SECURITIES AND EXCHANGE COMMISSION
                            WASHINGTON, D.C. 20549

                                  FORM 10-KSB
(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, 1997
                                      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.)
      3333 S. Congress Avenue, Suite 401
           Delray Beach, Florida                             33445
    (Address of Principal Executive Office)                Zip Code

Registrant's  telephone number,  including Area Code: (407) 265-3601  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. [ ]

The issuer's revenues for the most recent fiscal year were $4,730,112.

The  aggregate  market value of the voting stock held by  non-affiliates  of the
registrant,  (7,744,203  shares)  based upon the average bid and asked prices of
the Registrant's Common Stock on October 10, 1997, was approximately $7,800,000.

As of September 30, 1997 the Company had 9,276,995 issued and outstanding shares
of common stock.

<PAGE>


ITEM 1.  DESCRIPTION OF BUSINESS

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

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

         The Company's first ACDC units became operational in September l993. In
August  l995,  the  Company  had 50 ACDC units in  operation  and the  Company's
franchisees  (13 in total)  had 28 ACDC's in  operation.  These  ACDC units were
located in 30 states and in Puerto Rico.

         During 1995 the Company  discontinued  the sale of new franchises.  The
Company's  decision in this regard was based in part on the Company's  desire to
retain more ACDC units for its own use and to decrease the  expenses  associated
with selling franchises and servicing franchisees.

         At September  30, 1997,  the Company had 18 ACDC units in operation and
the Company's only remaining  franchisee had five ACDC's in operation.  The ACDC
units operated by the Company were located at car rental  agencies (9 units) and
certain AAA Club offices (9 units).

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

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

         In June 1995 the shareholders of the Company approved a 2 for 1 forward
split of the Company's  Common Stock.  In February 1996 the  shareholders of the
Company  approved  a 1 for 10  reverse  split  of the  Company's  Common  Stock.
Accordingly,  all  historical  share data in this report  have been  adjusted to
reflect this stock split.

         The  Company's  executive  offices  are  located  at 3333 S.  Congress
Avenue,  Suite 401,  Delray  Beach,  Florida  33445.  The  Company's  telephone
number is (561) 265-3601.


<PAGE>



Link International Technologies, Inc.

         Effective  December 31, 1996, the Company  acquired Link  International
Technologies,  Inc. ("Link") in consideration for the issuance of 674,157 shares
of the Company's Common Stock. For financial  statement purposes the acquisition
was  accounted for under the purchase  method and the assets  acquired from Link
(net of liabilities) were valued by the Company at approximately $600,000.

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

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

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

    In order to appeal to locations where pay telephones are clustered for large
scale use (such as  airports,  higher  end  hotels,  stadiums,  etc.),  Link has
designed a second, smaller version of its machine (scheduled to be introduced in
1997) which fits inside the stainless steel cabinets used at

<PAGE>


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

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

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

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

         See Item 6 of this report for  information  concerning  Link's revenues
for the year ending June 30, 1997.

Revenues From the ACDC System

         An ACDC station is capable of dispensing  from 1 to 12 cellular  phones
on a user-friendly, completely automated basis. The system uses electronic funds
transfer and accepts American Express,  Visa,  Mastercard,  Discover and Diner's
Club credit cards for payment in advance by the customer. The system is entirely
free-standing and requires no on-site support personnel.

         To rent a cellular  telephone from an ACDC, a customer  simply places a
credit or bank card in the machine's credit card reader.  The ACDC then provides
the customer with easy to follow, on-screen instructions regarding the procedure
for renting a cellular telephone.  The ACDC validates the customer's credit card
and charges the customer a deposit for the equipment rented. Once the customer's
credit card is accepted,  the cellular  telephone is dispensed  and the customer
can make and receive telephone calls with the cellular telephone.

         The equipment  rented by a customer is contained in a carrying case and
includes a cellular telephone with an active telephone number, two batteries,  a
battery recharger,  and a DC power connector which allows the cellular telephone
to be  operated  with  electric  current  provided  by an  automobile  cigarette
lighter.


<PAGE>



         For the ACDC units located at car rental  agencies,  a Company employee
staffs a counter  adjacent to the rental car  counter.  Rather  than  dispensing
cellular  telephones  through an ACDC unit, the Company  employee at the counter
handles all  cellular  telephone  rentals for persons  wanting to rent  cellular
telephones.  Standard ACDC units are available at these  locations for customers
wanting to rent a cellular telephone during off-peak hours. Rentals from staffed
locations  accounted  for  approximately  90% of  the  Company's  revenues  from
cellular telephone rentals from ACDC units during the year ending June 30, l997.
In January 1996 the Company began renting  cellular  telephones  from ACDC units
installed at certain AAA Club offices in Florida and Louisianna.

         At September  30, l997,  the Company had 18 ACDC units in operation and
the  Company's  only  franchisee  had five ACDC's in  operation.  The ACDC units
operated  by the  Company  were  located  at car rental  agencies  (9 units) and
certain AAA Club offices (9 units).

         As an  alternative  to selling  additional  franchises  the Company has
entered into various master  licensing  arrangements  with third parties.  These
arrangements normally involve the single sale of 10 or more ACDC units for (i) a
large location (such as an airport),  (ii) part or all of a foreign country,  or
(iii) a specific  region in the United  States.  As of June 30, l997 the Company
had sold thirty ACDC units to third parties under master licensing arrangements,
resulting  in gross  revenues of  approximately  $664,000,  and had sold 10 ACDC
units to a  corporation  affiliated  with certain  officers and directors of the
Company for $150,000. Although all of these sales occurred prior to December 3l,
l996,  as a result  of  credit  terms  extended  by the  Company,  approximately
$793,000  was still owed to the Company as of June 30, l997 for these  equipment
sales. See "Management - Transactions with Related Parties".

 Overnight Cellular Telephone Rentals

         In January 1996 the Company initiated its overnight  cellular telephone
rental program which provides for the delivery of cellular  telephones  anywhere
in the United  States  through  Federal  Express  overnight  service.  Customers
include  Florida,  Louisiana  and  Mississippi  AAA  members,  employees of Nike
Corporation and ESPN, and Alamo Rent-a-Car customers.  The Company also supplies
cellular  telephones for special events such as Superbowl XXIX and XXX. A person
wanting to rent a cellular  telephone  through this service  calls the Company's
toll free telephone  number to arrange for the  short-term  rental of a cellular
telephone.  The Company ships the cellular  telephone via Federal Express to the
address  designated  by the  customer,  together  with  a  Federal  Express  box
addressed  to the  Company.  When the  customer  no longer  needs  the  cellular
telephone, the customer returns the telephone to the Company by means of Federal
Express.  This program  generated  approximately  $215,000 in revenue during the
year ending June 30, 1997. The Company  believes that revenues from this program
will increase as more potential customers become aware of this service.


<PAGE>



Cellular Telephone Activation

         In January  1996 the Company  began  offering  its  cellular  telephone
activation  program to members of the Florida,  Louisiana  and  Mississippi  AAA
Clubs. This program allows a AAA member to receive a free cellular  telephone if
the member  agrees to a one year  service  contract  with a  cellular  telephone
carrier.  The Company is paid a commission for each service contract signed by a
AAA member.  During the year ending  June 30,  1997 the Company  activated  over
5,400 cellular phones.  This program generated about 38% of the Company's fourth
quarter revenue and operated at a gross profit of approximately $527,000 for the
year ending June 30, 1997. The AAA Clubs in Florida,  Louisiana and  Mississippi
Clubs have approximately 1.2 million members. The Company anticipates broadening
this service to other AAA clubs.

Long Distance Telephone Services

         Since  January  1996 the Company  has  offered  members of AAA Clubs in
Florida, Louisiana and Mississippi pre-paid long distance calling cards and long
distance telephone service. Beginning in January 1996 the pre-paid long distance
calling card program was introduced to Alamo Rent-a-Car customers. Calling cards
are sold to rental car  customers  over the  counter  and  through an  automated
calling card  dispensing  machine.  The Company  receives a commission  for each
pre-paid calling card sold.

         With respect to long distance telephone service, the Company acts as an
agent for a long distance  telephone  company.  For each AAA member who switches
their long distance  service to this telephone  company,  the Company receives a
commission based upon the member's long distance usage.

Research and Development

         During the years ending June 30, 1995, 1996 and l997, the Company spent
approximately  $89,000,  $134,000  and  $35,000,  respectively,  on research and
development.  Research  and  development  expenditures  pertained to the design,
development  and testing of  enhancements  to Link's  Point-Of-Sale  transaction
terminals.

Franchise Operations

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

         The Company's first ACDC units became operational in September 1993. In
August  1995,  the  Company  had 50 ACDC units in  operation  and the  Company's
franchisees (13 in total) had 28 ACDC's in operation.

         During 1995 the Company  discontinued  the sale of new franchises.  The
Company's  decision in this regard was based in part on the Company's  desire to
retain more ACDC units for its own use and to decrease the  expenses  associated
with selling franchises and servicing franchisees. As of September 30, 1997 only
one Company franchisee was operating ACDC units.


<PAGE>



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

Patents

         The United States Patent and Trademark  Office has issued the Company a
patent for the design of the  cabinet  which  houses the  Company's  ACDC Units.
Since the Company's  design  patent covers only the external  design of the ACDC
cabinet,  certain  other  aspects  of the ACDC  system  could be  duplicated  by
competitors. The Company has also been granted a patent covering certain aspects
of its prepaid phone card dispensing machines. See "Risk Factors."

Competition

         The Company  competes  with  numerous  other  companies  engaged in the
rental and activation of cellular telephones,  the sale of prepaid long distance
calling cards, the resale of long distance  telephone  service,  and the sale of
point-of-sale  terminals.  Many of these  competitors have greater financial and
marketing resources than those of the Company.

Sales and Marketing

         Organizations such as AAA travel clubs and credit unions continue to be
the  Company's  primary  market  for  cellular  telephone  activation,  cellular
telephone rentals and sales of prepaid calling cards and long distance service.

         The  Company  plans to  market  it's  prepaid  calling-card  dispensing
machines and it's ACDC units to major  corporations  with  significant  customer
bases consisting primarily of business and recreational  travelers.  The Company
markets it's Point-Of-Sale  transaction terminals to small retail locations such
as convenience stores and gasoline stations.

         The Company uses through trade shows, database marketing,  direct mail,
and sales brochures to market its products.

Employees and Offices

         As of September 30, 1997, the Company employed  thirty-six persons on a
full-time  basis.  Nineteen  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.


<PAGE>



ITEM 2.  DESCRIPTION OF PROPERTIES

         The Company occupies office,  shipping and repair facilities consisting
of approximately  8,000 square feet in Delray Beach,  Florida.  These facilities
are leased at an annual  rental of $80,724  pursuant to a lease which expires on
February 28, 1998.

         Link  leases a 7,000  square  foot  production  and office  facility in
Tampa,  Florida at an annual rent of $35,000. The lease on this facility expires
in June 2002.  Link's  administrative  and sales  offices are located in Irvine,
California  and  consist  of 1600  square  feet of space  which are leased at an
annual rent of $18,000. This lease on the space expires in February 1998.

ITEM 3.  LEGAL PROCEEDINGS.

         The  Company  is not a party  to any  pending  legal  proceedings.  The
Company's  California  franchisee  has demanded  that the Company  purchase this
franchise, as well as the franchisee's ACDC units, for approximately $1,000,000.
The Company is  currently  negotiating  the terms of this  acquisition  with the
franchisee.  If the Company and the  franchisee  cannot reach an agreement as to
the  acquisition of the franchise,  the franchisee has indicated that it intends
to file suit against the Company for breach of the  franchise  agreement.  As of
June 30, 1997 the Company had a liability of $770,000 for  franchise  and equip-
ment deposits paid by this franchisee to the Company.

         The Company is a  defendant  in a lawsuit  filed in Palm Beach  County,
Florida. The plaintiff in this lawsuit seeks damages in excess of $3,800,000 for
breach of  contract.  The Company has filed an Answer and has  asserted  various
affirmative defenses denying the plaintiff's claims.

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

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

         During the Company's  past fiscal year,  the Company did not submit any
matter to a vote of its shareholders.

