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


                                   FORM 10-K/A

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

               For the fiscal year ended December 31, 1995

     [ ]  TRANSITION  REPORT  PURSUANT TO SECTION 13 OR 15(d) OF THE  SECURITIES
          EXCHANGE ACT OF 1934

              For the transition period from ------- to --------


                         Commission File Number: 0-25632
                                ----------------

                        GUINNESS TELLI*PHONE CORPORATION
             (Exact name of registrant as specified in its charter)

       NEVADA                                                  68-0310550
    ---------------------                                 ---------------------
   (State or Jurisdiction                                   I.R.S. Employer
     of Incorporation)                                    Identification Number

   655 Redwood Hwy., Suite 219, Mill Valley, California        94941
   ----------------------------------------------------       ----------
   (Address of principal executive offices)                   (Zip Code)

     Registrant's telephone number, including area code: (415) 389-94420

     Securities Registrant pursuant to Section 12(b) of the Act: None

     Securities registered pursuant to Section 12(g) of the Act: None

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

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

     There is no current market for the Registrant's common stock. The number of
outstanding  shares of the  Registrant's  Common  Stock on December 31, 1995 was
13,427,480.



<PAGE>

<PAGE>
                                                       
                                TABLE OF CONTENTS

                                    PART I
ITEM 1.  BUSINESS ...................................................  1
     (a) Overview .................................................... 1
     (b) Registrant's Plan of Operation .............................. 2
         Necessity to Raise Additional Capital ...................... 10

                Research and Development to be Performed..................  10
                Anticipated Material Acquisition of Plant and Equipment...  11
                Anticipated Material Changes in Number of Employees.......  11
                Material Areas Peculiar to Registrant's Business..........  11

    (c)   Financial Information about Industry Segments...................  12

    (d)   Narrative Description of Business...............................  12
                Telli*Phone Products and Services.........................  12
                Status of Product.........................................  21
                Sources and Availability of Raw Materials.................  23
                Patents, Trademarks, Licenses, Franchises and Concessions.. 24
                Seasonal Business.......................................... 25
                Significant Working Capital Required....................... 25
                Dependence on a Single Customer............................ 26
                Backlog Orders............................................. 26
                Government Regulation...................................... 26
                Competition................................................ 26
                Research and Development................................... 30
                Environmental Impacts...................................... 31
                Employees and Management of Growth......................... 31

    (e)   Financial Information about Foreign and
                Domestic Operations and Export Sales....................... 31
                Revenues from Prior Operations............................. 32

    (f)   Factors Affecting Company's Business Operating Results and
                Financial Condition........................................ 32

ITEM 2.   PROPERTIES  ..................................................... 46

ITEM 3.   LEGAL PROCEEDINGS................................................ 47

ITEM 4.   SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.............. 47
            
                                       ii

<PAGE>
                                     PART II

ITEM 5.   MARKET FOR REGISTRANT'S COMMON EQUITY AND
          RELATED STOCKHOLDER MATTERS...................................... 47
                  Market Information....................................... 47
                  Holders.................................................. 47
                  Dividends................................................ 48

ITEM 6.   FINANCIAL INFORMATION............................................ 48

ITEM 7.   MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
          CONDITION AND RESULTS OF OPERATION............................... 49
                  Overview................................................. 49
                  Liquidity and Capital Resources ......................... 49

ITEM 8.   FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA...................... 53

ITEM 9.   CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
          ACCOUNTING AND FINANCIAL DISCLOSURE.............................. 53

                                    PART III

ITEM 10.  DIRECTORS AND EXECUTIVE OFFICERS................................. 54
                Backgrounds of Directors and Executive Officers............ 55
                Directorships.............................................. 57
                Involvement in Certain Legal Proceedings................... 57
                Promoters and Control Persons.............................. 58

ITEM 11.  EXECUTIVE COMPENSATION........................................... 58

ITEM 12.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
          OWNERS AND MANAGEMENT............................................ 59
                Controlling Interest....................................... 59
                Security Ownership of Management........................... 59

ITEM 13.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS................... 60
                Notes Due By Lawrence A. Guinness; Dilution of Guinness'
                Ownership in the Company................................... 60

                                     PART IV

ITEM 14.  EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND
          REPORTS ON FORM 8-K.............................................. 61
                Financial Statements....................................... 61
                Exhibits................................................... 61

                                      iii

<PAGE>
                                                 
                                     PART I

ITEM 1. BUSINESS

Overview

Guinness Telli*Phone  Corporation develops,  markets, and supports a proprietary
navigational  and integrated  applications  software  system that enables people
without any computer  experience to exchange  information  and conduct  business
over local telephone  lines (the  "MiniNet")  from a simple-to-use  computerized
consumer telephone  appliance with a display screen and online  capabilities for
transmitting,  receiving,  and processing  information (the "Telli*Phone").  The
Telli*Phone is  approximately  the size of a standard  telephone and utilizes an
internal proprietary operating system developed by the Company that combines the
power of a personal  computer with the versatility of a full  voice/mail  system
and smart card reader.

To  establish  immediate  marketplaces  for the MiniNet,  the Company  offers an
online  service in the form of a continually  updatable  telephone and community
information directory (the "Telli*Phone  Directory").  The Telli*Phone Directory
is stored in a computer (the  "Server")  maintained  and operated by the Company
and located  centrally  within the community to be served by the MiniNet.  It is
connected  to the local  telephone  system  through  ordinary  telephone  lines.
Through  the  Telli*Phone  Directory  users can  distribute  movie  reviews  and
purchase  theater  tickets,  broadcast  school  reports  and  transmit  parental
responses and comments,  reserve, order, and purchase food and merchandise,  and
distribute,  accumulate,  and maintain  special  discount  offers and  preferred
commercial arrangements.

Guinness Telli*Phone Corporation, a Nevada corporation, (hereinafter referred to
either as "GTC" or "Registrant") was originally  incorporated on July 8, 1993 as
U.S.  Telli*Phone  Corporation.  Effective  August  4,  1993,  U.S.  Telli*Phone
acquired  all of the  outstanding  shares of Innstar  Corporation,  an  inactive
company  having no assets,  in exchange for  1,551,480  shares of the  Company's
stock.  Innstar Corporation was then merged into the Company.  U.S.  Telli*Phone
did not receive any consideration  beyond the exchange of shares. The merger was
accounted for as a  recapitalization  and Innstar had no assets,  liabilities or
operations to include in the accompanying  financial statements.  The purpose of
the  merger was to  acquire a company  whose  shares  were  registered  with the
Securities and Exchange Commission and to change its domicile to Nevada which is
where U.S. Telli*Phone was incorporated.

The corporate name was changed to Guinness Telli*Phone  Corporation effective on
September  13, 1993.  On March 15, 1994,  through a series of  agreements  among
Registrant,  CoNetCo,  a  California  corporation,  and  Lawrence  A.  Guinness,
CoNetCo's  founder  and its  principal  shareholder,  Registrant,  pursuant to a
Reorganization  in accordance to section 368 (a) (1) (b) of the Internal Revenue
Code, as amended, acquired all of the issued and outstanding stock of CoNetCo in
exchange for 11,041,000 shares of the common stock of Registrant.

Registrant,  through this  acquisition,  acquired the rights to a telephone  and
community news and  information  computer  software  directory (the  Telli*Phone
Directory) and the

                                     Page 1

<PAGE>

Telli*Phone,  a combined  telephone and computer  communications  product with a
small  screen,  that has the  ability of  accessing  the  Telli*Phone  Directory
through ordinary  telephone lines The Telli*Phone has the potential of replacing
the standard  telephone now used in virtually  every household and office in the
United States.  Through the Telli*Phone's combined digital answering machine and
interactive  networking  access  system,  users  will have the  ability to send,
receive,  and store vast  amounts of  electronic  information  and  transactions
locally and worldwide.

Effective  February  18,  1990 (as  amended  by the March 15,  1994  agreement),
CoNetCo,   currently  the  Company's  wholly-owned  subsidiary,   acquired  from
CoNetCo's  major  stockholder  the assets of the  businesses  known as  Guinness
Productions,   Inc.  and  Guinness  Computer   Television  Corp.  (the  Guinness
Companies) in exchange for 8,000,000 shares of CoNetCo stock and royalty rights.
The assets acquired from the Guinness Companies  consisted  primarily of product
development  efforts performed by the Guinness  Companies to further develop the
Telli*Phone.  For  accounting  purposes,  all  costs  incurred  by the  Guinness
Companies  to develop the  Telli*Phone  have been  expensed in  accordance  with
Financial  Accounting  Standards Board Statements No. 2, Accounting for Research
and Development Costs. The assets acquired from the Guinness Companies have been
valued at their historical cost basis and not current fair market value, if any,
because all entities  are under common  control.  The  liabilities  incurred and
assumed by the Guinness Companies during its development of the Telli*Phone have
been  assumed  by  the  shareholder  of  the  Guinness  Companies.  The  primary
shareholder  of  Guinness  Telli*Phone  is also the primary  shareholder  of the
Guinness   Companies.   The  liabilities  assumed  by  the  Guinness  Companies=
shareholder total approximately $7.2 million,  which include  approximately $2.3
million of investor notes payable and related delinquent  compounded interest of
$3.6 million. Such liabilities were incurred by the Guinness Companies primarily
during the years 1982 to 1989. Such  liabilities  assumed have been treated as a
capital  contribution and increased  paid-in  capital.  CoNetCo and the Guinness
Companies are  predecessors of the Company and their  activities are included in
the  cumulative   financial  data.   Included  in  deficit   accumulated  during
development  stage  is  approximately  $7.2  million  relating  to the  Guinness
Companies.

Registrant's Plan of Operation

Registrant's  general plan of operation  beginning  the calendar year 1997 is to
assemble Telli*Phones,  based on the design of its working model and constructed
from  hardware  components  the  Company has  determined  are  available  in the
marketplace,  and  establish  a small  Initial  Market  Test of the  Telli*Phone
Directory in a controlled  environment to establish credibility for its business
assumptions and create specific value for its operating  systems and programming
assets.  Through a small  Initial  Market  Test  Registrant  hopes to be able to
attract sufficient financing to assemble additional  Telli*Phones and extend its
Initial Market Test to cover an entire community by the end of 1997.

     For the small  Initial  Market Test of its  products  the Company  plans to
produce a limited number of Telli*Phones and begin distributing them to homes in
the Southern Marin County Area. Registrant  anticipates being able to produce at
least  200  Telli*Phones  for  this  test.   Registrant  will  contract  various
engineering  firms in the San  Francisco  Bay Area to  assemble  the  first  200
Telli*Phones  for the  Initial  Market  Test.  

                                     Page 2
<PAGE>

During the  Initial  Market  Test,  Registrant's  engineers  intend to design an
inexpensive  Telli*Phone computer board that eliminates many hardware components
necessary  for the  operation  of a personal  computer but  unnecessary  for the
successful  operation of the  Telli*Phone as the everyday  consumer  product for
which it was designed. The purpose of designing a new Telli*Phone computer board
will be to reduce the production cost of Telli*Phones.  To this end,  Registrant
has begun discussions with a major manufacturer of telecommunications  equipment
that is capable of producing Telli*Phones and at a favorable price.

Approximately  two years ago  Registrant  approached,  on an informal  basis,  a
number of major retail  establishments  and a limited number of consumer product
manufacturers  to discuss their interest in working with the  Registrant  during
its Initial Market Test for the purpose of experimenting  with Telli*Phones as a
marketing tool. All parties verbally expressed enthusiasm about the proposal and
indicated  a  willingness  to work  with  the  Registrant.  They  also  verbally
expressed their  willingness to make a financial  contribution to the project in
return  for  their  exclusive  participation  and to give  them an edge on their
competition.

When the Initial Market Test of the Telli*Phone Directory is underway Registrant
plans to return to these potential  partners to renew the discussions to arrange
financing through the licensing of its technology for their use.  Registrant has
no  assurance  that it  will he able to  renew  past  discussions  or  that,  if
discussions  are opened  once  again,  it will be  successful  in  reaching  any
agreements with the parties.

During the Initial Market Test,  Registrant  anticipates that Subscribers to the
system will  demonstrate  a  willingness  to keep the product in their homes and
that additional  corporations  will become  interested in considering the use of
the  Telli*Phone  as a  marketing  tool.  Registrant  anticipates  being able to
solicit additional organizations to generate additional agreements to expand the
number of  participants  committed to the  project.  With  additional  financial
support  Registrant  anticipates  being able to raise the capital  necessary  to
begin full scale  operations  within the Initial  Market Test area by the end of
1997.

By January of 1997 Registrant  anticipates being able to reach an agreement with
the school district within the Initial Market Test area to sell subscriptions to
the Telli*Phone Directory throughout the community commencing in September 1997.
Within the last four years  Registrant has approached two major school districts
and discussed its plan to involve  school  districts in the sale of  Telli*Phone
Subscriptions  within  their  community  in return  for a share of the  revenues
generated from the use of  Telli*Phones by subscribers  within their  community.
Both districts responded favorably to the plan and verbally indicated that there
was no obstacle  standing in the way of their working with the Registrant on the
project.

The school districts in the Initial Market Test area operate in a similar manner
to districts previously  approached.  They sell magazine subscriptions each year
and  participate  in various other  projects to raise funds for schools in their
districts. However, Registrant has not approached any of the school districts in
the Initial  Market Test area and there is no assurance  that they would respond
in the same manner as the other school districts approached,  or that they would
be  willing to work with the  Registrant  on such a plan.  

                                     Page 3
<PAGE>

Network  Geographical Access Area

The  Telli*Phone   Directory   Computer  Station  is  located  in  Mill  Valley,
California. The office is in a building adjacent to Highway 101, the main artery
freeway running through Marin County servicing all its main populated areas. The
building  contains small  businesses,  medical  offices,  retail  establishments
including a deli, hair salon, nail salon, and major restaurant.

Mill Valley is 20 minutes north of the center of San Francisco across the Golden
Gate Bridge.  To the south it borders the town of Sausalito,  a popular  tourist
center. To the west is Mount Tamalpais,  a huge State  Recreational Area. Across
the freeway to the east are the wealthy towns of Tiburon and  Belvedere.  To the
north is the Town of Corte Madera with the largest  shopping center in the North
Bay and just beyond is the City of San Rafael, a large metropolitan  center with
a population of over 50,000.

The area of Marin to be covered by the Network  contains  approximately  100,000
households.  This  represents  less than 5% of the total  population  of the Bay
Area. The median income in Marin County is over $53,000 per household.

Most of the  population  in and around Mill Valley works in San  Francisco.  The
people live in expensive homes and care about their community,  their children's
education and protecting their quality of life. There are Little League Baseball
teams,  soccer leagues,  Boy Scout Troops,  service clubs,  recreation  centers,
church groups, sailing clubs, and hiking and biking trails.

Pacific Bell's Yellow Pages for Marin County generates  advertising  revenues in
excess of $20 million annually from approximately  40,000 listings.  It produces
461,000 purchases every month (National Yellow Pages Monitor Ratings).  The cost
of a l.5" x 1.5" column ad (black type only) is $48.00 per month.  The cost of a
3" x 1.5" column ad (black type only) is $111.50 per month.

The Yellow Pages is printed only once a year. Due to its inflexible  format,  it
does not contain much advertising from major department stores,  grocery stores,
recreation  departments (clubs,  community centers,  etc.), real estate brokers,
airlines,  ground transportation agencies,  movie and live theaters,  government
agencies, consumer agencies, or service bureaus.

The Yellow Pages does not allow for advertising  from individuals such as tutors
of academic studies or sports, house cleaners and maintenance, entertainers (for
parties,  etc.), local rentals (tools, sports equipment),  and second hand items
(books, clothes, etc.).

Individuals cannot distribute controlled advertising to generate part-time extra
income through arts,  crafts,  and hobbies.  With the  Telli*Phone  people could
offer  sewing,  baking,  maintenance,  video  production,  and word  processing.
Collectors of baseball cards through to antiques could trade and barter.

                                     Page 4
<PAGE>

Corporate Marketing Plan

The initial success of the  Telli*Phone  Directory is dependent on the Company's
ability to supply Telli*Phones to a great number of homes in a concentrated area
within  a very  short  period  of  time.  The  Company's  goal is to  deliver  a
Telli*Phone to the home of every family with school age children within the area
adjacent to the central computer.  The Company plans to involve the local school
district in the sale of  subscriptions  to the Telli*Phone  Directory and in the
distribution of Telli*Phones.

Each fall many school  districts  embark on fund raising  programs.  Part of the
program in some  districts is a drive to sell  magazine  subscriptions  to local
residents.  One  person  from a  magazine  distribution  company  works with the
district to encourage  the junior high school  children to solicit  homes in the
area and sell the  residents  annual  subscriptions  to popular  magazines.  The
school  district  receives  a  percentage  of the  revenues  generated  from the
subscription sales and the children receive prizes for their efforts.  The whole
process,  from organization to the handing in of orders, takes approximately two
weeks.

The Company  intends to offer a plan whereby the school district can generate an
on-going income to help fund education. The income earned by the school district
will be a percentage of the revenues from the sale of Telli*Phone  Subscriptions
and a percentage of the  advertising  revenues  generated  from the  Telli*Phone
Directory.  The  percentage  will be a calculation of the population of the area
served by the school  district as a percentage  of the total  population  in the
area covered by the local Telli*Phone Directory.

Secure Distribution Agreement

The Company must  finalize a  Telli*Phone  distribution  agreement  with a local
school district within the area to be served by the Telli*Phone Directory.  At a
minimum  the  Company  feels that it can expect a best  efforts  agreement  from
school  districts.  School  districts are  establishing  an  electronic  line of
communication  between the home and the school.  Many school districts have been
installing a voice/mail type system to automatically  report student absences to
the home and for parents to access a voice recording of important  announcements
and homework assignments. In some cases, where the system has been installed, it
costs the school district as much as $10 per student per month.

All these services and more can be available  within the school district through
the  Telli*Phone,  at no cost to the  district,  and  with  the  added  bonus of
generating income for the schools.

The  Company  feels that it is possible  for an  arrangement  to be  established
whereby the school  district makes it obligatory for parents to sign up with the
Telli*Phone Directory for $6.00 per month to receive school information and news
on an ongoing basis (similar to the schools  requiring  students to purchase gym
outfits, school notebooks and supplies, and supplementary materials from time to
time throughout the year).

                                     Page 5
<PAGE>
      
The  issues for the  parents  to  consider  are that they will be  reducing  the
administrative  overhead of the schools by  eliminating  the cost of  electronic
communications  with the  home,  they  will be  providing  the  schools  with an
additional  source of funding,  school  information  will now be  available on a
telephone display screen at the push of a button at any time, and special offers
through local  merchants will be available to Telli*Phone  Subscribers to reduce
their monthly costs.

To  further  encourage  people  to  acquire  subscriptions  to  the  Telli*Phone
Directory, the Company plans to offer subscriptions to the Telli*Phone Directory
on a free,  30 day,  "on  approval" trial basis within the area where the first
Telli*Phones  will be  distributed.  It is anticipated  that this will encourage
people without school age children to test this new voice/mail answering machine
and on-screen telephone directory.

Building Directory Listings

An agreement from the local school  district for  distribution  of  Telli*Phones
will  establish  proof  that  there  will be a  critical  mass of  users  in the
community with  Telli*Phones in their homes.  Local merchants will be encouraged
to purchase advertising space in the Telli*Phone Directory immediately and enter
information  about their goods and services  under their  Telli*Phone  Directory
listing.

Company Sponsored Advertising

The Company plans to send an  advertising  package to all businesses in the area
served  by the  Telli*Phone  Directory.  The  package  will  provide  them  with
information on the Telli*Phone and the Telli*Phone  Directory.  It will announce
that the Telli*Phone is being  introduced into their area and that many affluent
consumers,   located  near  their  place  of  business,   will  have  access  to
Telli*Phones and the Telli*Phone Directory.

They will be  informed  that a listing of the name of their  establishment,  the
address, and telephone number already appears in the Telli*Phone Directory along
with those of their competitors.  The package will include a return postage paid
Telli*Phone  Screen Card for them to create a screen of material that they would
like to be  available  to  consumers  under  their  listing  in the  Telli*Phone
Directory.  They will be offered one free listing of one  advertising  screen of
information  "on  approval"  for a period  of 60 days to give  them a chance  to
evaluate the system.

To  support  this  mailing  program,   the  Company  will  purchase  significant
advertising  space  in the  local  newspapers  to  promote  the fact  that  "the
Telli*Phone  is here" and is being made available to households in the area. The
advertising  will  be to  encourage  support  for  the  program  throughout  the
community,  make  merchants  aware  of the  marketplace  available  to  them  to
encourage them to return their Telli*Phone Screen Cards as soon as possible, and
to  evaluate  the  response  to the  Telli*Phone  from the people and schools in
districts where the Telli*Phone  has yet to be introduced  ("market  research to
evaluate and determine future budgeting for advertising and promotion").

                                     Page 6
<PAGE>

Free Newspaper and Magazine Articles

Human interest stories and Telli*Phone  background  articles will be prepared by
Telli*Phone  Editors  and sent to the  local  newspaper,  magazine,  radio,  and
television  stations.  Some of the  articles  to be  written or  subjects  to be
promoted are:

     a) the Telli*Phone, the local schools, and funding for education.

     b) the MiniNet vs. the Internet.

     c) the Telli*Phone and its use to your government and local politicians.

     d) the Telli*Phone and its importance to community groups and associations.

     e)  individual  accounts and ideas from people in the community on how they
plan to use the Telli*Phone Directory for their benefit.

Workshops, Sales Demonstrations, and Seminars

A small marketing staff will work with local clubs, associations,  and community
groups to conduct workshops and  demonstrations in the geographic area served by
the  Telli*Phone  Directory.  The purpose will be to demonstrate the Telli*Phone
and the  Telli*Phone  Directory  to  business  and  professional  members of the
community and inform them of the advantages  provided  everyone by communicating
through the Telli*Phone.

The  marketing  staff  will  encourage  these  people  to work  with  the  local
Telli*Phone Licensed Editors to help them understand how the Telli*Phone is used
in the community,  how to use the Telli*Phone to their benefit,  and how easy it
is to create screens for the Telli*Phone  Directory.  In addition, the marketing
staff will assist  advertisers in using the media to draw people's  attention to
their Telli*Phone Directory listings.

Members of local  groups,  associations.  and  organizations  will be invited to
attend  seminars  in the  Company's  offices  to  learn  how to use  many of the
functions  of the  Telli*Phone  and  promote its use  through  their  network of
members to reduce their costs,  simplify their operations,  and generate income.
People  attending these seminars will be invited to take a Telli*Phone  home and
test it with members of their household.

The Company  believes  that a  cooperative  marketing  effort among many people,
businesses,  and  organizations  who agree to use the  Telli*Phone  Directory to
broadcast  information  will encourage the growth of the Telli*Phone  into other
communities.   Through   advertising  and  articles  in  the  local  media,  the
information  available  through the Telli*Phone will be highlighted by those who
have created it.

                                     Page 7

<PAGE>

Telli*Phone Subscriber Smart Cards

The Company intends to issue plastic Telli*Phone smart cards  ("Telli*Cards") to
Subscribers  of the  Telli*Phone  Directory at the time their  Telli*Phones  are
delivered.  Businesses  in the  community  will be  encouraged  to offer special
discounts  to  Telli*Phone  Subscribers  who  show  their  cards  at the time of
purchase. These offers may not be advertised or made available through any other
medium.  As a result,  businesses  will be able to determine the return they are
experiencing from the use of Telli*Phone.

The Company  believes that as  Telli*Phone  Subscribers  hear about these saving
plans and special  offers,  they will be encouraged  to check their  Telli*Phone
before going to shop, even if they have decided what they are going to buy.

Initial Market Test

The Company will  introduce its products to the  marketplace  through an Initial
Market Test in a single local community. The Initial Market Test is important in
that it will allow the Company to debug its systems,  modify any design flaws to
insure that the products will meet the needs of the  marketplace,  and establish
verification  of the  Company's  Business  Plan before it makes any  significant
investment in the manufacture of Telli*Phones.  The goals to be verified are the
following:

     a) The Telli*Phone  Directory can be distributed  successfully  through the
sale of  subscriptions  by the local school  district and families  will come to
rely on the  Telli*Phone  as their  primary  source of school  news and  student
information.

     b) People  will come to rely on the  Telli*Phone  Directory  as their local
telephone book.

     c) The  Telli*Phone  will  grow  within  the  community  primarily  through
promotion and support from local businesses and community groups who will use it
for their own benefit.

     d)  People  will  come  to  rely  on  the   Telli*Phone  as  the  new  home
communications  appliance to replace their answering  machine and manage most of
their telecommunications needs.

     e) Major  information  providers will demonstrate their confidence that the
Telli*Phone will allow them to expand their  marketplace of users beyond that of
users of personal  computers by purchasing  Telli*Phone  licensing  contracts to
reach Telli*Phone Subscribers.

     f) The Telli*Phone  MiniNet will operate  successfully  and profitably as a
small business within a single community.

