U.S. SECURITIES AND EXCHANGE COMMISSION
                              Washington, DC 20549
                                   FORM 10-KSB

(Mark One)
[X] ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 
    1934

         For the fiscal year ended December 31, 1996
                                                     OR

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

    For the transition period from                to

                         Commission file number 1-13478

                    GLOBAL TELECOMMUNICATION SOLUTIONS, INC.
               ----------------------------------------------  
               (Name of small business issuer in Its charter)

        Delaware                                         13-3698386
---------------------------------           -----------------------------------
(State or other jurisdiction of             (I.R.S. Employer Identification No.)
incorporation or organization)               


   5697 Rising Sun Avenue, Philadelphia, PA                       19120
   -----------------------------------------                    ----------
   (Address of Principal Executive Offices)                     (Zip Code)

                                 (215) 342-7700
                ------------------------------------------------
                (Issuer's Telephone Number, Including Area Code)

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

    Title of Each Class:             Name of Each Exchange on Which Registered
    
    Common Stock, par value                 Boston Stock Exchange, Nasdaq 
        $.01 per share                          SmallCap Market

    Common Stock                            Boston Stock Exchange, Nasdaq 
    Purchase Warrants                            SmallCap Market

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

                  Check whether the issuer: (1) filed all reports required to be
filed by Section 13 or 15(d) of the  Securities  Exchange Act of 1934 during the
past 12 months (or for such shorter  period that the  registrant was required to
file such reports), and (2) has been subject to such filing requirements for the
past 90 days. Yes X No
                  Check  if there  is no  disclosure  of  delinquent  filers  in
response to Item 405 of Regulation S-B 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 ]
                  The  issuer's  revenues  for its most recent  fiscal year were
approximately $12.1 million.
                  As of  April  11,  1997,  the  aggregate  market  value of the
issuer's Common Stock held by non-affiliates of the issuer (based on the average
bid and asked  prices of such  stock)  was  $13,762,082.25.  At April 11,  1997,
1,856,448 shares of the issuer's Common Stock were outstanding.

                               Page 1 of 58 Pages
                             EXHIBIT INDEX - PAGE 52


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                                     PART I

ITEM 1.           DESCRIPTION OF BUSINESS.

The Company

                  Global Telecommunication  Solutions, Inc. ("Company" or "GTS")
is a  facilities-based  global  provider of prepaid phone cards that offer users
reliable,  convenient and  cost-effective  access to domestic and  international
telecommunications  services.  The  Company's  core  product  line  consists  of
traditional prepaid phone cards marketed domestically and internationally,  such
as its  signature  product,  the  Global  Link Card.  The  Company  also  offers
custom-designed  prepaid  phone cards for  business  promotional  use and retail
products utilizing prepaid phone card technology for specialized purposes,  such
as information  access and interactive  games. Many of the Company's phone cards
are offered with enhanced services, such as interactive applications, customized
voice greetings and data  collection,  and the Company intends to begin offering
other  enhanced  services in the near future,  such as voice mail and conference
calling.

                  The Company generated revenues of approximately  $12.1 million
in 1996,  compared  to $3.1  million in 1995.  It  activated  approximately  1.5
million  traditional  prepaid phone cards in 1996,  compared to 554,000 cards in
1995, and  decremented  approximately  21.9 million minutes from its traditional
phone cards in 1996,  compared to 4.3 million  minutes in 1995. The Company also
activated approximately 24.6 million custom-designed  promotional phone cards in
1996,  compared to 139,000  cards in 1995,  and  decremented  approximately  1.5
million  minutes from its promotional  phone cards in 1996,  compared to 550,000
minutes in 1995. Substantially all of the increases in revenues,  activations of
traditional   cards  and  decremented   minutes  from  traditional   cards  were
attributable to GTS'  acquisition on February 29, 1996 of all of the outstanding
capital stock of Global Link Teleco Corporation  ("Global Link").  Global Link's
operating results were  consolidated  with the Company's  commencing on March 1,
1996. Substantially all of the increases in activations of promotional cards and
decremented  minutes from promotional  cards were  attributable to a promotional
campaign  created by the Company for Kraft Foods. See  "Management's  Discussion
and Analysis of Financial Condition and Results of Operations."

                  The Company  currently markets its prepaid phone cards in four
product lines: (i) traditional prepaid phone cards marketed domestically through
distributors   and   retail   establishments,   such  as   convenience   stores,
supermarkets,   drug   stores   and  mass   merchandisers,   which   represented
approximately  71% of the Company's  revenues in 1996; (ii) traditional  prepaid
phone cards marketed  internationally to business and leisure travelers destined
for the United  States,  which  represented  approximately  8% of the  Company's
revenues  in  1996;  (iii)  custom-designed  promotional  phone  cards  sold  to
businesses  to enhance the  marketing  of their  products  and  services,  which
represented  approximately  17% of the  Company's  revenues  in  1996;  and (iv)
specialized  retail  products  utilizing  prepaid phone card  technology,  which
represented  approximately  3% of the  Company's  revenues in 1996.  The Company
believes  that its  established  reputation  in the prepaid  phone card industry
among   retailers,   distributors   and   business   customers,   its   existing
infrastructure  and  experienced  management  team  provide  it  with  important
advantages  over many  competitors.  In 1995,  the Company was named the prepaid
phone card company of the year by Telecard World, an industry trade publication.

