SECURITIES EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                   FORM 10-KSB
                            Annual Report Pursuant to
                       the Securities Exchange Act of 1934


                     For the fiscal year ended June 30, 1998
                         Commission file number 0-013313

                               GS TELECOM LIMITED
             (Exact name of registrant as specified in its charter)

            Former Name: Teleconferencing Systems International, Inc.

                        Colorado                       36-3296861
                    (State of incorporation)           (I.R.S. Employer
                                                       Identification No.)

        First Floor Hampton House, 20 Albert Embankment, London, England,
                                   U.K. SE17TJ
               (Address of principal executive offices) (Zip Code)

               Registrant's telephone number, including area code
                                (44) 171 587 3687

           Securities registered pursuant to Section 12(b) of the Act:

                            Title of each class: None

                 Name of each exchange on which registered: N/A

           Securities registered pursuant to Section 12(g) of the Act:

                    Title of each class: Common No Par Value

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 the  filing
requirements for at least the past 90 days.

                             Yes   X       No    
                                -------      --------

Check if disclosure of delinquent  filers pursuant to Item 405 of Regulation S-B
is not contained in this form, and no disclosure will be contained,  to the best
of  Registrant's  knowledge,  in  definitive  proxy  or  information  statements
incorporated  by reference  in Part III of this Form 10-KSB or any  amendment to
this Form 10-KSB.     X
                    -----



<PAGE>


State issuer's revenues for its most recent fiscal year.

Transitional Small Business Disclosure Format:

                               Yes          X   No
                         ------          -------

Aggregate  market  value  of the  voting  stock  held by  non-affiliates  of the
registrant as of June 30, 1998: $9,810,512 based upon the bid price of $2.00.

Number of outstanding  shares of the  registrant's no par value common stock, as
of June 30, 1998: 16,828,220.

DOCUMENTS INCORPORATED BY REFERENCE
List hereunder the following documents if incorporated by reference and the Part
of this Form 10-K which the document is  incorporated:  (1) Any annual report to
security holders - None; (2) Any proxy or information  statement - None; (3) Any
prospectus filed pursuant to Rule 424(b) or (c) under the Securities Act of 1933
- None.


<PAGE>


                                     PART 1

Item 1.           Business

GS Telecom Limited, formerly  Teleconferencing Systems International,  Inc. (the
Company) was incorporated in Colorado on December 19, 1983.

Teleconferencing  Systems  International,  Inc.  (Company  or TSI),  a  Colorado
corporation,  was incorporated on December 19, 1983, to design, manufacture, and
market a wireless audio teleconferencing system called the TSI Conferencer.

The  company  became a dealer  for  Coherent  ConferenceMaster  Systems in 1991.
Coherent's product was a feature rich small room system. For approximately a two
year period,  Coherent  ConferenceMaster  Systems provided sales revenue for the
company.  With the  evolution of small room systems  available in the  industry,
another small room system appear in 1993, the Polycom Sound Station. The Company
became a dealer for the Polycom Sound Station sold the system in 1994. At fiscal
year end 1995, the Company ceased all sales operations.

During  1991 and 1992,  TSI  developed  a version  of the wired TSI  Conferencer
System, the Court/Line system, to provide an audio interface to multi-tract tape
recorders,  and sound systems which are present in most  courtrooms.  Sales were
made  during  1993 and 1994 fiscal  years to both  Federal  and State  Courts in
various locations  throughout the country.  Due to competition in the market and
new systems introduction,  the Company's business declined dramatically in 1995,
and the Company ceased active operations.

On April 30,  1997,  the Company  acquired  100% of the common  stock of Wilding
Services,  Inc. to be a wholly  owned  subsidiary  for $1.00 and  assumption  of
approximately  $200 in filing  fees.  On June 29,  1997,  the  Company  Board of
Directors  elected  to  spin  off  in  a  share  distribution  pro-rata  to  its
shareholders Wilding Services,  Inc. together with the outdated inventory rights
to an  anticipated  contract  to sell  equipment  to  Bell  South,  and  Wilding
Services,  Inc. agreed to and subsequently issued a promissory note for $140,000
to the  Company to secure  payment of any debts of the  Company  which  might be
asserted  as a result of its prior  operations.  The Board  resolution  provided
shareholders  of the  Company  were to receive one share of stock of Wilding for
each 50 shares of the Company  owned by such  shareholder.  The  resolution  has
never been  submitted to  shareholders  for  approval,  although for  accounting
purposes it was treated as effective June 29, 1997.

On January 6, 1998, the Board of Directors  changed the  corporation  name to GS
Telecom  Limited  and  approved  a 150 to one  reverse  split of the  issued and
outstanding  common shares of the Company.  All share and per share amounts have
been retroactively restated in the accompanying financial  statements to reflect
the effect of the reverse stock slit.

<PAGE>

Activities  of the  company  since June 30,  1995 until  November  15, 1997 were
primarily  liquidation  of operating  assets and  settlement of  obligations  to
creditors  and  employees as  previously  reported.  On November  15, 1997,  the
Company acquired an Isle of Man Company (GST),  also named GS Telecom Limited,
by issuance of a $150,000 convertible note payable.

The acquired  subsidiary had net  liabilities of $544,268.  The note payable was
subsequently converted to 14,500,000 shares of common stock, which was issued to
the acquired company stockholders.

The assets of the subsidiary,  GST, also included  Associated  Power  Industries
Limited (API), a designer and manufacturer of energy savings systems. GST owns
50% of API and has an option to acquire the remaining 50% ownership interest for
three years.

GST also owned two subsidiary companies both of which were wholly owned:

Guardian  Smart Systems  Limited  (GSS) whose business is to design and market
domestic  energy savings and home  management  systems and Total Energy Controls
(Commercial)  Limited  (TECC)  whose business was to market and install energy
savings devices for commercial installations such as offices,  apartment blocks,
nursing homes, small care centers, car showrooms, etc.

Substantially  all  intercompany   transactions  have  been  eliminated  in  the
accompanying consolidated financial statements.

Due to a combination of factors  including lack of working capital none of these
companies was successful in establishing  their businesses  commercially and the
above two wholly owned  subsidiaries  were  effectively  closed down at June 30,
1998.  All trading was ceased and all staff  terminated  shortly  thereafter  in
accordance with their contracts. All amounts of obligations incurred as a result
of all of these  unsuccessful  commercial  operations have been reflected in the
attached accounts under closing down costs of $140,099.

In addition,  the  Directors  consider it prudent to provide  fully for possible
loss on the investment in API and for goodwill cost of the  subsidiaries  closed
down.

At the date of this  report  there  remains  the  obligation  to  discharge  the
accounts  payable  and other  payables of the three  companies;  GST and the two
wholly  owned  subsidiaries,  which it is planned,  will be done  through  funds
raised by new share  subscriptions.  Originally this capital was scheduled to be
raised under the Financial  Services Agreement signed with djLimited on June 15,
1997.

<PAGE>

Pursuant to this Agreement an amount of $376,500 was raised on November 20, 1997
for working  capital by a Private  Placement of 8% Convertible  Loan Notes,  due
September 30, 2000. An additional  $63,500 has been subscribed but not paid. The
transaction  was  accomplished  to foreign  investors  pursuant to Regulation S.
Subsequently this Agreement was terminated by GST on August 12, 1998.