Product Distribution

The initial success of each district  Telli*Phone  MiniNet will be the Company's
ability to create a critical mass of Subscribers  in a community  within a short
period of time.  The Company's 

                                     Page 8
<PAGE>

goal will be to deliver a  Telli*Phone  to the home of every  family with school
age children within a nucleus of the district served by a Telli*Phone  Directory
(the "Geographical  Access Area"). Each Geographical Access Area is comprised of
approximately 5 different areas called "Geographical Access Units."

The Company  plans to offer  school  districts  encompassing  the most  affluent
Geographical  Access Unit in the Geographical  Access Area a plan whereby it can
generate  funds for  school  projects.  The  minimum  goal will be to have every
family in the school district purchase at least a single month's subscription to
the Telli*Phone Directory from their son or daughter.

A Company  representative will conduct a workshop at meetings of the P.T.A., and
meetings of other parent groups responsible for raising funds for schools in the
district.  At these  meetings,  parents  will be shown the  Telli*Phone  and the
Telli*Phone Directory including the school news and information  directory.  The
Company  will work with school  representatives  to  establish a group of parent
volunteers  to help  enter  school  district  information  and class news in the
school news section of the Telli*Phone Directory.

A Telli*Phone  marketing  representative will conduct teacher workshops at every
school within the  schooldistrict to familiarize  teachers with the Telli*Phone,
the Telli*Phone Directory,  and the process by which funds will be generated for
the school district. A Telli*Phone will be left in the school office or teachers
lounge for  teachers to operate and  discover  ways they can use the school news
and information section of the Telli*Phone  Directory.  By allowing the teachers
this hands-on experience,  they will become familiar with the Electronic Teacher
section of the Telli*Phone Directory. Some teachers may be interested in writing
material  that will be  published  by the  Company and  distributed  through the
Telli*Phone.
==================================================
DEL MAR SCHOOL                          435-1468
105 Avenieda Miraflores        Tiburon, CA  94920

1.       SCHOOL BULLETIN
2.       GRADE and CLASS NEWS
3.       EVENTS and MEETINGS
4.       P.T.A. DIRECTORY and NEWS
5.       GENERAL INFORMATION and RULES
6.       YOUR CHILD (Confidential)
7.       LEAVE A MESSAGE FOR A TEACHER

TYPE A NUMBER - then PRESS the SEND key.
==================================================

                                     Page 9

<PAGE>

Necessity to Raise Additional Capital

It is the  opinion  of  Registrant,  that in the  next  six  months,  it will be
necessary  to  raise  additional  funds to meet the  expenditures  required  for
operating the business of the Registrant. Registrant has been in the development
stage  since  inception  and has no  history  of  revenues.  Realization  of the
Company's   objectives  is  dependent  upon  Registrant's  ability  to  pay  its
obligations,   raise  additional  capital  and  introduce  its  product  to  the
marketplace  to establish the success of future  operations.  The success of the
product in the marketplace, and the ability of Registrant to continue as a going
concern  cannot be  determined  at this  time.  The  report  of the  independent
Certified  Public  Accountant  expresses  substantial  doubt about the Company's
ability to continue as a going concern.

Registrant will require funds for:

         -    Office Rent and General Office Expense
         -    Administrative Salaries (CEO, COO, and Secretary)
         -    Product Development Salaries (Engineer, Editor, and Programmers)
         -    Telli*Phone Prototype Engineering Expense
         -    Data Base Software Programming Expense
         -    Capital Purchases:
         -    Central Computer for Telli*Phone Directory
         -    Telli*Phone Production Models for Initial Market Test (100 - 200)
         -    Marketing Expense
         -    Legal and Audit Expense

Registrant  plans to use a  variety  of means to  raise  the  required  capital,
including the sale of Common or Preferred stock or debt instruments.

Most  of the  initial  funds  will  be used  to  establish  a fully  operational
Telli*Phone  Directory  central  computer  system  with a number  of  commercial
listings.  In addition,  Registrant plans to have  distributed,  through a local
school district, at least two hundred Telli*Phones to households within the area
served by the  central  computer  Telli*Phone  Directory.  Once the system is in
place Registrant believes a significant value will have been established for its
technology.  Registrant anticipates being able to attract financial support from
at  least  one  major  corporation  that  will  have  an  interest  in  reaching
Telli*Phone Subscribers. This financial support will help to increase the number
of Subscribers to the Registrant's  Telli*Phone  Directory and increase revenues
to support ongoing operations.

Research and Development to be Performed

Registrant has no plans for the  establishment  of any research  projects during
the year  1997.  Additional  programming  development  of a  cosmetic  nature is
required to prepare the Telli*Phone Directory for use by the general public.

                                    Page 10

<PAGE>

In addition, directory listings have to be acquired from the State of California
and  entered  into the  central  computer  to be able to market the  Telli*Phone
Directory  as a  complete  directory  of  commercial  establishments  within the
geographic area to be served by the Telli*Phone Directory.

Management feels that approximately three months of software development will be
required to complete the above and programming enhancements.

Anticipated Material Acquisition of Plant and Equipment

Registrant  does not  plan to set up any  manufacturing  facilities  of its own;
therefore it will not be making any material  acquisition of plant and equipment
within the next fiscal year of operations.

Approximately  30% of the capital required to establish a Telli*Phone  Directory
within a limited  geographical  area for the Initial Market Test will be used to
set up and purchase  Telli*Phones  and the central  computer system to store the
Telli*Phone Directory. Registrant believes that there will be no market for this
equipment  other  than for use by the  Registrant  to  operate  the  Telli*Phone
Directory.

Following the small Initial  Market Test,  Registrant  believes that over 60% of
the  capital  required  to maintain a  Telli*Phone  Directory  within a specific
geographical  area and increase the number of Subscribers and advertisers to the
Telli*Phone Directory in that area will be used for the purchase of Telli*Phones
and other computer equipment.

Anticipated Material Changes in Number of Employees

Registrant  presently  employs a CEO, COO,  Secretary,  and Systems Engineer and
Programmer.  Within the first six months of 1997  Registrant  plans to employ at
least  two  more  programmers,   an  editor,  and  two  marketing  directors  in
preparation of the Initial Market Test.

Material Areas Peculiar to Registrant's Business

Registrant  is not  aware  of any  areas  of its  business  not  similar  to the
publishing and  distributing  of interactive  information  through the telephone
network.

                                    Page 11

<PAGE>

Financial Information About Industry Segments

               FINANCIAL INFORMATION RELATING TO INDUSTRY SEGMENTS
                       AND CLASSES OF PRODUCTS OR SERVICES

<TABLE>
<CAPTION>
                                                      YEAR
                                                      ----
                                     1993             1994              1995
                                     ----             ----              -----
<S>                                <C>             <C>               <C>
Net loss                          $(447,142)       $(353,954)        $(199,556)
Identifiable assets                  12,637             8,973         128,166

</TABLE>

There were no sales  during the three  years ended  December  31,  1995,  as the
Company is still in the development stage.

NOTE:  CoNetCo,  Guinness  Productions,  Inc., and Guinness Computer  Television
Corporation  are  predecessors  of the  Registrant  and  the  activities  of the
predecessors  are included in the  cumulative  financial  data of the Registrant
(See notes to Financial Statements).

Narrative Description of Business

Telli*Phone Products and Services

The Telli*Phone MiniNet

The Company believes that MiniNet hardware and Telli*Phone software navigational
tools and services are uniquely  positioned to capitalize on the shortcomings of
the  Internet as an  advertising  medium,  a system that  requires  people to be
computer  literate,  and a system  where  participation  requires a  substantial
investment into computer equipment and software.

The Company believes that by supplying consumers with access to media properties
focused  on local  interest  areas,  local  demographic  groups,  and  community
geographical  areas, the Company can provide  advertisers with a greater ability
to target their advertising messages to relevant audiences.

The Telli*Phone Directory

The  Telli*Phone  Directory  is a library  of  information  stored in a computer
maintained by the Company and located in the community being served. The Company
has programmed an  intelligent,  interactive  indexing system into the Directory
establishing categories where information can be entered by businesses,  groups,
and  associations   within  the  community.   These  authors  can  update  their
information at any time directly from a Telli*Phone.

The  principal  elements of any  computer  information  network are the computer
software programs through which the central computer and the end-user  terminals
interact and the pages of  information  contained  in the  computer  programming
system. The computer programming system

                                    Page 12
<PAGE>

determines the manner in which  information is presented on terminal screens and
the ease with which users can connect with the appropriate pages of information.
The pages of information  stored in the computer  programming system make up the
library of information and their content  impacts  directly on the usefulness of
the network.

The intelligence of the Telli*Phone programming system is unique compared to the
operation of traditional  programming systems. The brain of the Company's Server
is made up of individual programmed concept cells. Each cell contains a complete
software program developed by an author  experienced in the subject matter being
investigated by a Subscriber and edited by an editor experienced in the Guinness
Tri-Stage Learning Systems  programming  techniques.  The cells work together to
clarify  the  thinking  process in the mind of the  Subscriber  relative  to the
subject  matter  being  investigated  and then define a location on the computer
disk where pages of information about the subject are stored.

Telli*Phone Subscribers respond to pages of questions,  choices,  directions, or
instructions  presented on the Telli*Phone screen.  Based on each response,  the
cell program connected to that page of information evaluates the thought process
in the  mind of the  Subscriber  and  displays  specific  pages  of  information
relative  to that  thought  process.  The pages  displayed  on the screen may be
further questions for clarification, a list of facts, or a story presentation of
ideas to give the user a greater perspective of the options that may be explored
within a particular subject.

The Telli*Phone Directory is divided into four main categories. These categories
are divided into subjects that have been  dissected  many times by the Company's
editors  creating  many  additional  subject  levels  containing a total of over
10,000 programmed cells. The Telli*Phone cell programming system contains a high
level of intelligence  that allows people to simply "talk" to the Telli*Phone to
locate what they want.  At the present  time,  Subscribers  use the  Telli*Phone
keypad  to enter  numbers  corresponding  to  their  choices  from  the  options
displayed on the screen.

GUIDELINE  (free  to  Subscribers)  - An  electronic  directory  of  all  retail
       businesses  and  service   vendors  in  the  area  including  a  detailed
       description of their location,  products,  services,  and special offers.
       Advertisers may enter,  update,  or change their  information at any time
       through a Telli*Phone.

COMMUNITY NEWS AND INFORMATION  (free to Subscribers) - A library of information
       from  local  government  and  service   organizations  listing  services,
       meetings, special events, educational information, and programs offered.

BUYLINE(free to  Subscribers)  - A  listing  of buy and sell  items  offered  by
       Telli*Phone  Subscribers.  Information  may be  created  in the  Buyline,
       changed, or updated by Telli*Phone Subscribers at any time.

COMMUNITY  ON-LINE  (free to  Subscribers)  - A chat  service for members of the
community.

Each programmed cell pertains to a specific topic and contains coded information
from  different  authors  in the form of  digital  pages.  Authors,  businesses,
groups, and associations are

                                    Page 13

<PAGE>

assigned coded pages within the topic cells.  These coded pages contain  details
about their  ideas,  products,  or  services.  Through a  Telli*Phone  Authoring
Subscription people can write, edit, and update their information at any time on
a Telli*Phone,  or a personal  computer with a modem,  using the Company's AMENU
authoring  and  programming  system.  At the push of a  button,  their  pages of
information are sent to the Company's  Server via telephone lines where they are
automatically placed in the appropriate  sections of the Telli*Phone  Directory.
Since each cell has the potential of containing  pages of information  from many
sources,  Subscribers  have the opportunity of analyzing  specific topics from a
variety of angles.

People are charged a per page,  monthly fee to store their pages of  information
in the Telli*Phone  Directory.  The  Telli*Phone  Directory is maintained by the
Company in a central  computer,  connected to the local  telephone  system,  and
located in the community served by the Directory listings.  The central computer
is designed to support up to 500 telephone line  connections  and each telephone
line supports one Telli*Phone.  Based on this design, each Telli*Phone Server is
capable of communicating  with 500 Telli*Phones at the same time. It is expected
that each Server will service as many as 5,000  Telli*Phone  Subscribers  due to
the fact that not all Subscribers will be  communicating  with the Server at the
same time.

The Company  has not  conducted a test of the ability of the Server to support a
large number of  Subscribers  accessing  the  Telli*Phone  Directory at the same
time.  There is no assurance  that the software in the Server will be successful
in  accommodating  a large number of  Subscribers.  It may be necessary  for the
Company  to  purchase  additional  central  computers  to reduce  the  number of
Subscribers  accessing  a single  computer  at one  time.  This may  result in a
substantial  increase in the amount of working  capital  necessary  to operate a
community Server and provide adequate service for Subscribers to the Telli*Phone
Directory.

The Telli*Phone

The Telli*Phone is a telephone,  speakerphone, and digital answering system with
a super twist LCD screen.  Inside the case is a high powered  personal  computer
with a modem and a smart card reader.

People operate the Telli*Phone by pressing keys on the  Telli*Phone's  telephone
keypad  or  on  the  optional  remote  control  keyboard.  They  are  guided  by
instructions that are displayed on the Telli*Phone screen.

The  internal  operations  of the  Telli*Phone  are  controlled  by  proprietary
software developed by the Company.  The software which controls the operation of
the Telli*Phone can be accessed only by a Telli*Phone  central computer.  People
can make ordinary  telephone  calls from the Telli*Phone but to access a central
computer  the  telephone  number  for the  computer  must be  entered  into  the
Telli*Phone's  automatic dialing system from a Telli*Phone central computer.  In
this way the Company will be able to assess  licensing fees and transaction fees
for the use of the  Telli*Phone  for  anything  other  than as a  telephone  and
answering system.

                                    Page 14

<PAGE>

The Telli*Phone includes the following essential components:

     a)  a  two-line  telephone  with  16  telephone  keys;  
     b)  a  speaker  and microphone;
     c) a 14,400  baud modem  chip set (data  rate up to v.32 with  compression)
        which includes data, fax, and voice;
     d) a PC-XT 20 MHz processor,  386sl SMOS card IO  motherboard,  IM x 8 DRAM
memory and 2M x 8 FLASH program and data storage; 
     e) An 80 character 25 line LCD screen with 640 x 480 graphics  grid;  
     f) ROM based custom real time executive  controlling the phone;  and, 
     g) an external custom XT infra red keyboard.

     The Telli*Phone can serve as a digital answering machine with 16 minutes of
storage. It has full voice mail features including the ability to create,  edit,
and send faxes.  The  Telli*Phone  has an address  book that can store up to 500
names,  addresses,  and phone numbers with the ability of dialing  automatically
from the list and sending  voice,  data, or fax messages.  The phone can up/down
load data while on line with a network  or  directly  from a PC via an  external
serial port. In addition,  the Telli*Phone  supports a dot matrix printer,  card
swipe reader and scanner pen.

                             Basic Customer Features

The  Company  proposes to have  available  the  following  features on the first
Telli*Phones that it intends to distribute to the marketplace:

     a) touch tone dialing; 
     b) speakerphone;
     c) personal  auto dial  directory for storing  telephone  numbers and other
information relating to directory listings that will display on dialing;
     d) automatic redial of last number dialed;
     e) call  freezing  to prevent  calls  being made to  numbers  that  involve
charges including long distance and toll calls;
     f) automatic recorded voice and/or data message taking;
     g) calculator;
     h) automatic multidial calling from a list of numbers;
     i) a hold button;
     j) two telephone line capability;
     k) conference calling if two telephone lines are connected; and,
     i) a smart card reader.

                            Optional Add-on Features

The  following  optional  add-on  features  are  planned  to  be  available  for
Telli*Phone Subscribers for an additional monthly fee:

     a) expanded memory;

                                    Page 15

<PAGE>
     b) appointment and information reminder;
     c) visual, on-screen caller identification (actual name of caller if listed
in personal  directory)  to avoid  having to answer  unwanted  calls or calls to
members of the household who are not  available  (can be used without  having to
subscribe to Caller ID from the telephone company);
     d)  distinctive  ringing to alert  members of the household who an incoming
call is for;
     e) message leaving for storing individual messages that may be picked up by
designated callers when they call;
     f) multiple message sending to automatically  send a recorded voice or data
message to a list of people; and,
     g) messages forwarded automatically to another number.

                         Summary of Telli*Phone Features

AUTO   SCREEN  DIALING  -  Over  500  telephone  numbers  and  related  personal
       reference notes can be stored in the Telli*Phone auto-dial screen display
       directory.  Telephone  calls  are  made by  pressing  the  number  on the
       telephone  keypad that  corresponds to the correct listing on the screen.
       As the number is being automatically  dialed,  prerecorded personal notes
       relative to that  listing are  displayed  on the  Telli*Phone  screen for
       convenient reference during the call.

MESSAGETAKING  -  The  Telli*Phone  automatically  answers  incoming  calls  and
       digitally   stores   voice   messages,    faxes,   printed   memos,   and
       correspondence. This information may be reviewed later on the Telli*Phone
       screen  (voice  through the speaker) or the  Telli*Phone  will send it to
       another location where it may be listened to, viewed, or printed out on a
       fax machine.

       Since  messages are in digital  format,  they may be erased  individually
       (keeping some and deleting  others).  Codes may be entered so each member
       of the  business  or  household  may  view  only  his  or  her  messages,
       maintaining privacy.

MESSAGELEAVING - Voice messages,  faxes, or other typed memos may be recorded in
       the Telli*Phone to be picked up later by specific authorized callers.

MESSAGESENDING - Voice messages,  faxes, typed messages,  and correspondence may
       be  recorded on the  Telli*Phone  and  automatically  sent to one or more
       people.  Information  can be sent to a large  audience  by using the auto
       dialing directory.

CALLER IDENTIFICATION - When activated, the Telli*Phone asks callers to identify
       themselves  by  entering  their  telephone  number on the keypad of their
       telephone.  The  Telli*Phone  scans its directory,  displays the caller's
       name on its screen, and then begins ringing.  If the caller is not in the
       Telli*Phone directory, or if the caller is reluctant to enter a telephone
       number, the Telli*Phone will switch on its answering system to record the
       caller's incoming message.

                                    Page 16

<PAGE>
      
       If the  Telli*Phone  Subscriber has "Caller ID" from the local  telephone
       company,  the Telli*Phone  immediately  checks its directory and displays
       the name of the caller.  If the telephone  number is not found, it may be
       because the caller is not calling from a recognized phone; therefore, the
       Telli*Phone  asks the  caller to enter his or her  telephone  number as a
       double check.

APPOINTMENT AND INFORMATION  REMINDER - The  Telli*Phone  will ring at specified
       times and display or broadcast information previously recorded.

CALL   FREEZING  -  Passcodes  may  be  recorded  to  restrict  the  use  of the
       Telli*Phone for normal calling,  long distance calling,  dialing specific
       area codes like "800" or "900" numbers, or individual numbers.

SMART  CARD  READER - A credit  card size  smart  card is  available  and may be
       inserted into the  Telli*Phone  to enhance its features.  The card can be
       used to store and maintain  information  accessed through the Telli*Phone
       including  telephone  and mailing  lists,  banking  transactions,  faxes,
       messages,  correspondence,  voice recordings,  and health,  medical,  and
       insurance information.

EXTERNAL  KEYBOARD - A wireless IR keyboard is available for typing  information
and faxes from the Telli*Phone.

EXTERNAL PRINTER  AND OTHER  PORTS - The  Telli*Phone  has  inputs to plug in an
       external  printer,   monitor,  fax  machine,  disk  drive,  and  computer
       keyboard.

The Telli*Phone Central Computer (the "Server")

         The  Telli*Phone  Directory is stored in an Alpha Micro  computer  that
resides  in the  Company's  offices  in Mill  Valley,  California.  The  central
computer functions through a proprietary operating system that contains a simple
software mapping  structure.  The central computer has 16 disks and each disk is
divided into approximately 300 files through a geometric plotting procedure Each
file is  divided  further  into  approximately  300  sections  and each  section
contains numerous categories containing pages of information.





                [REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]

                                    Page 17

<PAGE>

A  particular  piece of  information  can be located by  entering  the code that
represents  its  location on the  computer  disk.  The  following  represents  a
specific page of information.

                              DSK9:E29R4B.F1D[5,1]

DSK9: The information is located on the ninth disk in the central computer.

[5,1]  The information is located in the 5th file in section 1.

F1D  F = The information appears under the "Food and Dining" Section of the
Telli*Phone Directory.
     1 = The information  was written by a restaurant  entered under a "general"
category.
     D = The content is a page of information  about the  restaurant  ("M" would
mean the page of information is a program to analyze the  Subscriber's  response
to the display page of information and determine the next page of information to
be displayed).

E29R4B This  code  represents  a  specific  page of  information  relating  to a
     particular customer who has placed advertising  material in the Telli*Phone
     Directory.  No other customer within the geographic area represented by the
     Telli*Phone Directory will have this code.
              
     E2 = The first three digits of the customer's telephone number are 332.
     9R = The second three digits of the customer's  telephone number are 924. 
     4 = The last digit of the customer's telephone number is 4. 
     B = The page is the second page of the customer's information.

The telephone number 332-9244 identifies CHRISTOPHE'S RESTAURANT, 1919 Bridgeway
Avenue, Sausalito, California.

The System  Operator of the  Telli*Phone  Central  Computer can easily  access a
particular  page of  information  or the program  that  controls  the  direction
determined  at a  specific  page.  To  view a  copy  of the  above  page  from a
Telli*Phone terminal the System Operator would first identify himself or herself
by typing the  appropriate  passcodes into the terminal.  Once  identified,  the
central  computer  will give the System  Operator a dot prompt  (A.@) to signify
that he or she is in a  command  mode and the  system  is  waiting  for  further
instructions.  The System Operator will then enter the following  information to
access the specific page of information.

     LOG FlD: = Go to disk 9 and access file 5, section 1.

     VIEW  E29R4B  = On  the  screen  display  page  2 of  the  information  for
Christophe's Restaurant in Sausalito.

                                    Page 18

<PAGE>

Telli*Phone Authoring and Programming Language

The  Telli*Phone  Directory  contains  display pages of  information  written by
editors trained in Guinness Tri-Stage Learning Systems. The pages of information
are composed from a small  strategic set of questions  that the editors feel are
important in determining the mind set of the Telli*Phone  Subscriber viewing the
display.  Telli*Phone Subscribers read the information on the Telli*Phone screen
and press keys on the  Telli*Phone  keypad to indicate  decisions that they have
made about the  information  displayed,  thus supplying  answers to the editor's
questions.

Attached to each page of information is a small  computer  program  written by a
Telli*Phone Editor that transforms  Subscribers= choices into instruction codes.
These codes direct the computer to specific disk locations,  files, and sections
where pages of  information  appropriate  to each  Subscriber's  response can be
found.  Each page of  information  may solicit more  answers for  clarification,
display  additional  material  focus on the issues most  important  to them,  or
present the information that will meet their needs.

Guinness  Telli*Phone  Corporation  does not want an editorial  staff limited by
their  engineering  skills in computer  programming.  Therefore  the Company has
written a software  authoring program that allows anyone without any programming
experience to create pages of information and  instruction  codes in the central
computer.  The  Company's  authoring  and display  programming  system is called
AMENU.

AMENU is a central  application  computer  software program that establishes the
guidelines  for  writing  Telli*Phone   Directory  programs  and  the  pages  of
information that represent the content of the Telli*Phone Directory. The program
is written in Assembler Language and takes up approximately 64K of memory. AMENU
interprets a Telli*Phone Editor's instructions into a language understood by the
central computer's operating system and sees that the author's  instructions are
carried out.

The AMENU Authoring Program has two significant pants.

                           AMENU Directional Software

Using ordinary  English and a few simple codes,  Telli*Phone  editors can design
AMENU Directional Programs for Telli*Phone  Subscribers.  Each AMENU Directional
Program  displays  one page of  information  and  contains  the  parameters  for
evaluating each Subscriber's  response to determine the next page of information
to be displayed.

                                   Page 19

<PAGE>

The following is an example of a AMENU Directional Program.
<TABLE>
<CAPTION>

<S>                                     <C>       <C>
 .G11
1,                                      M,       G111
2,                                      B,       F1:BEGIN
MARIN,                                  B,       G11263
3,                                      R,       GE:MAPS
0,                                      M,       G1
00,                                     B,       GI:BEGIN
$less than or greater than              M,       HELP

</TABLE>

Explanation of Program:

 .G11          Clear the screen, display the page titled AG11" on disk 9, file 5,
              section 1, and wait for  Subscriber's  response to the information
              on the screen.

1,            If the Subscriber  types in the number 1, maintain a record of the
              previous pages displayed in the memory stack and run a new program
              titled AG111@ in this same section.

