SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                  FORM 10-KSB/A
(Mark One)

(X)   ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
                                    EXCHANGE ACT OF 1934

For the Fiscal Year Ended June 30, 1999
                                             OR
( )   TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
                                    EXCHANGE ACT OF 1934

Commission File No. 0-25474

                            SIMS COMMUNICATIONS, INC.
                 (Name of Small Business Issuer in its charter)

                Delaware                                  65-0287558
         (State of incorporation)                        (IRS Employer
                                                         Identification No.)
       18001 Cowan, Suites C&D
           Irvine, California                               92614
    (Address of Principal Executive Office)                Zip Code

Registrant's  telephone number,  including Area Code: (949) 261-6665  Securities
registered  pursuant to Section  12(b) of the Act:  None  Securities  registered
pursuant to Section 12(g) of the Act:

                                  Common Stock
                                (Title of Class)

Check whether the Registrant  (1) has filed all reports  required to be filed by
Section 13 or 15(d) of the  Securities  Exchange  Act of 1934 during the past 12
months (or for such shorter period that the Registrant was required to file such
reports)  and (2) has been subject to such filing  requirements  for the past 90
days.
                                  X
                                 YES        NO

Check if disclosure  of delinquent  filers in response to Item 405 of Regulation
S-B is not contained in this form, and no disclosure  will be contained,  to the
best  of  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]

The Company's revenues for the most recent fiscal year were $2,240,876.

The  aggregate  market value of the voting stock held by  non-affiliates  of the
Company,  (17,172,937 shares) based upon the average bid and asked prices of the
Company's Common Stock on September 30, 1999 was approximately $1,288,000.

As of  September  30,  1999 the Company had  17,635,639  issued and  outstanding
shares of common stock.


<PAGE>


ITEM 1.  DESCRIPTION OF BUSINESS SIMS  Communications,  Inc. (the "Company") was
incorporated  in Delaware in August 1991 to rent cellular  telephones  through a
stand-alone dispensing station known as an Automated Communications Distribution
Center  ("ACDC").  Prior to 1996 the  Company  operated  ACDC  units for its own
account  and also sold  franchises  which  provided  third  parties the right to
operate ACDC units at various franchised  locations.  At September 30, 1999, the
Company  was not  operating  any ACDC  units and the  Company's  only  remaining
franchisee had four ACDC units in operation.

   The Company changed its name to MedCom USA, Incorporated in October, 1999.

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

      In  December  1996 the  Company  acquired  all the issued and  outstanding
shares of Link International,  Inc. ("Link").  Link manufactures and distributes
machines which dispense  prepaid calling cards ("PCD's") and terminals which are
used by  merchants  to perform a variety of  transactions,  including  accepting
credit  cards and bank  debit  cards in  payment  for sales of  merchandise  and
services. The PCD's are full sized stand-alone vending machines and are operated
by the Company. Long distance time for the prepaid calling cards is purchased by
the Company from various venders. Link also markets a proprietary scrip terminal
which  dispenses  a  receipt  to the  customer  which  can be  used  to pay  for
merchandise and/or services.

In June 1999 the Company sold 520 of Link's scrip  terminals to the employee who
was responsible for overseeing this aspect of the business. Although the Company
did not receive any material  cash  payment in  connection  with this sale,  the
purchaser  of the  assets  agreed to assume  $70,000  in  accounts  payable  and
approximately  $600,000 in capitalized  lease  obligations  associated  with the
acquisition  of the scrip  terminals.  The  assets  sold had a net book value of
approximately  $635,000.  The Company  recognized as income previously  recorded
deferred revenue related to the scrip terminals totaling $212,805, as well as an
immaterial  gain  related  to the sale of the assets  and the  release  from the
related  obligations.  Excluded  from the sale of Link's  assets  were 117 scrip
terminals  (45 of which are in  operation)  and all of the PCD's.  The purchaser
also agreed to hire all of the employees involved with this business line and to
assume the lease  obligation for the related office space.  The script terminals
were sold because this line of business was not  profitable  and, in the opinion
of the  Company's  management,  was  not  likely  to  become  profitable  in the
foreseeable future.

The Company is continuing to use the scrip  terminals and PCDs excluded from the
sale,  although this is not a major focus of the Company.  The script  terminals
and PCD's are managed by personnel  involved in other  aspects of the  Company's
business.

<PAGE>

     In  May  1998  the  Company  acquired  One  Medical   Services,   Inc.  in
consideration   for  142,350  shares  of  common  stock  and  187,500   warrants
exercisable  at $2.00 per share at any time prior to May 30,  2003.  The Company
has also  agreed to issue to the former  owners of One  Medical up to  1,485,000
additional  shares of common stock depending on the future operating  results of
One Medical.  The number of shares to be issued will be  determined  by dividing
the quarterly net income of One Medical (for each fiscal quarter  beginning June
30,  1998 and  ending  June  30,  2001),  by the  average  closing  price of the
Company's  common stock for the five day trading period prior to the end of each
quarter. One Medical provides a financial processing and communications  network
for the Home  Medical  Equipment  (HME)  industry.  In  addition  to  processing
information and verifying  insurance  medical cards,  this network  connects HME
buyers  with a  network  of HME  vendors.  This  proprietary  network  has  been
designated  for the medical and managed  healthcare  market,  but at the present
time is being  marketed to the retail  pharmacy  industry.  As of September  30,
1999, 80  pharmacies,  13 HME service  centers,  8 HME vendors and one catalogue
vendor were members of the One Medical network.

      In July 1999 the Company  licensed  its rights to the One Medical  Service
Network to an unrelated third party for  $1,377,000,  of which $300,000 was paid
by September  30,  1999,  $267,000 of which is to be paid by January 5, 2000 and
the remainder of which  ($810,000)  will be paid in accordance with the terms an
unsecured promissory note which bears interest at 7% per year. The principal due
on the note is to be reduced  by  license  royalties  due the  Company,  up to a
maximum of $6,000 per month, and prepaid phone card credits of $3,000 per month.
On July 30, 2002 the licensee is to make a one-time payment to the Company equal
to 25% of the then  outstanding  principal on the note. All unpaid principal and
interest is due on July 30, 2006.  The licensee can convert the amounts paid for
royalties  and the license fee into an 81% interest in One Medical  Services and
can  acquire  the  remaining  19% for the greater of $132,000 or its fair market
value.  The  licensee  also agreed to acquire  the  inventory,  pay  $200,000 of
accounts payable and assume the salaries and other overhead  associated with the
One Medical  operation.  The Company uses the prepaid  phone card credits in the
sale of its prepaid calling cards.

      The Company  licensed the rights to the One Medical  service  because this
line of business was not profitable.  The license also provides the Company with
monthly income.

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

      As of September 30, 1999  substantially all of the Company's revenues were
generated by the Justmed.com and the Movie Vision divisions.

JustMed.com

      The JustMed.com division involves three components:

o     The MedCard health insurance verification and billing system
o     The JustMed.com website
o     The Med Store

<PAGE>

MedCard System

      In November 1998 the Company  acquired,  from an unrelated  entity,  Dream
Technologies,  LLC (Dream),  an exclusive worldwide license to software programs
and related  technology known as the MedCard System. The license is for a period
of fifteen  years.  The term of the License can be extended for ten  consecutive
one-year periods after expiration of the initial fifteen-year term.

      The Medcard  license is  exclusive  for the entire term  provided at least
fifteen  thousand  systems are sold to end users by May 31,  2001.  Although the
Company,  as of March 31, 2000 had sold  approximately 850 systems,  the Company
believes that the minimum sales  requirement will not have a significant  impact
since: (1) the Company believes it will reach this milestone within the required
timeframe,  and (2) the  Company  believes it will be able to extend the May 31,
2001 date.  If neither  (1) or (2) occur,  the Company  believes  that the time,
money and  infrastructure  already  devoted to the Medcard  system will create a
significant obstacle to others desiring to market the system. Additionally,  the
Company will have a two-year advantage on the potential  competition in terms of
identifying and aligning itself with various sales channels.

      The Company is  required  to pay a royalty to Dream  equal to  twenty-five
percent of the first  $1,000,000  of net monthly  revenue and ten percent of net
monthly  revenue in excess of $1,000,000.  The term net revenues means the gross
revenues received from the use of the MedCard software program less (a) terminal
lease costs of up to $50 per month,:  (b)  commissions  payable to agents  which
place  terminals  with end users;  and (c) network costs which include (i) claim
fees  payable to data  vendors,  (ii)  charges  for  verification  of  insurance
converage  and (iii)  similar  telecommunications  charges  related to obtaining
claims processing and/or benefits verification information.

      The License  agreement  also requires the Company to retain as consultants
two  owners  of Dream  Technologies  until May 31,  2000 at a fee of $2,000  per
person per week.

      The MedCard System is an electronic  processing system which  consolidates
insurance eligibility verification and processes medical claims and approvals of
credit card and debit card payments in under 30 seconds through a small terminal
or personal computer.  Using the MedCard system,  patients are relieved from the
problems  associated  with  eligibility  confirmation  and billings,  healthcare
providers'  reimbursements are accelerated and account  receivables are reduced.
The time it takes to collect  payments from insurance  providers  decreases from
months to days.

      The  Medcard  System also allows a patient's  primary  care  physician  to
request approval from the patient's insurance carrier or managed care plan for a
referral to a secondary  physician or  specialist.  The  secondary  physician or
specialist  can use the  MedCard  system to verify  that the  referral  has been

<PAGE>


approved  by the  patient's  insurance  carrier,  thereby  eliminating  numerous
telephone calls that are normally required with referrals.  The MedCard system's
referral  capabilities  reduces paperwork and  administrative  costs,  increases
productivity  and provides  greater patient  information for the specialist,  as
well as a written record of the referral authorization.

      The MedCard system can record and track  encounters  between  patients and
health care providers for  performance  evaluation  and  maintenance of hospital
records.  After  examining a patient a physician is able to enter the  patient's
name, procedure code and diagnostic code at a nearby terminal.  This information
is then downloaded daily to MedCom's computer network, processed and transmitted
back to the hospital in both  summary and detail  reports  sorted by day,  week,
date and name of physician.

      The  MedCard  System  currently  operates  through  either a Point of Sale
Terminal  or a  personal  computer.  An on-line  version  is under  development.
Revenues from the MedCard  system are  generated  through the sale of terminals,
for  verifying  insurance  eligibility  and  for  processing  insurance  claims.
Potential  revenue sources include fees for credit card  transactions  processed
through the terminal, fees for collection of receivables if the Company provides
billing services,  reimbursement by insurance  carriers for submission of claims
electronically,  fees for using the  system's  referral  program and  processing
encounter data.

      The  MedCard  System  is  marketed   through   Company  sales   personnel,
independent  sales  representatives  and financial  institutions.  Company sales
personnel generally receive a commission for sales of the terminals. The Company
receives a fixed  amount per  terminal if the sale is not made by Company  sales
personnel.  The  Company  also  receives  a fee for each  transaction  processed
through the MedCard System.

      As of September 30, 1999 the MedCard  system was able to retrieve  on-line
eligibility and authorization  information from 77 medical  insurance  companies
and electronically  process and submit billings for its healthcare  providers to
over 1,650  companies.  These  insurance  providers  include CIGNA,  Prudential,
Oxford Health Plan,  United  Health Plans,  Blue Cross,  Medicaid,  Aetna,  Blue
Cross/Blue Shield and Metrahealth.

Website

      The JustMed.com  website is an Internet website which began functioning on
July 1, 1999. The website advertises  healthcare products and services which are
available to the general public and provides medical  information to the general
public.  Persons in need of  healthcare  products  and  services  can access the
website and order products or transfer to the more detailed websites  maintained
by the companies which provide the products and services. The Company expects to
generate revenues from this website by charging providers of healthcare products
and services fees for advertising on the website.  The Company will also receive
fees  when a  person  transfers  from  the  Company's  website  to the  websites
maintained by a provider of healthcare products or services. The Company expects
that  advertisers  on  its  website  will  include  distributors  of  healthcare
equipment and products, hospitals, physician practice groups, and clinics.

<PAGE>

      The Company  obtains the  medical  and other  information  for its website
primarily  from three  independent  suppliers,  Healthology,  InfoSpace.com  and
iSyndicate.

Med Store

      The Med Store is a feature of Sims' website which allows  consumers to use
their  computers  to  purchase a variety of  healthcare  products  and  services
supplied by unrelated  manufacturers  and healthcare  service  providers.  Items
available for purchase  include canes,  crutches,  walkers,  bath chairs,  blood
pressure units, cold therapies,  exercise  equipment and hot and cold packs. The
Med Store became operational on July 1, 1999.

      Accredited   Homecare   Pharmacy  and  Accredited   Medical  Services  are
responsible  for filling orders for products or services  purchased from the Med
Store.

Movie Vision

      In January 1998 the Company  issued  550,000 shares of its common stock to
the  shareholders  of Moviebar  Company USA and  Vectorvision,  Incorporated  in
consideration  for the  acquisition of businesses  known  collectively as "Movie
Vision."  Movie  Vision  rents  video  cassettes,  primarily  containing  motion
pictures,  through automated  dispensing units in hotels. Movie Vision currently
has video cassette dispensing machines in approximately 150 hotels in the United
States.

DCB Actuaries & Consultants

      In April 2000,  the Company  acquired 100% of the stock of DCB Actuaries &
Consultants SRO (DCB), a Czech Republic based company and certain technology and
intellectual  property from DSM, LLC, a Florida limited liability  company.  DCB
developed and currently operates a health insurance decision support system with
advanced data structures.

      DCB's advanced data  structures  can support the needs of a  comprehensive
health  care  delivery  system  in a  multitude  of  areas,  including:  patient
services,  risk  management,  clinical  services and  administrative  functions.
Clinical  services  provided by DCB's system include  electronic  patient record
systems, critical care pathways (i.e. treatment programs) and electronic medical
documents (i.e.  x-rays, lab results,  EKG's,  etc.).  Administrative  functions
provided  by  DCB's  system  cover  quality  assurance,  claims  management  and
market/sales analysis.

    The Company  intends to market DCB's  products  and  services to  hospitals,
insurance companies and governmental agencies in the United States and abroad.