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

         As of  September  30, 1997,  there were  approximately  800  beneficial
owners of the Company's  Common Stock,  Series A Warrants and Series B Warrants.
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

<PAGE>


mark-up,  mark-down or  commissions  and may not  necessarily  represent  actual
transactions.  The Company's Common Stock and Warrants began trading in February
1995.  The Company's  Warrants  have not traded since  January 1997.  The market
quotations  have been  adjusted  to reflect a two for one forward  stock  split,
which was  effective  in June 1995 and a 1 for 10 reverse  stock split which was
effective in March 1996.


                                                                  Quarter
 Series A        Series B
      Ending                Common Stock       Warrants            Warrants
                            High      Low     High     Low      High      Low

      3/31/95              $45.00   $20.00    $1.62    $0.70    $1.03     $0.44
      6/30/95              $31.90   $23.80    $2.46    $2.00    $2.25     $1.18

      9/30/95              $23.75   $ 5.00    $4.06    $1.87    $3.43     $1.25
          12/31/95         $ 7.81   $ 1.87    $3.75    $0.31    $2.50     $0.31
      3/31/96              $ 4.68   $ 0.93    $0.93    $0.03    $0.93     $0.03
      6/30/96              $ 1.78   $ 1.00    $0.09    $0.03    $0.06     $0.01

      9/30/96              $ 1.34   $ 0.50    $0.09    $0.03    $0.06     $0.03
           12/3l/96        $ 1.12   $ 0.66   $ 0.03     *      $ 0.03      *
      3/31/97              $ 1.94   $ 0.86   $ 0.03     *      $ 0.03      *
      6/30/97               $2.81    $1.03     *        *        *         *


* -No quotation

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

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.


<PAGE>



Statement of Operations Data:

                                         Years Ended June 30,

                                l997           1996          1995
Revenue                     $4,730,112       2,607,879       696,909
Cost of Sales               (2,861,421)     (1,686,188)     (607,509)
Operating and other
Expenses                    (4,657,587)     (4,645,197)   (2,540,512)

Net (Loss)                  (2,788,896)    $(3,723,506)  $(2,451,112)

Net (Loss) per Share            $(0.42)         $(1.56)       $(1.43)

Weighted Average
 Number of Shares
 Outstanding                6,667,291       2,384,055              1,716,580

Balance Sheet Data:
                                                   June 30,
                                   l997               1996             1995

Current Assets                 $2,006,289         $ 1,983,252        2,657,070
Total Assets                   $5,544,173          $3,312,372        3,616,793
Current Liabilities            $3,630,430          $2,343,308        1,438,465
Total Liabilities              $3,716,349          $2,404,534        1,608,819
Working Capital (Deficit)     $(1,624,141)          $(360,056)       1,218,425
Shareholders Equity            $1,827,824            $907,838        2,700,974

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

Results of Operations

         The  following  table  shows  the  percentage  of the  Company's  gross
revenues  by  category  for the periods  indicated,  as well as the  anticipated
revenue percentage from each category for the year ending June 30, 1998.



<PAGE>


                                         Percent of Gross Revenues
                                                                 ,
                                       Years Ending               Year Ending
                                  June 30,  (Projected)(1)
June 30, 1998
                                  1995    1996         l997

   A.1  Income from Company
        owned and operated
        ACDC units.                17%      30%      15%                4%

   A.2  Rental of cellular
        telephones directly
        from Company.              12%       3%       4%                2%

   B.   Initial franchise fees.     7%      --       --                --

   C.   Royalties from fran-
        chisees.                   14%       1%      --                --

   D.   Sale of ACDC units,
         and related
         equipment.                48%      29%      25%                2%

   E.   Fees paid by cellular
        telephone companies for
        activation of cellular
        telephones                  1%      32%      38%               20%

   F.   Sale of prepaid calling
        cards.                     --       --        5%                6%

   G.   Sale of long distance
        telephone service.         --       --        1%                6%

   H.   Revenues from Link
        International              --       --       12%               58%

   I.   Miscellaneous Income        1%       5%      --                --

(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,   l998   constitute   a
forward-looking  statement  which is  subject to risks and  uncertainties  which
could cause actual results to differ  materially from those  projected.  Factors
that could cause or  contribute  to such  differences  include  lack of adequate
funding,  loss of major customers and inability to meet sales  projections.  The
Company  undertakes  no  obligation  to publicly  release any  revision to these
forward-looking  statements which may be made to reflect events or circumstances
after the date of this  report or to reflect  the  occurrence  of  unanticipated
events.



<PAGE>


        Prior to 1996 the  Company  operated  ACDC units for its own account and
also sold  franchises  which  provided  third  parties the right to operate ACDC
units at various  franchised  locations.  The Company's  first ACDC units became
operational in September  l993. In August 1995, the Company had 50 ACDC units in
operation  and  the  Company's  franchisees  (13  in  total)  had 28  ACDC's  in
operation.  During 1995 the Company discontinued the sale of new franchises. The
Company's  decision in this regard was based in part on the Company's  desire to
retain more ACDC units for its own use and to decrease the  expenses  associated
with selling franchises and servicing franchisees.  As of September 3, 1997 only
one Company  franchisee  was operating  ACDC units.  At September 30, 1997,  the
Company  had 18 ACDC  units  in  operation  and  the  Company's  only  remaining
franchisee had five ACDC's in operation.

        Since 1996 the Company has  introduced  four  additional  programs in an
effort to  diversify  and broaden the  Company's  product and service  mix:  (i)
cellular telephone activations,  (ii) sale of pre-paid calling cards, (iii) sale
of long distance telephone service and (iv) rental of cellular  telephones using
overnight courier service. See Item 1 of this report.

        Effective  December 31, 1996,  the Company  acquired Link  International
Technologies,  Inc. in  consideration  for the issuance of 674,157 shares of the
Company's  Common Stock.  See Item 1 of this report and the discussion  below of
the Company's results of operations for the year ending June 30, 1997.

Year Ending June 30,l997

        Revenues  during  the year  ending  June  30,  1997  increased  from the
comparable period in 1996 year due to the introduction  and/or expansion of four
programs  which were  recently  introduced in an effort to diversify and broaden
the Company's product and service mix. These programs are (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.

        Revenues  also  increased  as the  result of a  one-time  licensing  fee
($500,000)  received  pursuant  to a License  Agreement  between the Company and
Cancall Cellular Communications, Inc. (Cancall).

        The  activation  program  of  cellular  telephones  for  members  of the
Florida,  Louisiana,  and  Mississippi  AAA clubs  began in January  1996.  This
program  allows a AAA member to receive a free cellular  telephone if the member
agrees to a one year cellular telephone service contract. The Company receives a
commission for each activation.

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

        As an  alternative  to selling ACDC units to franchises  the Company has
entered into various master  licensing  arrangements  with third parties.  These
arrangements normally involve the single sale of 10 or more ACDC units for (i) a
large location (such as an airport), (ii) part or all of a foreign country,

<PAGE>


or (iii) a specific region in the United States. As of June 30, 1997 the Company
had sold 30 ACDC units to third  parties  under master  licensing  arrangements,
resulting  in gross  revenues of  approximately  $664,000,  and had sold 10 ACDC
units to a  corporation  affiliated  with certain  officers and directors of the
Company for $150,000. Although all of these sales occurred prior to December 31,
1996, as a result of credit terms extended by the Company approximately $793,000
was still owed to the Company as of June 30, 1997 for these equipment sales.

        Effective  December  31,  1997 the Company  acquired  all the issued and
outstanding shares of Link International,  Inc. ("Link").  Link manufactures and
distributes  machines which dispense  prepaid  calling cards and terminals which
are used by merchants to perform a variety of transactions,  including accepting
credit  cards and bank  debit  cards in  payment  for sales of  merchandise  and
services.  The terminals  manufactured by Link are sometimes referred to as "POS
terminals".  As a result of this  acquisition,  Link's revenue and expenses have
been  consolidated  with those of the Company for the six months ending June 30,
1997.  During this six month  period,  Link's  revenues from sales of equipment,
prepaid calling cards and technical service were  approximately  $60,000,  which
amount excludes  revenues  attributable to the Licensing  Agreement  between the
Company and  Cancall.  During the six month  period  ending June 30, 1997 Link's
cost of sales accounted for 0.4% of the Company's consolidated cost of sales and
Link's other expenses accounted for 0.9% of the Company's Consolidated Operating
Expenses.

        In March 1997 the Company entered into a License  agreement with Cancall
whereby the Company provided Cancall with a license to operate and/or distribute
the Company's ACDC units,  as well as Link's  prepaid  calling card machines and
POS  terminals  (collectively  the  "Products").  The License  Agreement  grants
Cancall the exclusive right to operate and distribute the Products in Canada and
Europe and in the United States on a non-exclusive  basis.  However,  if Cancall
does not  purchase a minimum of 2,000 POS  terminals  for use in Europe  between
September 1, 1997 and January 1, 1999 then Cancall will lose its exclusive right
to operate and  distribute  the  Products in Europe.  In  consideration  for the
rights granted  pursuant to the Licensing  Agreement,  Cancall agreed to pay the
Company $500,000 which amount is either payable in cash or in equivalent  shares
of the Class B Preferred shares of Cancall.  The Class B Preferred shares can be
converted  into the  common  stock of  Cancall  on the  basis of 1.6  shares  of
Cancall's  common stock for each share of Cancall's Class B Preferred stock. Any
common  shares of Cancall  issued upon the  conversion  of the Class B Preferred
shares may not be sold until March l998 or such other date as  determined by the
Vancouver  Stock  Exchange.  The common stock of Cancall trades on the Vancouver
Stock Exchange.  As of June 30, 1997 the closing price of Cancall's common stock
(in U.S.  dollars) was $0.32.  The Licensing  Agreement also requires Cancall to
purchase a certain  number of ACDC  units and POS  terminals  from the  Company.
During the year  ending  June 30,  1997 the  Company  sold  thirty ACDC units to
Cancall for  $705,000.  In payment of the $500,000  licensing fee and the thirty
ACDC units,  Link issued 1,807,800 shares of it's Class B Preferred Stock to the
Company.

        Income from  franchise  operations  is no longer  significant  since the
Company discontinued its franchise operations during 1995.


<PAGE>



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

Year Ending June 30, 1996

        Revenues  increased from the  comparable  period in 1995 year due to the
introduction  of four new  programs  in an effort to  diversify  and broaden the
Company's  product and service mix. These  programs were (i) cellular  telephone
activations,  (ii) sale of pre-paid  calling cards,  (iii) sale of long distance
telephone service and (iv) rental of cellular telephones using overnight courier
service.

        The  activation  program  of  cellular  telephones  for  members  of the
Florida, Louisiana, and Mississippi AAA clubs began in January 1996. The program
allows a AAA member to receive a free cellular telephone if the member agrees to
a  one  year  cellular  telephone  service  contract.  The  Company  receives  a
commission  for each  activation.  During the year  ending  June 30,  1996,  the
Company activated over 2,600 cellular telephones and anticipates broadening this
service to other AAA clubs.

        Franchise  royalties  declined  as  franchises  were  reacquired  by the
Company. Income from equipment sales declined as the Company reserved prime ACDC
locations for its own use.

        Cost of sales for fiscal l996  largely  reflects  the  expansion  of the
Company's rental operations,  the newly instituted cellular telephone activation
program and costs of technology development and sales. Due to significant demand
at  certain  Alamo  Car  Rental  locations,   Company  personnel  rent  cellular
telephones  directly to customers.  This contrasts with the comparable period in
1995 when cost of sales consisted primarily of expenses associated with the sale
of ACDC units and a more limited telephone rental program.

        The higher  selling  and  general and  administrative  expenses  for the
current nine month period are due to the Company's  new programs and  additional
personnel needed for these programs.

        Interest  expense  declined as funds  provided by the  Company's  public
offering in February 1995 were used to repay outstanding debt.

Year Ending June 30, l995

        During fiscal l995,  revenues from equipment  sales to  franchisees  and
franchise fees declined as the Company  reserved more new ACDC locations for its
own use and eventually  discontinued the sale of new franchises.  Royalties from
franchisees increased over the prior period as the Company's first ACDC unit did
not become operational until September 1993.