2,            If the  Subscriber  types in a number 2, clear the memory stack of
              the previous pages  displayed,  go to disk 8, file 101, section 1,
              and run the program  "BEGIN"  which will display the  introduction
              page ("Begin") of the Restaurant Directory.

MARIN,        If the  Subscriber  types in the word  "MARIN",  clear the  memory
              stack  of  the  previous  pages  displayed  and  run  the  program
              AG11263",  in this section,  to help the Subscriber target an area
              of Maria County before  continuing to look for the  information he
              or she wants.

3,            If the Subscriber types in the number 3, clear the memory stack of
              the previous pages  displayed and go to disk 9, file 6, section 1,
              and load into memory the educational  program  "MAPS",  written in
              BASIC,  to  help  the  Subscriber  learn  how to read a map of the
              United States

0,            If the  Subscriber  presses  the  ABACK@  key  on the  Telli*Phone
              keypad,  go back and  display  the  previous  screen in the memory
              stack.

00,           If the  Subscriber  presses  the  "HOME"  key  on the  Telli*Phone
              keypad,  go  hack  and  display  the  introduction  screen  in the
              existing file.

                                    Page 20
<PAGE>

$    If the Subscriber enters anything that is not designated above,  then,
     without  clearing the memory stack,  load in the program  "HELP" that gives
     further  instructions  to the  Subscriber  on  using  the  Telli*Phone  and
     responding to the information in this file

                             AMENU Display Software

     The AMENU Display Software allows display screen editors to create pages of
information as easily as typing a page on an ordinary  typewriter.  What appears
on the Telli*Phone  Editor's  terminal screen is exactly what will appear on the
Subscriber's Telli*Phone screen.

     Special  Telli*Phone  formatting codes and graphics codes are available for
authors  who want to  create  more  sophisticated  pages of  information.  These
special codes may be entered into the page by pressing  specially marked keys on
a Telli*Phone remote control keyboard.

The Telli*Phone Security Program

     The  Company  has  written  a  security  software  program  that  prohibits
Telli*Phone Subscribers from entering or changing information in the Telli*Phone
Directory without receiving prior authorization.  Each Subscriber's account file
contains  details  about a  Subscriber's  privileges  in using  the  Telli*Phone
Directory  that is linked  to the  Telli*Phone's  tracking  code.  Every  time a
Subscriber sends information to the Telli*Phone Directory,  the central computer
checks  his or her  account  to  determine  whether  or  not he or she  has  the
authorization to proceed.

Telli*Phone Installation

         The Telli*Phone,  like a fax machine,  plugs into an ordinary telephone
outlet and operates  through  existing  telephone  lines without any  additional
telecommunication  device  or  installation  charges  from the  local  telephone
company.

Status of Product

         A Telli*Phone Directory presently resides in a central computer located
at the Registrant's  business  office.  Only a few business names and addresses,
with  accompanying  advertising,  have  been  entered  into a  small  number  of
classifications within the Telli*Phone  Directory.  This information was entered
for  demonstration  and testing  purposes only.  Registrant  does not feel it is
financially  practical to enter current  listings  until just before the product
becomes  available to Subscribers.  At this time, the  Telli*Phone  Directory is
accessed  through the telephone  system from an existing  working bench model of
the Telli*Phone plugged into a telephone outlet.

         During the first six  months of 1997  Registrant  intends  to  purchase
computer  hardware  components  for  the  assembly  of  Telli*Phones,   assemble
Telli*Phones and prepare the Telli*Phone  Directory and the central network data
base for the  Initial  Market  Test.  Also,  during  this same six month  period
Registrant will be working with a plastics  manufacturer to design and produce a
limited quantity of plastic cases to house the Telli*Phone hardware.

                                    Page 21
<PAGE>
       
     During the second and third  quarters of 1997  Registrant  plans to program
the content for the  Telli*Phone  Directory  to provide  sufficient  advertising
information  and  commercial  listings to make it a  profitable  product.  It is
anticipated,  because of the extensive work that has been completed in preparing
the indexes for the Telli*Phone Directory, that this work can be accomplished by
an editorial  staff at the same time  Telli*Phones  are being  assembled for the
Initial  Market  Test.  Registrant  plans  to  acquire  computer  lists  of  the
businesses within Marin County, California, the site of the Initial Market Test.
These lists are available through state agencies and private vendors and contain
businesses broken down into many categories that coincide with Registrant's data
base.  During this period a mailing  will be sent to all  businesses  within the
area  telling  them  that  they are  listed  in the  Telli*Phone  Directory  and
encouraging  them to create  promotional  screens  to be tied to their  listing.
Through a telemarketing  program Telli*Phone Free Lance Editors will assist them
in creating their first Telli*Phone Directory Screens.

     Following  the  Initial  Market  Test  the  Company  plans  to  contract  a
manufacturer to manufacture large runs of Telli*Phones to bring down the cost of
the product to the Company and increase its profit potential. To facilitate this
the Company's  engineer,  Mr. Richard Morse, will redesign the main mother board
of the Telli*Phone to eliminate many hardware  components that are not necessary
to the operation of the  Telli*Phone  as a product to  distribute  the Company's
software  products.  Management  anticipates  that  approximately  six months of
hardware  and software  engineering  will be required to design a final high run
production  model  of  the  Telli*Phone.  This  will  allow  a  manufacturer  of
telecommunications  and computer equipment to produce large runs of Telli*Phones
at a cost  considerably  below the cost of the Telli*Phones  that were assembled
for the Initial Market Test.

         As the Initial Market Test is underway  Registrant will begin preparing
the final  production  model of the  Telli*Phone  by designing a proprietary  PC
board to  eliminate  computer  components  usually  found on PC  boards  but not
necessary for the operation of the  Telli*Phone.  Also,  the  Telli*Phone  is an
instrument  designed to handle a limited number of specific tasks. Many hardware
components can be eliminated  from the typical PC board because the  Telli*Phone
programming  system is able to do many of its tasks in  software.  PC boards are
usually designed with hardware  components that permit users to manage a variety
of different tasks. Registrant anticipates that the unit price of a large run of
Telli*Phone  PC boards will be reduced  considerably  from the present cost of a
standard PC board for a personal computer.

         Management must emphasize that the Telli*Phone,  as a hardware product,
is  not a  product  of  the  Company.  The  Company  plans  to  either  assemble
Telli*Phones  from  hardware  components  that are  presently  available  in the
marketplace,  or establish a strategic  alliance with a manufacturer of hardware
products  to  manufacturer  Telli*Phones  on its behalf,  The Company  views the
Telli*Phone  as a  marketing  incentive  to  encourage  customers  to sign up to
receive the Company's software products.  The Company will supply customers with
Telli*Phones,  free  of  charge,  for as long as  they  are  subscribers  to its
software products.

         For the  Initial  Market Test the  Company  estimates  that it will pay
approximately  $600 for the hardware  components of each Telli*Phone  assembled.
The  Company  has  received  estimates  from  consultants   experienced  in  the
manufacturer of hardware components, e.g. Tiernan 

                                    Page 22

<PAGE>

Communications,  of a price  of  less  than  $200  per  Telli*Phone.  It is
difficult to predict an accurate price until the Company learns from its Initial
Market Test the level of consumer response to the Company's software products to
determine the size of runs that are most feasible.  If the Company's  product is
very  successful  then there will be  available  to the Company  many methods of
financing the manufacture of  Telli*Phones  that will allow the Company to order
larger runs and further reduce the cost to manufacture Telli*Phones.

     The  cost of  engineering  is  relative  to the cost of  manufacturing  the
product. The more engineering done prior to manufacturing the product, the lower
the cost to manufacture  the product.  The Company will not be able to determine
the amount of  engineering it is prepared to do until it sees the results of the
Initial Market Test.

     The Company  plans that the majority of the cost to make these changes will
be absorbed by the  manufacturer of Telli*Phones as a condition of the strategic
alliance.  To negotiate a strategic  alliance that will be to the benefit of the
Company will require that the Initial Market Test reveal significant  statistics
as insuring the potential  success of the Registrant's  software products in the
marketplace.

     Registrant  plans to announce  its  product  publicly,  and make  available
public information about its product during the second quarter of 1997.

     An  important   ingredient  of   Registrant's   marketing  plan  is  making
Telli*Phones  available to  Subscribers  at no additional  charge for as long as
they maintain a subscription to the Telli*Phone  Directory.  Registrant feels it
will  not  be  successful  unless  it is  able  to  attract  a  manufacturer  of
Telli*Phones  that  is  willing  to  make a large  financial  commitment  to the
project,  Registrant had successful discussions in 1988 with Northern Telecom, a
leading  manufacturer of equipment,  to supply it with  Telli*Phones  through an
agreement supported with financial commitments. Northern Telecom was not able to
develop an instrument sufficiently inexpensive to attract the general public. In
the past few years the cost of computer  and  telecommunications  equipment  has
fallen  dramatically.  Registrant  has completed a working model and design of a
Telli*Phone  that can be  produced  for a price that the  Registrant  feels will
attract  the  general  public.  However,  it has not yet  received  a  financial
commitment from a manufacturer  of equipment to enable  Registrant to proceed to
manufacture its product.

Sources and Availability of Raw Materials

     Registrant does not plan to manufacture  Telli*Phones  itself,  nor does it
have any  significant  expertise  in this area.  However,  Telli*Phones  will be
manufactured from the same materials used to manufacture  personal computers and
telephones,  Registrant  is not aware of any problem  that exists at the present
time or that is projected  to occur within the near future that will  materially
affect the source and  availability  of raw  materials for the  manufacture  and
supply of personal computers and telecommunications equipment.

                                    Page 23

<PAGE>

Patents, Trademarks, Licenses, Franchises and Concessions

     The  Company's  success  and  ability  to  compete  in the  marketplace  is
dependent in part upon its proprietary technology. Principally, the Company is a
publisher of information and therefore relies on trade secret and copyright laws
of the United  States and worldwide to protect its content,  authoring  systems,
and  programming  technology.  To distribute its works the Company will purchase
existing   hardware   technology   from   computer   hardware   developers   and
manufacturers.

     On July 31, 1996, the Company filed a U.S.  Trademark  Application with the
Assistant  Commissioner  for  Trademarks  in  Arlington,  Virginia  for the name
"Telli*Phone", with declaration, Under 15 U.S.C. '1051(b), as amended (Intent to
Use) for the following goods:

     "COMMUNICATION DEVICE CONTAINING ANSWERING MACHINE, VOICE/MAIL, FAX, MODEM,
      AND COMPUTER SCREEN TO PROVIDE INTERACTIVE NETWORK CAPABILITY"

     The Company  does not  presently  hold any patents,  trademarks,  licenses,
franchises,  or  concessions.  It does not feel that any patents or  trademarks,
other than the above,  it may hold or may apply for in the  future  will  affect
materially its ability to create  information or distribute that  information to
the marketplace. The Company feels that the success of its business is dependent
on the  kind of  information  it  distributes  and not  the  technology  used to
distribute it. The Company believes that factors such as the  technological  and
creative skills of its personnel,  new product  developments,  frequent  product
enhancements,  name  recognition,  and  reliable  product  maintenance  are more
essential to  establishing  and  maintaining a technology  leadership  position.
There can he no  assurance  that others will not develop  technologies  that are
similar  or  superior  to the  Company's  technology.  The  source  code for the
Company's  proprietary  software is  protected  both as a trade  secret and as a
copyrighted work. The Company generally enters into  confidentiality  or license
agreements with its employees,  consultants, and vendors, and generally controls
access to and distribution of its software,  documentation and other proprietary
information- Despite these precautions,  it may be possible for a third party to
copy or otherwise  obtain and use the Company's  products or technology  without
authorization,  or to develop  similar  technology  independently.  In addition,
effective copyright and trade secret protection may he unavailable or limited in
certain  foreign  countries.  Despite  the  Company's  efforts  to  protect  its
proprietary  rights,  unauthorized  parties may  attempt to copy  aspects of the
Company's  products or content or to obtain and use information that the Company
regards as proprietary.  Policing  unauthorized use of the Company's products or
content is  difficult.  There can be no  assurance  that the steps  taken by the
Company will prevent  misappropriation of its technology or content or that such
agreements will he enforceable. In addition,  litigation may be necessary in the
future to enforce the Company's  intellectual  property  rights,  to protect the
Company's trade secrets,  to determine the validity and scope of the proprietary
rights of others,  or to defend against claims of infringement,  invalidity,  or
liability.  Such litigation  could result in substantial  costs and diversion of
resources and could have a material  adverse  effect on the Company's  business,
operating results, or financial condition.

                                    Page 24
       
<PAGE>

     Except for  acquiring a local  business  license in areas where it plans to
establish a Telli*Phone Directory,  the Company is not, at this time, subject of
any federal, state, or local licensing requirements or regulations.

Seasonal Business

     The Company feels that  directories of information  are so diverse that the
use of them to provide  information  or to acquire  information is not seasonal.
The Company will be selling  subscriptions  to  consumers to access  information
from  the   Telli*Phone   Directory  and  will  sell  space  to  businesses  and
organizations  to advertise their products and services in its Directory . While
there may be an  increase  in  advertising  revenues  leading up to the  holiday
season in  December,  the Company  does not expect any  increase  to  materially
effect its flow of income or play any role in any change in its profits.

Significant Working Capital Required, Critical Mass of Users

     The  Company  business  requires  it to  purchase a  significant  amount of
equipment   and  then  to  attempt  to  generate   income  from  its  use  on  a
month-to-month  basis.  Paid  subscriptions  to  the  Telli*Phone  Directory  by
consumers  may not generate  enough  revenue to support the capital  required to
distribute  Telli*Phones on an on-going basis. The Company will need significant
revenues  from paid  advertising  in the  Telli*Phone  Directory  to support its
capital  expenditures.  To  generate  significant  income  from  businesses  and
organizations  wishing  to  advertise  in the  Telli*Phone  Directory,  it  must
distribute  enough  Telli*Phones  to create a critical  mass of users within the
area the  Telli*Phone  Directory is intended to serve. No one can guess how many
users will be required to obtain that critical mass, or the amount of equipment,
including Telli*Phones, that will have to be purchased and distributed to create
this critical mass of users.

     The Company has developed  specific  plans in an attempt to reduce the size
of the critical  mass of users that will be required to generate  enough  income
from advertisers in the Telli*Phone Directory to maintain its operations.  These
strategies are:

-      Limiting the marketplace to a confined area (a small community) where the
       critical  mass of users  needed to generate  income will be minimal,  the
       flow of word of mouth  advertising will be maximum,  and where there will
       be a number of businesses that primarily serve  households close to their
       establishments.

-      Entering  the name and address of every  business  within the  geographic
       area to be served by the Telli*Phone  Directory to provide a product that
       will have limited but immediate use.

-      Offering  free  pages of  advertising  in the  Telli*Phone  Directory  to
       businesses  operating  within  the area to be served  by the  Telli*Phone
       Directory,  for the first few months of operations to  immediately  begin
       building the Telli*Phone Directory and giving Subscribers the opportunity
       to compare the effectiveness of the Telli*Phone  Directory to traditional
       directories.

                                    Page 25

<PAGE>

-      Delivering  a number of  Telli*Phones  to select  homes with high  income
       families within the area to be served, for a free, on approval period, to
       create a minimum mass of preferred customers for potential advertisers.

Dependence on a Single Customer

     The Company  feels that the success of its  business  is  dependent  on the
success of its Initial Market Test.  The business of the Registrant  will not be
successful until enough advertising  revenues are generated to cover its monthly
expenses.  If  Registrant  is not  able to  reach  a  critical  mass  of  users,
significant  enough to attract enough businesses to create a significant  number
of paid  advertising  screens in the  Telli*Phone  Directory  during the Initial
Market Test,  Registrant will sustain  substantial losses and may not be able to
attract  any  additional  capital  to expand its  subscriber  base and reach the
necessary critical mass of subscribers.

Backlog Orders

     Registrant  has not yet  gone  to the  marketplace  with  its  product  and
therefore has no backlog orders of any kind.

Government Regulation

     The Company is not currently subject to direct regulation by any government
agency, other than regulations applicable to businesses generally, and there are
currently  few laws or  regulations  directly  applicable  to access or  conduct
commerce on the Internet or for access through an online service or to establish
an online  service.  However,  due to the  increasing  popularity and use of the
Internet and other  online  services,  it is possible  that a number of laws and
regulations  may be adopted with respect to the Internet and online  services in
general,  covering issues such as user privacy, pricing, and characteristics and
quality of products,  services,  and content.  For example, the Exon Bill (which
was recently  approved by the Senate) would  prohibit  distribution  of obscene,
lascivious, or indecent communications on the Internet. The adoption of any such
laws or  regulations  may cause the Company to limit the scope of the  Company's
products and services in the  marketplace  and  increase the  Company's  cost of
doing business or otherwise  have an adverse  effect on the Company's  business,
operating results, or financial  condition.  Moreover,  the applicability to the
Internet,  other online services, a MiniNet service, the Telli*Phone  Directory,
and  the  Telli*Phone  of  existing  laws  governing  issues  such  as  property
ownership, libel, and personal privacy is uncertain.

Competition

     The Company plans to distribute  Telli*Phones  to  Subscribers to encourage
them to replace their existing telephones with Telli*Phones. Subscribers will be
able to  keep  their  Telli*Phones  free of  charge  for as long as they  remain
subscribers  to the  Telli*Phone  Directory  and the Company is able to generate
enough  revenues from paid  advertising  in the Directory to support its monthly
operations.  At this time the Company sees no competition from computer hardware
and telecommunications equipment manufacturers and vendors. 

                                     Page 26
<PAGE>

     Although  the Company has  targeted  online  community  information,  local
directory services,  and  telecommunications  products for consumers who are not
computer  literate,  other  companies  offer  products  similar to the Company's
software and  publishing  products and target the same customers as the Company.
The Company  believes its ability to compete  depends on many factors within and
outside its control,  including the timing and market acceptance of the products
developed by the Company and its competitors,  performance,  price, reliability,
and customer service and support.

     The marketplace for online products and services is highly  competitive and
competition is expected to continue to increase significantly.  In addition, the
Company expects the market for online advertising, to the extent it develops, to
be intensely  competitive.  There are no substantial  barriers to entry, and the
Company  expects  that  competition  will  continue to  intensify.  Although the
Company  believes  that the diverse  segments of the online  market will provide
opportunities  for more than one supplier of products  and  services  similar to
those of the Company,  it is possible that a single supplier may dominate one or
more  market  segments.  The Company  competes  with other  providers  of online
navigational tools, products,  and services,  including directory and Web server
review services and search engine  services.  Many companies  offer  competitive
products  or  services  addressing  certain  of the  Company's  target  markets,
including  online  companies  like  America  On  Line  and the  French  Minitel;
suppliers of Internet products and services like Netscape, Microsoft, and Yahoo;
the   Regional   Bell   Operating    Companies   offering   Yellow   Pages   and
telecommunication   products   and   services   like   voice   mail  and  caller
identification;   MCI  offering  Internet   connections;   newspaper  publishing
companies offering local and classified  advertising  including,  including,  in
many  cases,  telecommunication  and  online  community  information  and  news;
printers, distributors, agencies, and clubs offering or managing retail discount
coupons and redemption certificates and awards.

     In addition,  entities that sponsor or maintain  high-traffic Web sites and
manufacturers  of  telecommunications  and computer  equipment  could develop or
acquire  simple  search  and  navigation  functions  that would  produce  simple
computerized  information  products and services that compete with those offered
by the Company.

     Many of the Company's competitors are substantially larger than the Company
and have significantly greater financial, technical. and marketing resources. As
a  result,  they  may be  able  to  respond  more  quickly  to  new or  emerging
technologies  and  changes  in  customer  requirements,  or  to  devote  greater
resources to the  development,  promotion,  and sale of their  products than the
Company.  It is also  possible  that new  competitors  may  emerge  and  acquire
significant  market share to the extent that smaller  providers of online tools,
services,  or products may be acquired by,  receive  investments  from, or enter
into  other  commercial   relationships   with  larger,   well-established   and
well-financed companies,  such as Microsoft,  Netscape,  Regional Bell Operating
Companies,  and long distance  telecommunications  companies like AT&T, MCI, and
Sprint.  Possible new  competitors  include  large foreign  corporations,  major
telecommunications companies, and other entities with substantial resources.

                                    Page 27

<PAGE>

     The most  significant  market where the Company  competes is in the area of
telephone directories. The Telli*Phone Directory will compete primarily with the
local  Telephone  Company Yellow Pages directory in areas where it establishes a
MiniNet Telli*Phone Directory central computer system.  Specifically,  it may be
competing for advertising dollars. Even though the local Telephone Companies are
regulated  by the State  Public  Utilities  Commissions,  they have,  unlike the
Company,  major  financial  resources  available  to them.  If the Yellow  Pages
publishers see the MiniNet system and Telli*Phone Directory as a major threat to
their profits,  it is possible that they would use their resources to attempt to
eliminate  competition  from the  MiniNet  and  Telli*Phone  Directory.  How the
Telephone Companies would attempt to eliminate  competition from the MiniNet and
Telli*Phone Directory is not clear at this time.

     Since 1983 many major  organizations  have spent  hundreds  of  millions of
dollars in an attempt to establish an interactive telecommunications service for
the home.  Most of the  methods  tried have  involved  an  attempt to  encourage
consumers  to  attach  a  videotex   telecommunications/terminal  box  to  their
television  sets for  people  to access  interactive  listings  and  directories
through their televisions. These systems are no longer in use due to the lack of
customer demand.  More recently,  some organizations with significant  financial
resources have made similar  attempts at establishing an interactive  service in
the  home  through  the  television  set  by  encouraging  consumers  to  attach
cablevision/terminal  boxes  to  their  television  sets.  These  terminals  are
connected to outside fiber optic cable systems and are promoted principally as a
means of receiving home movies on demand. These services are available only to a
limited  marketplace and it is too soon to project whether or not consumers will
utilize the service or be willing to pay for it.

     Some  organizations  have attempted to offer consumer oriented  interactive
directory services to the householder  through personal  computers.  It has been
reported  that IBM invested  over $1 billion into the Prodigy  service which has
yet to show a significant profit.  Compu Serve is well established while America
OnLine is currently  the most popular and  profitable  of the consumer  oriented
computer networks.  Attempts have been made by. financial organizations to offer
home banking services through a telephone which includes a computer processor, a
modem, and a digital video screen.

     Many businesses,  schools,  local government  agencies and associations are
using the  Internet  and  setting up their own home pages on the World Wide Web,
encouraging   the   computer-literate   to  contact  them  for  information  and
transactions.  To date, these attempts have met varying degrees of success,  and
some of them are as yet  unproven.  Recently,  as announced in the July 26, 1996
issue of Information & Interactive  Services  Report,  Digital City has spun off
from America OnLine. and with the Tribune Co. currently offers service to the PC
marketplace in Washington,  Boston and San Francisco, and plans to offer service
in 88 cities over the next few years.  Microsoft Corporation plans its own local
entertainment service to debut in January of 1997. Cox Interactive Media plans a
local service as does US West Interactive  Services.  AT&T is developing a local
Web  information  service called  Hometown  Network,  now being test marketed in
Sacramento.  All of these services  could be accessible to  Telli*Phone  MiniNet
Subscribers  once they are available to the marketplace and if the pricing makes
access practicable. All basically

                                    Page 28

<PAGE>

promise the same thing; movie reviews,  restaurant listings and reservation
capabilities  plus  community  and  school  information,  area  maps and  travel
information.

     Microsoft has recently  announced  CityScape,  a national online network of
community guides crammed with local listings,  maps,  reviews and classified and
retail ads plus local news.  Microsoft is courting publishers across the country
to contribute  news for a share of revenue and has reportedly  budgeted  several
hundred  million dollars for the project,  with plans to introduce  CityScape in
New York,  San  Francisco and San Diego early next year followed by the nation's
other large cities.

     A new generation of telephones  with screens for accessing the Internet are
currently being tested. These phones, which are less expensive and easier to use
than  computers  are  expected to bring  millions of new users to the Web's home
pages.  Among them,  Philips Home  Services is conducting a test in Garden City,
New York  using  Philips  screen  phones and  Oracle  Corporation's  interoffice
software  enabling 6,500 businesses and consumers to access the Web and send and
receive e-mail.  The Philips screen phone utilizes special software to translate
Web graphics to telephone  compatible  text based menus and contains Web content
developed  by  Garden  City's  newspaper,  including  movie  listings  and local
notices.  US West is  conducting  a trial of its  TransPhone  screen phone in 30
homes in Spokane,  Washington claiming it is really a test of the concept rather
than the device.  Motorola is  developing a screen phone as is Northern  Telecom
whose phone is to be released in early 1997 using Sun Microsystems,  Inc.'s Java
language to translate data from Web pages into a format  readable on the phone's
small screen.

     There is no  assurance  that  the  Company  can  compete  successfully  for
advertising dollars with other local media, the community newspapers, radio, and
TV,  or that the  Company  can  compete  with  current  and  future  sources  of
competition or that the competitive pressures faced by the Company will not have
a material adverse effect on the Company's  business,  results of operations and
financial condition.