Competition

      There are many  companies  that  compete  with the  Company at some level.
Competing health insurance  processing  systems include Envoy,  Medical Manager,

<PAGE>

Medic, Spot Check and Mediphis. Leading consumer healthcare websites include AOL
Health   Channel,   Thrive  Online,   drkoop.com,   Mayo  Clinic  Health  Oasis,
InteliHealth,  Mediconsult.com, and OnHealth. The Company also faces competition
from a variety of sources with respect to its Movie Vision operations, including
premium  cable  companies  such as HBO and Showtime,  video on demand  companies
including  On  Command  Video  and  Lodgenet  Entertainment  as well as  smaller
vendors,  such as VTV and  Suite  View  that  provide  the same  service  as the
Company.  Many of these competitors are far better  capitalized than the Company
and control significant market share in their respective industry segments.

Employees and Offices

      As of September 30, 1999,  the Company  employed 18 persons on a full-time
basis. Nine employees serve in management or administrative  capacities, and the
remainder are hourly workers in the Company's operations.  None of the Company's
employees  are covered by a  collective  bargaining  agreement.  The Company has
never  experienced  an  organized  work  stoppage,   strike  or  labor  dispute.
Management considers the Company's relations with its employees to be good.

      The  Company's  executive  offices are located at 18001 Cowan,  Suite C&D,
Irvine,  California  92614 and  consist of 4,900  square feet of space which are
leased at an annual rent of $70,000.  This lease on the space  expires in August
2003. The Company leases a 7,000 square foot  production and office  facility in
Orlando,  Florida  at an annual  rent of  $50,000.  The  lease on this  facility
expires in December 2005. The Company's telephone number is (949) 261-6665.

ITEM  2. DESCRIPTION OF PROPERTIES See Item 1 of this report.

ITEM 3.  LEGAL PROCEEDINGS.

      There are no material legal proceedings to which the Company is a party or
to which its properties are subject.

      On  December  21,  1998 Albert  Levenberg  filed a  complaint  against the
Company in the Fifteenth Judicial Circuit Court, Palm Beach County, Florida. The
complaint seeks $250,000,  plus interest and legal costs,  related to loans made
by Mr.  Levenberg  to the  Company in 1994.  The Company  believes  the claim is
without merit as the loans had either been repaid or converted  into  franchises
for sale of ACDC units.

      On May 11, 1999 Arthur Fried, a former employee, filed a complaint against
the Company in the Orange  County,  California  Superior  Court  seeking  actual
damages of $269,000,  and an unspecified amount of general and punitive damages.
The former  employee  claims  that the  Company  breached  a written  employment
agreement and made certain misrepresentations to the

<PAGE>


former  employee.  The Company  believes  these claims are without merit and has
filed a counterclaim against the former employee.

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

      Not Applicable

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

      As of September 30, 1999, there were  approximately  350 beneficial owners
of the  Company's  common  stock.  The  Company's  common stock is traded on the
National  Association  of  Securities  Dealers  Automatic  Quotation  ("NASDAQ")
System.  Set forth  below are the range of high and low bid  quotations  for the
periods  indicated  as  reported  by  NASDAQ.   The  market  quotations  reflect
interdealer prices, without retail mark-up, mark-down or commissions and may not
necessarily  represent  actual  transactions.  The market  quotations  have been
adjusted to reflect a two for one forward  stock split,  which was  effective in
June 1995, a one-for ten reverse  stock split which was effective in March 1996,
and a one-for-four reverse stock split which was effective in February 1998.

            Quarter Ending                High         Low

              9/30/97                      $2.31       $1.25
             12/31/97                      $5.00       $1.50
              3/31/98                      $2.87       $1.09
              6/30/98                      $2.75       $1.56

              9/30/98                      $2.88       $1.38
             12/31/98                      $2.44     $.56
              3/31/99                      $2.25     $.44
              6/30/99                      $1.69     $.88

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

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

<PAGE>

Issuance of Common Stock

      During the two years ended June 30, 1999 the Company issued:

      846,827 shares pursuant to the exemption provided by Regulation S,

      28,200 shares upon the  conversion of the Company's  Series A and Series B
preferred stock,

      2,679,271 shares in settlement of notes payable,

      1,041,500 shares pursuant to the Company's stock bonus plans,

      792,350 shares in connection  with the  acquisition of the Company's Movie
Bar, One Medical and MedCard divisions,

      318,512 shares in payment of outstanding liabilities,

      300,000 shares in connection  with the  termination of certain  franchises
which were previously sold by the Company (as well as related litigation),

      2,716,968 shares for services rendered, and

      5,883,379 shares for cash in private offerings.

      The shares  issued  upon the  conversion  of the Series A and B  preferred
stock and in  settlement  of the notes  payable were issued in reliance upon the
exemption provided by Section 3(a)(9) of the Securities Act of 1933.

      The shares  issued  pursuant  to the Stock Bonus Plan were  registered  by
means of a registration statement on Form S-8.

      The  remaining  shares  issued or sold during the two years ended June 30,
1999 were issued or sold in reliance upon the exemption provided by Section 4(2)
of the Act. The persons who  acquired  these  shares were either  accredited  or
sophisticated investors. The shares of common stock were acquired for investment
purposes only and without a view to distribution. The persons who acquired these
shares were fully  informed and advised  about matters  concerning  the Company,
including the  Company's  business,  financial  affairs and other  matters.  The
persons  acquired  these  shares  for  their  own  accounts.   The  certificates
representing the shares of common stock bear legends stating that the shares may
not be  offered,  sold  or  transferred  other  than  pursuant  to an  effective
registration  statement  under the  Securities  Act of 1933,  or  pursuant to an
applicable exemption from registration.  The shares are "restricted"  securities
as defined in Rule 144 of the Securities and Exchange Commission.

<PAGE>

ITEM 6.  MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATIONS

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

Statement of Operations Data:

                                             Years Ended June 30,
                                       1999                       1998
                                       ----                       ----

Revenues                            $2,240,876                   $980,951
Cost of Services                      (697,481)                  (523,479)
Operating and other
     Expenses                       (8,690,380)                (7,503,483)
Loss from Discontinued Operations           --                    (63,737)
                                 ----------------          ---------------
Net Loss                           $(7,146,985)               $(7,109,748)
                                   ============               ============

Balance Sheet Data:
                                               June 30,
                                   1999                    1998
                                    ----                    ----

Current Assets                $1,405,096                $1,088,002
Total Assets                   6,374,862                 5,602,751
Current Liabilities            2,142,550                 2,785,015
Total Liabilities              2,268,256                 3,372,542
Working Capital (Deficit)       (737,454)               (1,697,013)
Shareholders' Equity           4,106,606                 2,230,209

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



<PAGE>


Results of Operations

         The  following  table  shows  the  percentage  of the  Company's  gross
revenues  by  category  for the periods  indicated,  as well as the  anticipated
revenue percentage from each category for the year ending June 30, 2000.

                                               Percent of Gross Revenues
                                                                 Year Ending
                                         Years Ending June 30,  June 30, 2000
                                         1998         1999      (Projected) (1)
                                         ----         ----      ---------------

Rental of cellular telephones directly from
Company and from ACDC Units.              11%          --             --

Sale of ACDC units and related equipment.  --          --             4%

Fees paid by cellular telephone companies
for  activation of cellular telephones.   17%          --             --

Sale of prepaid calling cards.            14%          4%             1%

Sale of long distance telephone service.   4%          --             --

Revenues from Link International.         15%         28%             --

Revenues from Movie Vision                38%         40%            15%

Revenues from One Medical Service          1%          7%            10%

Revenues from Justmed.com                  --         19%            70%

Miscellaneous Income                       --          2%             --

(l)  There  can  be  no  assurance  that  these   percentages  will  not  change
     significantly  based  upon  events  which may not be within  the  Company's
     control.  Projected revenues for the year ending June 30, 2000 constitute a
     forward-looking statement which is subject to risks and uncertainties which
     could  cause  actual  results to differ  materially  from those  projected.
     Factors that could cause or contribute to such differences  include lack of
     adequate  funding,  loss of major  customers  and  inability  to meet sales
     projections.

      Prior to 1996 the Company operated ACDC units for its own account and also
sold franchises  which provided third parties the right to operate ACDC units at
various  franchised  locations.  At  September  30,  1999,  the  Company was not
operating any ACDC units and the Company's  only  remaining  franchisee had four
ACDC units in operation.

<PAGE>

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

      In  December  1996 the  Company  acquired  all the issued and  outstanding
shares of Link International, Inc. (see Item 1 of this report). In June 1999 the
Company sold 520 of Link's scrip  terminals to the employee who was  responsible
for overseeing this aspect of the Company's  business.  Although the Company did
not  receive  any  material  cash  payment in  connection  with this  sale,  the
purchaser  of the  assets  agreed to assume  $70,000  in  accounts  payable  and
approximately  $600,000 in capitalized  lease  obligations  associated  with the
scrip terminals. The assets sold had a net book value of approximately $635,000.
The Company recognized as income previously recorded deferred revenue related to
the scrip terminals  totaling  $212,805,  as well as an immaterial gain from the
sale of the assets and the release from the related obligations.

      In January  1998 the  Company  acquired  its Movie  Vision  division  from
Moviebar  Company  USA  and  Vectorvision,   Incorporated.  Movie  Vision  rents
videocassettes,   primarily   containing  motion  pictures,   through  automated
dispensing units in hotels.

      In May 1998 the Company acquired One Medical Services, Inc. (see Item 1 of
this  report).  In July 1999 the Company  licensed its rights to the One Medical
Service Network to an unrelated  third party for  $1,377,000,  of which $300,000
was paid by September  30,  1999,  $267,000 of which is to be paid by January 5,
2000 and the remainder of which  (810,000)  will be paid in accordance  with the
terms an  unsecured  promissory  note which bears  interest at 7% per year.  The
principal  due on the note is to be  reduced  by  license  royalties  and  other
credits  up to a maximum  of $9,000 per  month.  Additionally,  the third  party
assumed  all of the  operations  of One  Medical,  including  payroll  and other
operating  expenses.  This  transaction  will improve the Company's cash flow by
eliminating overhead and providing for future licensing and royalty fee income.

      In November  1998 the Company  acquired an world wide  license to software
programs and related  technology known as the MedCard system. The MedCard system
is an electronic  processing  system which  consolidates  insurance  eligibility
verification and processes medical claims and approvals of credit card and debit
card payments in under 30 seconds through a single, small terminal or a personal
computer.  The MedCard system is a major component of the Company's  JustMed.com
division.

      Revenues from the MedCard System are generated from the sale of terminals,
for  verifying  insurance  eligibility  and  for  processing  insurance  claims.
Potential  revenue sources include fees for credit card  transactions  processed
through the terminal, fees for collection of receivables if the Company provides
billing  services,  reimbursement  by insurance  carriers for submitting  claims
electronically,  fees for  using  the  system's  referral  program  and fees for
processing  encounter data. The Company anticipates that the MedCard System will
begin generating significant revenues during the year ending June 30, 2001.

<PAGE>

Year Ending June 30, 1999

      During the year ending June 30, 1999, the Company's revenue increased as a
result of the Company's  expansion  into  financial  processing  (Link debit and
scrip  terminals),  medical  transaction  processing  (One  Medical  and MedCard
divisions) and automated motion picture rentals (Movie Vision  division).  These
business  segments  produced  revenues  of  $625,801,   $583,777  and  $888,626,
respectively  for the year ended June 30, 1999.  Comparable  revenues from these
segments for the year ended June 30, 1998 were substantially less since the full
scale  distribution  of the Link debit and scrip  terminals  did not begin until
April  1998,  and  the One  Medical  and  MedCard  divisions  did  not  commence
operations until May 1998 and November 1998, respectively.  During the summer of
1999 the Company began directing its efforts toward its Justmed.com division. As
a result of this change in focus,  and as discussed  above,  the Company in June
1999 sold a major  portion of its script  terminals and in July 1999 the Company
licensed its rights to the One Medical division.  In connection with the sale of
the financial processing  division,  the Company recognized $210,000 of deferred
gross profit.

      Selling,  Marketing  and General and  Administration  expenses  (including
depreciation) increased to nearly $8,300,000 during the year ended June 30, 1999
compared to $5,900,000 in the prior year primarily due to the following:

1)      The Company's financial processing,  One Medical and Movie Bar divisions
        were in operation  during all twelve months of fiscal 1999,  compared to
        shorter periods in the prior year.
2)      The Company acquired its MedCard division in November 1998. As a result,
        only  operations  for the twelve month period  ending June 30, 1999 were
        affected by the expenses of this division.
3)      Depreciation and  amortization  expense was $1,056,572 in the year ended
        June 30, 1999  compared to $474,372 in the prior  period.  A substantial
        portion of this increase was the result of  depreciating  assets related
        to the Company's  ACDC  operations for a full year compared to the prior
        year.
4)      As a  result  of the  sale  of a  portion  of its  financial  processing
        division,  the Company  incurred  approximately  $140,000 of  commission
        expense in the quarter ended June 30, 1999.
5)      The Company incurred one-time expenses related to the closing of offices
        in New Jersey and Modesto,  California offices and in the termination of
        offices leases Florida.
6)      The  Company  expensed  approximately  $200,000 in  additional  reserves
        against note receivables deemed uncollectible at June 30, 1999. See Note
        5 to the Company's June 30, 1999 Financial Statements.

      During the year ended June 30, 1999 stock-based  compensation increased to
$2,540,338,  which was 50% greater  than the prior  period.  The Company  issued
shares of its common  stock to pay for the services  provided by  employees  and
outside consultants retained for a number of projects, including the development
of the Company's website, internet healthcare web portal and e-commerce business
applications.

