement of operations for the
         six months ended June 30, 1999 and fiscal 1998.

         The amount expensed in the consolidated statement of operations for the
         year ended December 31, 1998 was $291,923. In the period to February
         1999, the company was required to extend further amounts of $123,928 to
         effect the closure of Secure Networks. All liabilities associated with
         the closure of Secure Networks have been extinguished upon the
         liquidation of Secure Networks.

         As of June 30, 2000 EuroTelecom is carrying no assets or liabilities in
         respect of this company.

                                      F-22



<PAGE>

EUROTELECOM COMMUNICATIONS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

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

11    INCOME TAXES

         The Company did not provide any current or deferred US federal, state
         or foreign income tax provision or benefit for any periods presented
         because it has experienced operating losses since inception. The
         Company has provided a full valuation allowance on the deferred tax
         asset, consisting primarily of net operating loss, because of
         uncertainty regarding its realizability.

         As June 30, 2000 the majority of the losses carried forward arise in
         the UK. Under UK legislation the net operating losses can, subject to
         certain restrictions, be carried forward indefinitely.

         Deferred income taxes reflect the net tax effects of temporary
         differences between the carrying amounts of assets and liabilities for
         financial reporting purposes and the amounts used for income tax
         purposes. Significant components of the Company's deferred tax assets
         are approximately as follows:

<TABLE>
<CAPTION>
                                                       YEAR ENDED       SIX MONTHS      YEAR ENDED
                                                        JUNE 30,         JUNE 30,      DECEMBER 31,
                                                          2000             1999            1998
                                                          ----             ----            ----
                                                                      (IN THOUSANDS)
         <S>                                          <C>             <C>             <C>
         Net operating loss                           $       2,474   $       7,140   $       7,408
         Valuation allowance for deferred tax assets         (2,474)         (7,140)         (7,408)
                                                      --------------  --------------  --------------

                                                      $           -   $           -   $           -
                                                      ==============  ==============  ==============
</TABLE>


12    LEASES

         The Company leases certain office space under lease agreements.

         Future minimum lease payments under non-cancellable operating leases as
         of June 30, 2000, are as follows (in thousands):

                                      2001                        $         290
                                      2002                                  288
                                      2003                                  288
                                      2004                                  288
            Thereafter                                                    1,656
                                                                  --------------

                                                                  $       2,810
                                                                  ==============


         Total rental expense for the fiscal 2000, six months to June 30, 1999
         and fiscal 1998 was $261,000, $27,000 and $1,000 respectively.

                                      F-23



<PAGE>

EUROTELECOM COMMUNICATIONS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

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

13    BUSINESS AND CREDIT CONCENTRATIONS

         The Company's customers are primarily located in the UK. Details of
         corporate customers who account for more than 10% of revenue for fiscal
         2000, six months to June 30, 1999 and fiscal 1998 are as follows:

                                   YEAR ENDED       SIX MONTHS      YEAR ENDED
                                    JUNE 30,         JUNE 30,      DECEMBER 31,
                                      2000             1999            1998
                                      ----             ----            ----

            Customer A                   -             20%               -
            Customer B                  14%            13%               -


14    COMMITMENTS AND CONTINGENCIES


         From time to time the Company is subject to legal proceedings and
         claims in the ordinary course of business.

         The Company is not aware of any legal proceedings or claims against the
         Company that will have, individually or in aggregate a material adverse
         affect on the Company's business, prospects, financial condition and
         results of operations.


15    RELATED PARTY TRANSACTIONS

         The Company was charged $390,000 in fiscal 2000, $Nil in the six months
         to June 30, 1999 and fiscal 1998 in professional fees by a company in
         which one of the directors has a material interest.

         The Company entered into an application linking contract with Q.Ton
         Limited prior to its acquisition of 49% of Q.Ton Limited on May 10,
         2000, an affiliated company. As of June 30, 2000 the contract was
         uncompleted and no amounts had been billed. The amount of cost incurred
         to June 30, 2000 was approximately $1,000,000 with estimated earnings
         of $46,000 as of June 30, 2000. In accordance with the principles of
         equity accounting the Company has only recorded 51% of revenues and
         costs associated with this contract.