     The  Company  cannot  make any  assurances  that it will be able to  obtain
financing to take its products to the  marketplace  in a profitable  manner,  or
that if its  products  receive  favorable  acceptance  by the  general  consumer
public,  that it will have the resources to sustain itself while  competing with
major  organizations  with similar  goals.  The Company can provide no assurance
that it can  protect  itself from  providing  potential  competitors  additional
information  from its business plan that will assist them in determining ways to
make their present products  successful in the marketplace.  In addition,  there
can be no assurance that the Company will not experience difficulties that could
delay or prevent the  successful  introduction  and marketing of its products or
that they will meet the  requirements  of the  marketplace  and  achieve  market
acceptance.  There can be no assurance  that the Company will be able to compete
successfully against current or future competitors or that competitive pressures
faced  by the  Company  will  not  materially  adversely  affect  its  business,
operating results and financial condition.

                                    Page 29

<PAGE>

Research and Development

     The Company's current  development  efforts are focused on new products and
product  enhancements.  The Company  believes that its software and its software
and engineering  development team represent a significant  competitive advantage
for the Company.  The Company's  ability to attract and retain highly  qualified
employees  will be the  principal  determinant  of its  success  in  maintaining
technological  leadership in its field.  The Company intends to have a policy of
using  equity-based  compensation  programs to reward and  motivate  significant
contributors  among  its  employees.  The  Company  determined  that,  effective
December 31, 1994, all  significant  research and development had been completed
regarding the development of the Telli*Phone.

     In  the  last  three  fiscal  years  the  Company  has  spent  and  accrued
approximately the following  amounts on  company-sponsored  product  development
activities   determined  in  accordance  with  generally   accepted   accounting
principles.  The entire amounts were spent and accrued on activities relating to
the enhancement of software for the Company's new product, the Telli*Phone.

         1993 $       255,000
         1994         194,000
         1993         nil

     The Company, including any of its predecessors, has not, during each of the
three  fiscal  years  immediately  prior  to the  filing  of  this  registration
statement, received any revenues from operations,

     There can be no assurance  that the Company will be  successful  in getting
the  marketplace  to accept its product or that the Company  will  generate  any
significant income from the use of its products in the marketplace. There can be
no assurance that the Company will be successful in developing and marketing new
software and hardware  products and  enhancements  that meet  changing  customer
needs and in  responding  to such  technological  changes or  evolving  industry
standards. The Company's current products are designed around certain standards,
including,  for example,  simple-to-use  computer programming systems and future
sales  of the  Company's  products  will be  dependent,  in  part,  on  industry
acceptance of such standards.  Microsoft and IBM are each proposing  alternative
programming  standards and widespread  adoption of either  standard could have a
material  adverse  effect  on the  Company's  business,  operating  results,  or
financial  condition.  In addition,  there can be no assurance  that the Company
will not  experience  difficulties  that could delay or prevent  the  successful
development,  introduction,  and marketing of new products and enhancements,  or
that its new products and enhancements  will adequately meet the requirements of
the marketplace and achieve market acceptance.  Further, because the Company has
not commenced shipment of its products,  there can be no assurance that, despite
testing by the Company and potential customers,  errors will not be found in the
Company's  products,  or,  if  discovered,  successfully  corrected  in a timely
manner.  If the  Company  is unable to develop  on a timely  basis new  software
products,  enhancements to existing products,  or error corrections,  or if such
new products or  enhancements  do not achieve market  acceptance,  the 

                                    Page 30

<PAGE>

Company's  business,  operating  results,  and financial  condition will be
materially adversely affected.

Environmental Impacts

     Registrant  does plan to manufacture  the hardware  necessary to distribute
its products and will use existing  telecommunications  services to  communicate
with its Subscribers.  Registrant does not feel that it is affected by any rules
which have been enacted or adopted regulating the discharge of material into the
environment.  On the contrary,  Registrant  feels that its system may reduce the
number of trees cut down every year to supply the paper industry.

Employees and Management of Growth

     The Company has seven full-time employees, including four in administration
and  finance  and  three in  research  and  product  development.  Approximately
one-half of the Company's  senior  management  has joined the Company within the
last  three  months.  The  Company  plans to hire an  additional  15  employees,
including two in technical maintenance, three in marketing, and ten in directory
advertising sales and listings.

     The Company's future success is substantially  dependent on the performance
of its senior management,  key technical personnel, and marketing and sales team
and its  continuing  ability to attract and retain highly  qualified  technical,
managerial,  marketing,  and sales personnel.  Competition for such personnel is
intense and there can be no  assurance  that the Company  will be able to retain
its key managerial  personnel in the future.  None of the Company's employees is
represented by a labor union. The Company has not experienced any work stoppages
and considers its relations with its employees to be good.

     The  Company  intends  to  establish  Telli*Phone  MiniNet  Sites  in other
geographic  locations,  which will create additional  operational and management
complexities,  including  the need for  continual  updating and  maintenance  of
directory  listings.  There can be no assurance that the Company will be able to
effectively manage the expansion of its operations,  that the Company's systems,
procedures, or controls will be adequate to support the Company's operations, or
that Company management will be able to achieve the rapid execution necessary to
fully  exploit  the market  opportunity  for the  Company's  products  and media
properties.  Any inability to manage growth,  if any,  effectively  could have a
material  adverse  effect on the  Company's  business,  operating  results,  and
financial condition.

Financial Information About Foreign and Domestic Operations and Export Sales

     Registrant has had no history of operating  revenues,  domestic or foreign.
In addition,  Registrant will not be conducting any business that would generate
foreign sales in the foreseeable future.

                                    Page 31
<PAGE>

Revenues from Prior Operations

     Registrant,  including any of its predecessors, has not, during each of the
three  fiscal  years  immediately  prior  to the  filing  of  this  registration
statement, received any revenues from operations.

Factors Affecting Company's Business Operating Results & Financial Condition

Development Stage Company; Limited Operating History

     The Company has been in the  development  stage since its inception and has
not commenced a public  operation of the MiniNet,  has not begun  generating any
advertising  revenues  for  the  Telli*Phone  Directory,  nor  has it  commenced
shipment  of any  Telli*Phones.  Accordingly,  the  Company  has only a  limited
operating  history upon which an evaluation of the Company and its prospects can
be based.  The  Company and its  prospects  must be  considered  in light of the
risks,  expenses and difficulties  frequently  encountered by companies in their
early stages of development,  particularly companies in new and rapidly evolving
markets. To address these risks, the Company must, among oilier things, continue
to respond to competitive developments,  attract, retain, and motivate qualified
personnel,  implement and successfully  execute its advertising  sales strategy,
develop and market  additional  media  properties,  and  continue to upgrade its
technologies  and  commercialize   products  and  services   incorporating  such
technologies.  There can be no assurance  that the Company will be successful in
addressing such risks. The report of the independent Certified Public Accountant
expresses  substantial  doubt about the Company's ability to continue as a going
concern.

No Assurance of Successful Operations

     The Company will attempt to establish a computer  information  network, the
Telli*Phone  MiniNet.  An internal test of its computer  information network was
initiated in Marin  County,  California,  during  March 1987,  on a very limited
scale,  but it has not begun any operations of the network  involving the use of
the  MiniNet  by the  general  public and has not  received  any  revenues  from
operations.  There is no assurance that the Company will be able to successfully
commence or  establish a large scale  operation  of the MiniNet and no assurance
that the user public will accept a new way to access local community information
or  that  community   businesses  and  groups  will  adopt  new   communications
strategies.  The Company's  receipt of significant  revenues is dependent on the
successful  operation of its MiniNet,  the outcome of which cannot be determined
at this time.  Any failure to develop or maintain  the MiniNet  could  adversely
affect the Company's  business,  results of operations and financial  condition.
This condition raises  substantial  doubt about the Company's ability to achieve
or sustain profitability.

No Revenues  From  Product  Sales;  Significant  and  Continuing  Operating
Losses; Accumulated Deficit

     Since  the   incorporation  of  Guinness   Productions,   Inc.,  the  first
predecessor  of the Company,  in November  1980, the Company has not shipped any
products nor generated any 

                                    Page 32

<PAGE>

revenues  from  sales of its  products.  Accordingly,  the  Company  has no
operating  history upon which an evaluation of its prospects can be made.  There
is no assurance that the Company's operations will be successful or that it will
meet its stated  objectives.  Such  prospects must be considered in light of the
risks, expenses and difficulties  frequently encountered in the establishment of
a new  business in the  consumer  computer  telephony  and  information  network
development industry,  which is a continually evolving industry characterized by
an increasing number of market entrants and intense competition,  as well as the
risks,  expenses and  difficulties  encountered in the shift from development to
commercialization of new products based on innovative  technology.  There can be
no assurance that the Company will be successful in addressing such risks. As of
September 30, 1996, the Company and its predecessor  had an accumulated  deficit
of $9,989,833  with current  liabilities  of $1,645,642.  The Company  currently
expects to significantly  increase its operating  expenses to develop and expand
its  sales  and  marketing  operations,   to  fund  greater  levels  of  product
development,  and to develop and commercialize additional media properties. As a
result of the  foregoing  factors,  the  Company  expects to  continue  to incur
significant  losses on a quarterly and annual basis for the foreseeable  future.
There  can  be  no   assurance   that  the  Company   will  achieve  or  sustain
profitability.  See "Management's Discussion and Analysis of Financial Condition
and Results of Operations."

Potential Fluctuations in Quarterly Operating Results

     As a result of the Company's  limited operating  history,  the Company does
not have historical  financial data on which to base planned operating expenses.
Quarterly  revenue and  operating  results  will depend  substantially  upon the
advertising revenues received within the quarter from the Telli*Phone Directory,
which are difficult to forecast accurately.  The Company may be unable to adjust
spending in a timely manner to compensate for any unexpected revenues shortfall.
Accordingly,  any significant shortfall of demand for the Company's products and
services in  relation  to the  Company's  expectations  would have an  immediate
adverse  impact on the  Company's  business,  operating  results,  and financial
condition.  In addition, the Company plans to increase its operating expenses to
fund  greater  levels  of  research  and  development,  increase  its  sales and
marketing  operations,  develop  new  distribution  channels,  and  broaden  its
customer support  capabilities.  To the extent that such expenses precede or are
not  substantially  followed by  increased  revenues,  the  Company's  business,
operating results and financial condition will be materially adversely affected.

         The  Company's  operating  results may fluctuate  significantly  in the
future as a result of a  variety  of  factors,  many of which  are  outside  the
Company's control.  These factors include the number of Telli*Phone  Subscribers
operating  Telli*Phones  within the geographic  area covered by the  Telli*Phone
Directory (the MiniNet), the level of usage of the Telli*Phone Directory, demand
for Telli*Phone Directory advertising, seasonal trends in both MiniNet usage and
advertising   placements,   the  advertising   budgeting  cycles  of  individual
advertisers,  the  amount and timing of  capital  expenditures  and other  costs
relating to the expansion of the Company's  operations,  the introduction of new
products or services by the Company or its  competitors,  pricing changes in the
industry,  technical  difficulties with respect to the use of the Telli*Phone or
accessing  the  Telli*Phone   Directory  through  the  MiniNet  or  other  media
properties  developed by the Company,  general economic  conditions and economic
conditions  specific to the MiniNet and online media. 

                                    Page 33

<PAGE>

     As a strategic  response  to changes in the  competitive  environment,  the
Company  may from time to time  make  certain  pricing,  service,  or  marketing
decisions  or  acquisitions  that could have a  material  adverse  effect on the
Company's business,  results of operations, and financial condition. The Company
also  expects  that  it  may  experience  seasonality  in  its  business,   with
advertising impressions (and therefore revenues) being somewhat lower during the
summer  and after  year-end  vacation  and  holiday  periods,  when usage of the
Telli*Phone Directory may he expected to decline.

Due to all of the  foregoing  factors,  in some  future  quarter  the  Company's
operating  results may fall below the  expectations  of securities  analysts and
investors.  In such event, the trading price of the Company's Common Stock would
likely be materially and adversely  affected.  See "Management's  Discussion and
Analysis of Financial Conditions and Results of Operations."

Financial Condition of the Company

The Company  does not have an earning  history.  In  addition,  the Company is a
development stage company which is in the process of initiating a market test of
its computer information network and access device, the Telli*Phone. The Company
will require additional capital to finance its current and proposed  operations.
There is no  assurance  that the  Company  will be able to raise any  additional
capital or that such  additional  capital will be available at the time required
by the Company to  successfully  promote and  operate the  MiniNet.  There is no
assurance  of  the  Company's  ability  to  receive  significant  revenues  from
subscriptions  to the  Telli*Phone  Directory,  advertising  in the  Telli*Phone
Directory,  licensing fees to communicate  through the MiniNet with  Telli*Phone
Subscribers, or from the operation of the MiniNet.

New Concept and Emerging  Markets;  Uncertainty  of Market  Acceptance  and
Commercialization Strategy

The  utilization  of  combination  telephone-information  network  products  for
consumer   applications   represents   a  relatively   new   business   activity
characterized  by emerging  markets and an increasing  number of market entrants
who  have  introduced  or are  developing  an  array  of new  telecommunications
products and services,  some of which will compete in some segments  (i.e.  home
banking) against the Telli*Phone and the Telli*Phone  MiniNet  (Network) and any
other products  which may be developed by the Company.  The Company is currently
assessing  market  acceptance and demand with the intent of minimizing the risks
involved with the financing and  distribution of the  Telli*Phone  Directory and
the  Telli*Phone  on a  large  scale.  Market  acceptance  for  the  Telli*Phone
Directory,  the  Telli*Phone,  and MiniNet  will require  substantial  marketing
efforts and  expenditure  of funds to create  awareness  and demand by potential
customers.  There can be no assurance  either that a market will develop or that
it will become sustainable.

Uncertainty of Market Acceptance of New Technology

         The Telli*Phone MiniNet involves the use of a new communications device
or tool.  It may or may not be accepted  by the  marketplace.  Similar,  but not
identical,  approaches have been undertaken in the United Kingdom,  where it had
limited  success,  and  in  France,  where  it  is  

                                     Page 34

<PAGE>

succeeding with government assistance.  Until the Company's marketing plans
have been completed,  one will not know what degree of success can reasonably be
anticipated.  Extensive use of the Telli*Phone MiniNet will require what amounts
to a cultural  change in the  user-public  comparable to the FAX  revolution now
underway in America.  Whether a market will develop for the Company's  products,
or if it  develops  more slowly than  expected  or becomes  saturated  with more
well-funded  competitors,  or if it cannot  effectively  manage  expansion,  the
Company's  business,   operating  results,   and  financial  condition  will  be
materially adversely affected.

Dependence on Continued Growth in Use of the MiniNet

     The Company's  future  success is  substantially  dependent  upon continued
growth in the use of the MiniNet, the Telli*Phone, and the Telli*Phone Directory
in order to support the sale of  advertising  in the  Telli*Phone  Directory and
other online media properties under development by the Company.

     There is no assurance that  communication or commerce over the MiniNet will
develop or that  content  will be provided  in the  Telli*Phone  Directory.  The
MiniNet  may not  prove to be a viable  commercial  marketplace  for a number of
reasons,   including  potentially   inadequate   development  of  the  necessary
infrastructure,  such as a reliable network backbone,  or timely  development of
performance improvements including high speed modems. In addition, to the extent
that the MiniNet may  experience  significant  growth in the number of users and
level of use,  there can be no assurance  that the MiniNet  infrastructure  will
continue  to be able to support  the  demand  placed  upon it by such  potential
growth.  In addition,  the MiniNet  could lose it viability due to delays in the
development  of  adoption  of new  standards  and  protocols  required to handle
increased levels of MiniNet activity, or due to increased government regulation.
Changes  in or  insufficient  availability  of  telecommunications  services  to
support the MiniNet also could  result in slower  response  times and  adversely
affect  usage  of the  MiniNet  and  the  Telli*Phone  Directory.  If use of the
Telli*Phone   Directory   does  not   continue  to  grow,   or  if  the  MiniNet
infrastructure does not effectively support growth that may occur, the Company's
business, results of operations, and financial condition would be materially and
adversely affected.

Uncertain Adoption of the MiniNet as an Advertising Medium

     Because  the  Company  expects  to  derive  most  of  its  revenues  in the
foreseeable  future  from the sale of pages of  advertising  in the  Telli*Phone
Directory,  the  future  success  of the  Company  is  highly  dependent  on the
development  of the  MiniNet as an  advertising  medium.  Some of the  Company's
potential   advertisers  may  have  some  limited  experience  or  knowledge  of
advertising on the Internet through the World Wide Web,  however,  the Company's
advertising  customers  have no  experience  with the MiniNet as an  advertising
medium, have not devoted a significant portion of their advertising expenditures
to Web-based advertising,  and may not find such advertising to be effective for
promoting  their  products  and  services  relative  to  traditional  print  and
broadcast  media. No standards have yet been widely accepted for the measurement
of the  effectiveness  of Web-based  advertising,  and there can be no assurance
that such standards will develop  sufficiently to support Web-based  advertising
as a significant  advertising medium.  Moreover,  critical issues concerning the
commercial use of the Internet (including security,  

                                    Page 35

<PAGE>

     reliability,  cost,  ease  of  use  and  access,  quality  of  service  and
acceptance of  advertising)  remain  unresolved  and may  negatively  affect the
growth of  Internet  use and the  acceptance  of the  MiniNet as an  advertising
medium. In addition,  the MiniNet serves a very limited  marketplace  unlike the
Internet which has a worldwide marketplace.  If widespread commercial use of the
Internet  does not develop,  or if the Internet does not develop as an effective
and  measurable  medium for  advertising,  the  success of the  MiniNet  and the
Company's  business,  results of  operations,  and financial  condition  will be
materially and adversely affected.

Reliance on Advertising Revenues

     The Company expects to derive  substantially  most of its revenues from the
sale of pages of  advertising  in the  Telli*Phone  Directory,  and  expects  to
continue to do so for the foreseeable future. The Company has not introduced the
Telli*Phone Directory to the marketplace, has not attempted to sell any pages of
advertising,  and has not  generated  any  revenues  from  the  sale of pages of
advertising  in  the  Telli*Phone  Directory.  There  can be no  assurance  that
advertisers will purchase advertisements in the Company's Telli*Phone Directory.
The Company's ability to generate  advertising revenues will depend, among other
factors,  on  advertisers  acceptance  of  the  MiniNet  as  an  attractive  and
sustainable medium, the development of a large base of users of the Telli*Phone,
and the effective  development of media properties that provide user demographic
characteristics that will be attractive to advertisers.

No Assurance of Content Development or Advertising Revenues

     A key element of the Company's  strategy  involves the  implementation of a
Telli*Phone MiniNet operation and the distribution of the Telli*Phone  Directory
within limited geographical areas, to generate the maximum number of Telli*Phone
Subscribers  (critical  mass of users) that will generate the maximum  amount of
advertising  revenues from the maximum number of  advertisers,  at minimum cost.
Each area targeted for the  establishment of a MiniNet will be approximately the
same geographic area covered by the local telephone  directory for that area. In
these efforts,  the company will rely and will continue to rely substantially on
content  development  and  localization  efforts of third parties.  For example,
businesses advertising products and services,  community groups and associations
publishing news and directory information,  and individuals selling products and
services will create and update their pages of information using the Telli*Phone
or the assistance of local freelance editors, There can be no assurance that the
Company's  marketing and  educational  efforts will encourage  people to use the
Telli*Phone  Directory  or that  pages of  information  will be  placed by third
parties in the Telli*Phone  Directory or that pages of information placed in the
Directory will encourage people to become Subscribers of the Telli*Phone and use
the  Telli*Phone  Directory  or that the  Telli*Phone  Directory  will result in
significant revenue to the Company.  Any failure of these parties to develop and
maintain  high quality and  successful  Telli*Phone  Directory  pages also could
result in  dilution to the names  Telli*Phone  and  MiniNet,  which could have a
material adverse effect on the Company's  business,  results of operations,  and
financial condition.

         The  Company's  future  success  also  depends  in part upon the timely
processing  and updating of  Telli*Phone  Directory  listings  created by users,
businesses,  groups,  and associations.  

                                    Page 36

<PAGE>

     The  Company  may  experience  significant  delays  in the  processing  and
updating  of  information  that  could  have a  material  adverse  effect on the
usefulness of the Telli*Phone Directory for Telli*Phone  Subscribers which could
have a material adverse effect on the Company's business, results of operations,
and financial condition.

Dependence on Third Party Distribution of Content

     The Company  will be  dependent  on local  telephone  companies  to provide
transmission of Telli*Phone  Directory  information to Telli*Phone  Subscribers.
The telephone companies may assess data transmission rates that are sufficiently
high to make use of the MiniNet too expensive for most subscribers. In addition,
disruptions  in the  Company's  ability  to carry on its  business  due to phone
system  transmission  or equipment  failures  causing  interruptions,  delays or
cessation in service to users could result in a material  adverse  effect on the
Company's business, results of operations, and financial condition.

Dependence  on  Suppliers  of  Telli*Phone  Components;  Single  Sources of
Supply; Assembly of Telli*Phones; Cost of Telli*Phones

     The Company currently assembles  Telli*Phones from components or assemblies
that are  purchased  from single  sources,  The Company  believes that there are
alternative  sources  of  supply  for  most  of the  components  and  assemblies
currently  purchased from single sources.  Some of the components and assemblies
used by the Company for which there are not  immediately  available  alternative
sources  of  supply  are  provided  to  the  Company  under  standard   purchase
arrangements.  If a shortage or  termination of the supply of any one or more of
such components or assemblies  were to occur,  however,  the Company's  business
could be materially  and adversely  affected.  In such event,  the Company would
have to incur the costs  associated with  redesigning the Telli*Phone to include
available  components or assemblies or otherwise  obtain  adequate  substitutes,
which costs could be material.  Also,  there is no assurance that in redesigning
the Telli*Phone to include available components or assemblies that the operation
of the Telli*Phone could be materially and adversely  affected.  Any delays with
respect to redesigning the Telli*Phone or obtaining substitute  components would
materially and adversely affect the Company's  business,  results of operations,
and financial condition.

     There is no assurance  that the  components or assemblies  purchased,  when
delivered,  that some or all the components will not be defective or that all of
the  components  can be  delivered  in  accordance  with the  intended  delivery
schedule.  Significant  defects in the components and/or a delay in the delivery
of the components  could  significantly  and adversely affect the success of the
Company's business, results of operations, and financial condition.

     The  Company  is  designing  its own main  board to  eliminate  many of the
computer  components  presently  used in the  assembly of  Telli*Phones  but not
necessary for the operation of the  Telli*Phone.  Also,  the  Telli*Phone  is an
instrument  designed  to handle a  limited  number  of  specific  tasks and many
hardware  components  can be  eliminated  from the  present  model  because  the
Telli*Phone programming system is able to do many of the tasks through software.
The Company  anticipates  that the unit price of a large run of Telli*Phone main
boards to be designed 

                                    Page 37

<PAGE>

by the  Company  will  considerably  reduce the  present  cost to  assemble
Telli*Phones.  There is no  assurance  that the Company  will be  successful  in
designing such a board or when designed that the Telli*Phone  will function with
the  capabilities of the previous  models.  If the Company is not able to reduce
the present  cost of the assembly of  Telli*Phones  there is  substantial  doubt
about the Company's ability to generate enough income to justify the cost of its
products in the marketplace.  This condition would raise substantial doubt about
the Company's ability to continue as a going concern.

Dependence  on  Reliable  Source of  Telli*Phones;  Limited  Market for the
Telli*Phone

     The  Company  plans to contract  qualified  manufacturers  of computer  and
telecommunications  equipment  to  produce  large  runs of  Telli*Phones  on its
behalf. It also anticipates being able to raise the capital required to purchase
large runs of  Telli*Phones.  The Company believes that it will be able to raise
this capital through a variety of methods including the sale of securities, debt
financing, and limited partnerships.  There can be no assurance that the Company
will be able to raise the capital required to interest a manufacturer to produce
large  runs  of  Telli*Phones  or  that  if the  financing  is  available  and a
manufacture  produces  large  runs  of  Telli*Phones  that  some  or  all of the
Telli*Phones  will  not be  defective  or that  all of the  Telli*Phones  can be
delivered in accordance with the intended delivery schedule. Significant defects
in the  Telli*Phones  and/or a delay in the delivery of the  Telli*Phones  could
significantly,  materially, and adversely affect the Company's business, results
of operations, and financial condition.

     Although  the  Telli*Phone  can  be  used  as an  ordinary  telephone  with
stand-alone voice mail features, it is designed primarily for use as a device to
access  information  from the  Telli*Phone  Directory  through the MiniNet.  The
Company anticipates that, if the MiniNet is not successful,  there may not be an
alternative  computer  information  network to which the Company  could lease or
sell  Telli*Phones.  The Company  further  anticipates  that it would  realize a
substantial  loss  on the  Telli*Phones  if it  were  forced  to  lease  or sell
Telli*Phones  for use other than in a computer  information  network which would
materially and adversely affect the Company's  business,  results of operations,
and financial condition.