The Holders of these Notes have the option to convert one hundred percent (100%)
of the  original  principal  amount of the Note issued to the Holder at any time
after the 120th day  following  the date of issue,  into shares of the Company's
Common Stock at a conversion  price equal to the lower of the $2 per share or at
twenty-five  percent  (25%)  less  than the  average  closing  bid  price of the
Company's  Common Stock for the five (5) consecutive  trading days ending on the
trading  day  immediately  preceding  the  date  thereof.   Notwithstanding  the
foregoing,  if, after the  effectiveness of the Registration  Statement or if an
exemption is available from registration, the closing bid price of the Company's
Common  Stock  reaches four  dollars for the five (5)  consecutive  trading days
ending on the trading day  immediately  preceding the date thereof,  the Company
shall have the option of forcing  conversion  up to Fifty  Percent  (50%) of the
original principal amount of the Notes originally issued to the Holder, and, if,
after such  effectiveness,  the closing bid price of the Company's  Common Stock
reaches eight dollars,  the Company shall  thereafter have the option of forcing
conversion up to One Hundred Percent (100%) of the original  principal amount of
the Notes issued to the Holder. The notes were called in default in August 1998,
but on December 16, 1998, a written extension was agreed between noteholders and
the Company.

The Company has  recently  redefined  its focus as a high-tech  development  and
marketing company, engaged in identifying,  developing, and marketing innovative
technology.  Historically, the Company had focused primarily on the development,
sale and  installation  of  ecological  energy  saving  technology  through  its
subsidiaries and associate companies. However, the new management of the Company
recognized that its development program lagged behind competitors' advances, and
during the fourth  quarter of 1998,  new  management  commenced a  restructuring
process which  culminated on January 6, 1999, at which time GS Telecom  embarked
upon negotiations for the strategic  acquisition of targeted technologies with a
view to developing  technology for the telecommunication and e-commerce business
sectors.

During the fourth  quarter of 1998 and the first quarter of 1999,  the Company's
management   reorganized   and  effected   negotiations  to  make  a  number  of
acquisitions  subsequent  to the  securement  of private  financing  in order to
increase the technology base,  acquire high-tech  products with short term sales
revenue  capability  and  create  an  infrastructure  capable  of  handling  the
unification  of the acquired  technologies  toward the  objective of operating a
unique and proprietary  high-tech telecommunication and  e-commerce network on a
world-wide basis.

<PAGE>

The Company's long term objectives via a series of strategic resolutions are:

(1) Interests in API and the wholly-owned  subsidiaries,  GSS and TECC are to be
sold and all legally incurred debt of the wholly owned subsidiaries repaid. This
will  facilitate  an undiluted  focus on the business  objective of the Company,
which is the  development of a proprietary  and licensed  telecommunication  and
e-commerce network;

(2)  The  facilitation  of  an  underwriting  of  the  Company's  securities--to
facilitate technology acquisition, growth and expansion;

(3) The investment in  organizational  and expansion costs by the Company in its
new investments  --providing the Company with a secure base to grow its revenues
from this point forward;

(4) The  implementation  of an  aggressive  Internet  platform  for  the  direct
offering of the  Company's  future  products  and  services to end users  --this
allows the  current  infrastructure  to evolve  into a fully  integrated  direct
access Internet network; and

(5) The issuance of  territorial/industry  sector  exclusive  and  non-exclusive
licenses for select Company technologies and products.

Status of Products

None:

Competition

None.

Raw Materials

None.

Customer Dependence

None.

Patents, Trademarks, and Licenses

None.

Government Approval.

None pending.

<PAGE>

Governmental Regulations

None.

The Company has not been involved in any  bankruptcy,  receivership,  or similar
proceeding during its existence.

Research and Development

The Company spent $0 on research and  development  activities  during the fiscal
years ended June 30, 1997 and 1998.

Environmental Regulations

Compliance with federal, state, and local provisions regulating the discharge of
the  materials  into the  environment  does not have any material  effect on the
capital expenditures, earnings, and competitive position of the Company.

Employees

Effective as of June 30, 1998,  as a result of the dismissal of all employees of
the subsidiaries,  the Company had no employees.  As a result of contract terms,
certain employees were paid up to September 1998.

On February 19, 1998 and on March 31, 1998, the Company  received and accepted a
loan of $212,400 repayable on demand.

In July 1998,  Mr.  David  Innes  resigned  as  Chairman,  President,  and Chief
Executive and remained as a Director until October 1998.

Mr. Gordon Bliss acted as Chairman, President, and Chief Executive until October
1998 when he resigned.

Mr. Marshall Kaye acted as a Director until July 1998 when he resigned.

Dr. Steven Gillam, appointed in October 1998, is currently Chairman,  President,
and Chief Executive.

Mr. Andrew Castle appointed in October 1998, is currently a Director.

Mr. Gary Botha, currently a Director, was appointed in July 1998.

Ms. Joslin Bennett, currently a Director was appointed in January 1998.

<PAGE>

Item 2.           Property

         The Company  does not have any formal  offices at year end.  During the
         year ended June 30, 1998 records were  maintained  and mail received at
         33 Great James Street,  London WC1N 3HB. Records are now maintained and
         mail  received  at First Floor  Hampton  House,  20 Albert  Embankment,
         London, England, U.K. SE1 7TJ. The company owns no real property.

Item 3.           Legal Proceedings

         The  Company is a party to no  pending  legal  proceedings,  nor is its
         property subject to such proceedings, at June 30, 1998.

Item 4.           Submission of Matters to a Vote of Security
                  Holders

         On January 6, 1998,  the Company  submitted a proposal to  shareholders
         for a reverse split of the issued and  outstanding  shares on the basis
         of one new  share  for each 150  shares  issued  and  outstanding.  The
         proposal  was approved by the  shareholders.  Also,  at such date,  the
         shareholders approved a name change to GS Telecom, Limited.

                                     PART II

Item 5.           Market for Registrant's Common Equity and Related
                  Stockholder Matters

         As of the  date of this  report,  management  knows  of no  trading  or
         quotation of the Company's  common stock. The range of high and low bid
         quotations for each fiscal  quarter since the last report,  as reported
         by the National Quotation Bureau Incorporated, was as follows:

                  Year Ended June 30, 1998            High             Low 

                  First quarter                        .00              .00
                  Second quarter                       .00              .00
                  Third quarter                       2.00              .00
                  Fourth quarter                      2.87             2.00

                  Year Ended June 30, 1997            High             Low 

                  First quarter                        *                *
                  Second quarter                       *                *
                  Third quarter                        *                *
                  Fourth quarter                       *                *

<PAGE>

                  Year Ended June 30, 1996            High             Low 

                  First quarter                        *                *
                  Second quarter                       *                *
                  Third quarter                        *                *
                  Fourth quarter                       *                *

* No quotations reported

         The  above  quotations  reflect  inter-dealer  prices,  without  retail
         mark-up,  mark-down,  or commission and may not  necessarily  represent
         actual transactions.

         As of June 30, 1998, there were 400  (approximately)  record holders of
         the Company's common Stock.

         The Company has not  declared or paid any cash  dividends on its common
         stock and does not  anticipate  paying  dividends  for the  foreseeable
         future.