<PAGE>



Liquidity and Sources of Capital

        During the year  ending  June 30,  1997 the  Company's  operations  used
approximately $1,853,000 of cash. The licensing fee from Cancall. ($500,000) and
the sale of thirty ACDC units to Cancall  ($705,000) did not generate cash since
Cancall paid the licensing fee and the cost of the ACDC units with  non-tradable
shares of Cancall's  preferred stock. In addition,  due to credit terms extended
by the  Company,  approximately  $793,000  was  still  owed to the  Company  for
equipment sales made by the Company prior to December 31, 1996.

        In order to fund its  operating  losses,  the Company sold shares of its
common stock in private placements and borrowed funds from private lenders.

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

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


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

Officers and Directors

Name                      Age                    Position

Melvin Leiner              51      President,  Chief Executive  Officer,  and a
Director
Darren M Marks             30      Vice President of Marketing and Sales, and a
                                   Director
Donald M. Marks            57      Vice President
James J. Caprio            34      Vice President
Bruce S. Schames           50      Chief Financial Officer
David P. Barnhill          68      Director
Mark Bennett               38      Director
Michael Malet              50      Director
Chet Howard                54      Director
George Pursglove           46      Director

Donald M. Marks and Darren M. Marks are not related.


<PAGE>



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

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

         Melvin  Leiner has been the Company's  President  and Chief  Executive
Officer since November 1994.  Between  November 1994 and August 1991 Mr. Leiner
was the Company's  Chief Operating  Officer and Executive Vice  President.  Mr.
Leiner has been a director of the Company since August 1991.

         Darren  M.  Marks  joined  the  Company  in  August,  1991 as its  Vice
President and a Director.

         Donald M. Marks was a Director of the Company  between August 1991 and
April 1997.  Mr.  Marks has been an officer and  director of the Company  since
l99l.

         James J.  Caprio  was a Director  and the  Company's  Chief  Financial
Officer  between August 1991 and April 1997. In April 1997 Mr. Caprio  resigned
as a Director and as the  Company's  Chief  Financial  Officer.  Mr. Caprio has
been a Vice President of the Company since August 1991.

         Bruce S. Schames has been the  Company's  Controller  since  December,
1993.  In  April  1997  Mr.  Schames  became  the  Company's   Chief  Financial
Officer.  From  1991 to 1993  Mr.  Schames  was  self-employed  as a  Certified
Public  Accountant.  Between 1983 and 1991, Mr. Schames was employed as Manager
of Financial Reporting for the Dole Fresh Fruit Company.

         David P.  Barnhill has been a director of the Company  since  November
1996.  From January  1991 to September  1992 Mr.  Barnhill  was  President  and
Chief  Executive  Officer  of  Telenetics,  Inc.,  a  company  involved  in the
manufacture  of  computer  modems.  When  Telenetics  was  sold to a  group  of
private  investors in  September  1992,  Mr.  Barnhill  joined Lynx  Automation
Incorporated  as Chief  Financial  Officer.  In April 1994,  Mr.  Barnhill  was
promoted to President and Chief  Executive  Officer of Lynx. Lynx is engaged in
the manufacture of telephone accessories.

         Mark Bennett 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 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

<PAGE>


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.

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

         George  Pursglove  has been a Director of the Company  since  September
1997.  Since  November 1995 Mr.  Pursglove  has been a principal of  Conslidated
Business Group, a company providing financial consulting services to development
stage  businesses.  Between  March 1993 and November  1995 Mr.  Pursglove  was a
Senior Divisional  Merchandise  Manager, and later Director of Merchandising for
Office  Depot.  Between April 1992 and March 1993 Mr.  Pursglove was  Divisional
Merchandise Manager for the Price Company, a retailer of home improvement goods.

         Donald  Marks,  Melvin  Leiner,  James  Caprio and Darren  Marks may be
deemed  "Parents" and  "Founders" of the Company as such terms are defined under
the federal securities laws.

ITEM 10.  EXECUTIVE COMPENSATION

         The  following  table  sets  forth in  summary  form  the  compensation
received  by or  accrued  for (i) the  persons  who held the  position  of Chief
Executive  Officer  during the three  years  ending  June 30, 1997 and (ii) each
other  executive  officer of the Company who received salary and bonus in excess
of $75,000 during the past three years.

                      Annual Compensation         Long Term Compensation
                                                   Re-                    All
                                         Other    stric-                  Other
                                         Annual    ted              LTIP  Com-
                                         Compen-   Stock   Options  Pay-  pensa-
Name and Princi-  Fiscal Salary   Bonus  sation   Awards   Granted  outs   tion
pal Position       Year    (1)     (2)     (3)      (4)      (5)     (6)    (7)

Melvin Leiner,    1997  $26,000    --                 --   500,000      --  --
President and     1996  $21,038    --            250,000                --  --
Chief Executive   1995  $92,063    --    $8,400       --    40,000      --  --
Officer

Darren M. Marks,  l997  $26,000                            500,000
Vice President    1996  $21,038    --            250,000                --  --
                  1995  $86,594    --    $8,400       --    40,000      --  --


                      Annual Compensation         Long Term Compensation
                                                   Re-                    All
                                         Other    stric-                  Other
                                         Annual    ted              LTIP  Com-
                                         Compen-   Stock   Options  Pay-  pensa-
Name and Princi-  Fiscal Salary   Bonus  sation   Awards   Granted  outs   tion
pal Position       Year    (1)     (2)     (3)      (4)      (5)     (6)    (7)

Donald M. Marks,  l997   26,000                            500,000
Vice President    1996  $21,038    --            250,000                --  --
                  1995  $77,189    --    $8,400       --    40,000      --  --

James Caprio,     l997  $26,000                            500,000
Vice President    1996  $21,038    --            250,000                --  --
                  1995  $95,419    --    $8,400       --    40,000      --  --



<PAGE>


(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.
Amount in the table represents automobile allowances.

(4) During the period covered by the foregoing  table,  the shares of restricted
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, 1997.

         Name                       Shares            Value

         Melvin Leiner             299,081           $523,300
         Darren M. Marks           258,242           $451,900
         Donald M. Marks           330,242           $577,900
         James Caprio              258,242           $451,900

(5) The shares of Common  Stock to be  received  upon the  exercise of all stock
options granted during the period covered by the table.

(6) "LTIP" is an  abbreviation  for "Long-Term  Incentive  Plan". An LTIP is any
plan that is intended to serve as an incentive for  performance  to occur over a
period longer than one fiscal year.  Amounts  reported in this column  represent
payments  received  during  the  applicable  fiscal  year by the  named  officer
pursuant to an LTIP.

(7) All other  compensation  received that the Company could not properly report
in any other column of the Table including annual Company contributions or other
allocations to vested and unvested  defined  contribution  plans, and the dollar
value of any  insurance  premiums  paid by, or on behalf  of, the  Company  with
respect to term life insurance for the benefit of the named  executive  officer,
and the full dollar value of the remainder of the premiums paid by, or on behalf
of, the Company.

Employment Contracts

         In October,  1994, the Company entered into employment agreements with
Melvin  Leiner,  Donald M. Marks,  James J.  Caprio and Darren M.  Marks.  Each
employment agreement provides for the following:

         1.   Term of three years.

         2. Salary of  $105,000  during the first year of the  employment  term,
increasing  to  $120,000  during the second year and  $150,000  during the third
year.

         3. Incentive bonus computed according to the following formula:


<PAGE>



              Annual Company Revenues           Bonus Payable
                   From Operations               to Employee

               $3,000,000 to $5,000,000            $22,500
               $5,000,000 to $7,500,000            $45,000
               $7,500,000 to $10,000,000           $67,500
               Over $10,000,000                    $90,000

         4. Automobile allowance of $700 per month.

         5. 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.

         6.  Disability  benefits  equal to 50% of the  employee's  base salary,
determined  at the time of  disability,  and  payable  to the  employee  for the
remaining term of the employment agreement.

         The four  officers  listed in the  above  above  agreed to amend  their
respective employment agreements such that the collective salaries paid to these
four officers (effective September 30, 1996) will not exceed $360,000.

         In January 1997 the employment agreement's for Melvin Leiner and Darren
Marks were amended  such that Mr.  Leiner and Mr. Marks will each be paid a base
salary of  $95,000  per year for five years and will  recieve  six weeks of paid
vacation each year.  Each  officer's  base salary will increase by 15% each year
when the Company is  profitable  and by 10% each year  during  which the Company
suffers a loss.

         In April 1997 Mr. Caprio's  employment  agreement was amended such that
Mr.  Caprio  will be paid a base  salary of $90,000  per year for five years and
will receive six weeks of paid vacation each year. Mr. Caprio's base salary will
increase  by 15% each year when the  Company is  profitable  and by 5% each year
during which the Company suffers a loss.

         Effective December 31, 1996, Link International Inc. ("Link"), a wholly
owned  subsidiary of the Company,  entered into employment  agreements with Mark
Bennett (the  president of Link) and Michael Malet (the vice president of Link).
Each employment agreement provides for the following:

         1.   Term of five years.

         2. Annual salary of $72,000.

         3. Incentive bonus computed according to the following formula:


<PAGE>


              Annual Consolidated Company       Bonus Payable
              Revenues From Operations           to Employee

               $11,000,000 to $13,000,000          $22,500
               $13,000,000 to $16,500,000          $45,000
               $16,500,000 to $18,500,000          $67,500
               Over $18,500,000                    $90,000

         4. Automobile allowance of $700 per month.

         5. Options for the purchase of 322,000  shares of the Company's  common
stock. The options were granted pursuant to the Company's Incentive Stock Option
Plan, are exercisable at $1.00 per share, and expire on December 31, 2000.

         Except for the employment  agreements described above, the Company does
not have any written  employment  contracts with respect to any of its executive
officers, and does not have any compensatory plan or arrangement that results or
will result from the resignation,  retirement,  or any other  termination of any
executive officer's  employment with the Company or from a change-in-control  of
the Company or a change in an executive officer's  responsibilities  following a
change-in-control.

Long Term Incentive Plans - Awards in Last Fiscal Year

         None.

Employee Pension, Profit Sharing or Other Retirement Plans

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

Compensation of Directors

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

         Other Arrangements.  During the year ended June 30, 1997, and except as
disclosed elsewhere in this report, no director of the Company received any form
of compensation from the Company.

         In August 1997 the Company  issued 50,000 shares of its common stock to
David P. Barnhill in  consideration  of past  services  rendered to the Company.
Prior to June 30, 1998,  the Company plans to issue 50,000 shares of it's Common
Stock to Chet Howard and George Pursglove in consideration of services  provided
to the Company.



<PAGE>


Compensation Committee Interlocks and Insider Participation

         During the year  ended  June 30,  1997,  all of the  Company's  present
officers  participated in the  deliberations of the Company's Board of Directors
concerning executive officer compensation.

         During the year ended June 30, 1997 no director of the Company was also
an executive  officer of another entity,  which had an executive  officer of the
Company serving as a director of such entity or as a member of the  compensation
committee of such entity.

Committees

         In  September  1997 the  Company  formed an  Executive  Committee,  the
members of which are Melvin  Leiner,  Michael  Malet,  David Barnhill and George
Pursglove.  The  purpose  of  the  Executive  Committee  is to  review  proposed
expenditures that would require the Company to spend in excess of $50,000.

         In  September  1997 the Company  established  an Audit  Committee,  the
members of which are David Barnhill, Chet Howard and George Pursglove. The Audit
Committee  will (i)  recommend to the Board of  Directors a firm of  independent
public  accountants  to conduct  the  annual  audit of the  Company's  financial
statements. (ii) review with such accounting firm the scope and result of annual
audits and the adequacy of the Company's internal controls,  and (iii) otherwise
oversee the auditor's review of management  controls and the Company's financial
performance.

         The Company has a  Compensation  Committee  comprised of Melvin Leiner,
David  Barnhill  and Chet Howard.  The  Compensation  Committee  will review the
compensation  of the Company's  senior  management  and recommend any changes in
such compensation to the Board of Directors, as well as administer the Company's
Stock Option Plans, Stock Bonus Plan, and other compensation programs.