                                      F-24



<PAGE>

EUROTELECOM COMMUNICATIONS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

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

16    INDUSTRY AND GEOGRAPHIC AREA SEGMENTS

         The Company and its subsidiaries are engaged in three lines of
         business: Projects, Services and Communications. Operations of the
         subsidiary companies are conducted in the UK and US. The following is a
         summary of the Company's operations by business segment and by
         geographical segment. The accounting policies of the segments are the
         same as those described in Note 2 - Significant accounting policies

<TABLE>
<CAPTION>
                                                                    YEAR ENDED   SIX MONTHS ENDED   YEAR ENDED
                                                                     JUNE 30,        JUNE 30,      DECEMBER 31,
                                                                       2000            1999            1998
                                                                       ----            ----            ----
                                                                                  (IN THOUSANDS)
         (a)  Statement of operations
<S>                                                               <C>             <C>             <C>
              Revenues
                  Projects                                        $       2,871   $         443   $           -
                  Services                                                3,914             348              64
                  Communications                                          2,953             532               -
                                                                  --------------  --------------  --------------
                  Revenues for reportable segments
                   and consolidated revenues                              9,738           1,323              64
                                                                  --------------  --------------  --------------
              Loss before tax
                  Projects                                               (6,018)         (1,072)              -
                  Services                                                 (674)            (86)         (1,133)
                  Communications                                           (462)             (1)              -
                  Add: interest, loan beneficial conversion,
                   loss from closed subsidiary and share of
                   loss of affiliated company                                85          (1,078)           (346)
                                                                  --------------  --------------  --------------

                  Total loss for reportable segments              $      (7,069)  $      (2,237)  $      (1,479)
                                                                  ==============  ==============  ==============

              Depreciation and amortization
                  Projects                                        $         214   $           6   $           -
                  Services                                                   94              14              23
                  Communications                                             11              20               -
                                                                  --------------  --------------  --------------

                                                                  $         319   $          40   $          23
                                                                  ==============  ==============  ==============
</TABLE>

                                                     F-25



<PAGE>

EUROTELECOM COMMUNICATIONS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

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

16    INDUSTRY AND GEOGRAPHIC AREA SEGMENTS (CONTINUED)

                                                                   JUNE 30,
                                                                     2000
                                                                     ----
                                                                (IN THOUSANDS)
      (b)   Total assets

            Projects                                            $     5,657
            Services                                                  3,178
            Communications                                            1,417
            Unallocated                                              15,899
                                                                ------------

                                                                $    26,151
                                                                ============

<TABLE>
<CAPTION>
                                                 YEAR ENDED        SIX MONTHS ENDED        YEAR ENDED
                                                  JUNE 30,             JUNE 30,           DECEMBER 31,
                                                    2000                 1999                 1998
                                                    ----                 ----                 ----
                                                                   (IN THOUSANDS)
      (c)   Geographic analysis of revenue

            <S>                                   <C>                <C>                 <C>
            United Kingdom                        $     9,385        $     1,323         $        64
            United States                                 353                  -                   -
                                                  ------------       ------------        ------------

                                                        9,738              1,323                  64
                                                  ============       ============        ============
</TABLE>


17    RESULTS OF OPERATIONS FOR THE SIX MONTHS ENDED JUNE 30, 1998 (UNAUDITED)

                                                             SIX MONTHS ENDED
                                                                 JUNE 30,
                                                                   1998
                                                                   ----
                                                              (IN THOUSANDS,
                                                          EXCEPT LOSS PER SHARE)

         Revenues                                           $           32
                                                            ===============

         Gross profit                                                   32
                                                            ===============

         Selling, general and administrative expenses                  676
                                                            ===============

         Net loss                                                     (656)
                                                            ===============

         Loss per share                                     $        (0.12)
                                                            ===============

                                      F-26