Item 6.           Management's Discussion and Analysis of
                  Financial Condition and Results of Operations

                  Financial Condition and Changes in Financial
                  Condition

Operations  were  conducted,  in the  fiscal  year ended  June 30,  1998,  which
resulted in a loss for the year,  after  write-offs  and closing down costs,  of
($1,753,524).

The Company at year end had no capital,  no cash,  and other  assets of $20,247.
Current liabilities  exceeded assets by $1,565,641.  The Company at year end was
totally illiquid and needed cash infusions from shareholders to provide capital,
or loans from any sources.

Results of  Operations  For Year Ended June 30, 1998 Compared to Year Ended June
30, 1997

General  and  administrative  for the years  ended  June 30,  1998 and 1997 were
$826,397 and $18,441 respectively.  Losses on operations before other items were
($895,611) in 1998 and ($12,302) in 1997.

Other items were written off in the financial  statements because the businesses
have been discontinued as follows:

Provision for Loss on the Investment in API                ($242,447)
Write off of Goodwill or excess of purchase
price over book value of assets acquired
in purchase of GST                                         ($475,367)

Provision for Discontinued Operations
subsidiaries                                               ($140,099)

<PAGE>

Revenues for the year ended June 30, 1998 were $12,409  compared to revenues for
the same period in 1997 of $6,139.

The net loss for the year ended June 30, 1998 was ($1,753,524) after the written
off items of  ($857,913).  For the year ended  June 30,  1997 the net income was
$134,203 after $146,545 of extraordinary income.

Loss per share for year ended June 30,  1998 was  ($.110) and ($.216) per share,
before and after the write-offs  respectively,  compared to ($.04) and 0.0 cents
per share for the year ended June 30, 1997.

The  management  of the Company  does not  believe  that  inflation  has had any
material effect on the Company during the year ended June 30, 1998.

Y2K Compliance

At June 30,  1998,  the Company had no systems  which would be affected by a Y2K
problem, which had not been previously corrected in software.

Results of Operations for Year Ended June 30, 1997 Compared to June
30, 1996

The  Company  ceased  teleconferencing  sales  operations  in June  1995.  Small
collections of income  occurred in the year ended June 30, 1997 in the amount of
$6,139, which compared to revenues for the year ended June 30, 1996, of $50,327.
This amounted to a decrease of 88% in revenues.

The Company had a cost of sales of $0 for the year ended June 30, 1997, compared
to  cost  of  sales  of  $4,343  in  year  ended  June  30,  1996.  General  and
administrative for the years ended June 30, 1997 and 1996 were $6,441 and $9,787
respectively.

The  operating  losses for years  ended June 30,  1997 and 1996 were  ($302) and
($3,803),  respectively.  Total losses before extraordinary items were ($12,302)
in 1997 and  ($11,684) in 1996.  The net income for the year ended June 30, 1997
was $134,243 after extraordinary  income of $146,545 due primarily to settlement
and  extinguishment of trade and related party  obligations.  For the year ended
June 30, 1996, the net loss was ($5,904) after $5,780 of miscellaneous income.

Loss per  share for year  ended  June 30,  1997 was $0 per  share,  compared  to
approximately  $0 per share  for year  ended  June 30,  1996,  before  and after
extraordinary items.

The Company had cash of $204 at June 30, 1997 and no other liquid assets.

<PAGE>

During  the  course of the  fiscal  year  ended  June 30,  1997,  the  company's
outstanding  debt level  decreased to $0 from $141,502 in fiscal year ended June
30, 1996 due to spin off of possible  future  business  contracts,  assets,  and
liabilities into a subsidiary, Wilding Services, Inc.

Working capital decreased from $204 at June 30,1996 to a deficit of ($1,565,641)
at June 30, 1997.

Capital Resources

None.

The Company had no known material  commitments for capital  expenditures at June
30, 1998 other than  accounts  payable and notes  coming due. The Company has no
additional plans,  agreements,  or commitments  concerning any transaction which
would  require the Company to use a significant  amount of capital.  The Company
had no sources of capital at year end.

Item 7.           Financial Statements and Supplementary Data

                  Please refer to pages F-1 through F-11.

Item 8.           Changes in and Disagreements on Accounting and
                  Financial Disclosure

In connection with audits of two most recent fiscal years and any interim period
preceding resignation,  no disagreements exist with any former accountant on any
matter of accounting principles or practices, financial statement disclosure, or
auditing  scope  of  procedure,  which  disagreements  if  not  resolved  to the
satisfaction of the former accountant would have caused him to make reference in
connection with his report to the subject matter of the disagreement(s).

The audit report by Oatley  Bystrom and Hansen for the years ended June 30, 1998
and  1997,   contained  an  opinion  which   included  a  paragraph   discussing
uncertainties related to continuation of the Registrant as a going concern.

The principal  accountants'  reports on the financial  statements for any of the
past two years  contained no adverse  opinion or a disclaimer of opinion nor was
qualified as to uncertainty,  audit scope, or accounting  principles  except for
the going concern qualification specified above.

<PAGE>

                                    PART III

Item 9.           Directors and Executive Officers of the
                  Registrant and Compliance with Section 16(a)

         The directors and executive  officers of the Company as of date of this
         report, are as follows:

          Name                   Age            Position      

Dr. Steven Gillam*                46           Chairman of the Board,
                                               President, and Chief Executive
                                               Officer

Andrew Castle*                    47           Director

Joslin Bennett                    49           Director

Gary Botha*                       57           Director

David Innes                       63           Former Chairman, President, and
                                               Chief Executive (resigned
                                               October 1998)

Gordon Bliss                      54           Director (resigned October
                                               1998)

Marshall Kaye                     73           Director (resigned July 1998)

* Appointed after June 30, 1998

The  term of  office  of  each  director  and  executive  officer  ends  at,  or
immediately  after,  the next annual  meeting of  shareholders  of the  Company.
Except as otherwise indicated,  no organization by which any director or officer
has been  previously  employed  is an  affiliate,  parent or  subsidiary  of the
Company.

Management Experience

David Innes,  age 63, is a fellow of the Institute of Chartered  Accountants  in
England and Wales.  He qualified in 1957. He was a director of ABACA Group,  PLC
from  1990-1992.  From 1992 until  1996,  he  orchestrated  and  co-managed  the
privatization of Elit Ruhagyar Rt, a Hungarian clothing manufacturer.  He is the
Chairman of his own management  consultant  company,  AKS  Management  Services,
Ltd., since 1975. He was Director and Chief Executive of GS Telecom Ltd.
from June, 1997 to July 1998.

Marshall Kaye, age 73, obtained a degree in Physics in 1943 and studied toward a
further degree in Economics at Oxford University. Mr. Kaye has been the Chairman
of Cadmus Newsletters, Ltd. in England, publishers of Parliamentary and European
government

<PAGE>

specialized  newsletters  from 1987 to present.  He has been  Chairman of Rodney
Deitch Associates  (England) since 1987,  government  relations  consultant.  In
1995, Mr. Kaye became  Chairman of Advanced  Valve  Technologies  in England,  a
composite value manufacturer. From 1985 to 1991, he was Chairman G.H. Zeal, Ltd.
in England, a manufacturer of thermometers and scientific instruments.