<PAGE>

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

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

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

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

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

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

      3) In March  1997,  the  Company  entered  into a License  Agreement  with
Cancall Cellular  Communications,  Inc. ("Cancall") whereby the Company provided
Cancall with a license to operate  and/or  distribute  the Company's ACDC units,
prepaid  calling  card  machines  and  point-of-sale  terminals.  The  Licensing
Agreement  also required  Cancall to purchase a certain number of ACDC units and
point-of-sale terminals from the Company.  Between March and September 1997, the
Company sold 30 ACDC units to Cancall for  $705,000.  In payment of the $500,000
licensing fee and the 30 ACDC units,  Cancall  issued  1,807,800  shares of it's
Class B Preferred Stock to the Company.  As of September 30,1997 the Company had
valued the Cancall  Preferred  Stock at $1,310,000.  Subsequent to September 30,
1997 the Company and Cancall determined that Cancall would not be able to comply
with the terms of the Licensing  Agreement.  Accordingly,  Cancall (i) agreed to
rescind  the  licensing  agreement  and the  sale of the  ACDC  units  (ii)  the
equipment  previously  sold to Cancall were returned to the Company and (iii) an
expense of  ($764,000)  was recorded  which  represented  the profit  previously
recorded  by the  Company  on the sale of the ACDC  units and the  recept of the
licensing fee.

      4) Between June through September 1996 the Company sold 30 ACDC units to a
master  licensee in  California  resulting in gross  revenues of  $664,000.  The

<PAGE>

Company did not receive payment for the units, which were subsequently  returned
to the Company,  and a reserve of $374,980 (the profit  recognized for the units
sold) was recorded for uncollected receivables.

      5) The Company recorded a valuation  reserve  ($200,000) for the Company's
investment in Smartphone,  a corporation which sold prepaid cellular telephones.
The Company's investment  represented a 10% interest in Smartphone.  The Company
wrote off its investment in Smartphone  since Smartphone  ceased  operations and
did not have any net worth.

      6) An increase in the ACDC depreciation and patent  amortization rates due
to the classification of ACDC machines as fixed assets and a full year of patent
amortization.

Liquidity and Sources of Capital

    During  the  year  ending  June  30,  1999  the  Company's  operations  used
approximately  $3,400,000 of cash. In order to fund its  operating  losses,  the
Company  sold  shares  of its  common  stock  and  preferred  stock  in  private
placements. Approximately $1,400,000 was raised from the sale of preferred stock
and  approximately  $2,500,000  was raised from the sale of 3,636,879  shares of
common  stock.  The  3,636,879  shares of common  stock  were sold at  discounts
ranging from 11% to 60% of the then  prevailing  market  price of the  Company's
common  stock  since the  shares  were  restricted  securities,  as that term is
defined in Rule 144 of the  Securities  and Exchange  Commission.  During fiscal
year 1999,  the Company  also  issued (i)  2,607,950  shares of common  stock in
exchange for services and equipment valued at $2,340,423,  (ii) 2,260,675 shares
of common stock in settlement of outstanding  liabilities  totaling  $1,796,201,
and (iii)  262,969  shares of common stock for other  matters.  The total shares
issued during the year was 8,768,473.

      During  the year ended  June 30,  1999 the  Company  granted  options  and
warrants  for the  purchase of  6,771,164  shares of common  stock to  officers,
employees  consultants  and other  third  parties.  The  exercise  prices of the
warrants  relating  to  994,360  shares  of  common  stock  were  below the then
prevailing  market price of the Company's  common stock on the date the warrants
were granted  since the shares  issuable  upon the exercise of the warrants were
restricted  securities as that term is defined in Rule 144 of the Securities and
Exchange Commission.

      Between July 1, 1999 and April 3, 2000, the Company  raised  approximately
$6,100,000,  net of  expenses  of  approximately  $659,000,  from  the  sale  of
6,562,645 shares of common stock at prices ranging from $.45 to $4.00 per share.
A total of  3,090,000  of these  shares were issued at prices below market since
the shares were  restricted  securities.  The Company also issued  approximately
1,800,000 shares of common stock and received  approximately  $2,100,000 in cash
as a result of the  exercise of options and warrants at prices  ranging  between
$.44 and $5.00 per share.

      Proceeds  of  $567,000  from the  licensing  of the One  Medical  Services
Network were also used to fund the Company's operations.

<PAGE>

      The Company does not have any available  credit,  bank  financing or other
external sources of liquidity. Due to historical operating losses, the Company's
operations have not been a source of liquidity.  In order to obtain capital, the
Company may need to sell  additional  shares of its common stock or borrow funds
from  private  lenders.  During the next  twelve  months the  Company  will need
capital to repay outstanding debt and fund receivables and inventory balances.

      The Company's  auditors stated in their report on the Company's  financial
statements for the year ended June 30, 1999 that due to the Company's  recurring
losses form operations there is substantial doubt as to the Company's ability to
continue in  business.  The  existence of such an  explanatory  paragraph in the
auditor's  opinion can make it more difficult for the Company to raise or borrow
additional funds.

      Although  the  Company  has  reduced  its  cash  requirements  for  normal
operations  through  the  sale of the Link  assets  and the  license  of the One
Medical  Services  Network,  it will  still need cash to fund  operating  losses
during  the year  ending  June 30,  2000.  As of April 3, 2000 the  Company  had
approximately  $5,000,000 in cash. The Company believes that this amount will be
sufficient to fund its operations,  to purchase computer and  telecommunications
equipment  required for expansion of the MedCard System, and the acquisition and
operations of DCB as discussed in Item 1. In the event that the Company does not
have  adequate  cash to  purchase  all of the  computer  and  telecommunications
equipment  which it expects it will need, the Company is of opinion that it will
be  able  to  acquire  a  certain  amount  of  the  equipment   through  leasing
arrangements or other financing sources.  The Company may also be able to obtain
additional  funding,  if necessary,  by selling  additional shares of its common
stock. There can be no assurance,  however,  that the Company will be successful
in obtaining additional funding.

      As of June 30, 1999 the Company had borrowed $250,000 under a bank line of
credit, which was secured by a certificate of deposit. In July 1999, the Company
redeemed  the  certificate  of deposit and used the  proceeds to pay amounts due
under the line credit. The line of credit was then terminated.

      As of  June  30,  1999,  the  Company  had  defaulted  on the  payment  of
convertible  notes in the  principal  amount of $94,000.  Subsequent to June 30,
1999,  notes in the principal  amount of $69,000 were  converted  into shares of
common stock. A note with a balance of $25,000  remains unpaid as the Company is
unable to locate the lender.  With respect to the remaining  notes payable as of
June 30, 1999,  $11,214 was paid,  $343,905 was converted into 393,035 shares of
common stock and the maturity on the balance  ($70,000) was extended to November
1, 2000.

      The  Company's  long-term  debt  consists  entirely of  obligations  under
capital leases.

      In January  2000 the holders of the  Company's  Series C preferred  shares
converted the preferred  shares into  3,490,000  shares of the Company's  common
stock.  In payment of accrued  dividends  and other costs the Company  made cash
payments of $160,567 and issued  60,000 shares of its common stock plus warrants
to the holders of the Series C preferred shares.  The warrants allow the holders
to purchase 132,000 shares of the Company's common stock at a price of $0.75 per

<PAGE>

share at any time prior to December 22,  2002.  For  assisting in arranging  the
conversion of the preferred shares,  the Company issued 175,000 shares of common
stock to a financial consultant.

Year 2000 Issue

      The "Year 2000" issue affects the Company's  installed  computer  systems,
network  elements,  software  applications  and other business systems that have
time-sensitive  programs  that may not properly  reflect or  recognize  the Year
2000. Because many computers and computer  applications define dates by the last
two digits of the year,  "00" may not be properly  identified  as the Year 2000.
This error could result in  miscalculations  or system  failures.  The Year 2000
issue does not materially  affect the Company's  computer  systems,  software or
other  business  systems.  The Company has conducted a review to identify  areas
that  could be  affected  and has  developed  an  implementation  plan to ensure
compliance.  The Company believes that with  modifications to existing  software
the issue will not pose  significant  operational  concerns  nor have a material
impact  on  financial   position  or  results  of   operations.   The  costs  of
modifications  are not expected to be material and will be expensed as incurred.
However,  failures of computer systems  maintained by third parties could have a
material impact on the Company's  ability to conduct  business.  The Company has
requested that its major  independent  suppliers and support  providers  confirm
that they will be Year 2000 compliant.

ITEM 7.  FINANCIAL STATEMENTS

      See the financial statements attached to this report.

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

      Not applicable.

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

      The Company's officers and directors are as follows:

      Name              Age               Position
      ----              ---               --------
      Mark Bennett      40             President and a Director
      Michael Malet     51             Executive Vice President and a Director
      Alan Ruben        43             Chief Accounting and Financial Officer
      David Breslow     55             Director
      Julio Curra       40             Director

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

<PAGE>


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

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

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

      Alan Ruben joined the Company as Chief Accounting and Financial Officer in
October 1999. Prior to joining the Company,  he was the Chief Financial  Officer
for Direct Container Line, Inc., an international  shipping company.  Previously
Mr.  Ruben  was the  Vice-President  and  Chief  Financial  Officer  for  Relsys
International,  Inc., a medical  software  development  company.  Mr. Ruben is a
certified public accountant,  licensed in the state of California.  He began his
career with Coopers & Lybrand and was in public accounting for eighteen years.

      David Breslow has been a director of the Company  since March 1999.  Since
1996 Mr.  Breslow  has been the  President  and  Executive  Director  of  United
Pharmacists Network, Inc., a corporation involved in purchasing,  management and
other  services  to  pharmacies.  Between  1976 and 1995 Mr.  Breslow  owned and
managed various pharmacies in the Los Angeles, California metropolitan area.

      Julio  Curra has been a director of the  Company  since March 1999.  Since
1996 Mr.  Curra has been the  president  of  All-Line  Communications,  Inc.,  a
corporation involved in telecommunication sales. Between 1987 and 1996 Mr. Curra
was the  president  of  Julio  Curra  &  Associates,  a firm  also  involved  in
telecommunication sales.

      Robert Stevens is the Company's  Director of Development  and  Information
Technology.  He has been with the Company or its subsidiaries  since 1994. Prior
to joining the Company,  Mr. Stevens was the Vice  President of Development  for
three different companies. He was involved with a ten-year development effort on
EZ-Fax,  the first network fax server developed in 1984. He also spent seventeen
years at IBM, primarily in their complex systems group.

<PAGE>

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

      Mr. Breslow and Mr. Curra are members of the Company's audit committee.

Change in Management

      In November  1997 Melvin  Leiner,  Darren  Marks,  James Caprio and Donald
Marks  resigned as officers and  directors of the Company.  David  Barnhill also
resigned as a director  in November  1997.  In  November  1997 Mark  Bennett was
appointed  President and Michael Malet was appointed Executive Vice President of
the Company.  Mark  Bennett,  Michael  Malet,  Chet Howard and George  Pursglove
remained  directors of the  Company.  In September  1998  Cornelia  Eldridge was
appointed a director of the Company.  In February 1999 Mr. Howard, Mr. Pursglove
and Ms.  Eldridge  resigned as  directors  of the  Company.  In March 1999 David
Breslow and Julio Curra were  appointed  directors  of the  Company.  In October
1999, Alan Ruben was appointed Chief Accounting and Financial  Officer after Ian
Hart's employment  contract as chief financial officer expired. In January 2000,
Mr. Marvin Berger resigned as the Company's Vice President of Sales & Marketing.

ITEM 10.  EXECUTIVE COMPENSATION

      The following table sets forth in summary form the  compensation  received
by (i) the  Chief  Executive  Officer  of the  Company  and  (ii) by each  other
executive  officer of the Company who received in excess of $100,000  during the
fiscal years ended June 30, 1998 and 1999.

<TABLE>
     <S>               <C>      <C>     <C>        <C>             <C>         <C>

                                              Other Annual     Restricted    Options
    Name and         Fiscal   Salary   Bonus  Compensation    Stock Awards   Granted
Principal Position    Year      (1)     (2)       (3)              (4)         (5)
-------------------   ---------------------------------------------------------------

Mark Bennett,         1999   $128,482             $8,400            --      1,015,000
President and Chief   1998   $111,350    --       $8,400       $67,500        560,500
Executive Officer
Michael Malet,        1999   $112,462             $8,400            --        925,000
Vice President        1998   $100,923    --       $8,400       $58,500        457,000

</TABLE>

(1) The dollar value of base salary (cash and non-cash) received.
(2) The dollar value of bonus (cash and non-cash) received.
(3)  Any other annual compensation not properly  categorized as salary or bonus,
     including perquisites and other personal benefits,  securities or property.
     Amounts in the table represent automobile allowances.


<PAGE>


(4)  Amounts  reflect  the value of the  shares of the  Company's  common  stock
     issued as compensation for services.

      The table below shows the number of shares of the  Company's  Common Stock
owned by the officers listed above,  and the value of such shares as of June 30,
1999.

      Name                                Shares            Value
      Mark Bennett                       224,900          $218,153
      Michael Malet                      117,400          $113,878

(5)  The shares of Common  Stock to be received  upon the  exercise of all stock
     options granted during the fiscal years shown in the table.

Employment Contracts

      In March 1999 the Company  entered into  employment  agreements  with Mark
Bennett and Michael Malet. Each employment agreement provides for the following:

1.    Term of three years.

2.   Annual  salary of $137,500 in the case of Mr.  Bennett and  $120,000 in the
     case of Mr. Malet.

3.   Automobile allowance of $700 per month.

4.          Four weeks of paid  vacations  and the right to  participate  in any
            group medical,  group life  insurance or any other employee  benefit
            plan that the Company may, from time to time, maintain.

5.          Reimbursement  for any  medical,  dental  or  optical  expenses  not
            covered by any Company group healthcare plan.

6.          Disability  benefits equal to the  employee's  salary payable to the
            employee for the remaining term of the employment agreement.

7.          Premium  payments for a $1,000,000  term life insurance  policy with
            the beneficiary to be designated by the employee.

      In the event that there is a change in the  control of the Company and the
employee is terminated  without cause or the employee resigns for cause then the
Company is required to pay the Company a lump-sum amount equal to the employee's
annual salary  multiplied by 2.99. The term  "resignation for cause" means there
is a material  change in the employee's  authority,  duties or  activities.  For
purposes  of the  employment  agreement  a change in the  control of the Company

<PAGE>

means:  (1) the  acquisition  by any  person of more  than 15% of the  Company's
common  stock;  (2) the  acquisition  by any person  more than 50% of the voting
capital stock of any  subsidiary  of the Company;  (3) the merger of the Company
with another entity if after such merger the  shareholders of the Company do not
own at least 85% of voting capital stock of the surviving  corporation;  (4) the
approval by the  shareholders  of the Company of a plan to liquidate or dissolve
the Company;  (5) the sale of substantially all of the assets of the Company; or
(6) a  change  in a  majority  of the  Company's  directors  which  has not been
approved by at least two-thirds of the incumbent directors.