     In the intensely competitive  telephone-computer  industry, large companies
such  as  NorTel,  Panasonic,  and  Philips  which  have  significantly  greater
financial and management resources than the Company,  could produce a substitute
for the  Telli*Phone  appliance at a better  price.  In that case it is possible
that the Company could use that source for  Telli*Phones.  Also, there can be no
assurance that  competitors  will not identify,  develop,  manufacture and offer
products to the marketplace rendering the Company's products obsolete.

Dependence  on  Reliable   Computer   Equipment  for  the  MiniNet  Server;
Dependence on Additional Financing for Growth

     The computer  equipment  that  maintains  the  Telli*Phone  Directory  (the
"Server") and the  telecommunications  assemblies  connecting  the Server to the
local telephone system are purchased from single sources under standard purchase
arrangements.  The Company believes that there are

                                    Page 38

<PAGE>

alternative  sources of supply  for most of the  equipment  and  assemblies
currently  purchased  from single  sources.  If a shortage or termination of the
supply of any one or more of such  equipment and assemblies  were to occur,  the
Company's business could be materially and adversely affected. Also, the Company
anticipates  that the continuing  success of the MiniNet in the initial  markets
will  depend on the  Company's  ability  to  acquire  additional  equipment  and
assemblies  to  establish   MiniNet  Sites  and  distribute   Telli*Phones  into
additional  markets.  The Company  anticipates  using various  financing methods
including debt financing and equity  financing to raise capital for the purchase
of additional  MiniNet equipment and assemblies to establish  additional MiniNet
Sites.  There is no  assurance  that these funds will be raised or that if funds
are raised and  equipment  and  assemblies  are  purchased  that some or all the
equipment and assemblies  will not be detective or that all of the equipment and
assemblies can be delivered in accordance with the intended  delivery  schedule.
Significant  defects  in the  equipment  and  assemblies  and/or  a delay in the
delivery of the  equipment  and  assemblies  could  significantly  and adversely
affect the  success  of the  Company's  business,  results  of  operations,  and
financial condition.

Enhancement of the Telli*Phone, the Telli*Phone Directory, and the MiniNet

     Substantially all of the Company's  revenues in the foreseeable  future are
expected to be derived from  Subscriptions  to the  Telli*Phone  Directory.  The
purchase of advertising pages in the Telli*Phone  Directory,  and the license of
the Company's software and the right to communicate with Telli*Phone Subscribers
through their  Telli*Phones from a computer  networking data base.  Accordingly,
broad acceptance of the Company's software products and services by customers is
critical to the Company's future success, as is the Company's ability to design,
develop,  test, and support new software  products and  enhancements on a timely
basis  that  meet  changing   customer   needs  and  respond  to   technological
developments and emerging industry standards.

     To remain competitive, the Company must continue to enhance and improve the
responsiveness,  functionality, and features of the Telli*Phone, the Telli*Phone
Directory,  and the MiniNet  Server,  as well as other branded media  properties
that may be developed.  There can be no assurance  that the Company will be able
to  successfully  maintain  competitive  user  response  time or  implement  new
features and functions, such as user personalization and protection,  which will
involve the development of increasingly  complex  technologies.  There can be no
assurance that the company will not experience  difficulties that could delay or
prevent the successful development,  introduction, and marketing of new products
and enhancements, or that its new products and enhancements will adequately meet
the requirements of the marketplace and achieve market acceptance.

     Further,  because the Company has not  commenced  shipment of its products,
there can be no assurance that,  despite testing by the Company and by potential
customers,  errors  will  not  be  found  in  the  Company's  products,  or,  if
discovered,  successfully  corrected  in  a  timely  manner.  In  addition,  any
enhancements of or improvements to the Telli*Phone,  the Telli*Phone  Directory,
the MiniNet Servers or new media properties may contain  undetected  errors that
require  significant  design  modifications,  resulting  in a loss  of  customer
confidence  and user support and a decrease in the value of the Company's  brand
name  recognition.  Any  failure  of the  Company  to  effectively  develop  and
introduce  these  properties,  or failure of such  properties to achieve  market

                                    Page 39

<PAGE>

acceptance,   could  adversely  affect  the  Company's   business,   results  of
operations, and financial condition.

Need for Additional Equipment

     The Company  anticipates  that the  Telli*Phones and Server equipment to be
acquired for the market  launch will be  sufficient  to  successfully  operate a
single MiniNet Station in the initial markets targeted by the Company.  However,
the Company also anticipates  that the continuing  success of the MiniNet in the
initial  markets  will  depend on the  Company's  ability to acquire  additional
Telli*Phones and Server equipment to expand its network into additional markets.
There is no assurance  that the Company will be able to acquire such  additional
Telli*Phones  and Server  equipment or to  successfully  expand into  additional
markets.

Lack of Intellectual Property Protection

     The  Company  has  applied  for   Copyright/Trademark   protection  of  the
Telli*Phone  name but does not  possess  any patent or  registered  intellectual
property  rights  with  respect to any of its  technology  and has not filed any
concept patent applications. In addition, much of the technology utilized in the
development of the  Telli*Phone is generally  available to other  manufacturers.
Some of the technology  utilized in the Telli*Phone  hardware is licensed to the
Company on a  world-wide  perpetual  basis.  The Company may find that it has to
make royalty or licensing  payments for using the technology of other companies.
In  addition,  other  companies  with  greater  financial,  marketing  and other
resources than the Company could produce  products  similar to the  Telli*Phone,
the Telli*Phone Directory, and the MiniNet which if produced, may have features,
pricing and other  characteristics  which would make them more acceptable to the
market  than the  products of the  Company.  Despite  precautions,  there is the
possibility  of a third party  accessing and copying the  Company's  proprietary
technology or independently  developing similar or superior technology.  In this
case, litigation could have an adverse effect on the Company.

     The  Company  depends  in part upon  certain  technology  and  know-how  to
differentiate  its  products  from  those of its  competitors,  and  relies on a
combination  of  trade  secret  laws  and  nondisclosure   and   confidentiality
agreements with its employees. consultants,  researchers and advisors to protect
its  technology.  There can be no assurance  that such laws or  agreements  will
provide  meaningful  protection  for the Company's  trade secrets or proprietary
know-how  in the  event of any  unauthorized  use or  disclosure  of such  trade
secrets or know-how.  In addition,  others may obtain access to or independently
develop    technologies   or   know-how   similar   to   the   Company's.    The
telecommunications  industry is characterized by the existence of a large number
of patents and frequent litigation based on allegations of patent  infringement.
Although the Company  believes that its products and  technology do not infringe
on the  proprietary  rights of others and has not received any notice of claimed
infringement,  it is possible that an  infringement  of  proprietary  rights may
occur.  In such event,  the  Company  may be required to modify its  products or
obtain a  license.  There can be no  assurance  that the  Company  will have the
financial  or  other  resources  necessary  to  successfully  defend  a claim of
violation of proprietary rights. Failure to do any of the foregoing could have a
material adverse effect on the Company.  Furthermore,  if the Company's products
or technologies are deemed to infringe patents or 

                                     Page 40

<PAGE>
                           
proprietary   rights  of  others,   the  Company   could,   under   certain
circumstances,  become liable for damages,  which would have a material  adverse
effect  on  the  Company's  business,   results  of  operations,  and  financial
condition.

Dependence on Key Man; Need to Assemble Management Team

     The Company's  performance is dependent on its President and CEO,  Lawrence
Guinness.  The Company has no "key person" life insurance  policy,  and his loss
would  adversely  affect the Company.  Moreover,  the Company's  performance  is
dependent  on hiring and  retaining  high  quality  personnel  for  assembling a
management  team,  and developing  marketing  systems and personnel to deal with
expansion in the  marketplace.  There is  competition  for top  personnel and no
assurance  that the Company will be able to attract,  assimilate,  or retain the
necessary  personnel  which  could  have  an  adverse  effect  on the  business,
operating results or financial condition of the Company.

Substantial Dependence Upon Internal Operations; Personnel for Growth

     The Company  plans to use an  internal  sales and  marketing  force for the
marketing and sale of its products and not outside, unrelated third parties. The
Company  will be  required  to  expand  its  field  sales  force  and  telesales
organization  as it establishes  new  Telli*Phone  MiniNet Sites.  Growth of the
Company  could  possibly be affected by its  dependence  on outside  sources for
management,  personnel and other resources for several critical  elements of its
business including advertising and marketing,  technology, assembly, development
of Telli*Phone  Directory  content and  Telli*Phone  distribution  among others.
There can be no assurance  that such internal  operations  or expansion  will be
successfully  managed,  that the cost of such  expansion  will  not  exceed  the
revenues generated,  or that the Company's sales and marketing organization will
be able to  successfully  compete against the  significantly  more extensive and
well-funded  sales and marketing  operations of many of the Company's  potential
competitors.   The  Company's  inability  to  effectively  manage  its  internal
expansion  could  have a  material  adverse  effect on the  Company's  business,
operating results, and financial condition.

Management of Growth

     The rapid  execution  necessary for the Company to fully exploit the market
window  for its  products  and  services  requires  an  effective  planning  and
management process.  The Company's potential rapid growth, which is essential to
the  Company's  success,  has placed,  and is  expected to continue to place,  a
significant  strain on the  Company's  managerial,  operational,  and  financial
resources.  As of August 31, 1996,  the Company had seven  full-time  employees,
including four in  administration  and finance and three in research and product
development.  To manage its growth,  the Company must  implement and improve its
operational  and financial  systems and expand,  train,  and manage its employee
base. For example, the company is currently in the process planning the building
of its internal  maintenance and support  organization,  and sales and marketing
team.  There  can be no  assurance  that  the  Company  will be able to build or
successfully implement this organization or team on a timely basis. Further, the
Company will be required to manage multiple relationships with various customers
and third parties to generate  revenues from 

                                    Page 41

<PAGE>

licensing its technology to other Information  Providers to communicate and
transact  business with Telli*Phone  Subscribers.  Although the Company believes
that it has made adequate  allowances  for the costs and risks  associated  with
this  expansion,   there  can  be  no  assurance  that  the  Company's  systems,
procedures,  or controls will be adequate to support the Company's operations or
that Company management will be able to achieve the rapid execution necessary to
fully  exploit the market window for the  Company's  products and services.  The
Company's future operating results will also depend on its ability to expand its
sales  and  marketing  organizations,  implement  and  manage  new  distribution
channels  to  penetrate  different  and  broader  markets and expand its support
organization commensurate with the increasing base of its installed products. If
the Company is unable to manage  growth  effectively,  the  Company's  business,
operating  results,   and  financial  condition  will  be  materially  adversely
affected.

Competition

     Other companies offer products similar to the Company's products and target
the same customers as the Company.  The Company  believes its ability to compete
depends upon many factors  within and outside its control,  including the timing
and  market  acceptance  of the  products  developed  by  the  Company  and  its
competitors, performance, price, reliability, and customer service and support.

     Many of the Company's competitors are substantially larger than the Company
and have significantly greater financial, technical, and marketing resources. As
a  result,  they  may be  able  to  respond  more  quickly  to  new or  emerging
technologies  and  changes  in  customer  requirements,  or  to  devote  greater
resources to the  development,  promotion,  and sale of their  products than the
Company.  It is also  possible  that new  competitors  may  emerge  and  acquire
significant  market  share.  Possible  new  competitors  include  large  foreign
corporations,  major  telecommunications  companies,  and  other  entities  with
substantial resources.

     The most  significant  market where the Company  competes is in the area of
telephone directories. The Telli*Phone Directory will compete primarily with the
local  Telephone  Company Yellow Pages directory in areas where it establishes a
MiniNet Telli*Phone Directory central computer system.  Specifically,  it may be
competing for advertising dollars. Even though the local Telephone Companies are
regulated  by the State  Public  Utilities  Commissions,  they have,  unlike the
Company,  major  financial  resources  available  to them.  If the Yellow  Pages
publishers see the MiniNet system and Telli*Phone Directory as a major threat to
their profits,  it is possible that they would use their resources to attempt to
eliminate  competition  from the  MiniNet  and  Telli*Phone  Directory.  How the
Telephone Companies would attempt to eliminate  competition from the MiniNet and
Telli*Phone Directory is not clear at this time.

     Since 1983 many major  organizations  have spent  hundreds  of  millions of
dollars in an attempt to establish an interactive telecommunications service for
the home.  Most of the  methods  tried have  involved  an  attempt to  encourage
consumers  to  attach  a  videotex   telecommunications/terminal  box  to  their
television  sets for  people  to access  interactive  listings  and  directories
through their televisions. These systems are no longer in use due to the lack of
customer demand.  More recently,  some organizations with significant  financial
resources have 

                                    Page 42
<PAGE>

made similar  attempts at establishing  an interactive  service in the home
through  televisions  by  encouraging  consumers to attach  cablevision/terminal
boxes to their television sets.

     The  Company  cannot  make any  assurances  that it will be able to  obtain
financing to take its products to the marketplace, or that if it is able to take
its products to the marketplace and the products receive favorable acceptance by
the general consumer  public,  that it will have the resources to sustain itself
while  competing with major  organizations  with similar goals.  The Company can
provide  no  assurance  that it can  protect  itself  from  providing  potential
competitors  additional information from its business plan that will assist them
in  determining  ways  to  make  their  present   products   successful  in  the
marketplace.  In addition,  there can be no assurance  that the Company will not
experience  difficulties that could delay or prevent the successful introduction
and  marketing  of its products or that they will meet the  requirements  of the
marketplace  and achieve market  acceptance.  There can be no assurance that the
Company  will  be  able  to  compete  successfully  against  current  or  future
competitors  or  that  competitive  pressures  faced  by the  Company  will  not
materially  adversely  affect its  business,  operating  results  and  financial
condition. See "Business...Competition."

Security Risks and System Disruptions; Lack of Product Liability Insurance

     The Company has developed  software for a security  protocol which operates
in  conjunction  with  encryption  and  authentication  technology.  Despite the
existence  of this  technology,  the  Company's  products may be  vulnerable  to
break-ins  and  similar   disruptive   problems  caused  by  MiniNet  users  and
Subscribers.  Such computer break-ins and other disruptions would jeopardize the
security of information  stored in and transmitted  through the computer systems
of the Company's  MiniNet Servers and the computer systems of other  Telli*Phone
Information Providers,  which may result in significant liability to the Company
and may also deter potential customers. Persistent security problems continue to
plague public and private data networks.  Recent break-ins reported in the media
occurred at General Electric Co. ("GE"), Spring Corporation  ("Sprint") and IBM,
as well as the computer systems of NETCOM ON-Line Communication  services,  Inc.
("NETCOM"),  Netscape Communications  Corporation ("NETSCAPE") and the San Diego
Supercomputer  Center.  Such incidents involved hackers bypassing  firewalls and
misappropriating confidential information.  Alleviating problems caused by third
parties may require  significant  expenditures  of capital and  resources by the
Company and may cause  interruptions,  delays,  or  cessation  of service to the
Company's  customers;  such expenditures or interruptions  could have a material
adverse  effect on the  Company's  business,  operating  results,  and financial
condition. Moreover, the security and privacy concerns of potential customers as
well as  concerns  related to  computer  viruses,  may inhibit the growth of the
MiniNet marketplace generally,  the use of Telli*Phone technology to communicate
with  consumers  and transact  business,  and the  Company's  customer  base and
revenues in particular. The Company intends to limit its liability to customers,
including liability arising from a failure of the security features contained in
the Company's products, through contractual provisions. However, there can be no
assurance that such limitations will be enforceable.  The Company currently does
not have product  liability  insurance to protect  against these risks and there
can be no  assurance  that such  insurance  will be  available to the Company on
commercially  reasonable  terms or at all.

                                    Page 43

<PAGE>
     In addition,  the Company  intends to maintain secure MiniNet Servers which
will contain customer  information for public access. The Company's  advertising
revenues from the Telli*Phone Directory are dependent in part upon the Company's
ability  to  protect  its  internal  MiniNet  infrastructure  and the  pages  of
information in the Telli*Phone Directory against damage from physical break-ins,
copyright  infringements,  manipulation of information by unauthorized  persons,
natural disasters,  operational disruptions, and other events. Any such break-in
or damage or failure that causes  interruptions in the Company's operations or a
loss of customer  confidence and user support and a decrease in the value of the
Company's brand name recognition could materially adversely affect the Company's
business, operating results, or financial condition.

Extensive Capital Needs

     The Company will have extensive  capital needs to finance the establishment
and  growth of its  business.  There  will be a need for  Telli*Phones,  MiniNet
Server equipment, marketing, overhead and further development. It is anticipated
that the Company may use a variety of means to raise capital, including the sale
of  Common  or  Preferred  Stock  or  debt  instruments.  There  is a risk  that
sufficient  capital  will not be  raised.  Income  will  come  from  Telli*Phone
Directory  subscriptions  and from  fees  charged  to  individuals,  businesses,
groups,  and  associations  for the storage of their pages of information in the
appropriate sections of the MiniNet's Telli*Phone Directory. The Company intends
to generate profits through licensing its technology (software systems) to major
retailers, commercial organizations, agencies, groups, and associations who wish
to establish sites on the MiniNet's Telli*Phone Directory and to communicate and
transact business with Subscribers in their homes over their Telli*Phones. There
can be no  assurance  that this income will cover the cost of  Telli*Phones  and
MiniNet Server  equipment or the overhead of the Company.  In the event that the
Company's  plans  or the  basis  for  its  assumptions  change  or  prove  to be
inaccurate  or  cash  flow  proves  to be  insufficient  to fund  the  Company's
operations (due to  unanticipated  expenses,  loss of sales revenues,  problems,
operating  difficulties,  or  otherwise),  the Company would be required to seek
additional  financing.  In such event, there can be no assurance that additional
financing will be available to the Company on commercially  reasonable terms, or
at all.

Changing Regulatory Environment

     The Company believes that the regulatory  climate in the United States over
recent years has begun to influence the Regional Bell  Operating  Company's (the
"RBOCs") deployment of public communication  products. The Company believes that
the RBOCs have begun to upgrade their telecommunications product base with smart
products that reduce their cost of management, maintenance,  administration, and
equipment  that  includes  revenue  enhancement  features.  The  deployment  and
business  strategies  of the public  communication  divisions  of the RBOCs have
affected and will continue to affect the Company's business.  To the extent that
these business  strategies were to change,  for regulatory reasons or otherwise,
the Company's prospects would be materially and adversely affected.  On February
8, 1996, the President signed into law the Telecommunications Act of 1996, which
deregulates  many  elements  of the  telecommunications  industry  as a means of
stimulating  competition.  The deregulation could affect the  telecommunications
products  industry.  Although the Company believes that  deregulation  

                                    Page 44

<PAGE>

generally  will  benefit the Company,  there can be no  assurance  that the
Company will benefit from deregulation or that it will not be adversely affected
by deregulation.

Government Regulation and Legal Uncertainties

     Currently  the Company's  business is not affected by direct  regulation by
any government  agency other than by general  business  regulations,  but in the
future, laws or regulations may influence Company  operations,  as with the Exon
Bill,  prohibiting  obscene,   lascivious  or  indecent  communications  on  the
Internet.  The adoption of any such laws or regulations would similarly apply to
the  MiniNet and may  decrease  the growth of the  MiniNet,  which could in turn
decrease the demand for the Company's  products and increase the Company's  cost
of doing business or otherwise have an adverse effect on the Company's business,
operating results, and financial condition.  Moreover,  the applicability to the
MiniNet of existing laws governing issues such as property ownership, libel, and
personal privacy is uncertain. Issues such as privacy and libel may be addressed
in the future by government  agencies  reaching  decisions or passing laws which
could adversely affect the Company's business,  operating results, and financial
condition.

Concentration of Stock Ownership

     The present directors,  executive officers and their respective  affiliates
beneficially  own  approximately  73.09% of the  outstanding  Common Stock. As a
result, these stockholders will be able to exercise  significant  influence over
all matters requiring stockholder approval,  including the election of directors
and  approval of  significant  corporate  transactions.  Such  concentration  of
ownership may also have the effect of delaying or preventing a change in control
of the Company.

No Prior Public Market

     There has been no public market for the Company's  Common Stock,  and there
can be no  assurance  that an active  public  market for the  Common  Stock will
develop or be sustained.

Effects of Certain Charter Provisions;  Antitakeover Effects of Certificate
of Incorporation; Bylaws and Nevada Law

     The Board of Directors has the authority to issue up to 1,000,000 shares of
Preferred Stock and to determine the price, rights, preferences,  privileges and
restrictions,  including voting rights, of those shares without any further vote
or action by the stockholders. The rights of the holders of Common Stock will be
subject to, and may be  adversely  affected by, the rights of the holders of any
Preferred  Stock that may be issued in the future.  The  issuance  of  Preferred
Stock,  while  providing  desirable  flexibility  in  connection  with  possible
acquisitions  and other corporate  purposes,  could have the effect of making it
more difficult for a third party to acquire a majority of the outstanding voting
stock of the  Company.  The  Company  has no  present  plans to issue  shares of
Preferred Stock.

                                    Page 45

<PAGE>

Dilution

     It  should  be  noted  that  there  will  be  dilution  of the  issued  and
outstanding shares of the Company by the issuance of shares for future financing
and by the  installation  of an Employee  Stock  Option Plan.  In addition,  the
Company may sell  substantial  amounts of equities to investors in the future in
order to meet its capital needs. The Company's  business can be characterized as
"capital  intensive"  and  to  the  extent  funds  are  not  derived  from  debt
securities, borrowing or limited partnerships, equity may be used.

Dividend Policy

     The  company  has never paid cash  dividends  on its Common  Stock or other
securities  The  Company  currently  anticipates  that it will retain all of its
future  earnings for use in the expansion and operation of its business and does
not anticipate paying any cash dividends in the foreseeable future.

Notes Payable; Royalty Agreements

     There are 17  individuals  who advanced cash to the Company in exchange for
notes payable and royalty rights (the"Royalty  Holders").  Under the agreement,
the Company will pay royalties  aggregating 2.267% of the manufacturer's  actual
net price for which each Telli*Phone is sold.

     As part of CoNetCo's  acquisition of Guinness  Production,  Inc.,  Guinness
Computer  Television  Corporation (the "Guinness  Companies"),  in the Agreement
dated  February 18, 1990,  CoNetCo also acquired all of the concepts  previously
developed  by Lawrence A.  Guinness  ("Guinness")  in both Canada and the United
States. Part of the consideration for the acquisition of Guinness' rights in the
United States and Canada to the  theoretical  models of the  Telli*Phone and the
Telli*Phone

     Directory,  as well as all of Guinness'  rights to the products  previously
developed  by the  Guinness  Companies,  was the  issuance to Guinness of Common
Stock in CoNetCo and a  continuing  royalty of 5% of all  revenues  generated by
CoNetCo or any of its subsidiaries.

ITEM 2. PROPERTIES

     The Company  currently  occupies  approximately  1,000 square feet of space
located  in Mill  Valley,  California,  where it  maintains  its  administrative
offices  and  MiniNet  Server.  In  addition,  the  Company  currently  occupies
approximately 900 square feet of space in Sausalito,  California,  approximately
two miles from its  administrative  offices and Server,  where it maintains  its
engineering,  research, and product development facilities. This space is leased
on a month-to-month  basis and is sufficient to meet the current requirements of
the  Company and the  business  which it conducts  All  production  of the final
product will, in the near future, be  sub-contracted to other  manufacturers and
suppliers.

                                    Page 46
<PAGE>
       
     Registrant  will be required to expand when operations  commence.  There is
adequate space in the County of Marin,  State of  California,  the area in which
Registrant is currently located, to allow for expansion.

     Registrant  does not intend to consider  setting up its own  facilities  to
manufacture  Telli*Phones  until after the initial testing of its products,  and
the systems which it is developing have been fully tested. Management expects an
increase in facilities requirements during 1997.

ITEM 3. LEGAL PROCEEDINGS

     Registrant is not involved in any legal proceedings.


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

     No matter  was  submitted  during the  fourth  quarter  of the fiscal  year
covered by this report to a vote of security  holders,  through the solicitation
of proxies, or otherwise.

                                     PART II

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

     Market Information

     The shares of stock of the Company are  currently not listed on an exchange
and there has been no established public trading market for the Company's common
equity  within  the last five  years.  No current  market  exists for any of its
shares.

     There is currently no common equity that is subject to outstanding  options
or warrants to purchase, or securities  convertible into, common equity of which
have been issued by the Company that are capable of being sold  pursuant to Rule
144 under the Act until two years  after  March 15,  1994.  The  Company has not
agreed to register any common equity for sale by security holders.