Gordon  Bliss,  age 54 was  appointed to the Board of Directors in May 1998. Mr.
Bliss  received his management  training and experience  with Smith & Nephew and
Brown & Polson and subsequently  worked in the financial  services  industry for
nearly 30 years. In 1992 he joined C.E Heath Plc. the international brokerage as
Senior  Consultant.  In 1997 he joined Heywood  Collins as a Financial  Services
Advisor.

Marcia  Joslin  Bennet,  age 49, was  appointed  January 6, 1998 to the Board of
Directors.  Ms.  Bennet  has taken  courses in  Commerce  and  Banking  from the
University  of  Toronto  and has  taken  courses  from the  Canadian  Securities
Institute.  From 1981 to 1994, she was a director and Executive Committee Member
of Gordon Capital Corporation.  Since 1994, she has been Chairman and a Director
of Treleven,  Ltd. of Bermuda.  She has been a Registered  Representative of the
NASD and is a Fellow in the Canadian Securities Institute.

Dr. Steven Gillam,  age 46, became Chairman,  President,  CEO, and a Director of
the Company in October  1998.  He has been  Chairman of Jectabor  Limited  since
1987. He is founding director of North Derbyhire Doctors Limited.  He has been a
practicing physician since 1979. He received his education with a Doctorate from
St. George's  Hospital Medical School in London in 1975. He is Chairman of Manex
Entertainment,  Manex Visual  Effects,  and Manex  Studios  businesses  which he
co-founded since 1997.

Andrew  Castle,  age 46,  became a Director of the Company in October  1998.  He
received his  education at Kings College with an LLB degree in 1975. He has been
Chief Executive of Manex Group since 1998. He acted as Acquisitions Director for
Grand Heritage  Hotels Group in 1998. He has been a corporate  consultant to Fox
Brooks Marshall,  a Manchester U.K. law firm since 1993. Prior to 1993, he was a
practicing  solicitor in the U.K. He has been a Director of Manchester  Exchange
Trust LTD since 1998, a Director of Manchester Exchange Investment Company since
1998,  a  director  of Manex  Brokers,  Ltd,  and  Manex  Investments  and Manex
Corporate Services since 1998.

Gary Botha, age 57, was appointed as a Director in July 1998. Mr. Botha received
his education in at Glenwood High School and Natal  University  with a degree in
Accountancy  in 1963.  He was a partner  with  Whinney  Murray & Co.,  Chartered
Accountants  (now Ernst & Young)  from 1973 to 1977.  From 1977 to 1982,  he was
Finance Director of AW Galadari (Holdings) Limited of Dubai and Singapore.  From
1983 to 1986, he was Chief Executive  Officer of Asian Real Estate  Development,
Inc. Since 1987, he has been a private business consultant in the U.K.

<PAGE>

Section 16(a) of the Securities  Exchange Act of 1934, as amended (the Exchange
Act),  requires the Company's officers and directors,  and persons who own more
than 10% of a  registered  class of the  Company's  equity  securities,  to file
reports of  ownership  and  changes in  ownership  of equity  securities  of the
Company  with the  Securities  and  Exchange  Commission  and NASDAQ.  Officers,
directors and  greater-than  10% shareholders are required by the Securities and
Exchange Commission regulation to furnish the Company with copies of all Section
16(a) filings.

         1. The  following  people did not file any reports  under Section 16(a)
during the most recent fiscal year:

         a.       David Innes                   President and Director (at June
                                                30, 1998) - owner of more than
                                                10% of the common stock

         b.       Gordon Bliss                  Director

         c.       Joslin Bennett                Director

         d.       Marshall Kaye                 Director

         2. For each person, listed by subparagraph letter above:

Number of late               Number of                        Known failures
reports                      transactions not                 to file forms
                             reported on a
                             timely basis

a.       3                   January 1998-1                   Forms 3,4, and 5

b.       2                   unknown                          Forms 3 and 5

c.       2                   unknown                          Forms 3 and 5

d.       2                   unknown                          Forms 3 and 5

Item 10.          Executive Compensation

         The  Company  accrued a total of $0 in  compensation  to the  executive
officers  as a group for  services  rendered  to the  Company in all  capacities
during the fiscal year ended June 30, 1998. No one executive  officer  received,
or has  accrued  for his  benefit,  in excess of $60,000  for the year.  No cash
bonuses were or are to be paid to such persons.

         The Company does not have any employee incentive stock option plans.

         There are no plans pursuant to which cash or non-cash  compensation was
paid  or distributed  during the last fiscal year, or is proposed to be  paid or

<PAGE>

distributed in the future,  to the executive  officers of the Company.  No other
compensation not described above was paid or distributed  during the last fiscal
year to the executive  officers of the Company.  There are no compensatory plans
or  arrangements,  with respect to any  executive  office of the Company,  which
result or will result from the resignation,  retirement or any other termination
of such individual's  employment with the Company or from a change in control of
the Company or a change in the individual's  responsibilities following a change
in control.

<TABLE>
<CAPTION>

                    SUMMARY COMPENSATION TABLE OF EXECUTIVES

<S>                   <C>          <C>              <C>             <C>                        <C>                       <C>
                                      Annual Compensation                                      Awards
Name and              Year         Salary           Bonus           Other Annual               Restricted                Securities
Principal                          ($)              ($)             Compensation               Stock                     Underlying
Position                                                            ($)                        Award(s)                  Options/
                                                                                               ($)                       SARs (#)
-----------------------------------------------------------------------------------------------------------------------------------
David Innes,          1998         0                0               0                          0                         **
President(1)
                    ---------------------------------------------------------------------------------------------------------------
                      1997         0                0               0                          0                         0
                    ---------------------------------------------------------------------------------------------------------------
                      1996         0                0               0                          0                         0
</TABLE>


(1)      Resigned as of October 1998.

** Restricted common stock shares totalling  2,912,228 (for himself,  family and
affiliates)  were  issued for $.0103 per share in January  1998.  (See  Certain
Relationship and Related Transactions.)

         Option/SAR Grants Table (None)

Aggregated  Option/SAR  Exercises in Last Fiscal Year an FY-End Option/SAR value
(None)

          Long Term Incentive Plans - Awards in Last Fiscal Year (None)

            DIRECTOR COMPENSATION FOR FISCAL YEAR ENDED JUNE 30, 1998

(Except for  compensation of Officers who are also Directors which  Compensation
is listed in Summary Compensation Table of Executives)

<PAGE>

<TABLE>
<CAPTION>

                                    Cash Compensation                                   Security Grants
<S>                                <C>                  <C>          <C>                      <C>                   <C>
                                                        Meet                                  Number of             Number of
                                   Annual               -ing         Consulting               Shares                Securities
                                   Retainer             Fees         Fees/Other               (#)                   Underlying
Name                               Fees ($)             ($)          Fees ($)                                       Options/SARs(#)
-----------------------------------------------------------------------------------------------------------------------------------
A. Director                        0                    0            0                        4,255,399             0
David Innes                                                                                   (1)(2)
B. Director                        0                    0            0                           24,736             0
Gordon Bliss
C. Director                        0                    0            0                        0                     0
Joslin Bennett
D. Director                        0                    0            0                        0                     0
Marshall Kaye                      0                    0            0                           24,736             0

</TABLE>


Item 11.          a.       Security Ownership of Certain Beneficial
                           Owners and Management

(1)      1,057,015 were purchased at $.01 per share.

(2)  4,255,399  shares  when  combined  with  his  beneficial  ownership  of CCS
Corporate Services, Ltd and CCS Secretaries, Ltd.