    If following a change in control the employee is terminated  without  cause,
all options granted to the employee  pursuant to any of the Company's  incentive
or non-qualified stock option plans will be fully vested.

Options Granted During Fiscal Year Ending June 30, l999 The following tables set
forth information  concerning the options granted,  during the fiscal year ended
June 30, 1999, to the persons named below,  and the fiscal year-end value of all
unexercised  options  (regardless  of when granted) held by these  persons.  The
options  listed below were not granted  pursuant to the  Company's  incentive or
non-qualified stock option plans.

                                % of Total Options    Exercise
                   Options      Granted to Employees  Price Per   Expiration
 Name             Granted (#)     in Fiscal Year       Share         Date

Mark Bennett      1,015,000            33%             $0.82        4/16/04
Michael Malet       925,000            30%             $0.82        4/16/04

Option Exercises in Last Fiscal Year and Fiscal Year-End Values

                                               Number of        Value of Unexer-
                                          Securities Underlying  cised In-the-
                                          Unexercised Options    Money Options
                    Shares                  at June 30, 1999   at June 30, 1999
                  Acquired     Value          Exercisable/        Exercisable/
Name            on Exercise  Realized         Unexercisable       Unexercisable
                     (1)        (2)                (3)                 (3)
-------------------------------------------------------------------------------

Mark Bennett             --              --       1,575,500/--     $152,250/--
Michael Malet            --              --       1,382,000/--     $138,750/--

(1) The number of shares  received  upon  exercise of options  during the fiscal
    year ended June 30, 1999.

(2) With respect to options  exercised  during the  Company's  fiscal year ended
    June 30,  1999,  the  dollar  value of the  difference  between  the  option
    exercise  price and the market value of the option  shares  purchased on the
    date of the exercise of the options.

(3) The total number of unexercised options held as of June 30, 1999,  separated
    between those options that were  exercisable and those options that were not
    exercisable.

<PAGE>

(4)  For all  unexercised  options held as of June 30,  1999,  the excess of the
     market value of the stock  underlying  those  options (as of June 30, 1999)
     and the exercise price of the option

Long Term Incentive Plans - Awards in Last Fiscal Year

      None.

Employee Pension, Profit Sharing or Other Retirement Plans

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

Compensation of Directors

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

      Except as  disclosed  elsewhere  in this report no director of the Company
received any form of  compensation  from the Company  during the year ended June
30, 1999.

Stock Option and Bonus Plans

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

Incentive Stock Option Plan.

      The  Incentive  Stock  Option Plan  authorizes  the issuance of options to
purchase up to 1,500,000 shares of the Company's  Common Stock,  less the number
of shares  already  optioned  under both this Plan and the  Non-Qualified  Stock
Option Plan. Only officers,  and employees of the Company may be granted options
pursuant to the Incentive Stock Option Plan.

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

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

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

<PAGE>

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

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

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

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

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

Non-Qualified Stock Option Plans.

      The Non-Qualified  Stock Option Plans authorize the issuance of options to
purchase up to 3,000,000 shares of the Company's Common Stock less the number of
shares  already  optioned  under both this Plan and the  Incentive  Stock Option
Plan. The Company's employees, directors, officers, consultants and advisors are
eligible to be granted options pursuant to the Plan,  provided however that bona
fide services must be rendered by such consultants or advisors and such services
must  not  be  in  connection  with  the  offer  or  sale  of  securities  in  a
capital-raising  transaction.  The option  exercise  price is  determined by the
Board of  Directors  but cannot be less than the market  price of the  Company's
Common Stock on the date the option is granted.

      Options granted  pursuant to the Plan not previously  exercised  terminate
upon the first to occur of the following dates:

      (a)   The  expiration  of one year  after  the  date on  which  an  option
            holder's   employment   by  the  Company  is   terminated   (whether
            termination is by the Company, disability or death); or

      (b)   The  expiration  of the option  which occurs five (5) years from the
            date the option was granted.

<PAGE>

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

Stock Bonus Plans.

      Up to  2,400,000  shares of Common  Stock may be  granted  under the Stock
Bonus Plans.  Such shares may consist,  in whole or in part, of  authorized  but
unissued shares,  or treasury shares.  Under the Stock Bonus Plan, the Company's
employees, directors, officers, consultants and advisors are eligible to receive
a grant of the Company's shares; provided, however, that bona fide services must
be  rendered  by  consultants  or  advisors  and  such  services  must not be in
connection   with  the  offer  or  sale  of  securities  in  a   capital-raising
transaction.

Other Options

      During the year ended June 30, 1999 the Company  granted  Mark Bennett and
Michael Malet options to purchase 1,015,000 and 925,000 shares respectively,  of
the Company's  common  stock.  The options may be exercised at any time prior to
April 16, 2004 at an exercise  price of $0.82 per share.  These options were not
granted pursuant to the Company's Incentive or Non-Qualified stock option plans.

Other Information Regarding the Plans.

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

      In the discretion of the Board of Directors,  any option granted  pursuant
to the Plans may include installment exercise terms such that the option becomes
fully exercisable in a series of cumulating portions. The Board of Directors may
also  accelerate  the date upon which any option (or any part of any options) is
first  exercisable.  Any shares issued  pursuant to the Stock Bonus Plan and any
options granted pursuant to the Incentive Stock Option Plan or the Non-Qualified
Stock Option Plan will be forfeited if the "vesting" schedule established by the
Board of  Directors  at the time of the  grant  is not  met.  For this  purpose,
vesting  means the period  during which the employee  must remain an employee of
the Company or the period of time a  non-employee  must provide  services to the
Company.  At the time an employee ceases working for the Company (or at the time
a  non-employee  ceases to  perform  services  for the  Company),  any shares or

<PAGE>

options not fully vested will be forfeited and  cancelled.  In the discretion of
the Board of Directors payment for the shares of Common Stock underlying options
may be paid through the delivery of shares of the Company's  Common Stock having
an aggregate  fair market value equal to the option price,  provided such shares
have  been  owned  by the  option  holder  for at least  one year  prior to such
exercise. A combination of cash and shares of Common Stock may also be permitted
at the discretion of the Board of Directors.

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

      The Board of  Directors  of the Company may at any time,  and from time to
time,  amend,  terminate,  or suspend  one or more of the Plans in any manner it
deems  appropriate,  provided  that such  amendment,  termination  or suspension
cannot  adversely affect rights or obligations with respect to shares or options
previously  granted.  The  Board  of  Directors  may  not,  without  shareholder
approval:  make any  amendment  which would  materially  modify the  eligibility
requirements  for the Plans;  increase or decrease the total number of shares of
Common  Stock which may be issued  pursuant to the Plans except in the case of a
reclassification  of the Company's capital stock or a consolidation or merger of
the Company;  reduce the minimum  option price per share;  extend the period for
granting options;  or materially increase in any other way the benefits accruing
to employees who are eligible to participate in the Plans.

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

Summary.

      The  following  sets forth certain  information  as of September 30, 1999,
concerning the stock options and stock bonuses  granted by the Company  pursuant
to its Plans.  Each option  represents  the right to  purchase  one share of the
Company's Common Stock.

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

1998 Incentive Stock Option
   Plan                      1,500,000     688,000        N/A        812,000
1996 Non-Qualified Stock
     Option Plan             1,500,000     607,500        N/A        892,500
1998 Non-Qualified Stock
     Option Plan             1,500,000         --          N/A     1,500,000
1996 and 1998 Stock Bonus
  Plans                      1,500,000        N/A    1,497,625         2,375
1999 Stock Bonus Plan          900,000        N/A       46,571       853,429

Stock Bonuses

      The Company,  in accordance  with the terms of its Stock Bonus Plans,  has
issued  shares  of Common  Stock to  certain  Company  officers,  employees  and

<PAGE>

consultants.  The following  persons  (including  former officers and directors)
received shares of the Company's common stock as stock bonuses:

                                       Shares Issued as Stock Bonus
    Name                      1996       1997       1998      1999       2000
    ----                      ----       ----       ----      ----       ----

Mark Bennett                                        18,750
Michael Malet                            5,000      16,250
Other employees and
   consultants as a grou    461,250    111,875     174,000   710,500     46,571
                            -------    -------     -------   -------     ------
                            461,250    116,875     209,000   710,500     46,571
                            =======    =======     =======   =======     ======

ITEM 11.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.

     The following table sets forth, as of September 30, 1999,  information with
respect to the only persons owning  beneficially  5% or more of the  outstanding
Common Stock and the number and percentage of  outstanding  shares owned by each
director  and officer  and by the  officers  and  directors  as a group.  Unless
otherwise  indicated,  each owner has sole voting and investment powers over his
shares of Common Stock.
                                                             Percent of
Name and Address                     Shares Owned (1)         Class (2)
----------------                     -----------------      -------------

Mark Bennett                             224,900                 1%
18001 Cowan, Suite C&D
Irvine, CA 92614

Michael Malet                            117,400                  *
18001 Cowan, Suite C&D
Irvine, CA 92614

Marvin Berger                             65,000                  *
18001 Cowan, Suite C&D
Irvine, CA  92614

David Breslow                             10,000                  *
701 N. Brand, #380
Glendale, CA  91203

Julio Curra                                   --                 --
1767 Veterans Memorial Hwy. #6
Islandia, NY  11722                      _______               ____

Officers and Directors as a
  Group (6 persons)                      417,300                 3%
                                         =======               =====

*  Less than 1%

<PAGE>

(1)  Excludes  shares  issuable  prior to December 31, 1999 upon the exercise of
     options or warrants granted to the following persons.

      Name                   Options exercisable prior to December 31, 1999
      ----                   ----------------------------------------------

      Mark Bennett                        1,575,500
      Michael Malet                       1,382,000
      Marvin Berger                          25,000
      David Breslow                          10,000
      Julio Curra                                --

(2) Excludes any shares issuable upon the exercise of any warrants or options or
    upon the conversion of any promissory notes or other convertible securities.

ITEM 12.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.

      Effective January 30, 1998 the Company issued 550,000 shares of its common
stock to the shareholders of Moviebar Company USA and Vectorvision, Incorporated
in consideration for the acquisition of businesses  collectively known as "Movie
Vision."  Movie  Vision  rents  video  cassettes,  primarily  containing  motion
pictures,  through automated  dispensing units in hotels. Movie Vision currently
has video cassette dispensing machines in approximately 150 hotels in the United
States. For financial  statement  purposes,  the acquisition of Movie Vision was
valued at $1,100,000. Mark Bennett, the President and a director of the Company,
was shareholder of both Moviebar Company USA and Vectorvision,  Incorporated and
received  55,000  shares of the Company's  common stock in connection  with this
transaction.

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

    During  the year ended June 30,  1998,  the  Company  acquired  One  Medical
Services,  Inc.  David  Breslow,  a director of the  Company,  is the  Executive
Director of an entity that owned forty  percent  (40%) of the acquired  company.
One Medical  Services was valued at $1,067,398.  This  transaction was completed
before Mr. Breslow became a member of the Company's Board of Directors.

      See  "Stock  Option  and  Bonus  Plans"  in  Item 10 of  this  report  for
information  concerning stock options and stock bonuses granted to the Company's
present officers and directors.


<PAGE>



ITEM 13.  EXHIBITS AND REPORTS ON FORM 8-K

Exhibits

Number     Exhibit                                       Page Number

 3.1    Certificate  of Incorporation                        (1)

3.1.1   Amendment to Certificate of Incorporation            (3)

3.2   Bylaws of the Company                                  (1)

4.1   Incentive Stock Option Plan                        __________

4.2   Non-Qualified Stock Option Plans                   __________

4.3   Stock Bonus Plans                                  __________

10.5  July 1999 Licensing Agreement relating
        to One Medical System                            __________

23    Consents of Accountants                          Previously Filed

27    Financial Data Schedule                          Previously Filed

(1) Incorporated  by reference,  and as same exhibit number,  from  Registration
    Statement on Form SB-2 (Commission File Number 33-70546-A).

(2) Incorporated by reference,  and as same exhibit number, from Amendment No. 1
    to Registration Statement on Form SB-2 (Commission File Number 33-70546-A).

(3) Incorporated by reference,  and as same exhibit number, from Amendment No. 5
    to Registration Statement on Form SB-2 (Commission File Number 33-70546-A).



<PAGE>






                              FINANCIAL STATEMENTS




<PAGE>


                   SIMS COMMUNICATIONS, INC. AND SUBSIDIARIES


                                Table of Contents


                                                                        Page

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

Financial Statements

   Consolidated Balance Sheet...........................................F - 3

   Consolidated Statements of Operations................................F - 4

   Consolidated Statements of Stockholders' Equity......................F - 5

   Consolidated Statements of Cash Flows................................F - 6

Notes to Consolidated Financial Statements..............................F - 7


<PAGE>


                          INDEPENDENT AUDITORS' REPORT



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


We  have  audited  the   accompanying   consolidated   balance   sheet  of  SIMS
Communications,  Inc.  and  Subsidiaries  as of June 30,  1999  and the  related
consolidated statements of operations,  stockholders' equity, and cash flows for
the years  ended June 30,  1999 and 1998.  These  financial  statements  are the
responsibility of the Company's management.  Our responsibility is to express an
opinion on these financial statements based on our audits.

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

In our opinion, the consolidated  financial statements referred to above present
fairly, in all material respects, the financial position of SIMS Communications,
Inc. and  Subsidiaries  as of June 30, 1999 and the results of their  operations
and cash flows for the years  ended June 30,  1999 and 1998 in  conformity  with
generally accepted accounting principles.