Holders

     As of  August  15,  1996,  there are 492  shareholders,  holding a total of
13,427,480  shares of Common Stock of the Company.  The Company has no knowledge
of any matter since that date that would effect any change to that total.

     Lawrence A. Guinness,  President and Director of the Company, is the holder
of 8,765,166 shares of the Common Stock of the Company which  represents  65.28%
of the Company's common equity. Other than Mr. Guinness, no other persons have a
beneficial  ownership  of five  percent  (5%) or more of the Common Stock in the
Company. 

                                    Page 47
<PAGE>

Dividends

     Registrant is a development stage company and, since its inception, has not
yet  generated  any sales.  As a result,  it is not in a position to declare any
dividends, nor does it intend to declare any dividends in the near future.

ITEM 6. FINANCIAL INFORMATION


                 GUINNESS TELLI*PHONE CORPORATION AND SUBSIDIARY
                             SELECTED FINANCIAL DATA
                       FIVE YEARS ENDED DECEMBER 31, 1995

<TABLE>
<CAPTION>


                         1995       1994       1993       1992       1991
                         ----       ----       ----       ----       ----
<S>                      <C>        <C>        <C>        <C>        <C>     
Net Sales (D)            None       None       None       None       None

Income (Loss) from       
Continuing 
Operations(A)(D)        $(199,556) $(353,954) $(447,142) $(225,952) $(203,162)

Income (Loss) from
Continuing Operations
Per Share                (.02)       (.03)      (.04)      (.02)     (.02)

TOTAL ASSETS             $ 229,416   $ 19,828   $ 68,567   $ 7,015   $  7,296

Weighted Average
Number of Common
Shares Outstanding(B)   12,738,397 12,592,480  11,541,740 10,491,000 10,490,250

Long-term Obligations(C) None       None        None       None        None

Cash Dividends Declared
Per Share                None       None        None       None        None

</TABLE>

     (A) Cumulative  results of operation  since  inception are losses  totaling
$(9,733,329).

     (B) Giving  effect to amended  agreement on March 15, 1994  increasing  the
5,880,246 shares issued on February 18, 1990 to 8,000,000 shares.

     (C) Excludes  $435,000 of notes payable  which are  classified as a current
liability since the original due date was in 1991.

     (D) There have been no sales since  inception and  cumulative  losses since
inception have been $9,733,329.

     NOTE:  CoNetCo,  Guinness Products,  Inc., and Guinness Computer Television
Corporation  are  predecessors  of the  Registrant  and  the  activities  of the
predecessors are included in the cumulative financial data of the Registrant.

                                    Page 48

<PAGE>

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

Overview

     The  Company was  founded in 1993 and has been  principally  engaged in the
research  and  development  activities  related  to  advanced  navigational  and
integrated   applications  software  system  that  enables  people  to  exchange
information and conduct  business over local telephone lines from a computerized
consumer  telephone  appliance  (Telli*Phone)  with a display  screen and online
capabilities for transmitting,  receiving and processing  information.  Prior to
the formation of the Company,  research and  development of the  Telli*Phone was
undertaken  through  predecessor  companies,  Guinness  Productions and Guinness
Computer Television which commenced operations in 1981. The cumulative operating
results of the  Company  include  those  operations  of  companies  deemed to be
predecessors to the Company. As of December 31, 1994, the Company has determined
that  research  and  development  of the  Telli*Phone  has been  completed.  The
Company's  major emphasis during fiscal 1995 and 1996 has been the refinement of
the Telli*Phone and the generation of working capital.

     Guinness  Telli*Phone  has  generated no revenues  and incurred  cumulative
losses  of  approximately  $9.7  million  dollars  since  inception,   of  which
approximately  $7  million  of such  losses  relate to those of the  predecessor
companies.  The Company  expects to incur  operating  losses  through 1997 as it
continues to devote the  majority of its  available  financial  resources to the
commercialization  of the  Telli*Phone.  Future  profitability of the Company is
dependent upon successful commercialization of the Telli*Phone.  Furthermore, as
the Company attempts to achieve  commercialization of the Telli*Phone,  it could
encounter  seasonality or other currently  unforeseen factors causing additional
variability in its future operating results.

Liquidity and Capital Resources

     Registrant is not in a liquid position at this time nor does it possess any
assets that could be deemed liquid, other than cash. Liquidity of the Registrant
is expected to be severely  impacted until operations  commence and revenues are
generated.  The Report of  Independent  Certified  Public  Accountant  expresses
Substanial doubt about the Company's ability to continue as a going concern.

     Since inception,  the Company and its predecessors have funded its research
and  development  efforts by selling equity  securities  and borrowing  capital.
Approximately $7 million of additional paid-in capital represents liabilities of
the  predecessor  companies  operations  which  were  personally  assumed by the
Company's primary  shareholder.  During the first six months of fiscal 1997, the
Company plans to raise a minimum of $550,000  through the private or public sale
of equity  securities.  The  Company  intends to use such funds for the  Initial
Market Test of the  Telli*Phone  concept in a single  community.  The  following
details the anticipated use of the $550,000:

                                    Page 49

<PAGE>

     On the  assumption  the  Registrant is able to raise capital to finance the
Initial  Market  Test of the  product,  Management  plans to  utilize  the funds
raised, as follows:

    Investment Banker Consultant Fees ............................... 25,000
    Office Rent and Expense ......................................... 15,000
    Administrative Salaries & Office Expense (CEO, CFO,
     Engineer, Network Editor, Programmers) ........................ 150,000
    Telli*Phone Prototype Engineering Expense ......................  25,000
    Telli*Phone Production Models (100 - 200) ...................... 150,000
    Network Hardware Set Up Expense ................................  25,000
    Network Software/Programming Expense ...........................  90,000
    Preparatory Marketing Expense...................................  35,000
    Initial Promotional Layout Expense............................... 10,000
    Legal, Audit and Miscellaneous Expense........................... 25,000
    ------------------------------------------------------------------------
    Total                                                          $ 550,000

     The above  expenses  reflect the 6-month  budget for the  Registrant  while
operating in a  development  mode.  If capital is not raised in a timely  manner
Management  will either delay entry into the marketplace or reduce the number of
Telli*Phones required for the Initial Market Test.

     By the end of the six-month  period  Registrant  anticipates  attaining the
following objectives.

     1. A  fully  operational  community  Telli*Phone  Directory  in  place  and
operating with a significant number of community listings.

     2. At least 200 Telli*Phones  being used by households within the community
on an experimental basis.

     3. An  agreement  signed by a school  district to  distribute  Telli*Phones
throughout the Initial Market Test community.

     4.  At  least  one  Telli*Phone  Licensing  Agreement  signed  with a major
corporation  presently using a commercial  computer  network to communicate with
its customers through personal computers.

     The Company  anticipates  that after the Initial Test Market they will need
to raise additional working capital through the sale of equity securities or the
borrowing of capital.  The Company's current working capital is not adequate for
the Company to commence the Initial Test Market.  There can be no assurance that
any necessary  working capital will be available on acceptable  terms or at all.
If  adequate  funds are not  available,  the  Company may be required to change,
delay, reduce or eliminate its product commercialization.

                                    Page 50
<PAGE>
       
     For the small  Initial  Market Test of its  products  the Company  plans to
produce a limited number of Telli*Phones and begin distributing them to homes in
the Southern Marin County Area. Registrant  anticipates being able to produce at
least 200 Telli*Phones for this test.

     During the  Initial  Market  Test,  Registrant's  engineers  will assign an
inexpensive  Telli*Phone computer board that eliminates many hardware components
necessary  for the  operation  of a personal  computer but  unnecessary  for the
successful  operation of the  Telli*Phone as the everyday  consumer  product for
which it was designed. For the Initial Market Test the Company estimates that it
will pay  approximately  $600 for the hardware  components  of each  Telli*Phone
assembled.  The Company has received  estimates from consultants  experienced in
the manufacturer of hardware components, e.g. Tiernan Communications, of a price
of less than $200 per Telli*Phone.  It is difficult to predict an accurate price
until the  Company  learns  from its  Initial  Market Test the level of consumer
response to the Company's  software  products to determine the size of runs that
are most feasible.  If the Company's  product is very successful then there will
be  available  to the Company  many  methods of  financing  the  manufacture  of
Telli*Phones that will allow the Company to order larger runs and further reduce
the cost to manufacture Telli*Phones.

     To this end,  Registrant has begun discussions with a major manufacturer of
telecommunications  equipment that is capable of producing Telli*Phones and at a
favorable price.

     When the  Initial  Market  Test of the  Telli*Phone  Directory  is underway
Registrant plans to approach  potential partners to renew discussions to arrange
financing through the licensing of its technology for their use.  Registrant has
no  assurance  that  it  will  be able to  renew  the  discussions  or,  that if
discussions  are opened  once  again,  it will be  successful  in  reaching  any
agreements with the parties.

     On October 19, 1995,  Registrant  sold and issued a total of 700,000 shares
of the common  stock for a total of $301,000.  On December 15, 1995,  Registrant
sold and  issued a total of 135,000  shares of the  common  stock for a total of
$101,250.  The capital has been used to secure the components  that will be used
to  produce  Telli*Phones  for the  Initial  Market  Test  and to  complete  the
Telli*Phone software to manage the components in the working model.

     Registrant  has 17  notes,  dated  July 7,  1989,  due to  individuals  who
advanced  cash to the  Company in  exchange  for  promissory  notes and  royalty
rights.  These notes  continue to bear  interest at 10% per annum and all are in
default. It is the intention of the Company to offer stock to those note holders
who wish to receive  common  stock in  Guinness  Telli*Phone  Corporation  and a
repayment  proposal for those  investors who wish to receive  cash.  The Company
feels that it will not be in a position to determine  the  conditions  of such a
proposal until the Initial Market Test of its product is underway.

     Registrant,  after the  Securities  and Exchange  Commission  permits it to
trade its  securities,  plans to search for an  investment  banker to assist the
Company in developing various alternatives, including joint venture arrangements
with companies in the telecommunications field and the sale of common shares, to
raise the funds it will require to take its product to the marketplace,  

                                    Page 51

<PAGE>

conduct the Initial Market Test, and meet its future debt obligations.

     A few investment  bankers have  indicated to Management  that they would be
willing to work with the Company on a best  efforts  basis if it would  increase
the amount of capital it would be willing to raise. Management felt that none of
these  investment  bankers  possessed  the  kind of  contacts,  background,  and
expertise  necessary to raise the amount of capital they indicated they would be
prepared to provide.

Management  anticipates  potential  future  revenues will be generated from
three sources.

     (a) Sales of Subscriptions to the Telli*Phone Directory to Consumers.

     (b) Purchases of  commercial  space in the  Telli*Phone  Directory by local
businesses and community groups and associations.

     (c)  Licensing  fees  from  organizations  that  wish to  communicate  with
Telli*Phone Subscribers through their Telli*Phones.

     During the Initial Market Test,  Management will explore the feasibility of
selling  franchises  to  qualified  organizations  for the  right to  operate  a
Telli*Phone  Directory  within  a  defined  geographical  area  as a  method  of
financing the establishment of new Telli*Phone  Directory  MiniNet  geographical
sites.

                                    Page 52

<PAGE>

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

                   INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

                                                                    Page No.
                                                                    -------  
Report of Independent Auditor ....................................    F-1

Consolidated Balance sheet at
December 31, 1995, and 1994 ......................................    F-2

Consolidated Statement of Operations
for the Years Ended December 31, 1995, and 1994 ..................    F-3

Consolidated Statement of Changes in
Stockholders' Equity for the Years
Ended December 31, 1995, and 1994 ................................    F-4

Consolidated Statement of Cash Flows
for the Years Ended December 31, 1995, and 1994 ..................    F-5

Summary of Accounting Policies ...................................    F-6

Notes to Consolidated Financial Statements .......................    F-9


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

     In August 1996,  the Company's  Board of Directors  dismissed  Arthur Korn,
CPA, as its independent accountant and appointed BDO Seidman, LLP.

     The independent  auditor's  report of Arthur Korn, CPA, on the consolidated
financial statements of the Company for the three years ended December 31, 1995,
dated March 17, 1996,  included in Form 10-K for the fiscal year ended  December
31, 1995, contained an explanatory paragraph raising substantial doubt about the
Company's ability to continue as a going concern. Additionally, the audit report
included an explanatory  paragraph regarding the Company's  accounting principle
relating  to  capitalized  research  and  development  and that such  accounting
principle was being challenged by the SEC.

     In connection with the Company's audits for the fiscal years ended December
31, 1995, 1994 and 1993, there were (i) no disagreements  with Arthur Korn, CPA,
on  any  matter  of  accounting  principle  or  practice,   financial  statement
disclosure or auditing scope or procedure 

                                    Page 53
<PAGE>

which  disagreements,  if not resolved to the  satisfaction of Arthur Korn,
CPA, would have caused Arthur Korn, CPA, to make reference to the subject matter
of the disagreement in connection with his report;  (ii) no reportable events as
described in Item  304(a)(1)(5)  of Regulation  S-K.  During fiscal 1996,  after
lengthy  discussions with the SEC regarding the Company's  capitalized  research
and development  costs, the Company  corrected the accounting for such costs and
restated the financial statements to expense such costs.

     The company has finished a copy of the disclosure contained in this section
to Arthur Korn,  CPA, as to whether he agrees.  Arthur Korn,  CPA, has responded
that he agrees with the  statements  made herein and, as required by Item 304 of
Regulation  S-K, to furnish to the Company a letter  addressed to the Securities
and Exchange Commission to that effect.

     During the two most recent  fiscal  years and through  June 19,  1996,  the
Registrant  has  not  consulted  with  BDO  Seidman  regarding  either  (1)  the
application  of  accounting  principles  to  a  specified  transaction,   either
completed  or proposed;  or the type of audit  opinion that might be rendered on
the Registrant's  financial  statements and either a written report was provided
to the Registrant or oral advice was provided that BDO Seidman  concluded was an
important  factor  considered by the Registrant in reaching a decision as to the
accounting,  auditing of financial  reporting  issue; or (2) any matter that was
either the subject of a  "disagreement"  or a "reportable  event" (as such terms
are defined in Item 304(a)(1) of Regulation S-K).


                                    PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS

     The  executive  officers and  directors of the Company,  and their ages and
positions as of August 30, 1996, are as follows:

<TABLE>
<CAPTION>

Name                               Age            Position
-------------------                ---            ----------------    
<S>                                <C>            <C>
Lawrence A Guinness                53             President, Chief Executive
                                                  Officer and Director

Dixie K. Tanner                    54             Vice President,
                                                  Publishing and Director

Arthur Korn                        58             Chief Financial Officer
                                                  and Director

Richard A. Morse                   47             Vice President,
                                                  Engineering and Technology

John Willis                        54             Director

</TABLE>

                                    Page 54
<PAGE>

     There are no arrangements or understanding  between any of the directors or
executive  officers of the Company and any other  person or persons  pursuant to
which they were  selected as directors or officers.  All officers plan to devote
full time to the Company No other person has been  nominated or chosen to become
an officer at the present time.

     There is no family  relationship  between any director or executive officer
of the  Company.  No other  person  has been  nominated  or  chosen to become an
officer at the present time.

Background of Directors and Executive Officers

     Lawrence A. Guinness, a founder of the Company, has served as the Company's
President,  Chief  Executive  Officer,  and a member of the  Company's  Board of
Directors  since its founding.  He has devoted most of his adult life to various
ventures in the publishing business.

     In 1967, Mr Guinness,  with $300,000 in private  funding,  founded Guinness
Publishing Ltd., Toronto, Canada, a company that published educational textbooks
for the  elementary  school  curriculum.  The company's  publications  became an
instant  success with the schools in Canada and sales were made to United States
and other foreign  countries.  Mr. Guinness was a publisher in the true sense in
that his company (1)  thoroughly  researched  the  marketplace to target product
before development of a publication, (2) authored all its publications in-house,
and (3) marketed.  shipped, and maintained an inventory from its own offices and
warehouses.  The  company  became a  recognized  leader in the field of Canadian
educational  textbook publishing and, because of its successful record of sales,
the company was awarded Canadian  distribution rights to publications  published
by  companies  in Great  Britain  and the  United  States to expand  its line of
products.

     In 1969,  with $500,000  obtained from a New York venture capital firm, Mr.
Guinness  founded  Guinness  Publishing  Ltd., New York, to publish  educational
textbooks for the entire North  American  marketplace.  In addition to producing
and marketing  its own  successful  publications,  it authored  material,  under
contract, for American Book Company, a division of Lytton Industries.

     In 1979,  Mr.  Guinness  sold  his  foreign  publications  to  finance  the
development of computer programmed materials and educational programs.

     From  1980  to the  present,  using  $1,000,000  of his  own  funds  and an
additional  $5,000,000 raised from various private sources,  he founded Guinness
Productions,  Inc., to develop various computer  software programs and authoring
systems, and Guinness Computer Television  Corporation to develop software for a
computer  networking and navigational  system to distribute the programs that he
had  created.  In  1989  be  founded  CoNetCo,  now  a  subsidiary  of  Guinness
Telli*Phone Corporation, to develop an easy-to-use, inexpensive screen telephone
(the Telli*Phone) to access these and other programs and to receive  information
from computer network information servers. The materials, products, and computer
software  programs  developed since 1980 have been  incorporated  and integrated
into Guinness Telli*Phone Corporation.


                                    Page 55
<PAGE>
       
     From 1980 until 1987,  while  operating  Guinness  Productions,  Inc.,  and
Guinness Computer Television Corporation,  Mr. Guinness borrowed funds from time
to time from certain qualified  private  individuals for the development of some
of the software  being  utilized by Guinness  Telli*Phone  Corporation.  Some of
these investors of Guinness Productions,  Inc., and Guinness Computer Television
Corporation hold notes payable by Mr. Guinness that are in default.  Even though
the Statute of  Limitations  has run regarding the right of the holders of these
securities to rescind, Mr. Guinness intends to offer to all investors,  who have
invested in the  development  of the software  utilized by Guinness  Telli*Phone
Corporation an opportunity to have all their cash,  plus interest,  returned or,
as an alternative, to receive shares of his Common Stock in Guinness Telli*Phone
Corporation. at their option.

     Dixie K. Tanner  serves as  Secretary,  Vice  President and Director of the
Company.  She has worked with Mr. Guinness on various publishing  projects since
1977. Since graduating from the University of British Columbia in 1964 with a BA
in Anthropology  and Psychology,  she has been a tutor for handicapped  children
and a buyer,  manager,  and proprietor for retail businesses.  From 1977 to 1979
she  served as an author and editor of  Guinness  Publishing  Limited in Canada.
After Guinness  Publishing  Limited was sold, until 1986, Ms. Tanner returned to
community work as a volunteer and successful fund raiser.

     In 1986 Ms. Tanner joined Guinness Computer  Television  Corporation as the
Editor-in-Chief  of programming and development . In 1989 she joined CoNetCo,  a
subsidiary  of  the  Company,  as  Vice  President  and  Editor-in-Chief  of the
Telli*Phone Directory.

     Arthur Korn joined the Company as Chief  Financial  Officer and Director in
August 1996. From 1962 to 1979 Mr. Korn held various  positions with J.H. Cohn &
Company,  a large  regional  CPA firm in New  Jersey,  including  the partner in
charge of the quality control  department and from 1976 to 1979 was the Managing
Partner of the firm's Nevada offices. In 1979, Mr. Korn joined the San Francisco
office of Mann Judd Landau, Certified Public Accountants, a small national firm,
and was the  Managing  Partner from 1981 to 1984.  In 1984,  Mr. Korn merged his
office into the San Francisco  office of Moss Adams, a large regional West Coast
CPA firm,  and was the partner in charge of that office's  audit and  accounting
department.  In 1988 he  opened  his own  practice  serving  a wide  variety  of
industries  with  clients  from  closely  held  corporations  to publicly  owned
corporations registered with the Securities and Exchange Commission.

     Mr. Korn is currently  licensed as a CPA in California and Nevada.  He is a
member of the American  Institute of CPAs, the  California  Society of CPAs, the
New York State  Society of CPAs,  the New Jersey  State  Society of CPAs and the
American Arbitration Society. He has been a member of the California State Board
of Accountancy Report Quality Monitoring Committee since January, 1994. He was a
member of the State Accounting Principles and Auditing Standards Committee (AP &
AS) for the  California  Society of CPAs for seven years and Chairman of the San
Francisco  Chapter  AP & AS for  three  years.  He is a  member  of the East Bay
Chapter AP & AS,  Managing an Accounting  Practice  Committee and the Litigation
Support  Committee.  Mr.  Korn holds a BS degree in  Accounting  from  Fairleigh
Dickinson University.

                                    Page 56
<PAGE>
       
     Richard Alden Morse serves as Vice President of Engineering  and Technology
for the  Company.  Since 1986 Mr.  Morse has served as a  consultant  on various
computer related development projects. Since 1989 he has consulted with CoNetCo,
a  subsidiary  of the  Company,  and has  been  instrumental  in the  designing,
development, and building of the hardware and software operating systems for the
Telli*Phone.

     From 1985 to 1986 Mr. Morse worked for NEC as the Technical Manager for the
Single  Chip  Microcomputer  Product  Group.  He  supported  three  families  of
microcomputers  and  helped  the  Japanese  design  a new  set  of  single  chip
microcomputers  for American  managed groups of engineers.  From 1979 to 1984 he
was  employed  with  Fairchild  Semiconductor  and in 1983 and 1984 he served as
Product  Planning  Manager for the  Microprocessor  Division  where he managed a
group of engineers who designed advanced telcom chips (x.25 and MPCC). Mr. Morse
holds a BS degree in Physics from the University of New Hampshire.

     John Willis  became a director of the Company in August 1996.  From 1991 to
1994 Mr. Willis served as Senior Manager of the Capital  Markets Group and later
as Vice President of Sanwa Financial Products with the London,  England,  Branch
of Sanwa Bank Limited responsible for marketing to the FTSE 100, the one hundred
largest public limited corporations in the UK.

     From 1968 to 1988 Mr. Willis was  associated  with various  investment  and
investment  management  firms  as a  principal  or  equity  owner  in  either  a
management or sales position. His experience included Registered  Representative
with Dean Witter & Co., Denver,  Colorado;  Manager and equity owner of the West
Coast Regional  Office in Los Angeles of Ameritrade,  a discount  brokerage firm
with  headquarters  in Omaha,  Nebraska;  and Vice  President  and  Manager  for
Richardson  Greenshields,  Spear  Financial  Services,  and a  nationally  known
investment  management  firm. In 1988 he rejoined Dean Witter & Co, in their San
Francisco  Office  where he  served  as Vice  President  presiding  over  assets
exceeding $50 million.  From 1963 to 1968 he was employed with the Office of the
Comptroller  of the  Currency,  U.S.  Treasury  Department  as a  National  Bank
Examiner for the Twelfth  National Bank Region.  Mr. Willis holds a BS degree in
Business Administration from the University of Denver.

Directorships

     No  Director  of  Registrant  or  person  nominated  or  chosen to become a
Director holds any other  directorship in any company with a class of securities
registered  pursuant  to  section  12 of  the  Exchange  Act or  subject  to the
requirements  of  section  15(d) of such  Act or any  company  registered  as an
investment company under the Investment Company Act of 1940, 15 U.S.C. 80a-1, et
seq., as amended.

Involvement in Certain Legal Proceedings

     None of the directors of the  Registrant or persons  nominated are involved
in any legal  proceedings  as outlined in Item 401 (f) that are  material to the
evaluation of their ability or integrity.

                                    Page 57

<PAGE>

     From 1980 until 1987 Guinness borrowed funds from time to time from certain
qualified private  individuals for the development of some of the software being
utilized  by  Guinness  Telli*Phone  Corporation.  In 1987 the  Commissioner  of
Corporations  of the  State of  California  issued a "Cease  and  Desist"  order
preventing  Guinness from  borrowing any further monies and claiming these loans
involved the sale of securities.  The matter was referred by the Commissioner to
the District  Attorney in Marin  County,  California,  who met with Guinness and
after  informing  him that the County  had  investigated  the loans  thoroughly,
dismissed the matter  without taking any formal  action.  The District  Attorney
also advised Guinness to consult a securities  attorney before making any future
financial transactions. To this day Guinness has complied.

Promoters and Control Persons

     From 1980 until 1987 Guinness borrowed funds from time to time from certain
qualified private  individuals for the development of some of the software being
utilized  by  Guinness  Telli*Phone  Corporation.  In 1987 the  Commissioner  of
Corporations  of the  State of  California  issued a ACease  and  Desist@  order
preventing  Guinness from  borrowing any further monies and claiming these loans
involved the sale of securities.  The matter was referred by the Commissioner to
the District  Attorney in Marin  County,  California,  who met with Guinness and
after  informing  him that the County  had  investigated  the loans  thoroughly,
dismissed the matter  without taking any formal  action.  The District  Attorney
also advised Guinness to consult a securities  attorney before making any future
financial transactions. To this day Guinness has complied.