Stock Option and Bonus Plans

         The Company has an Incentive Stock Option Plan, a  Non-Qualified  Stock
Option Plan and a Stock Bonus Plan. A summary  description of each Plan follows.
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  5,000,000  shares of the  Company's
Common Stock,  less the number of shares  already  optioned under both this Plan
and the Non-Qualified  Stock Option Plan. The Incentive Stock Option Plan became
effective  on April 15,  1993 and will  remain in effect  until  April 15,  2001
unless terminated  earlier by action of the Board. Only officers,  directors and
key  employees of the Company may be granted  options  pursuant to the Incentive
Stock Option Plan.



<PAGE>


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

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

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

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

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

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

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

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

         Non-Qualified  Stock Option Plan. The  Non-Qualified  Stock Option Plan
authorizes  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  Non-Qualified  Stock Option
Plan became  effective  on April 15, 1993 and will remain in effect  until April
15, 2001 unless  terminated  earlier by the Board of  Directors.  The  Company's
employees,  directors,  officers,  consultants  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 Committee 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:



<PAGE>


         (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.

         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 Plan. Up to 3,000,000 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 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  Information  Regarding the Plans.  The Plans are administered by
the Company's  Board of  Directors.  The Board of Directors has the authority to
interpret the  provisions of the Plans and supervise the  administration  of the
Plans. In addition,  the Board of Directors is empowered to select those persons
to whom shares or options are to be granted,  to determine  the number of shares
subject to each grant of a stock bonus or an option and to determine  when,  and
upon what  conditions,  shares or options  granted  under the Plans will vest or
otherwise be subject to forfeiture and cancellation.

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



<PAGE>


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

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

         Any  options  granted  under the  Incentive  Stock  Option  Plan or the
NonQualified Stock Option Plan must be granted before April 15, 2001. Any shares
granted pursuant to the Stock Bonus Plan must be issued prior to April 15, 2001.
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, 1997, concerning the stock options and stock bonuses granted by the Company.
Each option  represents the right to purchase one share of the Company's  Common
Stock.

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

Incentive Stock Option Plan   5,000,000   2,734,000           N/A   2,266,000
Non-Qualified Stock Option
  Plan                        3,000,000   1,040,000           N/A   1,960,000
Stock Bonus Plan              3,000,000         N/A     2,292,500     707,500

         As of  September  30, 1997,  the Company has issued  stock  options and
granted stock bonuses to the following officers and directors.



<PAGE>


                                       Incentive Stock Options
                                Shares                       Expiration
                              Subject to     Exercise          Date of
      Option Holder             Option         Price            Option


      Melvin Leiner             20,000         $3.25                 9/30/99
      Melvin Leiner             50,000         $1.00                12/31/06
      Darren M. Marks           20,000         $3.25                 9/30/99
      Darren M. Marks           50,000         $1.00                12/31/06
      James J. Caprio           20,000         $3.25                 9/30/99
      James J. Caprio          500,000         $1.00                12/31/06
      Donald M. Marks           20,000         $3.25                 9/30/99
      Donald M. Marks          500,000         $1.00                12/31/06
      Other Company Employees
      and other parties        654,000    $1.00 to $3.25  9/30/99 to 12/31/06

Non-qualified Stock Options

      Melvin Leiner            500,000         $1.25                 7/29/02
      Darren Marks             500,000         $1.25                 7/29/02

Other Options (1)

      Donald M. Marks           20,000         $2.75                 9/30/99
      Melvin Leiner             20,000         $2.75                 9/30/99
      James J. Caprio           20,000         $2.75                 9/30/99
      Darren M. Marks           20,000         $2.75                 9/30/99
      Other Company employees
    and third  parties85,000 $1.00 to $3.25 9/30/99 to 5/31/00 (1) These options
were not granted pursuant to any of the Company's stock option plans.

Options Granted During Fiscal Year Ending June 30, l997

         The  following  tables set forth  information  concerning  the  options
granted, during the fiscal year ended June 30, 1997, to the persons named below,
and the fiscal  year-end value of all  unexercised  options  (regardless of when
granted) held by these persons.




<PAGE>


                                                               Potential
                   Individual Grants                       Realizable Value at
                        % of Total                         Assumed Annual Rates
                          Options                            of Stock Price
                        Granted to   Exercise               Appreciation for
              Options   Employees in Price Per  Expiration    Option Term (3)
 Name       Granted (#) Fiscal Year  Share         Date       5%         10%

Melvin
Leiner     500,000 (1)(2)   19%       $1.00      12/31/06   $314,447   $678,973

Darren
Marks      500,000 (1)(2)   19%       $1.00      12/31/06   $314,447   $678,973

Donald M.
Marks      500,000          19%       $1.00      12/31/06   $314,447   $678,973

James J.
Caprio     500,000          19%       $1.00      12/31/06   $314,447   $678,973

(1)  Susequent  to June 30,  1997  options,  relating  to 150,000  shares of the
Company's  common stock were  exercised.  The exercise  price  relating to these
options was paid by surrendering  300,000 options which had an exercise price of
$1.00 per shares.

(2)  Subsequent  to June 30,  1997 the  Company  granted an  additional  500,000
options to Melvin Leiner and Darren Marks.  These options were granted  pursuant
to the Company's  Non-Qualified  Stock Option Plan, are exercisable at $1.25 per
share, and expire on July 29, 2002.

(3) The potential  realizable  value of the options shown in the table  assuming
the market price of the  Company's  Common Stock  appreciates  in value from the
date of the grant to the end of the option term at 5% or 10%.

Stock Bonuses

         In May and  November  1996 and in May and August l997 the  Company,  in
accordance with the terms of its Stock Bonus Plan,  issued  2,192,000  shares of
Common  Stock to  certain  Company  officers,  employees  and  consultants.  The
following  persons  received  shares  of the  Company's  Common  Stock  in these
transactions:

                                Shares Issued as Stock Bonus
    Name                May 1996 (1)  November 1996   May l997  August 1997

Melvin Leiner              250,000            --              --    50,000
Darren Marks               250,000            --              --    50,000
James J. Caprio            250,000            --              --        --
Donald Marks               250,000            --              --        --
Bruce Schames               75,000            --              --        --
Other Employees and
  Consultants as a group   425,000       345,000         137,500   210,000



<PAGE>


(1) Shares  were  issued in  consideration  for past  services  rendered  to the
Company and, in the case of all officers  except Mr. Schames,  in  consideration
for the  agreement  among these  officers to amend their  respective  employment
agreements  such  that  the  collective  salaries  paid to these  four  officers
(effective September 30, 1996) will not exceed $360,000, instead of the $600,000
which would have  otherwise  been  payable to these  officers  pursuant to their
employment agreements.

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

         The following table sets forth certain  information as of September 30,
1997 regarding the number and percentage of outstanding  shares of the Company's
Common Stock  beneficially  owned by (i) each person  owning more than 5% of the
Company's Common Stock;  (ii) each officer and director;  and (iii) all officers
and directors as a group:

                                                                   Percent of
NAME                                  Number of Shares (1)          Class (1)

Melvin Leiner                              299,081                     3.2
3333 S. Congress Ave.
Suite 401
Delray Beach, FL  33445

Darren M. Marks                            258,242                     2.8%
3333 S. Congress Ave.
Suite 401
Delray Beach, FL  33445

Donald M. Marks                            330,242                     3.6%
3333 S. Congress Ave.
Suite 401
Delray Beach, FL  33445

James J. Caprio                            258,242                     2.8%
3333 S. Congress Ave.
Suite 401
Delray Beach, FL  33445

Bruce S. Schames                             3,825                     *
3333 S. Congress Ave.
Suite 401
Delray Beach, FL  33445

David P. Barnhill                           50,000                     *
3333 S. Congress Ave.
Suite 401
Delray Beach, FL  33445

Mark Bennett                               166,580                     1.8%
1967 Vista Caudal
Newport Beach, CA 92660



<PAGE>


                                                                   Percent of
NAME                                Number of Shares (1)            Class (1)

Michael Malet                              166,580                     1.8%
28 Oakdale
Irvine, CA 92604

Chet Howard
8954 Canary Ave.
Fountain Valley, CA 92708

George Pursglove                                 -                     -
9380 N.W. 39 Court
Coral Springs, FL 33065

Officers and Directors as a
  Group (10 persons)                     1,532,792                    16.7%

*  Less than 1%.

(1)  Excludes  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.

         The Company had a consulting  agreement with Compass  Consulting,  Inc.
pursuant to which Kenneth  Zubay,  a former officer and director of the Company,
rendered software and systems development, consulting, training and installation
services to the  Company.  The  consulting  agreement  expired on July 31, 1994.
Through  July 31,  l994,  the Company  delivered  (or was  obligated to deliver)
equipment  (at a cost  to the  Company  of  approximately  $66,000)  to  Compass
Consulting as payment for services provided to the Company.  During fiscal l995,
equipment was delivered to Compass Consulting pursuant to and in satisfaction of
the  amounts  owed  pursuant  to the  consulting  agreement.  In June l995,  the
equipment  previously  delivered to Compass  Consulting  was  repurhased  by the
Company for $l6,000 and the  agreement to issue l6,000  shares of the  Company's
preferred stock, valued at $80,000, to Compass Consulting.

         In December  1995 the Company  issued 43,778 shares of its Common Stock
to Melvin Leiner, Donald Marks, James Caprio and Darren Marks (175,112 shares in
total) as  repayment  of loans,  each in the  amount  of  $90,500,  made by such
persons to the Company.

         In  March  1996  the  Company  issued  25,000  shares  of its  Series B
Preferred  Stock to Melvin Leiner,  Donald Marks,  James Caprio and Darren Marks
(100,000 shares in total) as repayment of loans,  each in the amount of $25,000,
made by such persons to the Company.

         In June 1996 the Company  issued  250,000 shares of its Common Stock to
Melvin Leiner,  Donald Marks, James Caprio and Darren Marks (1,000,000 shares in
total) as  repayment  of loans,  each in the  amount of  $125,000,  made by such
persons to the Company.



<PAGE>


         Effective  May 1, 1996,  the Company's  Board of Directors  amended the
Company's Incentive Stock Option Plan, Non-Qualified Stock Option Plan and Stock
Bonus Plan such that each Plan  authorized  the issuance of 1,500,000  shares of
Common  Stock  pursuant to options or stock  bonuses  granted  pursuant to these
Plans. In July 1996 the Company's Board of Directors again amended the Company's
Stock Bonus Plan such that this Plan now  authorizes  the  issuance of 3,000,000
shares of Common Stock pursuant to stock bonuses granted pursuant to the Plan.

         In June 1996 the  Company  issued  shares of its  Common  Stock to the
following  officers and directors in repayment of loans made by such persons to
the Company:  Melvin  Leiner:  103,686  shares in repayment of loan of $51,843;
Donald  Marks:  114,350  shares in repayment of loan of $57,175;  James Caprio:
114,464  shares in  repayment  of loan of  $57,232;  and Darren  Marks:  87,440
shares in repayment of loan of $43,720.

         In September  1996, the Company  acquired a 10% interest in Smartphone,
Inc. (a corporation that sells a debit cellular telephone) from certain officers
and  directors  of the  Company,  in  consideration  for the issuance of 400,000
shares of the Company's common stock. The Company's investment in Smartphone was
recorded  at  $200,000,  which  was  the  original  cost  of the  officers'  and
directors' investment in Smartphone.

         During the year ended June 30,  1996,  the Company sold five ACDC units
and related technology to Lonestar,  Inc., a corporation owned by Melvin Leiner,
Darren Marks,  James Caprio and Donald Marks,  all officers of the Company,  for
$350,000.  The sales  price for these units was paid by  offsetting  advances of
$350,000  which had  previously  been made to the Company by such  officers.  In
December  l996 the  Company  sold ten  additional  ACDC  units to  Lonestar  for
$l50,000.  Lonestar made an initial  payment of $l5,000 for these ACDC units and
the balance is payable in 33 equal monthly intallments of $2,753, which includes
interest  at 8.25% per year.  The first  monthly  payment  was made on April l5,
l997.