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




                                       Ehrhardt Keefe Steiner & Hottman PC
August 19, 1999
Denver, Colorado


<PAGE>


                   SIMS COMMUNICATIONS, INC. AND SUBSIDIARIES



                           Consolidated Balance Sheet
                                  June 30, 1999

                                       Assets
Current assets
   Cash and cash equivalents                                         $  189,772
       Restricted cash (Note 7)
                                                                        250,000
   Accounts receivables, less allowance for doubtful                    250,913
    accounts of $31,811
   Inventories                                                          464,074
   Prepaid expenses                                                     100,337
   Notes receivable, current portion (Note 5)                           150,000
                                                                     ----------
         Total current assets                                         1,405,096

Property and equipment, net (Note 4)                                  2,059,602
                                                                     ----------

Other assets
   Notes receivable less allowance of $575,062 (Note 5)                 241,200
   Licensing rights, net of accumulated amortization of                 885,558
$38,500
   Patents, net of accumulated amortization of $189,446                 327,299
   Royalty advances (Note 3)                                            515,907
   Goodwill, net of accumulated amortization of $136,070                819,299
(Note 3)
   Other                                                                120,901
         Total other assets                                           2,910,164

Total assets                                                         $6,374,862

                        Liabilities and Stockholders' Equity
Current liabilities
   Accounts payable                                                  $  649,154
   Accrued expenses                                                     622,820
   Bank line of credit (Note 7)                                         250,000
   Notes payable (Note 8)                                               519,119
   Current obligations under capital leases (Note 8)                     43,432
   Dividends payable                                                     58,025
                                                                     ----------
         Total current liabilities                                    2,142,550

Long-term liabilities
   Obligations under capital lease (Note 8)                             125,706
                                                                     ----------

         Total liabilities                                            2,268,256
                                                                     ----------
Commitments and contingencies (Notes 2 and 14)

Stockholders'  equity (Notes 10, 11 and 12) Preferred stock,
 Series A, B and C, $.001 par value,
    152,600 shares authorized - 50,000(A),
    100,000 (B), 2,060  (C)  10,995  shares
    issued  and  outstanding  at  June 30, 1999
    (liquidation preference of $1,930,000)                                   11
   Common stock $.0001 par value 40,000,000 shares
    authorized, 16,727,506 issued and outstanding                         1,673
   Additional paid in capital                                        31,668,851
   Accumulated deficit                                              (27,563,929)
                                                                    -----------
         Total stockholders' equity                                   4,106,606
Total liabilities and stockholders' equity                           $6,374,862



                 See notes to consolidated financial statements.

<PAGE>


                      Consolidated Statements of Operations


                                                            Year Ended June 30,
                                                           1999          1998
                                                          -------        ------
Revenue (Note 13)
   Telecommunications                                 $  142,672     $  446,524
   Financial processing                                  625,801        147,533
   Automated movie rentals                               888,626        371,416
   Medical transaction processing                        583,777         15,478
                                                       -----------    ---------
        Total revenue                                  2,240,876        980,951
                                                      -----------    -----------

Cost of services                                         697,481        523,479
                                                      -----------    -----------

Gross profit                                           1,543,395        457,472
                                                      -----------   -----------

Operating expenses
   General and administrative (Note 11)                6,101,305      4,405,486
   Depreciation and amortization                       1,057,908        474,372
   Selling and marketing                               1,164,761      1,058,252
   Loss on termination of licensing and equipment             --        764,000
   agreement (Note 6)
   Research and development                                   --         32,760
   Litigation settlement (Note 14)                            --        444,300
                                                      -----------      --------
        Total expenses                                 8,323,974      7,179,170
                                                     -----------    -----------

Operating loss                                        (6,780,579)    (6,721,698)
                                                      -----------    -----------

Other income (expense)
   Interest expense                                     (337,153)      (158,263)
   Interest income                                        28,772         28,424
   Loss on write down of investment (Note 6)                  --       (200,000)
   Other                                                      --          5,526
                                                     -----------     ----------
                                                        (308,381)      (324,313)

Loss from continuing operations before income taxes   (7,088,960)    (7,046,011)

Income tax benefit (Note 9)                                   --             --
                                                      -----------      --------

Net loss from continuing operations                   (7,088,960)    (7,046,011)

Net loss from discontinued operations (Note 16)               --        (63,737)
                                                      -----------    ----------

Net loss                                              (7,088,960)    (7,109,748)

Preferred stock dividend                                  58,025             --
                                                      -----------      --------

Net loss applicable to common shareholders           $(7,146,985)   $(7,109,748)
                                                      ===========    ===========

Basic and diluted loss per common share from
 continuing                                          $     (0.67)   $     (1.78)
                                                      ===========    ==========
operations

Basic and diluted loss per common share from         $        --    $     (.01)
                                                     ===========      ==========
 discontinued operations

Basic and diluted net loss per common share          $     (0.67)   $    (1.79)
                                                      ===========   ===========

Weighted  average  common shares  outstanding
 (Notes 11 and 12)                                    10,602,609      3,961,389
                                                     ===========    ===========

                 See notes to consolidated financial statements.

<PAGE>


                   SIMS COMMUNICATIONS, INC. AND SUBSIDIARIES

                 See notes to consolidated financial statements.

                                      F - 4
                 Consolidated Statements of Stockholders' Equity
                       Years Ended June 30, 1999 and 1998

<TABLE>
<S>                               <C>      <C>          <C>        <C>        <C>       <C>       <C>         <C>             <C>
                                            Preferred Stock
                                  Series A and B            Series C          Common Stock
                                                                                               Additional
                                Number                 Number               Number              Paid-in    Accumulated
                               of Shares   Amount     of Shares   Amount  of Shares    Amount   Capital     Deficit         Total

Balance June 30, 1997           125,250    $  125          --     $   --   2,120,499   $  212   15,134,68  $(13,307,196) $1,827,824

Issuance of common stock in
connection with acquisitions
   (Notes 3 and 12)                  --        --          --         --     692,350       69   1,327,691            --   1,327,760
Issuance of common stock for
cash (ranging from $.80 to
   $1.00) net offering costs
of $633,421 (Note 12)                --        --          --         --   2,246,500      225   1,475,855            --   1,476,080
Issuance of  common  stock for
conversion  of notes  payable
 to  investors  in connection
with a Regulation S offering, net
of expenses of $162,956 (Note 12)    --        --          --        --      846,827       85     936,959           --      937,044
Issuance of common stock in
exchange for services (Note 12)      --        --          --        --    1,015,749      102   1,696,134           --    1,696,236
Unearned compensation expense
  (Note 12)                          --        --          --        --           --       --    (136,475)          --     (136,475)
Issuance of common stock upon
conversion of notes payable
 and interest (Note 12)              --        --          --        --      506,791       50     707,039           --      707,089
Issuance of common stock upon
 conversion of former officer
 notes payable and accrued
 salaries (Note 12)                  --        --          --        --      230,317       23     419,174           --      419,197
Issuance of common stock in
connection with litigation
settlement (Notes 12 and 16)         --        --          --        --      300,000       30     309,270           --      309,300
Imputed value of stock option
grants in exchange for consulting
 and other services (Note 12)        --        --          --        --           --       --     775,902           --      775,902
Net loss for the year ended
 June 30, 1998                       --        --          --        --           --       --          --   (7,109,748)  (7,109,748)
------------------------------------------------------------------------------------------------------------------------------------
Balance - June 30, 1998          125,250      125          --        --    7,959,033      796  22,646,232  (20,416,944    2,230,209
Issuance of common stock
 for cash ranging from $.44 to
 $1.00 per share, net of
 $307,925 of offering costs           --       --          --        --    3,636,879      364   2,552,748           --    2,553,112
Issuance of preferred stock at
$1,000 per share, net of
$253,154 and issuance of
common stock for offering costs       --       --        1,745        2      134,769       13   1,446,830           --    1,446,845
Issuance of common stock for
services and equipment                --       --           --       --    2,607,950      261   2,340,162           --    2,340,423
Issuance of common stock for
accounts payable                      --       --           --       --      150,700       15     123,415           --      123,430
Imputed value of stock option
grants in exchange for
consulting and other services         --       --           --       --           --       --     424,671           --      424,671
Issuance of common stock for
conversion of notes payable,
 franchise deposits and accrued
  interest                            --       --           --       --    2,109,975      211   1,672,786           --    1,672,997
Issuance of common stock and
warrants in connection with
  MedCard acquisition                 --       --           --       --      100,000       10     461,894           --      461,904
Conversion of Preferred Stock   (116,000)    (116)          --       --       28,200        3         113           --           --
Dividend on Series C Preferred
  Stock                               --       --           --       --           --       --          --      (58,025)     (58,025)
Net loss for the year ended
  June 30, 1999                       --       --           --       --           --       --          --   (7,088,960)  (7,088,960)
                                ----------------------------------------------------------------------------------------------------
Balance - June 30, 1999            9,250     $  9        1,745    $   2   16,727,506  $ 1,673  $31,668,851 $(27,563,929) $4,106,606
                                 ==================================================================================================

</TABLE>


<PAGE>


                       SIMS COMMUNICATIONS, INC. AND SUBSIDIARIES
                         Notes to Consolidated Financial Statements



                                           F - 40
                               Consolidated Statements of Cash Flows


                                                             Year Ended June 30,

                                                          1999             1998
                                                     -----------      ----------
Cash flows from operating activities
   Net loss                                        $(7,088,960)     $(7,109,748)
                                                   -----------      -----------
   Adjustments to reconcile net loss to net cash
    used in operating activities
     Depreciation                                      812,816          400,552
     Amortization                                      245,092           73,820
     Imputed value of options granted for services     424,671          127,661
      and interest
     Impairment of investment                               --          200,000
     Termination of licensing and equipment                 --          764,000
agreement
     Provision for uncollectible notes receivable       178,387         400,902
     Officer salaries converted to equity                    --         419,197
     Stock issued for services, interest, and in
      connection with litigation settlement           2,425,072       1,869,061
     Changes in assets and liabilities
       Accounts and other receivables                  (126,156)        167,832
       Inventories                                      (11,601)         51,574
       Prepaid expenses                                  (7,670)        113,193
       Royalty advances                                (515,907)             --
       Accounts payable                                 229,526        (147,349)
       Accrued expenses                                  40,425        (103,339)
       Franchise deposits and customer deposits              --         (11,493)
                                                        ----------   ----------
                                                      3,694,655       4,325,611
         Net cash used in operating activities       (3,394,305)     (2,784,137)
                                                     ----------      ----------

Cash flows from investing activities
   (Advances) repayments on notes receivable, net            --         (54,372)
   Acquisition costs paid, net of cash acquired        (462,154)       (424,095)
   Capital expenditures                                 (57,398)        (34,122)
   Change in other assets                                 5,851          62,664
                                                      ----------      ----------
         Net cash used in investing activities         (513,701)       (449,925)
                                                      ----------      ----------

Cash flows from financing activities
   Proceeds from issuance of long-term debt              537,892        805,459
   (Payments on) proceeds from officer advances               --        (65,809)
   Payments under capital lease obligation              (127,216)       (10,200)
   Proceeds from issuance of common and preferred      3,999,957      2,820,781
stock, net
   Payments on long-term debt                           (326,733)      (348,191)
         Net cash provided by financing activities     4,083,900      3,202,040

Net increase (decrease) in cash                          175,894        (32,022)

Cash and cash equivalents at beginning of year           263,878        295,900
                                                      ----------      ----------

Cash and cash equivalents at end of year              $  439,772     $  263,878
                                                       ==========     ==========

Supplemental disclosure of cash flows information

Cash paid during the year for interest was $164,167 (1999) and $169,345 (1998).

Non-cash investing and financing activities (Note 15)


                 See Notes to Consolidated Financial Statements

<PAGE>



Note 1 - Organization and Significant Accounting Policies

Organization

Sims  Communications,  Inc. and  Subsidiaries  was  incorporated in the state of
Delaware  on  August  15,  1991.   The  Company   provides  low  cost,   turnkey
point-of-sale   (POS)   transaction   automation   solutions  to  retailers  and
pharmacies.  These  solutions  include a  comprehensive  network of  transaction
processing  applications using its patented,  intelligent DebitLink POS terminal
with custom  software.  Functions  include  processing  on-line  credit card and
medical  reimbursement  approvals,  processing  automated home medical equipment
product  orders  and  payments,  processing  credit  card  and ATM  charges  and
payments, cash-backs, activating prepaid phone cards, obtaining prepaid cellular
phone  service,  securing  check  guarantees  and  authorizations  and  tracking
customer  affinity  programs.  Additionally,  the Company  rents  videocassettes
through its automated  dispensing units. Most recently,  the Company has evolved
such that while the primary business is still telecommunications;  the Company's
telecommunications  expertise and technology have been applied to the healthcare
industry  in  general  and  electronic  processing  of medical  claims,  on-line
insurance eligibility verification and e-commerce, specifically. And, as a means
to establish and gain  recognition for SIMS' new identity,  the Company included
in its proxy, a ballot to change the name of SIMS Communications, Inc. to MEDCOM
USA,  Incorporated.  Upon  acceptance of the proposed name change,  MedCom USA's
ticker symbol on The Nasdaq Stock Market will be "EMED."

Principles of Consolidation

The   consolidated   financial   statements   include   the   accounts  of  SIMS
COMMUNICATIONS,  Inc. and its wholly owned  subsidiaries  SIMS  Franchise  Group
Inc., SIMS Communications International,  Inc., Link International Technologies,
Inc.,  New View  Technologies,  Inc. and  JustMed.com,  Inc.  Additionally,  the
consolidated  financial  statements include the accounts of One Medical Service,
Inc., Moviebar Company USA, Inc., and Vector Vision, Inc. since their respective
dates of  acquisition.  The financial  statements also include the operations of
the Company's MedCard division from the date of the acquisition of the licensing
rights (Note 3). All significant  intercompany  balances and  transactions  have
been eliminated in consolidation.

Use of Estimates

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


<PAGE>




Note 1 - Organization and Significant Accounting Policies (cont'd)

Cash and Cash Equivalents

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

Inventories

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

Property and Equipment

Property and  equipment is stated at cost.  Equipment  under  capital  leases is
valued at the lower of fair  market  value or net  present  value of the minimum
lease payments at inception of the lease. Depreciation is provided utilizing the
straight-line  method over the estimated useful lives for owned assets,  ranging
from 5 to 7 years,  and the related  lease term for leasehold  improvements  and
equipment  under capital  leases.  Expenditures  for maintenance and repairs are
charged to expense as incurred.