ITEM 11. EXECUTIVE COMPENSATION

<TABLE>
<CAPTION>
            
                                                        Long-term
Name and                 Annual Compensation           Compensation
Principal Position       Year      Salary         Bonus     Awards    Other
-----------------       ----      ------         -----      ------    ------
<S>                     <C>       <C>            <C>        <C>       <C>
Lawrence Guinness      1995       $56,511 (1)    --         --         --
President and CEO      1994       $52,067 (1)    --         --         --
                       1993       $91,724 (1)    --         --         --

</TABLE>


(1)  The Company does not have a formal  employment  contract.  Compensation has
     been based upon annual discretionary factors such as technical advancements
     of the  Telli*Phone  and the generation of capital.  During 1994 and 1993 a
     portion  of  the  annual   compensation   was  allocated  to  research  and
     development costs.

                                    Page 58

<PAGE>


ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

Controlling Interest

     Lawrence A.  Guinness is the only person who has  beneficial  ownership  of
over Five percent (5%) of the Common Stock in the Company:

<TABLE>
<CAPTION>

                                                                      Percent
Title of            Name and Address of      Amount and Nature of      of
Class               Beneficial Owner         Beneficial Ownership     Class
-----------         --------------------     --------------------     --------
<S>                 <C>                      <C>                      <C>  

Common              Lawrence A. Guinness     8,765,166 shares         65.28%
                    3 Venus Ct.
                    Tiburon. CA 94920

Common              Morton Weisbrot and        835,000 shares           6.2%
                    John F. Parks
                    C/o Mail Box 246
                    Boulevard de la Marina 39-f
                    Cabo San Lucas, BCS, Mexico

</TABLE>

Security Ownership of Management

     The  following  table sets forth  certain  information  with respect to the
beneficial ownership of the Company's Common Stock as of August 13, 1996, and is
adjusted to reflect the sale of Common Stock offered  hereby for (I) each person
or entity who is known by the company to  beneficially  own five percent or more
of the  outstanding  Common  Stock of the  Company,  (ii) each of the  Company's
directors,  (iii)  each of the  Names  Officers,  and  (iv)  all  directors  and
executive officers of the Company as a group. Except as noted below, the address
for each such  person  is c/o  Guinness  Telli*Phone  Corporation,  655  Redwood
Highway, Suite 219, Mill Valley, CA 94941.

<TABLE>
<CAPTION>

                                                                      Percent
Title of            Name and Address of      Amount and Nature of      of
Class               Beneficial Owner         Beneficial Ownership     Class
-----------         --------------------     --------------------     --------
<S>                 <C>                      <C>                      <C>  

Common              Lawrence A. Guinness     8,765,166 shares(1)      65.28%
                    Pres., CEO, Director

Common              Dixie K. Tanner            500,000 shares          3.72%
                    Secretary, Director

Common              Arthur Korn                250,000 shares(2)       1.86%
                    CFO, Director

</TABLE>

Page 59

<PAGE>
<TABLE>
<CAPTION>

(continued)                                                                 
                                                                      Percent
Title of            Name and Address of      Amount and Nature of      of
Class               Beneficial Owner         Beneficial Ownership     Class
-----------         --------------------     --------------------     --------
<S>                 <C>                      <C>                      <C>  

Common              John L Willis            100,000 shares           .74%
                    Director

Common              Richard A. Morse         200,000 shares           1.49%
                    V.P. Engineering
                    and Product Development

                   Total:                   9,715,166 shares         73.09%

</TABLE>

     (1) Excludes options to purchase 634,834 shares of common stock.

     (2) To be acquired in fiscal year end December 31, 1997.


ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

Notes Due By Lawrence A. Guinness;  Dilution of Guinness'  Ownership In the
Company

     All of the investors who loaned funds to Guinness to invest in the Guinness
Companies hold notes payable by him that are in default. Even though the Statute
of Limitations has run regarding the right of the holders of these securities to
rescind,  Guinness  intends to offer his note holders an opportunity to have all
their notes  payables,  plus  interest  (totaling  approximately  $6.5  million)
repaid, or, as an alternative,  to receive Common Stock in the Company, at their
option.  Guinness  plans to offer his  personal  stock in  Guinness  Telli*Phone
Corporation to those  investors who wish to receive Common Stock in the Company,
thus there will be no  dilution  to the  issued  and  outstanding  shares of the
Company.  However,  this will dilute Guinness'  present ownership in the Company
and have an impact on his control of the Company's operations.  The outcome from
this event and its effect on the future of the Company  cannot be  determined at
this time. For those  investors who wish to receive cash, it is the intention of
Guinness to arrange financing through an investment  banker.  This financing may
take the  form of debt  financing,  securities  financing,  or a public  sale of
enough of Guinness' Guinness  Telli*Phone  Corporation shares of Common Stock to
satisfy the debt to the note holders remaining.

                                    Page 60

<PAGE>

                                     PART IV

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

Financial Statements

                   INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

                                                                    Page No.
                                                                    --------
Report of Independent Auditor ..................................      F-l

Consolidated Balance Sheet at
     December 31, 1995, and 1994................................      F-2

Consolidated Statement of Operations
     for the Years Ended December 31, 1995, and 1994 ...........      F-3

Consolidated Statement of Changes in
     Stockholders' Equity for the Years
     Ended December 31, 1995, and 1994...........................     F-4

Consolidated Statement of Cash Flows
     for the Years Ended December 31, 1995, and 1994 ............     F-5

Summary of Accounting Policies ..................................     F-6

Notes to Consolidated Financial Statements ......................     F-9


Exhibits

                                INDEX OF EXHIBITS

Attached hereto and made a part hereof are the following exhibits:

EXHIBIT 1 OFFSHORE  SECURITIES  SUBSCRIPTION  AGREEMENT - dated October 19,
1995, between Registrant and Messrs. Morton Weisbrot and John F. Parks.

EXHIBIT 2 OFFSHORE SECURITIES  SUBSCRIPTION  AGREEMENT - dated December 15,
1995, between Registrant and Messrs. Morton Weisbrot and John F. Parks.

                                    Page 61

<PAGE>

     Pursuant to the  requirements  of section 12 of the securities act of 1934,
the  registrant  has duly  caused  this report to be signed on its behalf by the
undersigned, thereunto duly authorized.

                                            GUINNESS TELLI*PHONE CORPORATION
                                            (Registrant)


Date:   December 10, 1996                    /S/ Lawrence A. Guinness
                                             ------------------------
                                             By:  Lawrence A. Guinness
                                             Its:   President



Date:   December 10, 1996                    /S/ Arthur Korn
                                             ------------------------
                                             By: Arthur Korn
                                             Its:   Chief Financial Officer



Date:   December 10, 1996                    /S/ Dixie K. Tanner
                                             ------------------------
                                             By: Dixie K. Tanner
                                             Its:   Secretary

                                    Page 62


<PAGE>


                                                       
                       
REPORT OF INDEPENDENT CERTIFIED ACCOUNTANTS

Board of Directors
Guinness Telli*Phone Corporation
Mill Valley, California

We have  audited  the  accompanying  consolidated  balance  sheets  of  Guinness
Telli*Phone  Corporation  and  Subsidiary (a  development  stage  company) as of
December  31,  1995  and  1994,  and  the  related  consolidated  statements  of
operations,  stockholders' equity, and cash flows for each of the three years in
the period  ended  December  31,  1995 and the period  from  November  12,  1980
(inception)  to  December  31,  1995.   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
misstatement.  An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements.  An audit also includes
assessing the  accounting  principles  used and  significant  estimates  made by
management,  as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

In our opinion,  the financial  statements  referred to above present fairly, in
all  material  respects,   the  consolidated   financial  position  of  Guinness
Telli*Phone  Corporation  and  Subsidiary  at December  31,  1995 and 1994,  and
results of their  operations and their cash flows for each of the three years in
the period  ended  December  31,  1995 and the period  from  November  12,  1980
(inception)  to  December  31,  1995,  in  conformity  with  generally  accepted
accounting principles.

The accompanying  consolidated  financial statements have been prepared assuming
that the Company will continue as a going  concern.  As more fully  described in
Note 1, the  Company  has been in the  development  stage  since its  inception.
Continuation as a going concern is dependent upon the Company's  ability to meet
its past due debt obligations and future financing requirements, and the success
of future  operations,  the outcome of which cannot be  determined at this time.
This condition raises  substantial doubt about the Company's ability to continue
as a going concern.  The  consolidated  financial  statements do not include any
adjustments that might result from the outcome of this uncertainty.


BDO Seidman, LLP

San Francisco, California
October 29, 1996

                                      F-1

<PAGE>


                        Guinness Telli*Phone Corporation
                    Subsidiary (A Development Stage Company)
                           Consolidated Balance Sheet

<TABLE>
<CAPTION>

December 31,                                       1995          1994
------------------------------------------------------------------------------
<S>                                               <C>            <C>
Assets
Current
  Cash                                            $ 97,997       $  -
  Stock subscription receivable (Note 6)                                             101,250               10,855
  Due from stockholder (Note 2)                     27,195          6,927
------------------------------------------------------------------------------
Total current assets                               226,442         17,782

Equipment, net of accumulated depreciation of
  $22,663 and $20,740                                2,974          2,046


                                                  $229,416       $ 19,828

=============================================================================
Liabilities and Stockholders' Equity
Current
  Notes payable (Note 3)                          $435,000       $435,000
  Accounts payable                                 659,372        725,312
  Accrued interest payable (Note 3)                366,180        293,346
  Deferred royalty income (Note 3)                 125,000        125,000
-----------------------------------------------------------------------------
Total current liabilities                        1,585,552      1,578,658
-----------------------------------------------------------------------------

Commitments and contingencies (Note 4)

Stockholders' equity (Notes 4 and 6)
 Common stock, $.001 par value; authorized,
 25,000,000 shares; issued and outstanding, 1995 -
 13,427,480 shares and 1994 - 12,592,480 shares     13,427         12,592
 Additional paid-in capital                      8,363,766       7,962,351
 Deficit accumulated during development stage   (9,733,329)     (9,533,773)
-----------------------------------------------------------------------------
                                                (1,356,136)     (1,558,830)
-----------------------------------------------------------------------------
                                                 $ 229,416      $   19,828

=============================================================================
</TABLE>

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

                                    Page F-2

<PAGE>

                        Guinness Telli*Phone Corporation
                    Subsidiary (A Development Stage Company)
                      Consolidated Statement of Operations

<TABLE>
<CAPTION>

                           Cumulative     
                               During          Year ended December 31,
                          Development    ----------------------------------
                                Stage        1995        1994        1993
---------------------------------------------------------------------------
<S>                           <C>            <C>          <C>         <C>

Operating expenses
Research and development
 (Note 8)                $ 4,551,152      $    -       $ 194,463    $ 255,530
  Interest expense         4,090,899       72,834         66,214       55,567
  Officer's salary           297,307       56,511         18,191       18,848
  Rent                       288,853        7,202         27,445       20,438
  Other administrative 
   expenses                  505,118       63,009         47,641       96,759
-----------------------------------------------------------------------------
Net loss                 $(9,733,329)    $(199,556)    $(353,954)   $(447,142)
==============================================================================

Loss per share                           $   (.02)     $   (.03)    $   (.04)

=============================================================================

Weighted average common
and common equivalent
shares outstanding                       12,738,000    12,592,000   11,542,000
===============================================================================
</TABLE>

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

                                    Page F-3

<PAGE>

                        Guinness Telli*Phone Corporation
                    Subsidiary (A Development Stage Company)
            Consolidated Statements of Changes in Stockholders Equity

<TABLE>
<CAPTION>

                                                            Deficit
                                                           Accumulated
                                                Additional   During
                              Common    Stock    Paid- In  Development
                              Shares    Amount    Capital    Stage     Total
-------------------------------------------------------------------------------
<S>                           <C>       <C>       <C>       <C>        <C>
Stock issued for product
  rights                    2,350,000  $2,350                          $ 2,350
Stock issued for predeces-
  sor company assets, in-
  cluding assumption of
  predecessor company debt  8,000,000   8,000   $7,147,091            7,155,091
Sale of common stock          141,000     141      134,364              134,505   
Contributed capital by
  majority shareholder
  through sale of personal
  stock (Note 4)                                   285,366              285,366
Net loss from November 12,
  1980 (inception) to Decem-
  ber 31, 1992 (Note 7)                                  $(8,732,677)(8,732,677)
------------------------------------------------------------------------------

Balance, December 31, 1992  10,491,000  10,491  7,566,821 (8,732,677)(1,155,365)
Stock sold for cash of
  $240,570 and a receivable
  of $55,930                   550,000     550     295,950              296,550
Stock issued for all of
  the outstanding shares
  of Innstar Corporation     1,551,480    1,551                           1,551
Contributed capital (Note 6)                        47,250               47,250
Net loss (Note 7)                                           (447,142)  (447,142)
------------------------------------------------------------------------------
Balance, December 31, 1993  12,592,480  12,592  7,910,021 (9,179,819)(1,257,206)
Contributed capital (Note 6)                       52,330                52,330
Net loss (Note 7)                                           (353,954)  (353,954)
------------------------------------------------------------------------------

Balance, December 31, 1994  12,592,480 12,592  7,962,351 (9,533,773) (1,558,830)
Stock sold for cash of
 $301,000 and a receivable 
 of $101,250 (Note 6)          835,000      835     401,415             401,250
 Net loss                                                    (199,556) (199,556)
------------------------------------------------------------------------------

Balance, 
December 31, 1995       13,427,480  $13,427 $8,363,766 $(9,733,329) $(1,356,136)
==============================================================================
</TABLE>


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

                                    Page F-4

<PAGE>

                        Guinness Telli*Phone Corporation
                    Subsidiary (A Development Stage Company)
                      Consolidated Statements of Cash Flows

<TABLE>
<CAPTION>

                           Cumulative     
                               During          Year ended December 31,
                          Development    ----------------------------------
                                Stage        1995        1994        1993
---------------------------------------------------------------------------
<S>                           <C>            <C>          <C>         <C>
Cash used in operations
Net loss                 $(9,733,329)    $ (199,556)   $(353,954)   $(447,142)
 Adjustments to reconcile net loss
 to cash used in operations:
  Depreciation                22,663          1,923        1,899        1,899
  Increase (decrease) in accounts
   payable                   659,372        (65,940)     185,182      110,096
   Increase in 
   accrued interest          366,180         72,834       66,214       60,192
   Deferred royalty income   125,000             -           -             -
------------------------------------------------------------------------------
                          (8,685,114)      (172,251)    (100,659)    (274,955)
------------------------------------------------------------------------------
Cash used in investing activities
 Additions to 
  fixed assets               (25,637)        (2,851)          -            -
------------------------------------------------------------------------------

Cash provided by financing
 activities
 Contributed 
  capital(Note 9)           7,671,490            -        52,330        47,250
 Sale of stock                671,570         301,000         -        240,570
 Notes payable                437,000            -            -         (2,000)
 Stockholder advances         (27,195)        (20,268)        -         (7,778)
 Collection of stock subscriptions
     receivable                55,930          10,855     45,075            -
------------------------------------------------------------------------------
                            8,808,748         291,587     97,405       278,042
------------------------------------------------------------------------------

Net increase (decrease) in cash
 and cash equivalents          97,997          97,997    (3,254)         3,087

Cash and cash equivalents,
 beginning of year           $     -          $    -    $ 3,254       $    167
------------------------------------------------------------------------------
Cash and cash equivalents,  
end of year                  $ 97,997         $ 97,997  $    -        $  3,254
==============================================================================
</TABLE>


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

                                    Page F-5

<PAGE>


                        Guinness Telli*Phone Corporation
                    Subsidiary (A Development Stage Company)
                         Summary of Accounting Policies


Basis of Consolidation

     The  consolidated  financial  statements  include the  accounts of Guinness
Telli*Phone Corporation (the Company) and its wholly-owned subsidiary,  CoNetCo,
a California corporation. All significant intercompany balances and transactions
have been  eliminated  in  consolidation.  As discussed  below,  the  cumulative
operating data of Guinness  Productions,  Inc. and Guinness Computer  Television
Corp. are included in historical financial  information since they are deemed to
be predecessor companies.

Description of Business

     The Company and its predecessors  have been in the development  stage since
inception.  The  Company is  engaged in  developing  an  interactive  networking
system, the Telli*Phone,  which will allow access to electronic information. The
Company determined that effective December 31, 1994 all significant research and
development regarding the Telli*Phone had been completed.

Business Combinations

     In 1989,  CoNetCo was formed and  acquired  the  theoretical  rights to the
Telli*Phone  from a  predecessor  company in exchange  for  2,350,000  shares of
CoNetCo stock, which were valued at par value.

     Effective  February 18, 1990 (as amended by the March 15, 1994  agreement),
CoNetCo,   currently  the  Company's  wholly-owned  subsidiary,   acquired  from
CoNetCo's  major  stockholder  the assets of the  businesses  known as  Guinness
Productions,   Inc.  and  Guinness  Computer   Television  Corp.  (the  Guinness
Companies) in exchange for 8,000,000 shares of CoNetCo stock and royalty rights.
The assets acquired from the Guinness Companies  consisted  primarily of product
development  efforts performed by the Guinness  Companies to further develop the
Telli*Phone.  For  accounting  purposes,  all  costs  incurred  by the  Guinness
Companies  to develop the  Telli*Phone  have been  expensed in  accordance  with
Financial  Accounting  Standards Board Statements No. 2, Accounting for Research
and Development Costs. The assets acquired from the Guinness Companies have been
valued at their historical cost basis and not current fair market value, if any,
because all entities  are under common  control.  The  liabilities  incurred and
assumed by the Guinness Companies during its development of the Telli*Phone have
been  assumed  by  the  shareholder  of  the  Guinness  Companies.  The  primary
shareholder  of  Guinness  Telli*Phone  is also the primary  shareholder  of the
Guinness   Companies.   The  liabilities  assumed  by  the  Guinness  Companies'
shareholder total approximately $7.2 million,  which include  approximately $2.3
million of investor notes payable and related delinquent  compounded interest of
$3.6 million. Such liabilities were incurred by the Guinness Companies primarily
during the years 1982 to 1989. Such  liabilities  assumed have been treated as a
capital  contribution and increased  paid-in  capital.  CoNetCo and the Guinness
Companies are  predecessors of the Company and their  activities are included in
the  cumulative   financial  data.   Included  in  deficit   accumulated  during
development  stage  is  approximately  $7.2  million  relating  to the  Guinness
Companies.

                                    Page F-6

<PAGE>

     Effective  August 4, 1993,  Guinness  Telli*Phone  Corporation,  through an
inactive predecessor company, U.S. Telli*Phone,  acquired all of the outstanding
shares of Innstar Corporation, an inactive company having no assets, in exchange
for 1,551,480 shares of the Company's stock. Innstar Corporation was then merged
into the Company.  U.S. Telli*Phone did not receive any consideration beyond the
exchange  of shares.  The merger was  accounted  for as a  recapitalization  and
Innstar had no assets,  liabilities or operations to include in the accompanying
financial  statements.  The purpose of the merger was to acquire a company whose
shares were registered with the Securities and Exchange Commission and to change
its domicile to Nevada which is where U.S. Telli*Phone was incorporated.

     Effective March 15, 1994, Guinness Telli*Phone  Corporation acquired all of
the  outstanding  shares of CoNetCo in  exchange  for  11,041,000  shares of the
Company's  stock.  The  issuance of shares is  accounted  for as the issuance of
shares by CoNetCo,  who is considered the acquirer for accounting  purposes,  in
exchange  for  monetary  assets  rather than a business  combination  since U.S.
Telli*Phone,  now Guinness Telli*Phone,  was an inactive corporation. The assets
acquired,  principally  the product  development  efforts,  which for accounting
purposes have zero book value, of the Telli*Phone network,  were recorded at the
historical  cost basis of CoNetCo  because of common control amongst current and
predecessor entities.

Depreciation

     Depreciation is computed on a straight-line basis over the estimated useful
lives of the assets, ranging from 5 to 12 years.  Depreciation expense of $1,923
in 1995  and  $1,899  in each of 1994 and 1993  and  $22,663  cumulative  during
development stage has been charged to operations.

Cash and Cash Equivalents

     The Company  considers  investments  purchased with an initial  maturity of
three months or less to be cash equivalents.

Use of Estimates

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

Loss Per Share

     Loss per common share has been  computed  following  Accounting  Principles
Board  Opinion No. 15. Loss per share has been  computed by dividing the loss by
the  weighted  average  number  of  common  shares  outstanding.   Common  stock
equivalents such as common stock options and warrants and convertible debentures
were not included in the computation of average shares outstanding because their
inclusion would be antidilutive.

                                    Page F-7

<PAGE>


Income Taxes

     Income  taxes  are  calculated  using the  liability  method  specified  by
Statement of  Financial  Accounting  Standards  No. 109,  Accounting  for Income
Taxes.

New Accounting Standards

     Statement  of  Financial  Accounting  Standards  No.  123,  Accounting  for
Stock-Based   Compensation,   established  financial  accounting  and  reporting
standards  for  stock-based  employee   compensation  plans  and  certain  other
transactions  involving the issuance of stock.  This statement is required to be
adopted prospectively beginning January 1, 1996. The impact of this statement is
not currently  expected to have any material impact on the financial position of
the Company and will be adopted for fiscal year 1996.

Fair Value of Financial Instruments

     Statement of Financial Accounting Standards No. 107, Disclosures about Fair
Value of Financial Instruments, requires that the Company disclose the estimated
fair value for its financial instruments for which it is practicable to estimate
their  values.  The  Company's  financial  instruments  include  cash,  due from
stockholders,  notes payable and accounts  payable.  The carrying  value of cash
approximates  fair value due to the short maturities of these  instruments.  The
fair value of other financial  instruments is not practical to estimate  because
of the current financial condition of the Company.

                                    Page F-8

<PAGE>


                        Guinness Telli*Phone Corporation
                    Subsidiary (A Development Stage Company)
                   Notes to Consolidated Financial Statements


1. Statement of Presentation

     The  financial  statements  have been  prepared  assuming  the Company will
continue as a going  concern.  Although the Company is still in the  development
stage,  management  is  currently  negotiating  to raise  adequate  financing to
produce and place Telli*Phone units into a test market. The Company's ability to
continue as a going  concern is dependent on  management's  success in obtaining
financing,  repaying  past  due  debt  obligations  and  the  acceptance  of the
Telli*Phone by the test market. However, the Company has significantly curtailed
expenditures  with only  necessary  costs being paid from the sale of stock (see
Note 6).  Once the system is in place,  the  Company  anticipates  being able to
attract financial support from those having an interest in reaching subscribers.

     There is substantial  doubt about the ability of the Company to continue as
a going concern.  The financial  statements do not include any adjustments  that
might result from the outcome of this uncertainty.

2. Due From Stockholder

     The amount due from  stockholder at December 31, 1995 and 1994,  represents
the balance of short-term  advances in excess of  reimbursements  by the primary
stockholder. The amount is unsecured and does not bear interest.

3. Notes Payable

     The Company,  through its wholly-owned  subsidiary,  CoNetCo,  entered into
approximately  20 different  royalty  agreements prior to 1990. The terms of the
agreements  required  a  fixed  payment  of  cash  for the  future  rights  to a
percentage  of the  future  Telli*Phone  sales  proceeds.  The  agreements  also
provided the holders of the royalty agreements the option to convert its royalty
interest  into  common  stock of CoNetCo on the basis of eight times the royalty
payment  divided by the  greater of $3 per share or three  times the average bid
price  on the day the  Company's  stock  is  traded  after  its  initial  public
offering.  During 1990,  approximately  17 of the notes holders  modified  their
royalty agreements to a conventional note payable.  These notes bear interest at
10%, are in default at December 31, 1995, and require  future  royalty  payments
but do not contain any features  allowing the  conversion to common  stock.  The
Company is currently negotiating with the note holders to convert their debt and
accrued  interest  into common stock.  As of December 31, 1995,  the Company had
received  $125,000 of advance  royalty  payments which had not been converted to
notes payable.  This amount will begin to be amortized into income once sales of
the Telli*Phone  commence.  The amortization  period of deferred revenue has not
yet been determined.

                                    Page F-9

<PAGE>

                        Guinness Telli*Phone Corporation
                    Subsidiary (A Development Stage Company)
             Notes to Consolidated Financial Statements (continued)


4. Commitments

Royalty Agreements

     As part of CoNetCo's acquisition of the Guinness Companies, CoNetCo granted
royalty  rights of 5% of all future  revenues  generated by the sale or lease of
the Community News Network and the Telli*Phone  instrument to the shareholder of
the Guinness Companies.  In addition,  royalty and note holders received royalty
rights. Under these agreements, the Company will pay royalties aggregating 2.26%
of the manufacturer's actual net price for which each Telli*Phone is sold.