         The following table sets forth  information,  as of June 30, 1998, with
respect to the  beneficial  ownership of the Company's no par value common stock
by each person known by the Company to be the beneficial owner of more than five
percent of the outstanding common stock.

<PAGE>

<TABLE>
<CAPTION>

      Stock      Names and Address                               Beneficial                Percent
Title of Class   of Beneficial Owner                             Ownership                of Class

<S>                  <C>                                         <C>                       <C>
Common               Investco(1)                                 5,738,546                 34.1%
                     Bourne Concourse
                     Peel Street
                     Ramsey
                     Isle of Man IM8 1JJ
                     British Isles

Common               Riyadh Trust Limited(2)                     1,879,547                 11.2%
                     2 New Road
                     Howth Summit
                     Howth
                     Ireland

Common               CCS Corporate                               1,696,900                 10.1%
                     Services, LTD(3)
                     Bourne Concourse
                     Peel Street
                     Ramsey
                     Isle of Man IM8 1JJ
                     British Isles

Common               CCS Secretaries, Ltd(4)                     1,501,484                  8.9%
                     Bourne Concourse
                     Peel Street
                     Ramsey
                     Isle of Man IM8 1JJ
                     British Isles

</TABLE>

(1) Beneficially owned by Investco represented by M.J. Stevenson,  Trustee for a
group of non-U.S. Citizens.

(2) Beneficially owned by The Riyadh Trust Limited,  represented M.J. Stevenson,
Trustee for numerous non-U.S. citizens.

(3)  Beneficially owned by David Innes, Director, and Atul Sharma

(4)  Beneficially owned by David Innes, Director

Beneficially owned by a number of Other Private Shareholders.

                  b.       Security Ownership of Management (Continued)

         The following table sets forth  information,  as of June 30, 1998, with
respect to the  management  ownership of the Company's no par value common stock
by the directors and officers of the Company, both individually and as a group.

<PAGE>

<TABLE>
<CAPTION>

<S>                <C>                                       <C>                       <C>
      Stock        Names and Address                         Beneficial                Percent
Title of Class     of Beneficial Owner                       Ownership                 of Class
Common               David Innes                             1,057,015                 6.2%
                     (Resigned 10/98)                        (4,255,399 shares or
                     Flat 2 Whitehall                        25.2% when combined
                     9/11 Bloomsbury Square                  with shares shown in
                     London WC1A 2LP                         notes (3) & (4)
                     England                                 in Item 11a above)

Common               Gordon Bliss                               24,736                0.14%
                     (Resigned 10/98)
                     11 Springs Gardens Court
                     79 Vauxhall Walk
                     London SE11 5HX

Common               Joslin Bennett                                  0                   0%
                     (Appointed 1/98)
                     Belair
                     21 Midelle Road
                     Warwick, Bermuda
                     WK 04

Common               Marshall Kaye                               24,736               0.14%
                     Hampton
                     Coombe Ridings
                     Kingston upon Thames
                     Surrey KT2 7JT

All Directors and Officers as a Group (four persons)                                  16.9%*

</TABLE>

* 25.48%  when  beneficial  ownership  of other  entities  by  David  Innes  are
included.


Item 12.          Certain Relationships and Related Transactions

The   Company    paid    management    fees   to   an   entity    owned   by   a
stockholder/director/officer  of the Company,  David Innes, totaling $0 for 1998
and $12,000 for fiscal year 1997.

The   Company    paid    management    fees   to   an   entity    owned   by   a
stockholder/director/officer of the Company totaling $12,000 in fiscal 1997.

Rent
During  fiscal  year 1998 and  1997,  the  Company  rented  no  facilities  from
affiliates.

Indebtedness of Management.  No director or executive officer of the Company and
no  associate  of any such  director or  executive  officer was  indebted to the
Company at any time since the beginning of the Company's  last fiscal year in an
amount in excess of $60,000.

<PAGE>

                                     PART IV

Item 13.          Exhibits and Reports on Form 8-K

                  The following documents are filed as part of this report:

                  1.       Reports on Form 8-K:  Incorporated by Reference to
                           filing dates:

                           July 8, 1997
                           July 14, 1997
                           November 14, 1997
                           January 16, 1998
                           January 22, 1998

                  2.       Exhibits:


                                            INDEX
                                                   Form 10-K
Regulation                                         Consecutive
S-K Number     Exhibit                             Page Number

3.1            Articles of Incorporation           *Incorporated by reference to
                                                   Registration Statement
                                                   #2-87742-D

3.2            Bylaws                              *Incorporated by reference to
                                                   Registration Statement
                                                   #2-87742-D

3.3            Articles of Amendment to            p. 21,22
               Articles of Incorporation

27.1           Financial Data Schedule             F-12



<PAGE>

                                   SIGNATURES

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

                                            GS TELECOM, LIMITED     
                                            (Registrant)

Date: ______________

                                            ------------------------------------
                                            __________________, Officer


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

                                            GS TELECOM, LIMITED
                                            (Registrant)

Date: ______________

                                            ------------------------------------
                                            Director


                                            ------------------------------------
                                            Director


                                            ------------------------------------
                                            Director


                                            ------------------------------------
                                            Director

<PAGE>


                                               OATLEY BYSTROM & HANSEN
                                            A Professional Corporation of CPA's
                                            6061 South Willow Drive,  Suite 230
                                             Greenwood Village, Colorado  80111
                                            (303) 770-8383 o Fax (303) 721-6925

REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

March 17, 1999

To the Board of Directors
GS Telecom Limited
Denver, Colorado

We have  audited  the  accompanying  consolidated  balance  sheet of GS  Telecom
Limited as of June 30, 1998 and 1997, and the related consolidated statements of
operations,  cash flows and changes in  stockholders'  equity  (deficit) for the
years then ended.  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 did not  audit  the  financial
statements  of GST  Limited,  a  wholly  owned  Isle  of Man  subsidiary,  which
financial  statements  reflect  all of  the  assets  and  revenues  of the  1998
consolidated  totals.  Those financial statements were audited by other auditors
whose report has been furnished to us, and our opinion, insofar as it relates to
the amounts  included  for GST Limited as of June 30, 1998 and for the year then
ended is based solely on the report of the other auditors.

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

In our opinion, the accompanying  consolidated  financial statements referred to
above present fairly,  in all material  respects,  the financial  position of GS
Telecom Limited at June 30, 1998 and 1997, and the results of its operations and
its cash flows for the years then ended, in conformity  with generally  accepted
accounting principles.

The accompanying  consolidated financial statements have been presented assuming
that the  Company  will  continue as a going  concern,  which  contemplates  the
realization of assets and the  satisfaction  of liabilities in the normal course
of business. As discussed in Note A to the financial statements, the Company has
incurred  significant  recurring losses and has substantial  working capital and
stockholders' deficits as of June 30, 1998. At June 30, 1998, the Company had no
substantial product,  services or properties and requires significant additional
financing to satisfy its outstanding obligations and commence operations. Unless
the Company successfully obtains suitable significant additional financing there
is substantial doubt about the Company's ability to continue as a going concern.
Management's  plans in regard to these matters are also discussed in Note A. The
financial  statements  do not include any  adjustments  to reflect the  possible
future effect on the  recoverability and classification of assets or the amounts
and  classification  of  liabilities  that may result  from the  outcome of this
uncertainty.