<PAGE>



ITEM 13.  EXHIBITS AND REPORTS ON FORM 8-K

    (a)  Exhibits

Exhibit                                                           Exhibit No.
  No.        Description                                            Page No.

3.1          Certificate of Incorporation, as amended                 (1)

3.1.1        Amendment to Articles of Incorporation                   (3)

3.2          Bylaws of the Company                                    (1)

10.7         Software Licensing Agreement with                        (1)
             Telemac Cellular Corporation

10.13        Form of Franchise Agreement                              (2)

10.14        Employment Agreements with Donald                        (3)
             Marks, Melvin Leiner, James Caprio
             and Darren Marks

28.1         Form of 1993 Incentive Stock Option Plan                 (1)
             and 1993 Non-Statutory Stock Option Plan

28.2         Stock Bonus Plan                                         (2)



(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).




2812D


<PAGE>


                                  SIGNATURES

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

                                       SIMS COMMUNICATIONS, INC.

                                       By /s/ Melvin Leiner
                                         Melvin Leiner, President and
                                         Chief Executive Officer

                                       By /s/ Bruce Schames
                                         Bruce Schames, Principal
                                         Financial and Accounting Officer

                                       Date: October 14, 1996


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

Signature                            Title                     Date


/s/ Melvin Leiner               Director                 October 14, 1996
Melvin Leiner

/s/ Darren Marks                Director                 October 14, 1996
Darren Marks

                                Director                 October 14, 1996
David P. Barnhill

/s/ Mark Bennett                Director                 October 14, 1996
Mark Bennett

/s/ Michael Malet               Director                 October 14, 1996
Michael Malet

                                Director                 October 14, 1996
Chet Howard

                                Director                 October 14, 1996
George Pursglove



2812D


<PAGE>

















                                  FORM 10-KSB

                                  (EXHIBITS)

                           SIMS Communications, Inc.
                            3333 S. Congress Avenue
                                   Suite 401
                            Delray Beach, FL 33445




<PAGE>


Exhibits

Number   Exhibit                                              Page Number

3.1      Certificate of Incorporation, as amended                 (1)

3.1.1    Amendment to Articles of Incorporation                   (3)

3.2      Bylaws of the Company                                    (1)

10.7     Software Licensing Agreement with                        (1)
         Telemac Cellular Corporation

10.13    Franchise Agreement                                      (2)

10.14    Employment Agreements with Donald                        (3)
         Marks, Melvin Leiner, James Caprio
         and Darren Marks

28.1     Form of 1993 Incentive Stock Option Plan                 (1)
         and 1993 Non-Statutory Stock Option Plan

28.2     Stock Bonus Plan                                         (2)



(1) Filed with initial Registration Statement.

(2) Filed with Amendment No. 1 to Registration Statement.

(3) Filed with Amendment No. 5 to Registration Statement.

<PAGE>


                    SIMS COMMUNICATIONS, INC. AND SUBSIDIARIES






                                 Table of Contents


                                                                       Page

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

Financial Statements

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

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

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

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

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



<PAGE>






                           INDEPENDENT AUDITORS' REPORT



Board of Directors and Stockholders
SIMS Communications, Inc. and Subsidiaries
Delray Beach, Florida


We  have  audited  the   accompanying   consolidated   balance   sheet  of  SIMS
Communications,  Inc.  and  Subsidiaries  as of June 30,  1997  and the  related
consolidated statements of operations,  stockholders' equity, and cash flows for
the years  ended June 30,  1997 and 1996.  These  financial  statements  are the
responsibility of the Company's management.  Our responsibility is to express an
opinion on these financial statements based on our audits.

We  conducted  our  audits  in  accordance  with  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, 1997 and the results of their  operations
and cash flows for the years  ended June 30,  1997 and 1996 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
October 8, 1997
Denver, Colorado

                                     F - 1


<PAGE>


                    SIMS COMMUNICATIONS, INC. AND SUBSIDIARIES

                            Consolidated Balance Sheet
                                   June 30, 1997


<TABLE>
<S>                                                                        <C>
                                        Assets
Current assets
   Cash and cash equivalents ($250,000 restricted)                  $  295,900
(Note 6)
   Accounts receivables, less allowance for doubtful
    accounts of $27,584                                             $  205,888
   Inventories                                                       1,083,199
   Prepaid expenses and other current assets, net of
    accumulated amortization of $178,185                               205,860
   Notes receivable, current portion (Notes 4 and 9)                   215,442
                                                                     ---------
         Total current assets                                        2,006,289
                                                                     ---------

Property and equipment, net of accumulated                             737,079
  depreciation of $424,002 (Note 3)                                   --------

Other assets
   Notes receivable (Notes 4 and 9)                                    726,448
   Patents, net of accumulated amortization
      of $41,804 (Note 17)                                             474,941
   Investments (Note 5)                                              1,510,000
   Other                                                                89,416
                                                                     ---------
         Total other assets                                          2,800,805
                                                                     ---------
Total assets                                                        $5,544,173
                                                                    ==========

                         Liabilities and Stockholders' Equity
Current liabilities
   Accounts payable                                                 $  567,407
   Accrued expenses                                                    727,698
   Bank line of credit (Note 6)                                        250,000
   Current obligations under capital lease (Note 7)                      8,377
   Current maturities of long-term debt (Note 7)                     1,066,985
   Franchise deposits and deferred revenue (Note 5)                    944,154
   Officer advances payable (Note 9)                                    65,809
                                                                     ---------
         Total current liabilities                                   3,630,430

Long-term liabilities
   Long-term debt (Note 7)                                              48,000
   Obligations under capital lease (Note 7)                             37,919
                                                                     ---------
         Total long-term liabilities                                    85,919

                                                                     ---------
Total liablities                                                     3,716,349
                                                                     ---------
Commitments and contingencies (Notes 4 and 15)

Stockholders' equity (Notes 10 and 11)
   Preferred stock, Series A, $.001 par value,
    50,000 shares authorized, 25,250 shares issued
    and outstanding (liquidation preference of                              25
    $505,000)
   Preferred  stock,  Series B,  $.001 par  value,  100,000  shares  authorized,
    100,000 shares issued
    or outstanding (liquidation preference of                              100
    $100,000)
   Common stock $.0001 par value 40,000,000 shares
    authorized, 8,481,995 issued and outstanding                           848
   Additional paid in capital                                       15,134,047
   Accumulated deficit                                             (13,307,196)
                                                                     ---------
         Total stockholders' equity                                  1,827,824
                                                                     ---------
Total liabilities and stockholders' equity                          $5,544,173
                                                                    ==========

</TABLE>

                See notes to consolidated financial statements.

                                     F - 2


<PAGE>


                   SIMS COMMUNICATIONS, INC. AND SUBSIDIARIES

                       Consolidated Statements of Operations



                                                        Year Ended June 30,
                                                       --------------------
                                                       1997            1996

                                                   -----------      -----------
<TABLE>
<S>                                                    <C>                <C>
Revenue
   Cellular phone rentals                          $   904,351      $   849,877
   Cellular phone activations                        1,780,019          846,524
   Calling cards                                       244,309               -
   Equipment and other                               1,298,222          831,171
   Licensing                                           500,000               -
   Franchise, royalty and licensing                      3,211           80,307
        Total revenue                                4,730,112        2,607,879

Cost of sales                                        2,861,421        1,686,188

Gross profit                                         1,868,691          921,691

Operating expenses
   General and administrative                        1,774,162        1,518,950
   Depreciation and amortization                       247,990          206,581
   Selling expenses                                  1,128,395          982,130
   Equity based compensation                         1,431,741        1,765,000
   Research and development                             34,686          134,470
        Total expenses                               4,616,974        4,607,131

Operating loss                                      (2,748,283)      (3,685,440)

Other income (expense)
   Interest expense                                    (71,537)         (65,221)
   Interest income                                      30,924           27,155
                                                       (40,613)         (38,066)
Loss before income taxe                             (2,788,896)      (3,723,506)

Income tax benefit (Note 8)                                 -                -

Net loss                                           $(2,788,896)     $(3,723,506)

Net loss per common share                          $      (.42)     $     (1.56)

Weighted average common shares outstanding
  (Notes 11 and 12)                                  6,667,291        2,384,055
</TABLE>

                See notes to consolidated financial statements.

                                     F - 3

<PAGE>

                 Consolidated Statements of Stockholders' Equity
                       Years Ended June 30, 1997 and 1996


<TABLE>
<CAPTION>

                                      Subscribed Preferred Stock     Preferred Stock Series A      Preferred Stock Series B
                                      Subscribed
                                       Number of                       Number of                    Number of
                                         Shares         Amount           Shares       Amount         Shares         Amount


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

Balance June 30, 1995                    24,250         245,000            -          $  -              -             $ -

Adjustment  of stock upon reverse stock      -             -               -             -              -               -
 split of 1 for 10 (Note 12)

Issuance  of  common   stock  for  cash      -             -               -             -              -               -
 (ranging from $.75 to $1.88 per share)

Issuance    of   common    stock   upon
 conversion  of officer  notes  payable       -             -              -             -              -               -
 ($2.07 per share) (Note 11)

Issuance of common  stock for  services        -            -              -             -              -               -
 ($1.00 per share) (Note 11)

Issuance    of   common    stock   upon
 conversion  of officer  notes  payable        -             -             -             -              -               -
 ($.50 per share) (Note 11)

Officer  notes payable  forgiven  (Note        -             -             -             -             -             -
11)

Accrued officer salaries forgiven              -             -             -             -             -             -
 (Note 11)

Preferred stock - subscribed (Note 11)   101,000       120,000             -             -             -             -

Dividends paid on preferred stock             -             -              -             -             -             -
Net loss for the year                         -             -              -             -             -             -
Balance - June 30, 1996                  125,250       365,000             -             -             -             -

Issuance  of common  stock  issued  for       -             -              -             -             -             -
  investments (Notes 5 and 11)                -             -              -             -             -             -

Isssuance of common  stock for  services      -             -              -             -             -             -
(Note 11)

Issuance  of  common   stock  for  cash
 (ranging   from   $.50  to  $.70   per       -             -              -             -             -             -
 share),  net of  $198,160  in offering
 costs (Note 11)

Issuance    of   common    stock   upon
 conversion of notes  payable  (ranging       -             -              -             -             -             -

Imputed value of stock options  granted       -             -              -             -             -             -
for  consulting  services  and interest
(Note 11)

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

Net loss                                      -             -              -             -             -             -

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



</TABLE>

<PAGE>
<TABLE>
<CAPTION>

                                                                     Additional
                                           Number of                  Paid-in       Accumulated
                                            Shares        Amount      Capital         Deficit          Total
                                           (Note 11)

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

Balance June 30, 1995                      20,188,710      2,018     8,547,550     (6,786,594)         2,007,974

Adjustment  of stock upon reverse stock   (18,169,780)    (1,816)        1,816             -                 -
 split of 1 for 10 (Note 12)

Issuance  of  common   stock  for  cash        50,928          5        50,301             -              50,306
 (ranging from $.75 to $1.88 per share)

Issuance    of   common    stock   upon
 conversion  of officer  notes  payable       175,110         18       361,982             -             362,000
 ($2.07 per share) (Note 11)

Issuance of common  stock for  services     1,365,000        136     1,364,864             -           1,365,000
 ($1.00 per share) (Note 11)

Issuance    of   common    stock   upon
 conversion  of officer  notes  payable       419,940         42       209,928             -             209,970
 ($.50 per share) (Note 11)

Officer  notes payable  forgiven  (Note  11)       -           -       124,294             -             124,294

Accrued officer salaries forgiven (Note 11)        -           -       400,000             -             400,000

Preferred stock - subscribed (Note 11)             -           -           -               -             120,000

Dividends paid on preferred stock                  -           -           -           (8,200)            (8,200)

Net loss for the year                              -           -           -       (3,723,506)        (3,723,506)

Balance - June 30, 1996                      4,029,908        403   11,060,735    (10,518,300)           907,838

Issuance  of common  stock  issued  for      1,074,157        108      799,892            -              800,000
investments (Notes 5 and 11)

Issuance of common  stock for  services        892,500         89      927,889            -              927,978
(Note 11)