Net loss Per Common Share

Basic  earnings per share is calculated by dividing net income  attributable  to
common shareholders by the weighted average number of common shares outstanding.
Dilutive earnings per common share is computed similarly,  but also gives effect
to the impact  convertible  securities,  such as convertible debt, stock options
and warrants,  if dilutive,  would have on net income and average  common shares
outstanding  if converted at the beginning of the year. The Company has incurred
losses in each of the periods  covered in these  financial  statements,  thereby
making the inclusion of convertible securities and stock options in the 1999 and
1998  dilutive  earnings  per  share  computations  antidilutive.   Accordingly,
convertible securities and stock options have been excluded from the calculation
of dilutive  earnings per share.  Basic and dilutive  earnings per share are the
same for each period presented.

Antidilutive securities excluded from dilutive earnings per share.

        Security                    Price          Shares      Expiration Date

Stock options and warrants    $0.44  -  $13.00     9,988,429     7/1999-12/2006
Convertible Preferred Stock   $1.28  -  $  1.50    1,249,271         10/2001


<PAGE>



Note 1 - Organization and Significant Accounting Policies (cont'd)

Licensing Rights

Licensing rights capitalized in connection with the MedCard licensing  agreement
are being amortized over the length of the agreement of fifteen years.

Goodwill

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

Revenue Recognition

Revenues from the sale of  intelligent  vending  equipment are  recognized  upon
delivery of the equipment.  Revenue from the sale of MedCard units is recognized
upon shipment of the unit. Revenue is recognized upon the sale of phone cards at
the time of the sale.  Revenue on the rental of  cellular  phones  through  ACDC
machines is  recognized  at the time the rental is  completed.  Processing  fees
related to medical  transactions  and  financial  processing  are  recognized as
revenue at the time the transaction is completed. Deferred revenue on equipment,
which  has  been  sold  and  leased  back,  is  recognized  over the term of the
resulting  lease.  Automated movie rental revenues are recognized at the time of
rental and upon delivery of prepaid movie cards (where applicable).

Patents

Patent  costs are  those  costs  related  to filing  for  patents  and the value
allocated to patents based upon the  acquisition  of Link  Technologies  and its
subsidiaries.  They are amortized on the straight-line basis over their expected
economic life of seven years.

Fair Value of Financial Instruments

The  carrying  amounts  of  financial   instruments   including  cash  and  cash
equivalents,  receivables,  accounts payable, and accrued expenses  approximates
fair value at June 30, 1999 because of the  relatively  short  maturity of these
instruments.

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

Income Taxes

The Company uses the asset and liability  method of accounting for income taxes.
Under the asset and liability  method,  deferred tax assets and  liabilities are
recognized for the future tax consequences  attributable to differences  between
the financial statement carrying amounts of

<PAGE>


Note 1 - Organization and Significant Accounting Policies (cont'd)

existing  assets and liabilities  and their  respective tax basis.  Deferred tax
assets and  liabilities  are  measured  using  enacted tax rates  expected to be
recovered  or settled.  The effect on deferred tax assets and  liabilities  of a
change in tax rates is  recognized  in income in the period  that  includes  the
enactment date.

Impairment of Long-Lived Assets

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

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

Research and Development

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

Concentration of Credit Risks

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

Reclassifications

Certain   accounts  in  the  June  30,  1998  financial   statements  have  been
reclassified to conform to the June 30, 1999 presentation.



<PAGE>



Note 2 - Continued Operations

The  accompanying  financial  statements  have been  prepared on a going concern
basis  which   contemplates   the  realization  of  assets  and  liquidation  of
liabilities in the ordinary  course of business.  During the year ended June 30,
1999, the Company continued to suffer recurring losses from operations in excess
of $7,000,000, resulting in an accumulated deficit of approximately $27,500,000.
Subsequent to June 30, 1999,  the Company has raised  approximately  $400,000 in
private  placement  offerings and is continuing  to look for  additional  equity
capital.  Additionally,  the  Company  has  entered  into an  Exclusive  License
Agreement with an outside party for its One Medical  Services,  Inc.  subsidiary
whereby it will receive  $567,000 over the next six months and an 8% 7-year note
payable  in the amount of  $810,000  (see Note 17).  There can be no  assurances
however  that the Company will be  successful  in  obtaining  additional  equity
financing,  if needed, or if available on terms satisfactory to the Company,  or
be able to generate  significant profits from the operations described above. If
the Company is unable to raise  additional  equity capital or unable to generate
profits from operations, it may not be able to continue as a going concern.

Although the Company's  common stock is currently listed on the NASDAQ Small Cap
Market ("NASDAQ"),  there is no assurance that the Company's stock will continue
to be listed.  The National  Association of Securities  Dealers,  Inc.  ("NASD")
requires  for  continued  inclusion  on the NASDAQ  Small Cap  Market,  that the
Company must maintain $2,000,000 in tangible net worth and that the bid price of
the Company's common stock must be at least $1.00. If delisted from NASDAQ,  the
Company's  stock would  trade in the  unorganized  interdealer  over-the-counter
market  through  the  OTC  Bulletin  Board  which  provides  significantly  less
liquidity  than  NASDAQ.  Securities  which are not traded on NASDAQ may be more
difficult to sell and may be subject to more price volatility than NASDAQ listed
securities. The consolidated financial statements do not include any adjustments
that might be necessary if the Company is unable to continue as a going concern.

Note 3 - Acquisitions

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

In January 1998, the Company  purchased the net assets of Moviebar  Company USA,
Inc.  and all of the  outstanding  stock  of  Vector  Vision,  Inc.,  valued  at
$1,126,714  in  exchange  for  550,000  shares of the  Company's  common  stock.
Additionally,  the  Company  issued  options to  purchase  25,000  shares of the
Company's  common  stock at $ 2.20 per  share  (Notes 10 and 11).  The  acquired
companies rent motion picture video cassettes through automated dispensing units
that are located in hotels  throughout the United States.  The acquisitions were
accounted for under the purchase method of accounting.


<PAGE>



Note 3 - Acquisitions (cont'd)

Moviebar Company USA, Inc. and Vector Vision, Inc. (cont'd)

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

      Cash                                                   $   6,518
      Accounts receivable                                       90,928
      Inventory                                                 24,500
      Property and equipment                                 1,127,768
      Accounts payable                                        (123,000)
                                                             ---------
                                                            $1,126,714

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

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

One Medical Services, Inc.

In June 1998, the Company  purchased all of the outstanding stock of One Medical
Services,  Inc.,  ("One  Medical")  valued at $1,067,398 in exchange for 142,350
shares of the  Company's  common  stock and  additional  consideration  detailed
below.  Additionally,  the Company issued warrants to purchase 187,500 shares of
the  Company's  common  stock at $ 2.00 per share (Notes 10 and 11). The Company
has also  agreed to issue to the former  owners of One  Medical up to  1,485,000
additional  shares of common stock depending on the future operating  results of
One Medical.  One Medical,  has developed,  in conjunction  with the Company,  a
communications  and  transaction  platform  which allows  pharmacies,  insurance
companies,  medical  providers and suppliers to process  transactions  through a
Debit Link terminal for such items as ordering,  medical reimbursement  approval
and payment.  The  acquisition  was accounted  for under the purchase  method of
accounting.

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



<PAGE>



Note 3 - Acquisitions (cont'd)

One Medical Services, Inc. (cont'd)

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

                                                         $1,067,398

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

                                                         $1,067,398

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

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

Subsequent to June 30, 1999,  the Company has licensed the One Medical  Services
technology to an outside party (see Note 17).

MedCard Management Systems, Inc.

In November,  1998, the Company purchased  certain assets of MedCard  Management
Systems, Inc. of Islandia, New York ("MedCard"), along with the licensing rights
to the MedCard  name and the  MedCard  System  software  and network for fifteen
years.  The term of the  agreement  may be extended  after fifteen years for ten
successive  one-year periods.  The MedCard System is a comprehensive  electronic
processing  system that  consolidates  insurance  eligibility  verification  and
processes  medical claims and approval of credit card/debit card payments within
30 seconds. Consideration for the transaction included cash of $450,000, 100,000
shares of restricted common stock valued at $1.28 per share,  which approximated
market,  and warrants to purchase 350,000 shares of common stock with an imputed
value of $333,904.  At June 30, 1999,  licensing rights related to the agreement
totaled $885,558 net of $38,500 of accumulated amortization.


<PAGE>



Note 3 - Acquisitions (cont'd)

MedCard Management Systems, Inc. (cont'd)

In connection with the acquisition of the licensing rights,  the Company entered
into a royalty agreement  requiring future royalty payments based on sales (Note
14). The Company has provided  additional  funding  related to these  operations
that are recorded as royalty  advances.  As of June 30, 1999,  royalty  advances
totaled $515,907.

Note 4 - Property and Equipment

Property and equipment consist of the following:

                                                            June 30,
                                                             1999
   Property and equipment
      Vehicles                                           $   20,608
      Furniture and fixtures                                137,209
      Machinery and equipment                             3,497,529
      Software                                              100,450
      Less accumulated depreciation and amortization     (1,696,194)

                                                         $2,059,602

Note 5 - Notes Receivable

The Company made  advances to and entered into a joint  venture  agreement  with
Commonwealth Group International, Inc. and Frederick C. Sayle. The $150,000 note
receivable  bears  interest  at a rate  of 10% per  annum,  with  principal  and
interest  originally payable by February 1, 1998.  Additionally,  the Company is
entitled to 16.7% of the gross revenues from agreements with Commonwealth  Group
International,  Inc. which include cable television and cellular  communications
licenses owned by CGI-UKRAINE Ltd and ASWEST,  Commonwealth Group International,
Inc.  joint  venture  partners.  The Company has received  interest on the notes
through  June 30,  1999 and  believes  that  both  principal  and  interest  are
collectible at June 30, 1999.

As of June 30,  1997,  the Company had sold  equipment to a customer for a total
sales price of $664,000. The total amount of $664,000 is payable under the terms
of a note  receivable  which bears  interest at 8.5%.  Principal and interest is
payable  commencing  by  December  31,  1997 in equal  monthly  installments  of
approximately  $14,000 through November 30, 2002. No payments have been received
as of June 30,  1999.  Accordingly,  the Company has  recorded an  allowance  of
$452,800 which reduces the net balance to $211,200, which approximates the value
of the underlying collateral.



<PAGE>



Note 5 - Notes Receivable (cont'd)

The Company has an unsecured note receivable for $30,000, which was collected in
October 1999.

The  Company  has a note  receivable  from an entity  owned  entirely  by former
officers of the Company, with a balance of $122,262.  This amount has been fully
reserved against because collection is considered to be unlikely and the Company
does not have any collateral for this note.

Note 6 - Investments

During the year ended June 30,  1998,  the Company  terminated  a licensing  and
equipment  agreement with a Canadian  Company that had  originally  been entered
into in the year  ended June 30,  1997 in  exchange  for  preferred  stock.  The
equipment was returned to the Company,  the preferred  stock was returned to the
Canadian  Company and a loss  provision for $764,000 was provided for during the
year ended June 30, 1998.

Note 7 - Bank Line of Credit

The Company  maintains a secured  revolving line of credit with a bank for up to
$250,000.  The  balance at June 30, 1999 was  $250,000.  The  line-of-credit  is
secured by a restricted  certificate  of deposit with a balance at June 30, 1999
of approximately  $250,000.  The line-of-credit  bears interest at 5.77% payable
monthly.  The  line-of-credit  expired  June 5, 1999 and on July 13,  1999,  the
Company voluntarily redeemed the certificate of deposit and applied the proceeds
toward repayment of the credit line principal and accrued interest in full.

Note 8 - Notes Payable and Capital Leases
                                                               June 30, 1999
8.0%  convertible  notes  payable -  individuals,
interest  payable  quarterly, principal  due at
maturity  dates  ranging  from August 1997 to
May 1998.  Debt includes  conversion to common
stock feature with conversion rates ranging from
 $1.25 to $2.50 per share.  Currently in default                   94,000

Note payable - individual,  non-interest bearing
payable in monthly installments of $1,500 through
 June 2000.                                                        37,500

Note payable - franchisee,  bearing interest at 10%,
 principal and interest due October 31, 1999; debt
 includes  conversion  to common stock feature at $.875
 per share.                                                       317,619

<PAGE>

Note 8 - Notes Payable and Capital Leases (cont'd)

Convertible  Bridge  Financing  Note  -  corporation,
 bearing  interest  at 4%, principal and interest due
July 28, 1999. Debt includes conversion to common
 stock feature at $.70 per share.                                 70,000
                                                              ----------

Total current maturities                                      $  519,119
                                                              ==========

Capital Leases

The Company leases various office and other equipment which are accounted for as
capitalized  leases. The following is a schedule of future minimum capital lease
payments  together with the net present value of the minimum lease obligation as
of June 30, 1999.

         Year Ending June 30,

               2000                                        $68,843
               2001                                         67,818
               2002                                         67,818
               2003                                         15,797
               2004                                          3,814
                                                             -----
               Total                                       224,090
               Less interest                               (54,952)
                                                           -------
                                                           169,138
               Less current portion                        (43,432)

                                                          $125,706

The assets recorded under capital leases are as follows:

        Furniture, fixtures and equipment                 $162,630
        Less accumulated depreciation                      (13,379)

                                                          $149,251

Depreciation  expense for equipment  under capital lease was $70,418 and $14,679
for the years ended June 30, 1999 and 1998, respectively.

Note 9 - Income Taxes

Deferred  tax  liabilities  and assets are  determined  based on the  difference
between the financial  statement and tax basis of assets and  liabilities  using
enacted tax rates in effect for the year in which the  differences  are expected
to reverse. The measurement of deferred tax assets is

<PAGE>



Note 9 - Income Taxes (cont'd)

reduced,  if  necessary,  by the  amount  of any tax  benefits  that,  based  on
available evidence, are not expected to be realized.

The principal temporary  differences that will result in deferred tax assets and
liabilities  are certain  expenses and losses  accrued for  financial  reporting
purposes  not  deductible  for tax  purposes  until paid,  depreciation  for tax
purposes in excess of  depreciation  for  financial  reporting  purposes and the
deferral of franchise costs and franchise sales revenues for financial reporting
purposes which are recognized for tax purposes in the period paid. The effect of
the  differences  outlined  above and the benefit of the Company's net operating
loss  carryforward   generated  a  long-term  deferred  tax  asset  that  totals
approximately  $8,800,000  and has been  reduced  100% by a valuation  allowance
because of a lack of profitable operating history. Accordingly,  there is no net
deferred  tax  asset  reflected  in  the  accompanying   consolidated  financial
statements.  The Company will continue to assess the valuation  allowance and to
the  extent  it is  determined  that it is more  likely  than  not  that the tax
benefits will be realized,  the tax benefit of the remaining net deferred assets
will be recognized at that time.