Corporate Background

                  GTS and Global  Link were  incorporated  under the laws of the
State of Delaware in December 1992 and March 1994,  respectively.  The Company's
principal executive offices are located at 5697 Rising Sun Avenue, Philadelphia,
Pennsylvania 19120 and its telephone number is (215) 342-7700.

Market Overview and Opportunity

                  Prepaid  phone cards have been widely used  throughout  Europe
and Asia for more than ten years.  Although prepaid phone cards were not used on
a widespread  basis in the United States prior to 1994, the market in the United
States is rapidly  expanding,  with annual sales of prepaid  phone cards growing
from an estimated  $100  million in 1993 to an  estimated  $1.1 billion in 1996.
Industry  analysts  project  annual  sales of prepaid  phone cards in the United
States to reach $2.5 billion by 2000.  The Company  anticipates  that  continued
industry growth will be fueled by (i) increasing  consumer acceptance of prepaid
phone  cards and  recognition  of their cost  advantages  over  standard  credit


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calling cards, collect calling and other options  available to consumers seeking
to place phone calls when away from the house or office and (ii) a broader base
of consumer  segments  using  prepaid phone  cards, such as  business employees,
students and travelers.

                  The  court-directed  divestiture  of the Bell  System  in 1984
created  competition in the long distance  market.  Over time,  alternatives  to
AT&T, the long distance carrier resulting from the divestiture,  began to emerge
to compete for long distance customers. In 1995, the United States long distance
industry  generated  revenues of more than $75 billion.  One type of  competitor
that emerged from the changing long distance market was the reseller,  an entity
that  purchases a high volume of long  distance  minutes from major  carriers at
rates  significantly  lower than those that could be obtained by individuals and
small businesses,  and, in turn, resells those minutes to its own customer base.
Eventually,  certain  resellers  began to market  resold long  distance  minutes
through the sale of prepaid phone cards.

                  Prepaid   phone   cards  are  a   reliable,   convenient   and
cost-effective  alternative to coin-operated calling, collect calling,  operator
assisted calls and standard  credit calling cards.  Unlike credit calling cards,
which provide virtually  unlimited credit and impose surcharges on long distance
services, prepaid phone cards are paid for in advance and provide finite amounts
of calling time.  Currently,  two types of prepaid phone card  technologies  are
used in the United  States.  Most domestic  prepaid  phone cards,  including the
Company's  cards,  utilize a remote  memory  technology,  which permits users to
place local, long distance and international  calls from any touch-tone(R) phone
by dialing a toll-free or local access number to connect to a prepaid phone card
switching  platform.  After being prompted to enter a PIN, the caller is advised
of the value remaining on the card and is prompted to enter the telephone number
to be called. The call is then routed to its destination. The per-minute charges
for  the  call  are   automatically   decremented   from  the  prepaid   account
corresponding to the PIN as the call progresses.

                  In contrast,  "smart card" technology utilizes computer chips,
magnetic  strips or optical readers built into cards that must be swiped through
or  inserted  into  specially-designed  pay  telephones.  Smart card  technology
requires  the  replacement  of  standard  telephones  with  telephones  that are
equipped with mechanisms  capable of reading such cards. In order for smart card
technology to be widely used in any particular area, all or substantially all of
the public pay telephones in that area must be equipped to read the smart cards.
Those  telephones  that do not  contain a smart card  reader,  such as hotel and
office  telephones,  still  require the consumer to use a phone card with remote
memory technology.  Smart card technology is currently in widespread  commercial
use in Europe  and  Japan  and has been  introduced  in the  United  States on a
limited basis by NYNEX, U.S. West and GTE.

                  As the  prepaid  phone  card  industry  evolves,  the  Company
believes  that  traditional  prepaid  phone  cards  will  increasingly  become a
commodity and that the successful competitors will be those that (i) establish a
brand name  recognized for reliable  telecommunications  services and responsive
customer  service,  (ii)  improve  operating  margins  by  optimizing  their own
switching and network facilities to reduce transmission costs through least-cost
routing  and  providing  transmission  capacity  for  small   telecommunications
services providers, (iii) possess the experience and calling volume to negotiate
carrier  agreements with multiple long distance  carriers that provide favorable
volume discounts and (iv)  differentiate  their cards and services by offering a
variety of  convenient  features,  such as the  ability to easily  recharge  the
cards,   interactive   features  for  business   promotions  and   entertainment
applications,  and value-added enhanced services,  such as voice mail, fax mail,
conference calling and speed dialing.