Issuance  of  common   stock  for  cash
 (ranging   from   $.50  to  $.70   per      2,292,570        229    1,176,411            -            1,176,640
 share),  net of  $198,160  in offering
 costs (Note 11)

Issuance    of   common    stock   upon
 conversion of notes  payable  (ranging        192,860         19      124,981            -              125,000
 from $.50 to $.70 per share) (Note 11)

Imputed value of stock options  granted             -           -      679,264            -              679,264
for  consulting  services  and interest
(Note 11)

Subscribed   preferred   stock   issued             -           -      364,875            -                   -

Net loss                                            -           -          -        (2,788,896)       (2,788,896)

Balance June 30, 1997                        8,481,995      $ 848  $15,134,047    $(13,307,196)       $1,827,824
</TABLE>

                                      F-4

<PAGE>


                   SIMS COMMUNICATIONS, INC. AND SUBSIDIARIES
                      Consolidated Statements of Cash Flows


<TABLE>
<CAPTION>
                                                         Year Ended June 30,
                                                         -------------------
                                                        1997            1996
                                                        ----            ----
<S>                                                      <C>             <C>
Cash flows from operating activities
   Net (loss)                                       $(2,788,896)    $(3,723,506)
                                                    -----------     -----------
   Adjustments to reconcile net loss to net cash
    used in operating activities
     Depreciation                                       206,186         205,021
     Amortization                                        41,804           1,560
     Imputed value of options granted for services      503,763              -
      and interest
     Gross profit on sales of equipment to officers
      in settlement of advances payable (Note 9)             -         (284,060)
     Sales settled by receipt of note receivable       (280,000)             -
     Sales settled by receipt of officer notes         (150,000)             -
      receivable
     Sales settled by receipt of investments         (1,310,000)             -
     Stock issued for services                          927,978       1,765,000
     Changes in assets and liabilities
       Accounts and other receivables                   116,737        (304,171)
       Inventories                                      662,655         (80,724
        Prepaid expenses                                 28,545           4,149
       Accounts payable                                 104,909         350,330
       Accrued expenses                                  (5,002)        303,383
       Franchise deposits and customer deposits          88,391         (96,186)
                                                    -----------     -----------
                                                        935,966       1,864,302
                                                     -----------     -----------
         Net cash used in operating activities       (1,852,930)     (1,859,204)
                                                    -----------     -----------

Cash flows from investing activities
   Repayments (advances) on notes receivable              7,110        (234,000)
   Capital expenditures                                 (13,522)        (52,000)
   Change in other assets                               (24,855)         24,292
                                                    -----------     -----------
         Net cash used in investing activities          (31,267)       (261,708)
                                                    -----------     -----------

Cash flows from financing activities
   Proceeds from issuance of long-term debt             797,500         160,348
   Proceeds (payments to) from officer advances          50,209       1,146,264
   Payments under capital lease obligation               (7,565)         (7,440)
   Proceeds from issuance of common stock             1,176,640          50,306
   Payments on long-term debt                          (159,229)        (57,909)
   Dividends paid                                            -           (8,200)
                                                    -----------     -----------
         Net cash provided by financing activities    1,857,555       1,283,369
                                                    -----------     -----------

Net decrease in cash                                    (26,642)       (837,543)

Cash at beginning of year                               322,542       1,160,085
                                                    -----------     -----------
Cash at end of year                                  $  295,900      $  322,542
                                                      ==========      ==========
</TABLE>

Supplemental disclosure of cash flows information
  Cash paid during the year for interest was $70,710 (1997) and $57,311 (1996).

Non-cash investing and financing activities (Note 16)


                 See notes to consolidated financial statements.

                                      F - 5


<PAGE>


                   SIMS COMMUNICATIONS, INC. AND SUBSIDIARIES

                   Notes to Consolidated Financial Statements

Note 1 - Organization and Significant Accounting Policies

Organization

SIMS  COMMUNICATIONS,  Inc. and  Subsidiaries  was  incorporated in the state of
Delaware on August 15, 1991. The Company was formed as a communication equipment
company  and has  expanded  its  focus to  include  telecommunication  services,
cellular  telephone  activations  and rentals,  long distance,  prepaid  calling
cards,  inbound 800 service and international  operator services.  Its customers
are  located  throughout  the  states of  Florida,  North  and  South  Carolina,
California,  Michigan, Wisconsin,  Mississippi and Louisiana.  Additionally, the
Company has established  relationships for future international sales in Europe,
Asia and Canada.

Principles of Consolidation

The   consolidated   financial   statements   includes   the  accounts  of  SIMS
COMMUNICATIONS,  Inc. and its wholly owned  subsidiaries  SIMS  Franchise  Group
Inc., Cellex Communications Inc., and SIMS Communications  International,  Inc.,
and Link International Technologies,  Inc. and its wholly owned subsidiaries New
View  Technologies,  Inc.,  Link Dispensing  Systems,  Inc., and Southeast Phone
Card,  Inc. All significant  intercompany  balances and  transactions  have been
eliminated in consolidation.

Use of Estimates

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

Cash and Cash Equivalents

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

Inventories

Inventories  consists  primarily  of  automated  cellular  distribution  centers
(ACDC's),   cellular   phones,   telephone   debit  card  dispensers  and  other
miscellaneous  communications equipment and are recorded at the lower of cost or
market determined by the first-in, first-out method.


                                     F - 6

<PAGE>


                   SIMS COMMUNICATIONS, INC. AND SUBSIDIARIES

                   Notes to Consolidated Financial Statements


Note 1 - Organization and Significant Accounting Policies (continued)

Property and Equipment

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

Organization Costs

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

Net loss Per Common Share

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

Patents

Patent  costs are  those  costs  related  to filing  for  patents  and the value
allocated to the patents based upon the business  acquisition  (Note 17).  These
costs are amortized on a straight-line  basis over the estimated  useful live of
ten years.

Fair Value of Financial Instruments

The  carrying  amounts  of  financial   instruments   including  cash  and  cash
equivalents,  receivables,  accounts payable, and accrued expenses  approximated
fair value as of June 30, 1997 because of the relatively short maturity of these
instruments.

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

Income Taxes

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

                                     F - 7


<PAGE>


                   SIMS COMMUNICATIONS, INC. AND SUBSIDIARIES

                   Notes to Consolidated Financial Statements


Note 1 - Organization and Significant Accounting Policies (continued)

Revenue Recognition

Rental  revenue is recognized  upon the completion of the customer phone rental.
Activation  revenue is recognized upon the activation of the customers  cellular
account with the  appropriate  carrier.  Revenues from the sale of the Automated
Cellular  Distribution Center (ACDC),  telephone debit card dispensers and other
equipment are  recognized  upon  delivery.  Reviews from license  agreements are
recognized upon the completion of all obligations pursuant to the agreement.

Royalty Fees

Royalties as allowed by the  franchise  agreement are accrued on a percentage of
gross sales, as defined, as reported by franchisees and are included in accounts
receivable.

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.  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.

Reclassifications

Certain   accounts  in  the  June  30,  1996  financial   statements  have  been
reclassified to conform to the June 30, 1997 presentation.

Note 2 - Continued Operations

The  accompanying  financial  statements  have been  prepared on a going concern
basis  which   contemplates   the  realization  of  assets  and  liquidation  of
liabilities in the ordinary  course of business.  During the year ended June 30,
1997, the Company continued to suffer recurring losses from operations in excess
of $2,788,000, resulting in an accumulated deficit of approximately $13,307,000.
The  Company is looking  to raise  additional  equity  capital  through  private
placements.   Additionally,  the  Company  is  in  the  process  of  negotiating
significant licensing and sales agreements.  However,  there can be no assurance
that the Company will be successful in obtaining  additional  licensing or sales
agreements  or  in  raising  additional  capital.  The  consolidated   financial
statements do not include any adjustments that might be necessary if the Company
is unable to continue as a going concern.

                                     F - 8


<PAGE>


                   SIMS COMMUNICATIONS, INC. AND SUBSIDIARIES

                   Notes to Consolidated Financial Statements


Note 3 - Property and Equipment

Property and equipment consist of the following:

                                    June 30,
                                      1997
                                                           --------
Property and equipment
   Vehicles                                              $   20,608
   Furniture and fixtures                                   127,230
   Machinery and equipment                                  961,243
   Software                                                  52,000
   Less accumulated depreciation                           (424,002)
                                                           --------

                                                         $  737,079
                                                         ==========


Note 4 - Note Receivable

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

During the years ended June 30, 1997 and 1996,  the Company sold  equipment to a
customer  for a total sales price of $280,000  and  $384,000,  respectively.  No
payments have been received as of June 30, 1997. During the years ended June 30,
1997 and 1996, a Company was contracted to provide services necessary to get the
units operational but failed to perform.  That Company is no longer involved and
operations  are to commence by October 1997. As such, all amounts due related to
the sales have been extended.  The total amount of $664,000 is payable under the
terms of a note receivable which bears interest at 8.5%.  Principal and interest
is payable  commencing  by December 31, 1997 in equal  monthly  installments  of
approximately $14,000 through November 30, 2002.

Note 5 - Investments
Smartphone
During  the year ended  June 30,  1997,  the  Company  acquired  a 10%  minority
interest in  Smartphone,  Inc. (a company that sells prepaid  cellular air time)
from certain  officers and directors of the Company at their original cost basis
of $200,000. This was effected by the issuance of 400,000 shares of common stock
which were valued at $.50 a share.

                                     F - 9


<PAGE>


                   SIMS COMMUNICATIONS, INC. AND SUBSIDIARIES

                   Notes to Consolidated Financial Statements


Note 5 - Investments (continued)
Cancall
During the year  ended June 30,  1997,  the  Company  sold 30 ACDC units and 100
telephone  debit  card  dispensers  for  $810,000  as  well as  entering  into a
licensing  agreement for $500,000 with Cancall  Cellular  Communications,  Inc.,
(Cancall)  for a total price of  $1,310,000.  The licensing  agreement  entitles
Cancall the right to market,  distribute and operate the Company's  products and
trademarks on an exclusive basis within the territories of Canada and Europe and
on a  non-exclusive  basis within the territories of the United States and Asia.
The  exclusive  license  within  the  European  territory  is subject to certain
minimum purchase commitments the must be met by Cancall over a two year period.

In  consideration  for the above  transaction,  the Company  received  1,807,800
shares of Cancall's  Class A $ 1.00 par value  preferred  stock.  The  preferred
stock can be converted into 3,013,000 shares of Cancall's common stock at a rate
of $.60(Canadian) per share after a one year mandatory holding period. Cancall's
common stock is traded on the  Vancouver  Stock  Exchange  under the symbol CLE,
however,  the preferred stock has no established market or readily  determinable
market value.  As such, the transaction was valued at the cost of the underlying
goods sold.

As of June 30, 1997,  the 100 telephone  debit card  dispensers had not yet been
delivered. As such, deferred revenue in the amount of $105,000 has been recorded
in the financial statements.

Note 6 - 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,  1997  was  approximately  $250,000.  The
line-of-credit is secured by a restricted  certificate of deposit with a balance
at June 30, 1997 of approximately $250,000. The line-of-credit bears interest at
5.77% payable monthly. The line-of-credit expires June 7, 1998.

Note 7 - Notes Payable and Capital Leases
                                                                      June 30,
                                                                        1997
                                                                      --------
Promissory note payable at 10% interest payable monthly commencing September 15,
 1995. Balance of principal is payable in full by February,  1997. As additional
 consideration,  the  Company  agrees to pay the note holder 8.0% of all profits
 received through the Company's agreements with
 Commonwealth Group International, Inc. (Note 4).                   $  310,348

                                     F - 10


<PAGE>


                   SIMS COMMUNICATIONS, INC. AND SUBSIDIARIES

                   Notes to Consolidated Financial Statements


Note 7 - Notes Payable and Capital Leases (continued)

                                                                      June 30,
                                                                        1997
                                                                      --------
8.0%  convertible  notes  payable -  individuals,  interest  payable  quarterly,
 principal due at maturity  dates  ranging from August 1997 to April 1998.  Debt
 includes  conversion to common stock feature with conversion rates ranging from
 $1.25 to $2.50 per share. Additionally, each note holder
 was  issued  options  to  purchase   shares  of  the                  672,500
 Company's stock (Note 11)

Note payable - individual,  bearing interest at bank prime plus 1% (8.5% at June
 30, 1997), principal
 payments  of  $5,000  plus   interest   due  monthly                   75,000
 through September 1998.