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

                                                              Year Ended
                                                                June 30,
                                                          1999            1998

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

Effective tax rate (benefit)                              --%             --%

The deferred tax asset consists of the following:
                                                                  June 30,
                                                                    1999

      Total long-term deferred tax asset                         $8,800,000
      Valuation allowance                                        (8,800,000)

                                                                 $       --

At June 30, 1999,  the Company has  approximately  $26,000,000  of net operating
loss  carryforwards  for  income tax  reporting  purposes  which  expire in 2007
through 2014.  During 1995,  1998 and 1999,  there were  transactions  involving
changes in  ownership  which  restrict the  utilization  of net  operating  loss
carryforwards in the future.


<PAGE>



Note 10 - Stock Option and Bonus Plans

The Company's Incentive Stock Option Plans, Non-Qualified Stock Option Plans and
Stock Bonus Plans are  collectively  referred to as the "Plans".  The  following
sets forth certain  information as of June 30, 1999 concerning the stock options
and stock  bonuses  granted by the Company  pursuant  to the Plans.  Each option
represents the right to purchase one share of the Company's Common Stock.

<TABLE>
<S>                                    <C>            <C>             <C>              <C>
                                                      Shares
                                     Total Shares   Reserved for   Shares Issued       Remaining
                                      Reserved      Outstanding      as Stock        Shares/Options
                                     Under Plans     Options          Bonus           Under Plan

1998 Incentive Stock Option Plan    1,500,000        688,000          N/A               812,000

1996 Non-Qualified Stock            1,500,000        607,500          N/A               892,500
   Option Plan

1998 Non-Qualified Stock            1,500,000             --          N/A             1,500,000
   Option Plan

1996 and 1998 Stock Bonus           1,500,000            N/A     1,497,625                2,375
    Plans
1999 Stock Bonus Plan                 500,000            N/A            --              500,000

</TABLE>

Incentive Stock Option Plan.

The 1998  Incentive  Stock  Option Plan  authorizes  the  issuance of options to
purchase up to 1,500,000  shares of the Company's  Common  Stock.  The Incentive
Stock Option Plan will remain in effect until 2008 unless terminated  earlier by
action of the Board.  Only officers,  directors and key employees of the Company
may be granted options pursuant to the Incentive Stock Option Plan.

Non-Qualified Stock Option Plans

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




<PAGE>


Note 10 - Stock Option and Bonus Plans (cont'd)

Non-Qualified Stock Option Plans (cont'd)

The following is a summary of options granted:

<TABLE>
<S>                              <C>          <C>        <C>             <C>            <C>          <C>            <C>
                                             Non-
                                          Qualified   Options and                                               Weighted
                              Incentive      Stock     Warrants         Weighted                                  Average
                                Stock     Options      Issued Not       Average     Weighted                   Exercise Price
                             Options and     and      Related to a     Exercise      Average      Currently      Currently
                               Warrants   Warrants        Plan           Price    Fair Value    Exercisable    Exercisable
                                ---------  --------   ------------     --------  -----------    -----------    -------------

Outstanding June 30, 1997       683,500     10,000      250,765        $   4.96                    944,265       $   4.96

 Options   and   warrants      (161,000)        --           --           (4.00)
     expired or cancelled
 Options  transferred
   between Plans               (522,500)   522,500           --            4.86
   Options   and   warrants          --     75,000    2,362,000            1.73        1.17
   granted                     ---------   -------   -----------     ----------   ---------

Outstanding June 30, 1998            --    607,500    2,612,765            2.56                  3,220,265           2.56

Options   and   warrants             --         --           --
 expired or forfeited            (3,000)
   Options   and   warrants     691,000         --    6,080,164           1.04         .69
  granted                     ----------   ---------    ----------     ----------   ---------

Outstanding June 30, 1999       688,000    607,500    8,692,929       $   1.53                   8,840,429     $     1.61
                             ===========  =========   ==========     ==========                  =========      =========
</TABLE>

<TABLE>
<S>                                   <C>              <C>            <C>             <C>               <C>
                                                                                            June 30,1999
                              Options and Warrants Outstanding                  Options and Warrants Exercisable
                                                                   Weighted
                                                    Weighted        Average                           Weighted
                                    Number           Average       Remaining         Number           Average
                                  Outstanding       Exercise      Contractual     Exercisable      Exercise Price
Range of Exercisable Price                            Price           Life

$.44 - $3.00                       9,064,614           1.15           3.50         7,916,614        $    1.18
$4.00 - $8.00                        872,565           4.91           3.96                               4.91
                                                                                     872,565
$10.00 - $13.00                       51,250          11.76            .22            51,250            11.76
                                 -------------    -------------    -------------    -------------    -------------

                                   9,988,429           1.53           3.52         8,840,429        $    1.61
                                 =============    =============    =============    =============    ==========
</TABLE>


<PAGE>


Note 10 - Stock Option and Bonus Plans (cont'd)

Non-Qualified Stock Option Plans (cont'd)

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

The Company has adopted the disclosure-only  provisions of FAS 123. Accordingly,
no  compensation  cost has been recognized for the issuances of stock options to
employees.  For the years ended June 30, 1999 and 1998, employees of the Company
were issued options to purchase a total of 3,281,000 and 1,806,500 shares of the
Company's  common  stock,  respectively,  at rates  ranging from $.81 to $13 per
share expiring from September 1999 to December 2006.

Had  compensation  cost for the Company's  issuances of stock options during the
years  ended June 30, 1999 and 1998 been  determined  based on the fair value at
the date of grant  consistent with the provisions of FAS 123, the Company's 1999
and 1998 net loss and loss per share would have been  increased to the pro forma
amounts indicated below:

                                                       June 30,

                                                 1999            1998
                                            -----------     ---------

       Net loss - as reported                $(7,088,960)    $(7,109,748)
       Net loss - pro forma                  $(9,469,523)    $(9,227,346)
       Net loss per share - as reported      $     (.67)     $    (1.79)
       Net loss per share - pro forma        $     (.89)     $    (2.33)

The Company utilizes the  Black-Scholes  options-pricing  model to calculate the
fair value of each individual issuance of options or warrants with the following
assumptions used for grants during the year ended June 30, 1999; dividends yield
of 0.0%; expected average annual volatility of 133.86%; average annual risk-free
interest rate of 6.0%; and expected terms averaging 3 years.

Stock Bonus Plans

Up to  2,000,000  shares of Common  Stock may be granted  under the Stock  Bonus
Plan.  Such shares may consist,  in whole or in part, of authorized but unissued
shares,  or  treasury  shares.  Under  the  Stock  Bonus  Plans,  the  Company's
employees, directors, officers, consultants and advisors are eligible to receive
a grant of the Company's shares; provided, however, that bona fide services must
be rendered by consultants or advisors and such services must not be in

<PAGE>



Note 10 - Stock Option and Bonus Plans (cont'd)

connection   with  the  offer  or  sale  of  securities  in  a   capital-raising
transaction. As of June 30, 1999, 1,497,625 shares of the Company's common stock
have been issued under the Stock Bonus Plans.

Note 11 - Stockholders' Equity

Common Stock

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

Preferred Stock

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

In April  1995,  the  Company  established  the  Series A  Preferred  Stock  and
authorized the issuance of up to 50,000 shares. Each share of series A Preferred
Stock is entitled  to a dividend at the rate of $1.60 per share when,  as and if
declared by the Board of Directors.  Dividends not declared are not  cumulative.
Additionally,  each share of Series A Preferred  Stock is  convertible  into .20
shares of the  Company's  Common Stock at any time after July 1, 1999.  Upon any
liquidation or dissolution of the Company,  each  outstanding  share of Series A
Preferred  Stock is  entitled  to  distribution  of $20 per  share  prior to any
distribution to the holders of the Company's  common stock. As of June 30, 1999,
the Company has 9,250 shares of Series A Preferred Stock issued and outstanding.

In March  1996,  the  Company  established  the  Series B  Preferred  Stock  and
authorized  the  issuance  of up to  100,000  shares.  Each  share  of  series B
Preferred Stock is entitled to a dividend at the rate of $.15 per share when, as
and if  declared  by the Board of  Directors.  Dividends  not  declared  are not
cumulative.  Additionally, each share of Series B Preferred Stock is convertible
into  one  share  of  the  Company's  Common  Stock.  Upon  any  liquidation  or
dissolution of the Company,  each outstanding  share of Series B Preferred Stock
is entitled to distribution of $1.00 per share prior to any  distribution to the
holders  of the  Company's  common  stock.  As of June 30,  1999,  all  Series B
Preferred shares had been converted and there were no shares outstanding.

In  November,  1998,  the  Company's  board of  directors  amended the  original
certificate  of  designation  for its Series C Preferred  Stock ("Series C") and
authorized  the  issuance  of up to 2,060  shares.  Each  share of the  Series C
Preferred  Stock is entitled to a dividend at the rate of $.06 per share and has
a stated  value of $ 1,000 per  share.  Dividends  on all shares of the Series C
Preferred  Stock shall begin to accrue and accumulate from the date of issuance.
Additionally,  each share of Series C Preferred Stock is convertible into shares
of the  Company's  Common  Stock  at an  adjustable  conversion  rate.  Upon any
liquidation or dissolution of the Company,

<PAGE>


Note 11 - Stockholders' Equity (cont'd)

Preferred Stock (cont'd)

each  outstanding  share of Series C Preferred Stock is entitled to distribution
of the stated amount per share prior to any  distribution  to the holders of the
Company's common stock. From November,  1998 to January,  1999, the Company sold
1,700  shares of its 6%  Series C  Preferred  Stock to a group of  institutional
investors for $1,700,000 net of $253,154 in offering  costs.  For each preferred
share,  the Company will issue warrants on certain dates.  The warrants  entitle
the holder to purchase  common  stock at prices  ranging from $1.27 to $1.50 per
share.  While the  Company has the right to redeem the  preferred  shares at any
time; the redemption  price varies from 110% to 125% of face value  depending on
the redemption  date. In connection with the preferred stock sales,  the Company
issued 45 shares of preferred,  14,769  shares of common and 37,500  warrants to
purchase common at prices ranging from $1.27 to $1.50 per share to the placement
agent.  In addition,  the Company  issued  120,000 shares of common stock to the
investment banking group and 200,000 warrants to purchase common stock at prices
of $2.50 to $5.00 per share. The dividend attributable to the Series C preferred
stock was $58,025 at June 30, 1999.

For the years  ended June 30,  1999 and 1998,  the  Company  did not declare any
dividends.

Equity Transactions

During the year ended June 30, 1999, the following equity transactions occurred:

The Company sold 3,636,879 shares of common stock at prices ranging from $.44 to
$1 per  share in  private  placements  raising  $2,553,112  net of  $307,925  in
offering costs.

The  Company  issued  2,607,950  shares of its common  stock for  $2,340,423  of
services and equipment received.

The Company  issued 150,700 shares of its common stock for $123,430 for services
previously rendered.

The  Company  issued  2,109,975  shares of its common  stock in order to convert
$1,672,997  worth of long-term  debt,  notes  payable,  franchisee  deposits and
accrued interest into stockholders' equity.

The Company  issued 466,150 shares of its common stock valued at $431,445 to its
employees under the Company's Stock Bonus Plan.

The Company  issued  100,000  shares of its common  stock  valued at $128,000 in
connection  with the  acquisition  of certain  assets of MedCard  including  the
exclusive  licensing  rights to the MedCard name and the MedCard System software
and network. Additionally, the Company

<PAGE>



Note 11 - Stockholders' Equity (cont'd)

Equity Transactions (cont'd)

issued  options to  purchase  350,000  shares of the  common  stock at $1.34 per
share.  The  options  expire  in  November,  2001 and have an  imputed  value of
$333,904  which was  allocated  as part of the purchase  price of the  licensing
rights acquired (Note 2).

The Company  issued  options to purchase  150,000  shares of its common stock at
$.59 per share to a company retained as its investment banker in connection with
any future  offerings.  As no such offering took place, the imputed value of the
options, $77,730, has been charged to stock based compensation at June 30, 1999.

The Company  issued  options to purchase  50,000  shares of its common  stock at
$1.50  per  share  in  connection  with a loan  advanced  to the  Company  by an
individual.  The imputed  value of the  options,  $40,101,  has been  charged to
interest expense during the year ended June 30, 1999.

The Company  issued  options to purchase  420,000  shares of its common stock at
rates  ranging from $.82 to $2.50 per share.  These  options  expire  September,
2001.  $306,840 of expense has been  recognized  based on imputed values ranging
from $.61 to $1.50 per option.

The total value of the  above-mentioned  stock and warrants  that is included in
general and administrative  expenses in the accompanying  consolidated statement
of operations was $2,540,338 during the year ended June 30, 1999.

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

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

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

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


<PAGE>



Note 11 - Stockholders' Equity (cont'd)

Equity Transactions (cont'd)

$.80 to $2.00.  These options  expire May 2000 and January  2002.  These options
have an imputed value of $407,657 that was included in offering expenses.

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

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

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

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

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

The total value of the  above-mentioned  stock and warrants  that is included in
general and administrative  expenses in the accompanying  consolidated statement
of operations was $1,687,422 during the year ended June 30, 1998.

Note 12 - Stock Splits

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

Note 13 - Business Segments

The  Company  has  four  reportable  segments:   telecommunications,   financial
processing,  automated  movie rentals and medical  transaction  processing.  The
telecommunications  segment  is  responsible  for the  sales and  processing  of
cellular telephone activations and rentals, prepaid cellular phone

<PAGE>



Note 13 - Business Segments (cont'd)

cards and other  telecommunications  related services.  The financial processing
segment has developed,  in  conjunction  with the Company's  intelligent  "Debit
Link" system,  a monetary  transaction  processing  platform that eliminates the
need for ATM's used  primarily in major fast food chains.  The  automated  movie
rentals  segment rents  videocassettes  through  automated  dispensing  units in
hotels,  primarily located in the states of Florida and California.  The medical
transaction processing segment has developed,  in conjunction with the Company's
intelligent  "Debit Link" system,  a communications  and transaction  processing
platform  which  allows  pharmacies  to access  on-line  credit card and medical
reimbursement  approval and automated product ordering and payment. This segment
also includes the MedCard System, a comprehensive  electronic  processing system
that consolidates insurance eligibility  verification and process medical claims
and  approval  of  credit  card/debit  card  payments  within  30  seconds.  The
accounting  policies  of the  segments  are the same as those  described  in the
summary of significant  accounting  policies.  The Company's reportable segments
are strategic business units that offer different products and services.