OATLEY BYSTROM & HANSEN

                                      F-1



                                 STEIN RICHARDS
                             CHARTERED ACCOUNTANTS
10 London Mews, London, W2 1HY Tel: +44(0) 171 402 2176 Fax: +44(0) 171 724 4529


REPORT OF INDEPENDENT CHARTERED ACCOUNTANTS

16th March 1999



To the Board of Directors
GS Telecom Limited
Denver, Colorado


We have audited the accompanying consolidated balance sheet of GST Limited (Isle
of  Man)  as of  June  30,  1998  and the  related  consolidated  statements  of
operations,  cash flows, and changes in  stockholders'  equity (deficit) for the
year  then  ended.  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 audit.

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

In our opinion, the accompanying  consolidated  financial statements referred to
above present fairly, in all material  respects,  the financial  position of GST
Limited (Isle of Man) at June 30, 1998 and the results of its operations and its
cash  flows for the year then  ended,  in  conformity  with  generally  accepted
accounting principles.

The accompanying  consolidated financial statements have been presented assuming
that the  Company  will  continue as a going  concern,  which  contemplates  the
realization of assets and the  satisfaction  of liabilities in the normal course
of business. As disclosed in the financial statements,  the Company has incurred
significant   recurring   losses  and  has   substantial   working  capital  and
stockholders' deficits as of June 30, 1998. At June 30, 1998, the Company had no
substantial product,  services or properties and requires significant additional
financing to satisfy its outstanding obligations and commence operations. Unless
the Company successfully obtains suitable significant additional financing there
is substantial doubt about the Company's ability to continue as a going concern.
Other  than  specific  provisions  included  in  the  accounts,   the  financial
statements do not include any  adjustments or reflect the possible future effect
on  the   recoverability  and  classification  of  assets  or  the  amounts  and
classification  of  liabilities  that  may  result  from  the  out  come of this
uncertainty.




                                                  STEIN RICHARDS
                                                  Chartered Accountants
                                                  Registered Auditors

                     Martin Stein FCA      Robert Nissen ACA

Registered to carry on audit work and authorised to carry on investment business
by the Institute of Chartered Accountants in England and Wales.

                                      F-2

<PAGE>

<TABLE>
<CAPTION>

GS TELECOM LIMITED                                                      
CONSOLIDATED BALANCE SHEET                                                      
                                                                                June 30,              
                                                                           1998            1997
<S>                                                                        <C>             <C>
ASSETS

CURRENT ASSETS                                                  
        Cash                                                               $-              $     204 
        Accounts receivable                                                     3,938              - 
        Prepaid and other current assets                                       16,309              - 
                Total current assets                                         $ 20,247      $     204 
                                                        
                                                        
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)

CURRENT LIABILITIES
        Convertible and demand notes payable                                 $588,900      $       - 
        Accounts payable                                                      695,519              - 
        Payable to affiliates and related parties                             288,048              - 
        Accrued interest payable                                               23,712              - 
        Bank overdraft                                                          1,378              - 
                Total current liabilities                                   1,597,557              - 
                                                        
STOCKHOLDERS' EQUITY (DEFICIT)                                                  
        Common stock, no par value; 100 million shares authorized:
                16,828,414 and 278,220 shares issued and outstanding,
                respectively                                                1,137,357        966,857
        Accumulated deficit                                                (2,720,177)      (966,653)
        Foreign currency translation adjustments                                5,510              - 
                Total stockholders' (deficit)                              (1,577,310)           204 
                                                        
                Total liabilities and stockholders' equity (deficit)          $20,247           $204 
                                                        

                                       See accompanying notes

                                      F-3

</TABLE>



<PAGE>

<TABLE>
<CAPTION>


GS TELECOM LIMITED
CONSOLIDATED STATEMENT OF OPERATIONS
                                                                 Year Ended June 30,
                                                            1998            1997
<S>                                                        <C>              <C>
NET SALES                                                   $65,431          $6,139
                                                        
COST OF SALES                                              (134,645)              - 
                                                        
        Gross income (loss)                                 (69,214)          6,139
                                                        
SELLING, GENERAL AND ADMINISTRATIVE EXPENSE                 826,397          18,441
                                                        
                Loss from continuing operations            (895,611)        (12,302)

DISCONTINUED OPERATIONS:
  Discontinued operations                                  (140,099)              - 
  Write-off investment in unconsolidated subsidiary        (242,447)              - 
  Write-off goodwill of consolidated subsidiaries          (475,367)              - 

    Loss from discontinued operations                      (857,913)              - 

    Loss before extraordinary item                       (1,753,524)        (12,302)
                                                        
EXTRAORDINARY ITEM -
  SETTLEMENT AND EXTINGUISHMENT OF TRADE DEBT
   AND RELATED PARTY AMOUNTS PAYABLE                              -         146,545
                                                        
NET INCOME (LOSS)                                       $(1,753,524)       $134,243




BASIC AND DILUTIVE NET INCOME (LOSS) PER SHARE:
                                                        
  (LOSS) FROM CONTINUING OPERATIONS                          $(0.11)         $(0.04)
                                                        
  (LOSS) FROM DISCONTINUED OPERATIONS                         (0.11)              -   
                                                        
  EXTRAORDINARY ITEM                                              -            0.52 
                                                        
  NET INCOME (LOSS) PER SHARE                                $(0.22)          $0.48 
                                                        

  WEIGHTED AVERAGE SHARES OUTSTANDING                     8,124,053         278,220


                                    See accompanying notes.

                                      F-4

</TABLE>

 
<PAGE>
<TABLE>
<CAPTION>

GS TELECOM LIMITED                                                      
CONSOLIDATED STATEMENT OF CASH FLOWS                                                    
                                                                           Year Ended June 30,
                                                                      1998            1997
<S>                                                              <C>                 <C>
CASH FLOWS FROM OPERATING ACTIVITIES                                                    
   Net income (loss)                                             $(1,753,524)        $134,243 
   Ad provided by operating activities

      Write-off investment in unconsolidated subsidiary              242,447                - 
      Write-off goodwill of consolidated subsidiaries                475,367                - 
      Common stock issued for services                                20,500                - 
      Depreciation and amortization                                   52,380                - 
      Changes in operating assets and liabilities:                          
         Receivables                                                  (3,938)             576 
         Inventories                                                       -            5,851
         Prepaid and other current assets                            (16,309)             196 
         Accounts payable                                            695,519         (120,795)
         Accrued interest payable                                     23,712                - 
         Bank overdraft                                                1,378                - 
      Net cash flows from (used for) operating activities           (262,468)          20,071

CASH FLOWS FROM INVESTING ACTIVITIES                                                    
  Purchase of equipment                                              (44,947)               - 
  Investment in unconsolidated subsidiary                           (242,447)               - 
  Investment in consolidated subsidiaries                           (332,800)               - 
         Net cash flows (used for) investing activities             (620,194)               - 

CASH FLOWS FROM FINANCING ACTIVITIES
  Advances from (repaid to) affiliates and related parties           288,048          (20,707)
  Issuance of convertible and other notes payable                    588,900                -
         Net cash flows (used for) from financing activities         876,948          (20,707)

EFFECT OF EXCHANGE RATE CHANGES ON CASH                                5,510                - 

NET INCREASE (DECREASE) IN CASH                                         (204)            (636)
                                                        
CASH AT BEGINNING OF YEAR                                                204              840 

CASH AT PERIOD END OF YEAR                                                $-             $204 


SUPPLEMENTAL DISCLOSURES:
  Net interest paid                                                  $24,119               $- 
  Non-cash investing and financing activities:
         Note payable issued stockholders of acquired subsidiary     150,000                - 


                                    See accompanying notes.