Non interest  bearing note payable -  individual,  principal  payable in monthly
 installments of $1,500
 through June 2000.                                                     51,000

11% Note payable - bank,  principal and interest payable in monthly installments
 of $541 through
 June 14, 1998.  Collateralized by equipment.                            6,137
      --- -----                                                          -----
                                                                     1,114,985
Less current maturities                                             (1,066,985)
                                                                    ----------

Total                                                               $   48,000
                                                                    ==========

Principal payment on notes payable subsequent to June 30, 1997 are as follows:

            Year Ending June 30,
            --------------------

                   1998                                  $1,066,985
                   1999                                      33,000
                   2000                                      15,000
                   ----                                      ------

                                                         $1,114,985
                                                         ==========

Capital Leases

The  Company  leases  various  office   equipment  which  is  accounted  for  as
capitalized  leases. The following is a schedule of future minimum capital lease
payments  together with the net present value of the minimum lease obligation as
of June 30, 1997.

                                     F - 11


<PAGE>


                   SIMS COMMUNICATIONS, INC. AND SUBSIDIARIES

                   Notes to Consolidated Financial Statements


Note 7 - Notes Payable and Capital Leases (continued)

        Year Ending June 30,
        --------------------

              1998                                         $ 14,079
              1999                                           12,294
              2000                                           12,294
              2001                                           12,294
              2002                                           11,270
              ----                                           ------
              Total                                          62,231
              Less interest                                 (15,935)
                                                            -------

                                                           $ 46,296
               Less current portion                          (8,377)
                                                            ========
                                                           $ 37,919

The assets recorded under capital leases are as follows:

        Furniture and fixtures                             $ 45,535
        Less accumulated amortization                       (10,221)
                                                            -------

                                                           $ 35,314
                                                           ========

Amortization expense for equipment under capital lease was $2,271 and $7,780 for
the years ended June 30, 1997 and 1996, respectively.

Note 8 - Income Taxes

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

The principal temporary  differences that will result in deferred tax assets and
liabilities  are certain  expenses and losses  accrued for  financial  reporting
purposes  not  deductible  for tax  purposes  until paid,  depreciation  for tax
purposes in excess of  depreciation  for  financial  reporting  purposes and the
deferral of franchise costs and franchise sales revenues for financial reporting
purposes which are recognized for tax purposes in the period paid. The effect of
the differences  outlined above generated a long-term deferred tax asset that is
fully  impaired  because of a lack of profitable  operating  history.  The fully
impaired  asset,  computed  at a 34  percent  tax  rate at  June  30,  1997  was
approximately  $4,112,000.  Accordingly,  there  is no net  deferred  tax  asset
reflected in the accompanying consolidated financial statements.

                                     F - 12


<PAGE>


                   SIMS COMMUNICATIONS, INC. AND SUBSIDIARIES

                   Notes to Consolidated Financial Statements


Note 8 - Income Taxes (continued)

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,
                                                          ----------------------
                                                           1997            1996
                                                           ----            ----

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,
                                                                     1997
                                                                     ----

      Total long-term deferred tax asset                             $4,112,000
      Valuation allowance                                            (4,112,000)
                                                                     ----------

                                                                    $       -
                                                                    ===========

At June 30, 1997,  the Company has  approximately  $12,094,000  of net operating
loss  carryforwards  for  income tax  reporting  purposes  which  expire in 2007
through  2012.  During 1995,  there was a change in ownership due to the initial
public  offering,  which could  restrict the  utilization  of net operating loss
carryforwards in the future.

Note 9 - Related Party

Sales

During the year ended June 30, 1997 and 1996,  the Company  sold  equipment  and
other technology to Lonestar,  Inc., an entity owned entirely by the officers of
the Company.  The sales price was $150,000 and $350,000,  respectively,  and was
used to satisfy $15,000 of officer  advances  payable and created  $135,000 note
receivable for the year ended June 30, 1997 and was used to satisfy  $350,000 of
officer  advances  payable for the year ended June 30, 1996. The note receivable
bears  interest  at 8.25%  and is  payable  in  equal  monthly  installments  of
principal and interest of  approximately  $2,750  commencing  April 1997 through
March 2002. As of June 30, 1997 the outstanding balance was $127,890.

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

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

                                     F - 13


<PAGE>


                   SIMS COMMUNICATIONS, INC. AND SUBSIDIARIES

                   Notes to Consolidated Financial Statements


Note 9 - Related Party (continued)

Officer Advances Payable

During the year ended June 30, 1997, officers advanced amounts to the Company to
help fund  operations and meet  obligations.  At June 30, 1997,  $65,809 remains
outstanding and due on demand to certain officers and directors of the Company.


Note 10 - Stock Option and Bonus Plans

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

Incentive Stock Option Plan

The  Incentive  Stock  Option Plan  authorizes  the  issuance of up to 5,000,000
shares of the Company's  Common Stock to persons that exercise  options  granted
pursuant to the Plan.  It became  effective on April 15, 1993 and will remain in
effect  until April 15, 2001 unless  terminated  earlier by action of the Board.
Only officers, directors and key employees of the Company may be granted options
pursuant to the Incentive Stock Option Plan.

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

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

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

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

                                     F - 14


<PAGE>


                   SIMS COMMUNICATIONS, INC. AND SUBSIDIARIES

                   Notes to Consolidated Financial Statements


Note 10 - Stock Option and Bonus Plans (continued)

Non-Qualified Stock Option Plan

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

The following is a summary of options and warrants granted:
<TABLE>
<CAPTION>

                                                  Non-Qualified   Options
                                      Incentive      Stock      Issued Not        Exercise
                                        Stock                   Related to a      Price Per
                                       Options      Options        Plan            Share
                                     ----------     -------     ------------   --------------

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

Outstanding June 30, 1995            180,000            -              -       $ 5.50 - $6.50
   Options expired                        -             -              -                -
   Options exercised                      -             -              -                -
   Options granted                        -             -              -                -
                                     ----------     -------     ------------   --------------

Outstanding June 30, 1996            180,000            -              -         5.50 -  6.50
   Options expired                        -             -              -                -
   Options exercised                      -             -              -                -
   Options granted                 2,769,000        40,000        809,250        1.00 -  3.25
                                   ----------     -------     ------------   ---------------

Outstanding June 30, 1997          2,949,000        40,000        809,250      $ 1.00 - $6.50
                 === ====          =========      ========    ===========      ==============
</TABLE>


                                     F - 15


<PAGE>


                   SIMS COMMUNICATIONS, INC. AND SUBSIDIARIES

                   Notes to Consolidated Financial Statements


Note 10 - Stock Option and Bonus Plans (continued)

The Company has the following stock options outstanding as of June 30, 1997:

                                                                  Currently
   Options            Exercise                                    Exercisable
 Outstanding           Price     Expiration Date                   Options
 -----------           -------   ---------------                   --------
     90,000              5.50    September 1999                     90,000
     90,000              6.50    September 1999                     90,000
  2,000,000              1.00    December 2006                          -
    644,000              1.00    December 2001                          -
     90,000              3.25    September 1999                         -
     35,000              1.25    December 2006                          -
     20,000              1.25    September 1999                     20,000
     20,000              2.00    September 1999                     20,000
     90,000              2.75    September 1999                     90,000
    160,000               .50    December 2001                     160,000
    100,000              1.25    December 2001                     100,000
    100,000              1.25    August 2001                       100,000
     50,000              1.75    December 2001                      50,000
     75,000              1.00    May 2000                           75,000
     37,500              2.50    May 2000                           37,500
     43,750              1.25    May 2000                           43,750
    153,000              2.00    May 2000 - July 2002              153,000
    -------                                                        -------

  3,798,250                                                      1,029,250
  =========                                                      =========

Effective for the year ended June 30, 1997, the Financial  Accounting  Standards
Board issued 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 year ended June 30,  1997,  employees  of the  Company  were
issued options to purchase a total of 2,899,000  shares of the Company's  common
stock at rates  ranging from $1.00 to $3.25 per share  expiring  from  September
1999 to December  2006.  Had  compensation  cost for the Company's  issuances of
stock options during the year ended June 30, 1997 been  determined  based on the
fair value at the date of grant  consistent  with the provisions of FAS 123, the
Company's  1997 net income and earnings  per share would have been  decreased to
the pro forma amounts indicated below:

                                     F - 16


<PAGE>


                   SIMS COMMUNICATIONS, INC. AND SUBSIDIARIES

                   Notes to Consolidated Financial Statements


Note 10 - Stock Option and Bonus Plans (continued)

       Net loss - as reported                            $(2,788,896)
       Net loss - pro forma                              $(6,429,498)
       Net loss per share - as reported                  $     (.42)
       Net loss per share - pro forma                    $     (.96)

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, 1997; dividends yield
of 0.0%; expected average annual volatility of 100.10%; average annual risk-free
interest rate of 8%; and expected terms ranging from 1.5 to 4.5 years.
Stock Bonus Plan

Up to  3,000,000  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 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.  For the
years  ended  June 30,  1997 and  1996,  892,500  and  1,365,000  shares  of the
Company's   common   stock  have  been  issued   under  the  Stock  Bonus  Plan,
respectively.

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's  directors  established  the  Company's  Series A
Preferred  Stock and authorized the issuance of up to 50,000 shares.  Each share
of series A  Preferred  Stock is entitled to a dividend at the rate of $1.60 per
share when, as and if declared by the Board of Directors. Dividends not declared
do not  cumulate.  Additionally,  each  share  of  Series A  Preferred  Stock is
convertible into .80 shares of the Company's Common Stock at any time after July
1, 1999.  Upon any liquidation or dissolution of the Company,  each  outstanding
share of Series A Preferred  Stock is entitled to  distribution of $20 per share
prior to any  distribution  to the holders of the Company's  common stock. As of
June 30, 1997, the Company has 25,250 shares of Series A Preferred  Stock issued
and outstanding.


                                     F - 17


<PAGE>


                   SIMS COMMUNICATIONS, INC. AND SUBSIDIARIES

                   Notes to Consolidated Financial Statements


Note 11 - Stockholders' Equity (continued)

Preferred Stock (continued)

In March 1996,  the  Company's  directors  established  the  Company's  Series B
Preferred Stock and authorized the issuance of up to 100,000 shares.  Each share
of series B  Preferred  Stock is  entitled to a dividend at the rate of $.15 per
share when, as and if declared by the Board of Directors. Dividends not declared
do not  cumulate.  Additionally,  each  share  of  Series B  Preferred  Stock is
convertible into one share of the Company's  Common Stock.  Upon any liquidation
or  dissolution  of the Company,  each  outstanding  share of Series B Preferred
Stock is entitled to distribution  of $1.00 per share prior to any  distribution
to the holders of the Company's  common stock.  As of June 30, 1997, the Company
has 100,000 shares of Series B Preferred Stock issued and outstanding.

During the year  ended  June 30,  1996,  the  Company  paid a total of $8,200 in
dividends  to  Preferred  Stockholders.  For the year ended June 30,  1997,  the
Company did not declare any dividends payable.

Warrants

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

Equity Transactions

During the year ended June 30, 1996, the following equity transactions occurred:

          The Company agreed to issue an additional 1,000 shares of the Series A
          preferred  stock as payment for the  repurchase of certain  franchises
          valued at $20,000.

          The  Company  converted  $362,000  of officer  advances  payable  into
          175,110 shares of the Company's common stock at $2.07 per share.


          The Company issued  1,365,000  shares of the Company's common stock at
          $1 per share for a total of  $1,365,000 as  compensation  for services
          from officers and other employees.

          The Company agreed to issue 100,000 shares of $.001 par value Series B
          convertible  preferred stock as repayment of certain officer  advances
          payable valued at $100,000. Each share of the Series B preferred stock
          can be converted  into one share of the Company's  common stock at the
          option of the holder.