Operating results and other financial data are presented for the four reportable
segments of the Company for the years ended June 30, 1999 and 1998.  Net revenue
includes  sales  to  external  customers  within  that  segment.  There  are  no
significant  transfers  between  segments.  Cost of goods  sold  includes  costs
associated with net revenue within the segments.  Depreciation  and amortization
includes expenses related to depreciation and amortization directly allocated to
the segment.  Segment income (loss) does not include general and  administrative
expenses,   selling  and  marketing,  other  operating  expenses,  other  income
(expense)  items or income taxes.  Identifiable  assets are those assets used in
segment  operations,  which consist primarily of cash,  receivables,  inventory,
prepaid expenses, machinery, equipment, licensing rights and goodwill. Corporate
assets are principally patents.

<TABLE>
<S>                      <C>           <C>           <C>           <C>         <C>             <C>
                                                                 Medical
                      Tele-         Financial    Automated    Transaction   Corporate
                    Communications  Processing   Movie Rental  Processing   And Other      Consolidated

June 30, 1998:

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

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

Depreciation and
 amortization        $  245,700    $       -    $  94,058     $       -      $134,614       $ 474,372

Selling, General
 & Administrative                                                         $ 7,029,111      $7,029,111

Loss from            $  (44,644)   $  19,400    $ 132,318     $  10,640   $(7,163,725)    $(7,046,011)
 continuing
 operations
 before income
 taxes

Identifiable         $2,224,685    $ 467,962    $1,450,122    $1,058,714     $401,268      $5,602,751

<PAGE>

Note 13 - Business Segments (cont'd)

June 30, 1999:

Net revenues         $  142,672    $ 625,801    $ 888,626     $ 583,777     $     -    $2,240,876

Cost of services     $   86,252    $ 236,517    $ 243,512     $ 131,200     $     -     $ 697,481

Depreciation and
 amortization        $  504,686    $ 117,768    $ 223,839     $ 136,458     $ 75,157   $1,057,908

Selling, General
 & Administrative                                                        $ 7,574,447   $7,574,447

Loss from            $ (448,266)   $ 271,516    $ 421,275     $ 316,119  $(7,649,604) $(7,088,960)
 continuing
 operations
 before income
 taxes

Identifiable         $1,812,851    $ 573,362    $1,197,108    $2,464,242    $327,279   $ 6,374,862
</TABLE>


Product or Service Type     Year Ended June 30, 1999   Year Ended June 30, 1998
-----------------------     ------------------------   ------------------------
                                 $          0              $   103,774
Rental of  cellular
     telephones
Activation     fees     for
cellular telephones                         0                  158,309
Sale  of  prepaid   calling            89,635                  144,457
cards
Sale   of   long   distance
telephone service                           0                   39,984
Financial        processing           625,801                  147,533
revenue
Movie rentals                         888,626                  371,416
One medical revenues                  156,712                   15,478
MedCard system                        427,065                        0
Other                                  53,037                        0
Total                            $  2,240,876              $   980,951

Note 14 - Commitments and Contingencies

Operating Leases

The  Company  leases  administrative   offices  and  warehouse  locations  under
noncancelable  operating  leases in California  and Florida.  The minimum annual
rent  generally  increases  each year by an amount based in the  Consumer  Price
Index.  The Company is also generally  responsible for paying its portion of the
common area maintenance, real estate taxes and insurance expenses. Additionally,
the Company also leases various office equipment under  noncancelable  operating
leases  with terms up to 5 years.  Rental  expense  for the years ended June 30,
1999 and 1998 was $279,550 and $113,275, respectively.



<PAGE>



Note 14 - Commitments and Contingencies (cont'd)


Future minimum lease commitments at June 30, 1999 are as follows:

           Year Ending June 30,

                 2000                                    $  287,000
                 2001                                       238,000
                 2002                                       236,000
                 2003                                       192,000
                 2004                                       119,000
                 Thereafter                                 105,000
                                                         ----------

                                                         $1,177,000

Employment Agreements

The Company has entered into three-year  employment agreements with its two most
senior  officers.  The  agreements  entitle the officers to an annual  salary of
$137,500 and $120,000, respectively. As additional compensation, each officer is
entitled  to receive an  incentive  bonus  computed  based upon  annual  Company
revenues from operations and is entitled to other benefits, including such items
as an automobile  allowance,  health and life  insurance,  vacation and sick pay
benefits.

The Company has also  entered  into a three year  employment  agreement  with an
officer of a subsidiary of the Company  commencing on June 1, 1998.  The officer
is entitled to a salary of $96,000 per year.  As  additional  compensation,  the
officer is entitled to receive incentive bonus stock options computed based upon
annual  performance  criteria and is entitled to other benefits,  including such
items as an automobile allowance,  health and life insurance,  vacation and sick
pay benefits.  As part of an Exclusive Licensing Agreement with an outside party
dated July 20, 1999, the Company and the executive  terminated  this  employment
agreement (Note 17).

Additionally, the Company has entered into three year employment agreements with
another officer and two other employees.  These agreements  amount to a total of
$187,000 in annual  base  compensation.  In  connection  with these  agreements,
43,274 shares of the Company's common stock and options to purchase up to 34,000
shares of the  Company's  common stock at rates ranging from $1.00 to $2.00 were
issued.  These agreements are automatically  renewable for a period of two years
after the third anniversary date. As additional compensation, each individual is
entitled to receive an incentive  bonus computed  based upon annual  performance
criteria as determined in the  applicable  agreements and is entitled to certain
other benefits, including such items as an automobile allowance, health and life
insurance,  vacation and sick pay benefits.  One of the  agreements  entitle the
individual to additional compensation of $92.50 for each POS

<PAGE>




Note 14 - Commitments and Contingencies (cont'd)

Employment Agreements (cont'd)

transaction  automation  terminal placed in service or sold.  Effective June 10,
1999, the Company and this employee terminated the employment agreement.

Royalty Agreement

In connection with the acquisition of the licensing  rights of MedCard (Note 3),
the Company entered into a royalty agreement with the licensor. The Company will
pay the licensor 25% of monthly  revenues,  less direct costs,  generated by the
licensed  software.  Royalties on net revenues in excess of $1,000,000 per month
shall be paid at 10%  instead of 25%.  The  agreement  requires  the  Company to
advance  $550,000 of royalty  fees  payable to the licensor and then retain as a
credit 40% of the future monthly royalty payments until the advance is offset in
full.

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

Additionally, the Company has an agreement with an individual requiring payments
based  upon the net  profits of Cellex  Communications,  Inc.  (Cellex).  20% of
Cellex's net profits are to be remitted to this individual pursuant to the terms
of the  agreement.  As of June 30, 1998,  Cellex has remitted  $22,818 in profit
participation payments to this individual.  Effective December 1997, the Company
discontinued  the operations of Cellex (Note 16). As of June 30, 1999, no monies
had been remitted for profit participation for the current year.

Consulting Agreements

The  Company  has  entered  into  various  consulting  agreements  with  outside
consultants.  These  agreements  entitle the  consultant  to issuances of common
stock and  options  as well as cash  compensation  in  exchange  for  consulting
services relating to such things as raising  additional debt and equity capital,
sales development,  investor and public relations and general strategic business
consulting.  For the year ended June 30,  1999,  the  Company  issued  2,123,300
shares of common stock and options to acquire  360,000 shares of common stock at
rates ranging from $.82 to $2.00 per share in exchange for  consulting  services
valued at  $2,134,296.  As of June 30,  1999,  75,000  shares  remained  payable
pursuant to the terms of two of the consulting agreements.  No other outstanding
obligations  existed as of June 30, 1999  pursuant to the terms of the remaining
consulting agreements.  For the year ended June 30, 1998, the Company has issued
483,551  shares of common stock and options to acquire  100,000 shares of common
stock at rates  ranging from 1.00 to 5.00 per share in exchange  for  consulting
services valued at $ 1,029,412.



<PAGE>



Note 14 - Commitments and Contingencies (cont'd)

Litigation

During the year ended June 30, 1998, an action was brought  against  subsidiary,
Vector  Vision,  Inc.  The  litigation  alleged  the  former  employee  was owed
approximately  $80,000 in  un-reimbursed  expenses  and monies  advanced  to the
company.  The Company settled the matter for approximately  $50,000. As security
for the settlement,  the Company gave the individual a collateral  assignment of
revenue  generated  from a location using the Company's  automated  movie rental
system as well as related  equipment  and  agreed to have a judgment  of $80,000
entered  against them should they default in payment.  As of June 30, 1999,  the
Company owed $8,000 to the former employee under the settlement agreement;  this
amount is included in accrued expenses.

During  February  1998,  the Company  reached a settlement  with a former master
license  holder (the  "license  holder") for Holland,  Belgium and Germany.  The
Company  issued  300,000 shares of common stock valued at $309,300 and agreed to
pay  $135,000 in cash,  resulting in a special  charge of $424,300.  At June 30,
1998, $90,000 was due to license holder and included in accrued expenses. During
the fiscal year ended June 30, 1999, the Company made $15,000 in payments to the
license holder in accordance  with the settlement  agreement.  On April 7, 1999,
the license holder converted the balance of the amount due ($75,000) into 70,755
shares of the Company's common stock (see Note 11).

Additionally, in the fiscal year ended June 30, 1998, a franchisee demanded that
the Company repurchase his franchises for approximately $1,000,000 or a suit for
breach of the  franchise  agreement  would be filed.  On February 19, 1999,  the
Company  negotiated a settlement with the franchisee  whereby the Company issued
571,429 shares of common stock to satisfy $500,000 of the  franchisee's  deposit
liability (see Note 11). In addition,  the Company issued a 10% Promissory  Note
for $317,619 in favor of the franchisee due October 31, 1999 (see Note 8).

A suit has been filed  against  the  Company by a former  employee  for  damages
totaling $269,000.  Management believes the claim is without merit and has filed
a counterclaim against the plaintiff charging criminal wrongdoing.

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

Note 15 - Statements of Cash Flows

During the year ended June 30, 1999:

The  Company   acquired   $860,810  of  fixed  assets  through  capital  leases,
satisfaction of notes receivable and for stock.


<PAGE>

Note 15 - Statements of Cash Flows (cont'd)

The  Company  accrued  dividends  payable of  $58,025 on the Series C  Preferred
Stock.

The  Company  incurred  various  noncash  transactions  in  connection  with the
acquisition of the MedCard licensing rights (Note 3).

The Company converted $500,000 of franchise deposits,  $1,068,348 of convertible
notes and  interest  payable and  $123,430 of accounts  payable  into  2,260,675
shares of common stock.

The Company converted $327,661 of franchise deposits into notes payable.

The Company  converted  116,000  shares of Series A and B  Preferred  Stock into
21,950 shares of common stock.

The Company sold $635,237 of fixed assets by  transferring  the related  capital
leases to the acquiring entity.

During the fiscal year ended June 30, 1998:

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

The Company  converted  $707,089 of  convertible  notes and interest  payable to
506,791 shares of common stock.

The Company converted  $419,197 of officer notes payable and salaries to 230,317
shares of common stock.

The Company  incurred  various  noncash  transactions  related to their business
acquisitions (Note 3).

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

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

Note 16 - Discontinued Operations

Effective  December 1997, the Company  decided to discontinue  the operations of
Cellex  communications  Inc.,  which  provided  cellular  activation and prepaid
cellular time services.  The Company expects no additional  revenues or expenses


<PAGE>




Note 16 - Discontinued Operations (cont'd)

and has no material  remaining  assets or liabilities.  For the years ended June
30,  1999 and 1998,  there was a loss on the  disposal  of the  segment  and the
discontinued operations resulted in a charge of $63,737.

Note 17 - Subsequent Event

On July 20, 1999, the Company  entered into an agreement with a corporation  for
the exclusive  licensing  rights to market the One Medical Service  system.  The
Company  received  $200,000  upon  execution of the document and will receive an
additional  $367,000 over the following six months.  The Company also received a
7-year 8% unsecured note receivable,  in the amount of $810,000,  as part of the
transaction.  The note  shall be paid off by  monthly  royalty  payments  to the
Company and other  scheduled  payment  amounts  over its term.  The Licensee can
convert  the monies  paid for  royalty  and  licensing  fees into an  eighty-one
percent  (81%)  ownership  in One  Medical  Service.  It can  also  acquire  the
remaining  nineteen percent (19%) for the greater of $132,000 or the fair market
value of such interest.  The Licensee also agreed to acquire the inventory,  pay
$200,000  of  accounts  payable  and  assume  the  salaries  and other  overhead
associated with the One Medical operation.



<PAGE>



                                   SIGNATURES


    In accordance  with Section 13 or 15(a) of the Exchange Act, the  Registrant
has caused this Report to be signed on its behalf by the undersigned,  thereunto
duly authorized on the 18th day of April 2000.

                                     SIMS COMMUNICATIONS, INC.
                                     By   /s/ Mark  Bennett
                                     Mark Bennett, President

                                    By  /s/  Alan Ruben
                                   Alan Ruben , Principal Financial Officer and
                                    Chief  Accounting Officer

         In accordance with the Exchange Act, this Report has been signed by the
following persons on behalf of the Registrant in the capacities and on the dates
indicated.

Signature                            Title                    Date

 /s/ Mark Bennett
Mark Bennett                        Director             April 18, 2000

 /s/ Michael Malet
Michael Malet                       Director             April 18, 2000

 /s/ David Breslow
David Breslow                       Director             April 18, 2000


Julio Curra                         Director





<PAGE>







                                  FORM 10-KSB/A

                                    EXHIBITS

                            SIMS Communications, Inc.
                             18001 Cowan, Suites C&D
                                Irvine, CA 92614