                                      F-5

</TABLE>


<PAGE>
<TABLE>
<CAPTION>

GS TELECOM LIMITED
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIT)


                                                     Common Stock              Accumulated
                                                Shares          Amount             Deficit
<S>                                           <C>               <C>           <C>
Balances at July 1, 1996                         278,220        $966,857      $(1,100,896)
                                                        
   Net income                                          -               -          134,243 
                                                        
Balances at June 30, 1997                        278,220         966,857         (966,653)

   Conversion of note payable issued to
     stockholders of acquired subsidiary      14,500,000         150,000                - 

   Issuance of fractional shares from fiscal
     1997 reverse stock split                        194               -                -      
                                                                
   Stock issued for services                   2,050,000          20,500                -      
                                                                
   Net (loss)                                          -               -       (1,753,524)  
                                                                
Balances at June 30, 1998                     16,828,414      $1,137,357      $(2,720,177) 


                                    See accompanying notes.

                                      F-6

</TABLE>


<PAGE>

GS Telecom Limited
Notes to Consolidated Financial Statements

Note A - Organization and Business

Organization and Nature of Business
-----------------------------------
GS Telecom Limited, formerly  Teleconferencing Systems International,  Inc. (the
"Company") was incorporated in Colorado on December 19, 1983.  Activities of the
Company from June 30, 1995 until November 15, 1997 were primarily liquidation of
operating  assets and settlement of obligations  owed creditors and employees as
previously reported.

On November 15, 1997, the Company acquired an Isle of Man company; also named GS
Telecom  Limited  (later  changed  to GST  Limited - "GST"),  by  issuance  of a
$150,000  convertible  note  payable.  GST,  the  acquired  subsidiary,  had net
liabilities  of  $544,268.  The note  payable was  subsequently  converted  into
14,500,000   shares  of  common  stock  and  issued  to  the  acquired   company
stockholders, some of whom (David Innes) were related parties.

The assets of the GST  subsidiary  also  included  Associated  Power  Industries
Limited  ("API"),  an U.K.  designer and manufacturer of energy savings systems.
GST owns 50% of API with an  option  to  acquire  the  remaining  50%  ownership
interest for three years beginning  September 1, 1998. The investment in API has
been accounted for using the equity method,  since the Company had  insufficient
board  representation  or other control  attributes  involving API.  During year
ended June 30 1998,  Management  elected to write-  off its  investment  in API,
$242,447, as a result of API's continued operating losses.

GST also has two U.K. wholly owned subsidiaries:  Guardian Smart Systems Limited
("GSS") and Total Energy Controls  (Commercial) Limited ("TECC").  GSS' business
is the design and  marketing  of domestic  energy  savings  and home  management
systems and TECC's  business is to market and install  commercial  energy saving
devices.  Mainly  due to a lack of  working  capital,  neither  GSS nor TECC was
successful,  and  Management  elected,  effective  June 30, 1998, to discontinue
operations.  Accordingly,  the Company has taken steps and adopted a plan to pay
obligations  owed  employees  and others,  resulting in an  estimated  loss from
discontinued operations of $140,099, and expensed un-amortized goodwill totaling
$475,367.

Going Concern Considerations
----------------------------
The accompanying  financial  statements have been prepared  assuming the Company
will continue as a going concern,  which  contemplates the realization of assets
and  satisfaction  of liabilities in the normal course of business.  The Company
has incurred  significant  recurring losses and has substantial  working capital
and stockholders' deficits as of June 30, 1998.

At June 30, 1998, the Company had no substantial product, services or properties
and required significant additional financing to satisfy outstanding obligations
and to commence operations.  Management's plans to address these matters include
private  placements of stock,  obtaining  short-term loans, and seeking suitable
joint venture relationships in technology and e-commerce fields of business.

                                      F-7

<PAGE>

GS Telecom Limited
Notes to Consolidated Financial Statements

Unless  the  Company  successfully   obtains  suitable  significant   additional
financing there is substantial  doubt about the Company's ability to continue as
a going  concern.  The financial  statements do not include any  adjustments  to
reflect the possible future effect on the  recoverability  and classification of
assets or the amounts and classification of liabilities that may result from the
outcome of this uncertainty.

Since June 30, 1998 the Company has  entered  into an  agreement  to acquire for
common  stock of the  Company,  software  ownership  interests  in software  and
special effects production companies (see Note I).

Note B - Summary of Significant Accounting Policies

Principles of Consolidation
---------------------------
The  financial  statements  include  the  accounts  of GS Telecom  Limited,  GST
Limited,  Guardian Smart Systems Limited and Total Energy Controls  (Commercial)
Limited.  All  significant  inter-company  transactions  and balances  have been
eliminated.

Use of Estimates
----------------
Preparation  of financial  statements  in  conformity  with  generally  accepted
accounting principles requires management to make estimates and assumptions that
affect the amounts reported in the financial  statements and accompanying notes.
Significant areas requiring the use of management estimates are accrual of costs
of   discontinued   operations,   assessment  of  realization  of  goodwill  and
investments, useful asset lives for depreciation and amortization, and valuation
of stock of issued for  services  and  deferred  tax  benefits.  Actual  results
inevitably  will  differ  from  those  estimates,  and such  differences  may be
material to the financial statements.

Foreign Currency
----------------
The financial  statements of the Company's non-U.S.  subsidiaries are translated
into U.S. dollars using current rates of exchange, with gains or losses included
in the cumulative  translation  adjustment  account in the stockholders'  equity
section  of  the  consolidated  balance  sheet.  Revenues,  costs  and  expenses
denominated  in foreign  functional  currencies  are  translated at the weighted
average exchange rate for the period. Gains and losses on currency  transactions
(denominated  in currencies  other than the local currency) are reflected in the
statement of consolidated operations.

                                      F-8

<PAGE>

GS Telecom Limited
Notes to Consolidated Financial Statements

Revenue Recognition
-------------------
Sales are recognized  when products are shipped.  Sales generally are on an open
account basis, subject to credit limits.

Property, Plant and Equipment
-----------------------------
Property,  equipment  and  vehicles are  recorded at cost.  Maintenance  and
repair  costs  are  charged  to  expense  as  incurred,   and  renewals  and
improvements  that  extend  the  useful  life  of  assets  are  capitalized.
Depreciation  is computed  using the  straight-line  method over the assets'
estimated useful lives as follows:

                    Equipment           4 years
                    Vehicles            4 years
                    Office equipment    4 years

On June 30, 1998,  substantially  all  operations of the Company's  subsidiaries
were discontinued and the remaining net costs of depreciable assets were charged
off.  Accordingly,  depreciation  expense  recorded  in fiscal 1998 and 1997 was
$44,947 and none, respectively.