                                     F - 18


<PAGE>


                   SIMS COMMUNICATIONS, INC. AND SUBSIDIARIES

                   Notes to Consolidated Financial Statements


Note 11 - Stockholders' Equity (continued)

Equity Transactions (continued)

     The Company issued 419,940 shares of its common stock in repayment of loans
     of $209,970 from certain officers.

     Certain  officers  of the  Company  forgave  $124,294  of officer  advances
     payable and $400,000 of accrued salaries.  For financial statement purposes
     this amount has been treated as a contribution to capital.

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

          The Company acquired a 10% minority  interest in Smartphone  valued at
          $200,000 for 400,000 shares of the Company's common stock (Note 5).

          The Company  acquired Link  Technologies,  Inc. and  Subsidiaries  for
          674,157 shares of the Company's  common stock with a value of $600,000
          (Note 17).

          The Company issued  892,500  shares of the Company's  common stock for
          $927,978 of professional services received.

          The Company  issued  800,000  shares and 1,392,570  shares at $.50 per
          share and $.70 per share in private placements,  respectively, raising
          $1,176,640 net of $198,160 in offering costs.  The Company also issued
          100,000 shares to the underwriter in connection with these offerings.

          The Company  converted  $125,000 of convertible debt to 192,860 shares
          of the Company's stock at rates ranging from $.50 to $.70 per share.

          The Company issued options to purchase 250,000 shares of the Company's
          Common  Stock at rates  ranging  from  $1.25  to  $1.75  per  share in
          exchange for professional consulting services. $325,578 of expense has
          been  recognized  at imputed  values  ranging  from $1.23 to $1.38 per
          option. These options expire from August 2001 to December 2001.

          The Company issued options to purchase 309,250 shares of the Company's
          common  stock at rates  ranging  from  $1.00  to  $2.50  per  share in
          connection with the 8% convertible  notes payable.  These options have
          an imputed  value of  $353,686  based on rates  ranging  from $1.01 to
          $1.29.  The amount was  recorded as  deferred  loan costs and is being
          amortized  over the life of the loans.  As of June 30, 1997,  $178,185
          has been expensed. These options expire from May 2000 to July 2002.




                                     F - 19


<PAGE>


                   SIMS COMMUNICATIONS, INC. AND SUBSIDIARIES

                   Notes to Consolidated Financial Statements


Note 12 - Stock Splits

In March 1996, the Company declared a 1 for 10 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 - Significant Customers

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

As of June 30, 1996,  one  franchisee  accounted  for $50,000 (62%) of franchise
revenue and $384,000  (46%) of equipment and other revenue.  Another  franchisee
and  stockholder  accounts  for  $724,264  (83%) of the  franchise  and customer
deposits.

Note 14 - Business Segments

The Company's principal operations are in the  telecommunications  and cellcular
industries. In prior years, the Company also generated significant revenues from
the franchising of cellular related technology.  However, trends in the industry
forced the  Company to change  their  focus,  therefore,  franchising  no longer
generates  significant  revenues  or losses.  The  Company  still is involved in
minimal franchising activities,  however,  franchising is no longer considered a
significant  segment and does not require separate  disclosures.  No formal plan
has been adopted related to the discontinuance of franchising operations.

Note 15 - Commitments and Contingencies

Operating Leases

The Company leases its  administrative  offices under a noncancelable  operating
lease through  February 1998. The minimum annual rent will increase each year by
an amount based in the Consumer Price Index. The Company is also responsible for
paying  its  portion of the  common  area  maintenance,  real  estate  taxes and
insurance expenses. The Company also leases two other facilities; one in Florida
and one in California,  under  noncancelable  operating  leases through February
1998  to June  2002.  Additionally,  the  Company  also  leases  various  office
equipment under noncancelable  operating leases with terms up to 4 years. Rental
expense for the years ended June 30, 1997 and 1996 was  $101,039  and  $106,705,
respectively.

                                     F - 20


<PAGE>


                   SIMS COMMUNICATIONS, INC. AND SUBSIDIARIES

                   Notes to Consolidated Financial Statements


Note 15 - Commitments and Contingencies (continued)

Operating Leases (continued)

Future minimum lease commitments at June 30, 1997 are as follows:

        Year Ending June 30,

              1998                                        $ 122,656
              1999                                           37,227
              2000                                           35,000
              2001                                           35,000
              2002                                           35,000
              ----                                           ------

                                                          $ 264,883
                                                          =========

Employment Agreements

     The Company  has entered  into five year  employment  agreements  with four
     officers of the Company  commencing April 7, 1997. Each officer is entitled
     to a first  year  salary  of  $90,000,  increasing  15% per year  until the
     agreement is expired.  If the Company has not  demonstrated  its ability to
     operate profitably within one year, the increase will only be 5% until such
     time that profitable operations have been achieved. Each officer is granted
     500,000 options to purchase  shares of the Company's  common stock for $.50
     per share until  December  31, 2002  pursuant  to the  Non-Qualified  Stock
     Option  Plan.  Additionally,  the officer will  receive  50,000  options to
     purchase  shares of the  Company's  common  stock for $.50 per share  until
     December 31, 2002. These shares are not pursuant to any plan. 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 an automobile allowance. As of June 30, 1997,
     $256,000  of  accrued  officer  salaries  payable  is  included  in accrued
     expenses.

     The Company has also entered into five year employment  agreements with two
     officers of a subsidiary of the Company commencing on January 1, 1997. Each
     officer  is  entitled  to a salary of $ 72,000  per year.  Each  officer is
     granted 302,000  options to purchase  shares of the Company's  common stock
     for $1.00 per share until December 31, 2001 pursuant to the Incentive Stock
     Option  Plan.  Additionally,  the officer will  receive  20,000  options to
     purchase  shares of the  Company's  common  stock for $1.00 per share until
     December 31, 2001. These shares are not pursuant to any plan. 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 an automobile allowance.

                                     F - 21


<PAGE>


                   SIMS COMMUNICATIONS, INC. AND SUBSIDIARIES

                   Notes to Consolidated Financial Statements


Note 15 - Commitments and Contingencies (continued)

Royalty Agreement

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

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

Consulting Agreements

     The Company has entered into a one year consulting agreement effective from
     August 1996 and a two year  consulting  agreement  effective  from  October
     1996. The one year agreement provides the consultant with 175,000 shares of
     the Company's  common stock and options to purchase  150,000  shares of the
     Company's  common stock in exchange for general  business  services such as
     execution of a business plan, public relations and  identification of sales
     opportunities. The two year agreement provides the consultants with 100,000
     shares of the Company's  common stock and options to purchase an additional
     100,000  shares  of  the  Company's   common  stock  in  exchange  for  the
     consultant's  assistance in introducing  the Company to potential  European
     investors  and in  setting up  relationships  with  international  business
     contacts.  The options have exercise prices ranging from $1.25 to $1.75 per
     share and expire five years from the date of grant (Note 11).

Litigation

     A matter is pending in state court in Palm Beach County,  Florida,  whereby
     the  plaintiff  seeks  damages  in  excess  of  $3,800,000  for  breach  of
     agreement. The Company has filed an Answer and Affirmative Defenses denying
     the claims and intends to continue to vigorously defend themselves  against
     these claims. The financial  statements do not include any adjustments that
     might result from the outcome of this uncertainty.

     Additionally,  a franchisee  has demanded that the Company  repurchase  his
     franchises  for  approximately  $1,000,000  or a  suit  for  breach  of the
     franchise  agreement will be filed. The Company is currently  attempting to
     negotiate a settlement and has  approximately  $770,000 accrued relating to
     this obligation.

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

                                     F - 22


<PAGE>


                   SIMS COMMUNICATIONS, INC. AND SUBSIDIARIES

                   Notes to Consolidated Financial Statements


Note 16 - Statements of Cash Flows

During the fiscal year ended June 30, 1996, the Company transferred  $517,017 of
ACDC units,  from  inventory to property,  plant,  and  equipment as these units
represented company owned locations. During the fiscal year ended June 30, 1997,
the  Company  transferred  $419,275  of ACDC  units  from  property,  plant  and
equipment to inventory.

During the fiscal year ended June 30,  1996,  the Company had a 1 for 10 reverse
stock split.

During the fiscal year ended June 30, 1996, the Company bought back  franchisees
upon the issuance of preferred stock (Note 11).

During  the fiscal  year ended June 30,  1996,  the  Company  converted  accrued
officer salaries,  officer advances payable, debt and accrued interest to common
and preferred stock (Note 10).

During the fiscal  year ended June 30, 1997 and 1996,  the  Company  bought back
franchisees by entering into debt  obligations  totaling  $135,000 and $147,000,
respectively,  equal  amounts of inventory and other assets were received by the
Company.

During the fiscal year ended June 30, 1997, the Company issued 400,000 shares of
common stock for a 10% interest in Smartphone which was valued at $200,000.

During the fiscal year ended June 30,  1997,  the Company  converted  an account
receivable to a note receivable in the amount of $150,000.

 During  the  fiscal  year  ended  June 30,  1997,  the  Company  acquired  Link
 Technologies, Inc., and Subsidiaries for 674,157 shares of common stock, with a
 value of $600,000  (Note 17).  During the fiscal year ended June 30, 1997,  the
 Company acquired fixed assets of $45,535 through a capital lease.

  During the fiscal year ended June 30, 1997, the Company converted  $125,000 of
  convertible notes payable to 192,860 shares of common stock.

  During the fiscal year ended June 30, 1997, the Company  purchased  $30,600 of
  Debit Link  machines  from officers of the Company and was recorded as a notes
  payable to officers.

  During the fiscal year ended June 30, 1997,  the Company  issued stock options
  to  individuals  as an  inducement  to provide  financing  pursuant  to the 8%
  convertible notes payable. The options had an imputed value of $353,686. As of
  June 30,  1997,  $178,185 has been  amortized  to expense  with the  remaining
  $175,501  recorded as deferred  loan costs and  included in prepaids and other
  current assets (Note 11).

                                     F - 23


<PAGE>


                   SIMS COMMUNICATIONS, INC. AND SUBSIDIARIES

                   Notes to Consolidated Financial Statements


Note 17 - Acquisition

Effective  January 1, 1997,  the Company  acquired Link  Technologies,  Inc. and
Subsidiaries  (Link) for 674,157  shares of the Company's  common stock,  with a
value of $600,000.

The  accompanying  consolidated  financial  statements  includes  the results of
operations from the effective date of the acquisition, January 1, 1997, of Link.

The  acquisitions  are  accounted  for under the purchase  method of  accounting
applying the  provisions  of  Accounting  Principles  Board Opinion No. 16 ("APB
16").  Pursuant to the  requirements  of APB 16, the aggregate  purchase  price,
based on fair values,  will be allocated to the tangible and  intangible  assets
and  liabilities  assumed based on their estimated fair value at the date of the
acquisitions.

The aggregate  purchase price  allocated to the assets  acquired and liabilities
assumed which are included in the consolidated financial statements consists of:


          Assets acquired
            Cash                                            $ 2,737
            Accounts Receivable                             142,234
            Inventory                                       160,742
            Fixed assets                                    201,032
            Patents                                         484,222
                                                            -------
                                                            990,967
          Liabilities assumed:
            Accounts payable and accrued expenses          (390,967)
                                                           --------

   Net assets acquired                                      600,000

  Fair value of common stock issued                         600,000

The common stock issued in the  acquisition  was recorded at the market value of
the stock on the date of the acquisition which was $.89 per share.

                                     F - 24


<PAGE>


                   SIMS COMMUNICATIONS, INC. AND SUBSIDIARIES

                   Notes to Consolidated Financial Statements


Note 17 - Acquisition (continued)

Pro Forma Statement of Operations

The unaudited pro forma results of operations  had the Company  acquired Link as
of July 1, 1996 and 1995 are as follows for the fiscal years ended June 30, 1997
and 1996:
                                                      June 30,
                                                      --------
                                              1997               1996
                                           -----------        ----------

      Revenues                              $4,792,000        $3,119,000
                                            ==========        ==========

      Net loss                             $(2,780,000)      $(4,206,000)

      Net loss per common share            $      (.42)      $     (1.76)
                                            ==========       ===========



                                     F - 25