Stock Options

     In order to provide  interim funds for the  development of the  Telli*Phone
instrument,  CoNetCo's major stockholder  agreed in September 1989 that he would
sell  some of his  stock in  CoNetCo  to  "qualified  investors"  and  remit the
proceeds as donated capital to CoNetCo.  In exchange for the donated capital, he
received  an option to  purchase a like number of shares sold by him at the same
price he received  from their sale and  contributed  to CoNetCo.  This option to
purchase shares vests upon the Company reporting earnings per share of $1 before
giving effect, if any, to these options.  The options expire in the lesser of 10
years from  September 1, 1989,  or two years  following the year the options are
vested.  The option has been assumed by Guinness  Telli*Phone  Corporation  on a
share-for-share  basis.  The total number of shares sold by the stockholder with
the proceeds contributed to CoNetCo was 634,834 at a price of $285,366, or $0.45
per share.

Shareholder and Predecessor Company Obligations

     A creditor of the  Guinness  Companies,  and now a creditor of the Guinness
Companies' former shareholder,  has filed a lien against the shareholder and has
also named CoNetCo as an additional  judgment debtor. The creditor is seeking to
recover approximately  $650,000 related to $500,000 of loans and related accrued
interest borrowed by the Guinness  Companies.  The Company does not believe that
it has any legal obligation to repay the debt of the Guinness Companies and that
all such liabilities were assumed by the shareholder of the Guinness  Companies.
The shareholder of the Guinness Companies is currently the majority  shareholder
of the Company.  The ultimate  outcome of this matter is unknown and nothing has
been recorded relating to the matter.

                                      F-10

<PAGE>


                        Guinness Telli*Phone Corporation
                    Subsidiary (A Development Stage Company)
             Notes to Consolidated Financial Statements (continued)

5. Income Tax

     The Company adopted SFAS No. 109 effective January 1, 1993. The adoption of
SFAS No. 109 had no effect on any of the financial statements.

     Since  the  Company  is in the  development  stage  and  management  cannot
determine  that it is more likely than not the asset will be  recovered,  it has
provided a 100%  valuation  allowance  against the deferred tax asset  resulting
from its net operating loss carry-forward and no deferred tax asset is reflected
in the accompanying financial statements. There are no deferred tax liabilities.

     The  deferred  tax  assets and  valuation  allowances  for the years  ended
December 31, 1995 and 1994 are as follows:

<TABLE>
<CAPTION>

                                        1995                     1994
                                        ----------------------------------
<S>                                     <C>                      <C> 
Net operating loss Carry-forward        $1,139,000               $963,000
Valuation allowances                    (1,139,000)              (963,000)
                                        ----------------------------------
                                        $     -                  $     -

</TABLE>

     The  Company has  approximately  $700,000  of Federal  net  operating  loss
carry-forwards  expiring  between 2004 and 2010.  The losses  accumulated by the
Company for tax purposes is significantly  lower than the accumulated  losses in
these  financial   statements  because  the  accumulated  losses  for  financial
statement  purposes  includes  approximately  $7.2 million of losses incurred by
predecessor  companies.   Additionally,   the  accumulated  loss  for  financial
statement  purposes was also increased by  approximately  $2 million relating to
costs  improperly  capitalized  by CoNetCo since 1989 to develop the  Tell*Phone
(See Note 7). For tax purposes,  the Company must amend its prior tax returns to
correct for CoNetCo's accounting for the product development costs.

6. Equity Transactions

         On October 19,  1995,  the Company  sold  700,000  shares of its common
stock for $301,000 which was all received in 1995. On December 15, 1995, the
Company  sold  135,000  shares of its common  stock for  $101,250  which was not
received  until  January  1996.  Both of these  transactions  were  executed  in
accordance with Regulation S under the Securities Act of 1933.

         In fiscal  1994 and 1993,  the  principal  shareholder  paid  operating
expenses on behalf of the Company totaling $52,230 and $47,250.

                                   Page F-11

<PAGE>
                        Guinness Telli*Phone Corporation
                    Subsidiary (A Development Stage Company)
                   Notes to Consolidated Financial Statements

7. Prior Period Adjustment

     The prior  year's  financial  statements  have been  changed to correct for
errors  relating to the accounting for costs incurred to develop the Telli*Phone
and the calculation of accrued interest and deferred royalty income. The Company
and its predecessors had been  capitalizing  development  costs through December
31, 1994 (when such costs should have been  expensed),  and had been  improperly
calculating  accrued interest and deferred royalty income. The primary effect of
the  correction  was to  write  off the  product  development  costs  previously
capitalized.  The effect of these  adjustments  were to increase the accumulated
deficit at December 31, 1992,  1993,  1994 and 1995 by  $7,138,638,  $7,434,227,
$7,666,226 and $7,648,738 and increase the loss for the years ended December 31,
1993  and  1994 by  $295,589  and  $231,999  and  decrease  the loss for 1995 by
$17,488.

8. Research and Development

     Research and development  costs represent costs the Company  (including the
predecessor  companies)  believes are directly related to the development of the
Telli*Phone.   Included  in  cumulative   research  and  development   costs  is
approximately  $1,077,000 of officer compensation and approximately  $800,000 of
rent expense.  During the period of product  development,  the Company estimated
that,  excluding  interest,  approximately  80% of all  expenses  incurred  have
related directly to the development of the Telli*Phone.

9. Cash Flow Statement

     There were no cash  payments  for  interest  or taxes  during  the  periods
presented.  In 1993, the Company  acquired the stock of Innstar  Corporation for
1,551,480  shares of the  Company's  common  stock,  valued at $.001 per  share.
Because  the  cumulative   statement  of  operations  includes  the  predecessor
companies' operations, accumulated loss includes approximately $7.2 million from
the  predecessor   companies.   Additionally,   contributed   capital   includes
approximately $7.2 million of liabilities  assumed personally by the predecessor
company shareholder, who is also the primary shareholder of the Company.

                                   Page F-12

<PAGE>         
                                      
                                    EXHIBIT 1


                   OFFSHORE SECURITIES SUBSCRIPTION AGREEMENT



                                October 19, 1995


Agreement dated October 19, 1995, between Guinness  Telli*Phone  Corporation and
Messrs. Morton Weisbrot and John F. Parks for the sale of Seven Hundred Thousand
(700,000)  shares of the common  stock of Guinness  Telli*Phone  corporation  at
Forty-Three Cents (U.S. $0.43) per share.


                               Exhibit 1, Page 1
<PAGE>


                   OFFSHORE SECURITIES SUBSCRIPTION AGREEMENT

     This  Offshore  Securities  Subscription  Agreement is executed in reliance
upon the  transaction  exemption  offered by  Regulation S  ("Regulation  S") as
promulgated  by the  Securities  and  Exchange  Commission  ("SEC"),  under  the
Securities Act of 1933, as amended ("1933 Act").

     This Agreement has been executed by the  undersigned in connection with the
private  placement  of shares of Common  Stock  (hereinafter  referred to as the
"Shares") of:

                        GUINNESS TELLI*PHONE CORPORATION

Symbol: GTPC            Exchange: NASDAQ (Will Apply)

a  corporation  organized  under  the laws of the State of  Nevada,  United
States of America (hereinafter referred to as the "SELLER"), and

The undersigned:

Messrs. Morton Weisbrot & John F. Parks
c/o Mail Box 246
Boulevard de la Marina 39-F
Cabo San Lucas, BCS, Mexico

individuals  who  are  non-USA  resident,   (hereinafter   referred  to  as  the
"PURCHASER"),  who  represents  and  warrants  to, and agrees  with  Seller,  as
follows:

1.  Agreement to Subscribe; Purchase Price.

     a. The undersigned  hereby subscribes for Seven Hundred Thousand  (700,000)
shares at  Forty-Three  Cents  (US$0.43)  per shares  payable  in United  States
Dollars.

     b. Form of  Payment:  Purchaser  shall pay the  purchaser  by good funds in
United States  Dollars to the  designated  depository for closing by delivery of
security versus payment.

     2.   Subscriber   Representation;   Access  to   Information;   Independent
Investigation:

     a. Offshore  Transaction:  Purchaser  represents  and warrants to Seller as
follows:

     (1) Purchaser is not a U.S. person as that term is defined under Regulation
S.

     (2) At the time the buy order was  originated,  Purchaser  was  outside the
United  States and is outside the United  States as of the date of the execution
and delivery of this agreement.

     (3)  Purchaser  is  purchasing  the Shares for his own  account  and not on
behalf  of any  U.S.  person,  and the sale  has not  been  pre-arranged  with a
purchaser  in the  United  States.  

                                Exhibit 1, Page 2
<PAGE>
     
     (4) Each distributor  participating  in the offering of the securities,  if
any, has agreed in writing that all offers and sales of the securities  prior to
the expiration of a period  commencing on the date of the transaction and ending
40 days  thereafter  shall  only be made in  compliance  with  the  safe  harbor
contained  in  Regulation  S,  pursuant  to  registration  of  shares  under the
Securities Act of 1933 or pursuant to an exemption from registration.

     (5) Purchaser represents and warrants and hereby agrees that all offers and
sales of the shares prior to the  expiration of a period  commencing on the date
of the  transaction  and  ending  40  days  thereafter  shall  only  be  made in
compliance  with  the  safe  harbor  contained  in  Regulation  S,  pursuant  to
registration  of the securities  under the Securities Act of 1933 or pursuant to
an exemption from registration, and all offers and sales after the expiration of
the 40 day period shall he wade only pursuant to such a registration  or to such
exemption from registration.

     (6) All offering  documents received by Purchaser include statements to the
effect that the Shares have not been registered under the Securities Act of 1933
and may not be offered or sold in the United States or to U.S.  persons during a
period  commencing on the date of the  transaction and ending 40 days thereafter
unless  the  shares  are  registered  under  the  Securities  Act of  1933 or an
exemption from the registration requirements is available.

     (7) Purchaser  acknowledges that the purchase of the shares involves a high
degree of risk and further  acknowledges  that he can bear the economic  risk of
the purchase of the shares, including the total loss of his investment.

     (8) Purchaser understands that the shares are being offered and sold to him
in reliance on specific exemptions from the registration requirements of Federal
and State  securities  laws and that the  Seller is  relying  upon the truth and
accuracy of the representations,  warranties,  agreements,  acknowledgements and
understandings  of  Purchaser  set  forth  herein  in  order  to  determine  the
applicability of such exemptions and the suitability of Purchaser to acquire the
shares.

     b. Current Public  Information.  Purchaser  acknowledges that Purchaser has
been furnished with or has acquired  copies of the Company's Form 10, as well as
copies of the Form 10-Q for the first and second quarters of 1995.  which are on
file with the Securities and Exchange Commission,  as required by the Securities
Act, and other publicly available documents.

     c. Independent Investigation; Access. Purchaser acknowledges that Purchaser
is making the  decision to purchase the shares  subscribed  for, has relied upon
independent  investigations  made by him and his purchaser  representatives,  if
any, and Purchaser and such representatives,  if any, have, prior to any sale to
him,  been given access and the  opportunity  to examine all material  books and
records of the Corporation, all material contract and documents relating to this
offering and an  opportunity  to ask questions  of, and to receive  answers from
Seller or any person acting on its behalf concerning the terms and conditions of
this  offering.  Purchaser and his advisors,  if any, have been  furnished  with
access to all publicly available  materials  relating to the business,  finances
and operations of the Seller and materials relating to the offer and sale of the
shares which have been  requested.  Purchaser  and his  advisors,  if any,  have
received complete and satisfactory answers to any such inquiries.

                                Exhibit 1, Page 3
<PAGE>

     d. No Government Recommendation or Approval.  Purchaser understands that no
federal or state agency has passed on or made any  recommendation or endorsement
of the Shares.

3. Issuer Representations:

     a.  Reporting  Company  Status.  Seller is a reporting  issuer.  Seller has
complied with all reporting  obligations  under either  Section 12 (b), 12(g) or
15(d) of the Securities  Exchange Act of 1934, as amended (the "Exchange  Act").
It has on file with the  Securities  and Exchange  Commission a Form 10, and the
10-Q filings required to be filed for the first and second quarters of 1995.

     b. Offshore Transaction.

     (1) Seller has not  offered  these  securities  to any person in the United
States or to any U.S. person as that term is defined in Regulation S.

     (2) At the time the buy  order  was  originated,  Seller  and/or  its agent
reasonably  believed  Purchaser  was outside of the United  States and was not a
U.S. person.

     (3) Seller and/or its agent reasonably believe that the transaction has not
been pre-arranged with a Purchaser in the United States.

     c. No Directed  Selling Efforts.  In regard to this transaction  Seller has
not conducted any "directed selling efforts" as that term is defined in rule 902
of Regulation S nor has Seller  conducted any general  solicitation  relating to
the offer and sale of the  within  securities  to  persons  resident  within the
United States or elsewhere.

4. Legends on Certificates.  The transaction restriction in connection with
this  offshore  offer and sale restrict  Purchaser  from offering and selling to
U.S.,  persons or for the  account or benefit of a U.S.  person for a forty (40)
day period.  The rules do not require the placement of such a restrictive legend
on the share certificate. Rule 903 (c)(2) governs the forty (40) day transaction
restriction.

5. Exemption; Reliance on Representations.  Purchaser understands that the offer
and sale of the  Shares is not being  registered  under the 1933 Act.  Seller is
relying on the rules  governing  offers and sale made outside the United  States
pursuant to  Regulation  S. Rules 901 through  904 of  Regulation  S govern this
transaction.

6. Transfer Agent  Instructions.  Seller's  transfer agent will be instructed to
issue one or more share  certificates  representing  shares without  restrictive
legend in the names of purchaser  to be specified  prior to closing and that the
shares have been issued  pursuant to Regulation S. Seller further  warrants that
no instructions  other than these  instructions  have been given to the transfer
agent  and that  these  shares  shall be  freely  transferable  on the books and
records of the company subject to compliance with applicable securities laws.

7. Stock Delivery  Instructions.  The share certificates shall be delivered
to the Purchaser on a delivery  versus payment basis at such times and places to
be mutually agreed.

                                Exhibit 1, Page 4
<PAGE>

8.  Closing  Date.  The date of the issuance of the sale of the Shares (the
"Closing Date" shall be October 19, 1995, or such other mutually  agreed to time
and place.

9. Conditions to the Company's  Obligation to Sell.  Purchaser  understands
that Seller's obligation to sell the Stock is conditioned upon:

     a. The receipt and acceptance by Seller of this Subscription  Agreement for
all of the shares as evidenced by  execution of this  subscription  agreement by
the President or any Vice President of the Seller.

     b.  Delivery  into the closing  depository by Purchaser of good funds (i.e.
the letter of credit) as payment in full for the purchase of the shares.

10. Conditions to Purchaser's  Obligation to Purchase.  Seller  understands
that Purchaser's obligation to purchase the stock is conditioned upon:

     a. Acceptance by Purchaser of a satisfactory Subscription Agreement for the
sale of Shares;

     b. Delivery of shares of common stock without restrictive legend.

11.  Governing Law. This Agreement  shall be governed by and interpreted in
accordance with the rulings of the laws of the State of Nevada.

     IN WITNESS WHEREOF,  this Offshore  Securities  Subscription  Agreement was
duly executed on the date first written below.



---------------------------------------
           Purchaser


Accepted this 15th day of December, 1995.


GUINNESS TELLI*PHONE CORPORATION

By: ---------------------------------
    Lawrence A. Guinness, President

                                Exhibit 1, Page 5

<PAGE>

                                              

                                    EXHIBIT 2



                   OFFSHORE SECURITIES SUBSCRIPTION AGREEMENT



                                December 15, 1995




     Agreement dated December 15, 1995, between Guinness Telli*Phone Corporation
and Messrs.  Morton  Weisbrot  and John F. Parks for the sale of One Hundred and
Thirty-five   Thousand   (135,000)  shares  of  the  common  stock  of  Guinness
Telli*Phone corporation at Seventy-Five Cents (U.S. $0.75) per share.

                                Exhibit 2, Page 1
<PAGE>


                   OFFSHORE SECURITIES SUBSCRIPTION AGREEMENT

     This  Offshore  Securities  Subscription  Agreement is executed in reliance
upon the  transaction  exemption  offered by  Regulation  S  ("Regulation  S" as
promulgated  by  the  Securities  and  Exchange  Commission  ("SEC",  under  the
Securities Act of 1933, as amended ("1933 Act").

     This Agreement has been executed by the  undersigned in connection with the
private  placement  of shares of Common  Stock  (hereinafter  referred to as the
Shares") of:

                        GUINNESS TELLI*PHONE CORPORATION

Symbol: TELI                Exchange: NASDAQ (Have Applied)

a corporation organized under the laws of the State of Nevada, United
States of America (hereinafter referred to as the "SELLER"), and

The undersigned:

Messrs. Morton Weisbrot & John F. Parks
c/o Mail Box 246
Boulevard de la Marina 39-F
Cabo San Lucas, BCS, Mexico

individuals  who are  non-USA  resident,  (hereinafter  referred  to as the
"PURCHASER"),  who  represents  and  warrants  to, and agrees  with  Seller,  as
follows:

1.  Agreement to Subscribe; Purchase Price.

     a. The undersigned hereby subscribes for One Hundred  Thirty-Five  Thousand
(135,000)  shares at  Seventy-Five  cents (US$0.75) per shares payable in United
States Dollars.

     b. Form of  Payment:  Purchaser  shall pay the  purchaser  by good funds in
United States  Dollars to the  designated  depository for closing by delivery of
security versus payment.

2.   Subscriber   Representation;   Access  to   Information;   Independent
Investigation:

     a. Offshore  Transaction:  Purchaser  represents  and warrants to Seller as
follows:

     (1) Purchaser is not a U.S. person as that term is defined under Regulation
S.

     (2) At the time the buy order was  originated,  Purchaser  was  outside the
United  States and is outside the United  States as of the date of the execution
and delivery of this agreement.

     (3)  Purchaser  is  purchasing  the Shares for his own  account  and not on
behalf  of any  U.S.  person,  and the sale  has not  been  pre-arranged  with a
purchaser in the United States.

                                Exhibit 2, Page 2

<PAGE>

     (4) Each distributor  participating  in the offering of the securities,  if
any, has agreed in writing that all offers and sales of the securities  prior to
the expiration of a period  commencing on the date of the transaction and ending
40 days  thereafter  shall  only be made in  compliance  with  the  safe  harbor
contained  in  Regulation  S,  pursuant  to  registration  of  shares  under the
Securities Act of 1933 or pursuant to an exemption from registration.

     (5) Purchaser represents and warrants and hereby agrees that all offers and
sales of the shares prior to the  expiration of a period  commencing on the date
of the  transaction  and  ending  40  days  thereafter  shall  only  be  made in
compliance  with  the  safe  harbor  contained  in  Regulation  S,  pursuant  to
registration  of the securities  under the Securities Act of 1933 or pursuant to
an exemption from registration, and all offers and sales after the expiration of
the 40 day period shall he wade only pursuant to such a registration  or to such
exemption from registration.

     (6) All offering  documents received by Purchaser include statements to the
effect that the Shares have not been registered under the Securities Act of 1933
and may not be offered or sold in the United States or to U.S.  persons during a
period  commencing on the date of the  transaction and ending 40 days thereafter
unless  the  shares  are  registered  under  the  Securities  Act of  1933 or an
exemption from the registration requirements is available.

     (7) Purchaser  acknowledges that the purchase of the shares involves a high
degree of risk and further  acknowledges  that he can bear the economic  risk of
the purchase of the shares, including the total loss of his investment.

     (8) Purchaser understands that the shares are being offered and sold to him
in reliance on specific exemptions from the registration requirements of Federal
and State  securities  laws and that the  Seller is  relying  upon the truth and
accuracy of the representations,  warranties,  agreements,  acknowledgements and
understandings  of  Purchaser  set  forth  herein  in  order  to  determine  the
applicability of such exemptions and the suitability of Purchaser to acquire the
shares.

     b. Current Public  Information.  Purchaser  acknowledges that Purchaser has
been furnished with or has acquired  copies of the Company's Form 10, as well as
copies of the Form 10-Q for the first and second quarters of 1995.  which are on
file with the Securities and Exchange Commission,  as required by the Securities
Act, and other publicly available documents.

     c. Independent Investigation; Access. Purchaser acknowledges that Purchaser
is making the  decision to purchase the shares  subscribed  for, has relied upon
independent  investigations  made by him and his purchaser  representatives,  if
any, and Purchaser and such representatives,  if any, have, prior to any sale to
him,  been given access and the  opportunity  to examine all material  books and
records of the Corporation, all material contract and documents relating to this
offering and an  opportunity  to ask questions  of, and to receive  answers from
Seller or any person acting on its behalf concerning the terms and conditions of
this  offering.  Purchaser and his advisors,  if any, have been  furnished  with
access to all publicly available  materials  relating to the business,  finances
and operations of the Seller and materials relating to the offer and sale of the
shares which have been  requested.  Purchaser  and his  advisors,  if any,  have
received complete and satisfactory answers to any such inquiries.

                                Exhibit 2, Page 3

<PAGE>

     d. No Government Recommendation or Approval.  Purchaser understands that no
federal or state agency has passed on or made any  recommendation or endorsement
of the Shares.

3. Issuer Representations:

     a.  Reporting  Company  Status.  Seller is a reporting  issuer.  Seller has
complied with all reporting  obligations  under either  Section 12 (b), 12(g) or
15(d) of the Securities  Exchange Act of 1934, as amended (the "Exchange  Act").
It has on file with the  Securities  and Exchange  Commission a Form 10, and the
10-Q filings required to be filed for the first and second quarters of 1995.

     b. Offshore Transaction.

     (1) Seller has not  offered  these  securities  to any person in the United
States or to any U.S. person as that term is defined in Regulation S.

     (2) At the time the buy  order  was  originated,  Seller  and/or  its agent
reasonably  believed  Purchaser  was outside of the United  States and was not a
U.S. person.

     (3) Seller and/or its agent reasonably believe that the transaction has not
been pre-arranged with a Purchaser in the United States.

     c. No Directed  Selling Efforts.  In regard to this transaction  Seller has
not conducted any "directed selling efforts" as that term is defined in rule 902
of Regulation S nor has Seller  conducted any general  solicitation  relating to
the offer and sale of the  within  securities  to  persons  resident  within the
United States or elsewhere.

4. Legends on Certificates. The transaction restriction in connection with
this  offshore  offer and sale restrict  Purchaser  from offering and selling to
U.S.,  persons or for the  account or benefit of a U.S.  person for a forty (40)
day period.  The rules do not require the placement of such a restrictive legend
on the share certificate. Rule 903 (c)(2) governs the forty (40) day transaction
restriction.

5. Exemption; Reliance on Representations.  Purchaser understands that the offer
and sale of the  Shares is not being  registered  under the 1933 Act.  Seller is
relying on the rules  governing  offers and sale made outside the United  States
pursuant to  Regulation  S. Rules 901 through  904 of  Regulation  S govern this
transaction.

6. Transfer Agent  Instructions.  Seller's  transfer agent will be instructed to
issue one or more share  certificates  representing  shares without  restrictive
legend in the names of purchaser  to be specified  prior to closing and that the
shares have been issued  pursuant to Regulation S. Seller further  warrants that
no instructions  other than these  instructions  have been given to the transfer
agent  and that  these  shares  shall be  freely  transferable  on the books and
records of the company subject to compliance with applicable securities laws.

7. Stock Delivery Instructions. The share certificates shall be delivered
to the Purchaser on a delivery  versus payment basis at such times and places to
be mutually agreed.

                                Exhibit 2, Page 4
<PAGE>

8. Closing Date. The date of the issuance of the sale of the Shares (the
"Closing Date" shall be December 15, 1995, or such other mutually agreed to time
and place.

9. Conditions to the Company's Obligation to Sell. Purchaser understands
that Seller's obligation to sell the Stock is conditioned upon:

     a. The receipt and acceptance by Seller of this Subscription  Agreement for
all of the shares as evidenced by  execution of this  subscription  agreement by
the President or any Vice President of the Seller.

     b.  Delivery  into the closing  depository by Purchaser of good funds (i.e.
the letter of credit) as payment in full for the purchase of the shares.

10. Conditions to Purchaser's Obligation to Purchase. Seller understands
that Purchaser's obligation to purchase the stock is conditioned upon:

     a. Acceptance by Purchaser of a satisfactory Subscription Agreement for the
sale of Shares;

      b.  Delivery of shares of common stock without restrictive legend.

11. Governing Law. This Agreement shall be governed by and interpreted in
accordance with the rulings of the laws of the State of Nevada.

     IN WITNESS WHEREOF,  this Offshore  Securities  Subscription  Agreement was
duly executed on the date first written below.


-----------------------------------
     Purchaser


Accepted this 15th day of December, 1995.


GUINNESS TELLI*PHONE CORPORATION


By: --------------------------------
    Lawrence A. Guinness, President

                              Exhibit 2, Page 5