Goodwill
--------
Goodwill arose from the  acquisition of GST in fiscal 1998 for assumption of net
liabilities  totaling  $332,800  and  issuance  of a $150,000  convertible  note
payable to stockholders of the subsidiary.  Prior to June 30, 1998, goodwill was
being  amortized over 40 years on a  straight-line  basis.  As of June 30, 1998,
Management  elected to  discontinue  the  operations  of GST,  and  accordingly,
write-off the $475,367 unamortized cost of the goodwill.

Income Taxes
------------
The Company has adopted the  provisions  of Statement  of  Financial  Accounting
Standards No. 109,  "Accounting for Income Taxes," which incorporates the use of
the asset and liability  approach of accounting for income taxes.  The asset and
liability   approach  requires  the  recognition  of  deferred  tax  assets  and
liabilities  for the  expected  future  consequences  of  temporary  differences
between the financial  reporting  basis and tax basis of assets and  liabilities
(see Note D).

Statement of Cash Flows Information & Supplemental Non-Cash Financing Activities
--------------------------------------------------------------------------------
Cash and cash equivalents include cash and short-term  investments with original
maturities of three months or less.

                                      F-9

<PAGE>

GS Telecom Limited
Notes to Consolidated Financial Statements

Basic Earnings (Loss) Per Share
-------------------------------
Basic earnings  (loss) per share of common stock are computed using the weighted
average number of shares  outstanding  during each period.  Diluted earnings per
share  is  computed  on the  basis  of  the  average  number  of  common  shares
outstanding plus the dilutive effect of convertible notes payable.

The basic and the dilutive  earnings per share are the same in fiscal 1998 since
the Company had a net loss and the  inclusion  of the effect of the  convertible
notes issued in 1998 would be anti-dilutive.

Concentrations
--------------
Substantially all operations of the Company were conducted in the U.K. in fiscal
1998.

Note C - Notes Payable

Unsecured 9% notes payable to an individual
dated February 19, 1998 and March 31, 1998,
payable on demand.                                                   $212,400

8% convertible notes payable issued November
20, 1997, due September 30, 2000. The notes
are classified as a current liability because
the Company has subsequently agreed to repay
the obligations upon receipt of anticipated
funding in fiscal 1999.                                               376,500
                                                                    ---------

                                                                     $588,900

Note D - Income Taxes

As a result of the  substantial  change in ownership of the Company arising from
the  issuance  of 14.5  million  shares of common  stock in November  1997,  the
Company's net operating loss carryforward  became limited to the estimated value
of the stock issued.  As of June 30, 1998 the  accumulated  net  operating  loss
carryforward  totals  approximately  $150,000 that may be offset  against future
taxable income,  if any. The loss  carryforward  expires in varying amounts from
2003 through 2013.

A tax benefit has not been reported in the accompanying financial statements for
the  operating  loss  carryforward  because the Company is  uncertain  as to the
likelihood of utilization.  Accordingly,  the approximate tax benefit of $22,500
of the loss  carryforward  has been offset by a valuation  allowance of the same
amount, a decrease of $87,500 in 1998.

Note E - Stockholders' Equity

Stock-Split
-----------
On January 6, 1998,  the board of directors  approved a 150-to one reverse split
of the issued and  outstanding  common shares of the Company.  All share and per

                                      F-10

<PAGE>

GS Telecom Limited
Notes to Consolidated Financial Statements

share amounts have been  retroactively  restated in the  accompanying  financial
statements to reflect the effect of the reverse stock split.

Conversion of Note Payable
--------------------------
On  November  15,  1997,  the  Company  acquired  GST by  issuance of a $150,000
convertible note payable to GST  stockholders.  On January 6, 1998, the $150,000
note payable was converted into 14,500,000 shares of common stock (approximately
$.01 per share).

Stock Issued for Services
-------------------------
On February  10,  1998,  the Company  issued  2,050,000  shares of common  stock
registered  on Form S-8 to two  individuals  (holders of note  payable  from the
Company) for services related to the reorganization of the Company. The value of
the services were estimated at $20,500 ($.01 per share).

Convertible Notes Payable
-------------------------
The convertible  note holders have the option to convert the original  principal
amount of the notes (a total of  $376,500)  into common stock at the lower of $2
per share or 75% of the average  closing bid price of the stock for trading five
days prior exercise.  Notwithstanding the foregoing, if, after the effectiveness
of a registration  statement or if an exemption is available from  registration,
the  closing  bid  price of the  common  stock  reaches  $4 per  share  for five
consecutive trading days, the Company has the option to require conversion of up
to 50% of the original  principal,  and if the closing bid price  reaches $8 per
share, the Company has the option of requiring conversion of all of the original
principal.

Note F - Related Party Transactions

The   Company    paid    management    fees   to   an   entity    owned   by   a
stockholder/director/officer of the Company totaling $12,000 in fiscal 1997.

Certain companies owned by David Innes, an officer and Director,  and members of
his family and others,  received  stock by purchase and through note  conversion
totaling 4,255,399 shares of the Company in 1998. The  proporationate  ownership
of the  private  companies  holding  the  shares  is not  known and has not been
disclosed  to the  Company.  Mr.  Innes  received  shares  as part  of the  note
conversion for the acquisition of GS Telecom of the Isle of Man.

Note G - Commitments

The Company  leases its present  office on  a month-to-month basis at $1,000 per
month. Rental expense for offices and related facilities in fiscal 1998 and 1997
was $25,171 and none, respectively.

Note H - Fair Value of Financial Instruments

The  carrying  amounts for  accounts  receivable,  accounts  payable and accrued
expenses  approximates  fair  value  because  of the short  maturities  of these
instruments.  The fair value of notes payable approximates fair value because of
the market rate of interest on the debt.

The  determinations  of fair value  discussed above are subjective in nature and
involve  uncertainties  and significant  matters of judgment and do not include
income tax  considerations.  Therefore,  the results  cannot be determined  with
precision and cannot be substantiated by comparison to independent market values
and may not be realized in actual sale or settlement of the instruments.

                                      F-11

<PAGE>

GS Telecom Limited
Notes to Consolidated Financial Statements

Note I - Events Subsequent to June 30, 1998 (Unaudited)

In  September  1998,  the Company  entered  into a reverse  merger  agreement to
acquire  Masstech,  Inc.,  a  Delaware  corporation.  Subsequently,  the  merger
agreement  was modified to provide for the  Masstech'  software  and  intangible
property rights ("IPR") for $150,000 in the form of 6.6 million shares of common
stock of the Company (approximately $.23 per share). In addition, two principals
of Masstech,  Dr.  Steven Gillam and Mr.  Andrew  Castle,  agreed to sell to the
Company  for 48.4  million  shares of  common  stock of the  Company,  their 15%
ownership  interest  in each of four  companies  involved in  producing  special
effects for the Hollywood film industry:

Manex Studios, LLC
Manex Visual Effects, LLC
Manex Entertainment, LLC
Mass Illusions, LLC

Subsequent  to entering  into the initial  agreement,  Dr. Gillam and Mr. Castle
have been appointed as members of management  and directors of the Company.  The
proposed  transaction  is yet not closed  because "due  diligence"  has not been
entirely completed nor has contract restructuring.

Universal  Syntropy  Corporation,  a  California  corporation  wholly  owned and
organized by the Company in fiscal 1999,  is managing the  commercialization  of
the IPR discussed above. Universal Syntropy is located in Alameda, California

                                      F-12