Strategy

                  The Company's  strategy is to continue the rapid growth of its
operations and capture an increasing  share of the expanding  prepaid phone card
market.  Key  components of the Company's  strategy  include:  (i) expanding the
domestic  and  international  retail  distribution  channels  for the  Company's
prepaid phone cards; (ii) expanding its Company-owned,  interconnected switching
network;  (iii) acquiring companies or assets to achieve the Company's strategic
goals;  and (iv) pursuing other growth  opportunities  including:  identifying a
broader base of consumer segments for the Company's prepaid phone cards, such as
business  employees,  students and travelers;  exploring  alternative methods of
prepaid  phone card  distribution,  such as vending  machines and ATM  machines;
exploiting  alternative  technologies  for  prepaid  products,  such as  prepaid
wireless   services;   and   expanding   strategic   relationships   with  other
telecommunications services providers.

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<PAGE>



                  Expanding Distribution

                  Domestic  Retail.  The Company's  in-house sales force markets
the  Company's  Global  Link  Card and other  traditional  prepaid  phone  cards
domestically  (i)  directly  to  national,   regional  and  independent   retail
establishments, which sell the phone cards to a wide range of end users, (ii) to
independent  distributors with widespread  distribution channels and access to a
substantial number of retailers,  such as newsstand  distributors,  food brokers
and  tobacco  and  confectionery  distributors  and  (iii)  to  other  marketing
companies  and  organizations  that sell the  phone  cards to  consumers  within
specific niche markets. The Company also markets its prepaid phone cards through
Company-owned and operated retail phone centers.

                  The Company  believes  that it can  increase  domestic  retail
penetration by:

                  o        creating   smaller  regions  and  hiring   additional
                           Regional Sales Managers and other sales personnel who
                           could  then  focus on  specific  target  markets  and
                           address individual retailer requirements;

                  o        increasing  its sales force in each  market  where it
                           installs a  switching  platform  in order to promote,
                           market and sell its Local Link services; and

                  o        recruiting  additional  distributors  to  market  and
                           promote  its prepaid  phone cards to local,  regional
                           and national retailers.

                  International Retail.  The Company intends to increase 
                  international distribution of its phone cards by:

                  o        hiring  additional  marketing  personnel to actively 
                           solicit new sales agents and distributors in Europe,
                           the Far East and South America; and

                  o        introducing  telecommunications  services  that  will
                           provide  end users  with  convenient,  cost-effective
                           access  within and  between  more than 30  countries,
                           including the United States and Canada.

                  Promotional  Phone Cards.  The Company  intends to broaden its
promotional  phone card  offerings  by hiring  additional  creative,  design and
marketing  personnel,  as well as sales  representatives  to focus  primarily on
large business customers, advertising agencies and promotional companies.

                  Expanding Switching Network

                  The  Company  intends to expand its  network of  Company-owned
switching platforms by installing  additional switching platforms in a number of
major  metropolitan  areas in the  United  States  and  interconnecting  them to
provide  reliable,   cost-effective  telecommunications  services.  The  Company
believes that the installation of switching  platforms in strategically  located
markets can substantially  reduce costs associated with customers  accessing its
switching   platforms  and  terminating   domestic   telephone  calls.  See  "--
Telecommunications Infrastructure."

                  Pursuing Acquisition Opportunities

                   Numerous  companies  have  entered  the  prepaid  phone  card
industry over the last few years,  attracted by the industry's  dramatic  growth
and barriers to entry that,  initially,  were minimal.  Many of these  entrants,
while  possessing  access  to  potentially  strong   distribution   channels  or
innovative  products,  did not  anticipate  the  complexity  of the  phone  card
business  and have not been able to exploit all of the  elements  necessary  for
success,  such as an established  infrastructure,  a dedicated  sales force,  an
established  reputation  in the prepaid  phone card  industry  among  retailers,
distributors  and  business  customers,  access to  capital  and an  experienced
management team. The Company believes that the highly  fragmented  prepaid phone
card industry presents an opportunity for consolidation through acquisitions and
subsequent integration of acquired businesses.  Accordingly, the Company intends
to acquire companies or assets to achieve its strategic goals.

                  Industry  analysts  estimate that there are  approximately 500
prepaid phone card companies competing within the industry. The Company believes
that a large  majority of these  companies are small and have limited  access to
capital,

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and  that  many of them  represent  suitable  acquisition  candidates  for  more
developed  companies,  such  as  the  Company,  that  have  access  to  capital,
management  expertise  and  an  established  telecommunications   infrastructure
important to integrate the viable aspects of acquired companies' operations into
their own and to capitalize on the economies of scale which may result from such
acquisitions.  The  Company  anticipates  that once its  integrated  network  of
switching   platforms  is  in  place,   it  will  be  able  to   integrate   the
telecommunications volume generated by acquired companies' customer bases and to
benefit from economies of scale that were previously unavailable to the acquired
Company as a  stand-alone  operation.  While the  Company  regularly  engages in
discussions  regarding  proposed  acquisitions,  it currently  has no agreement,
arrangement or understanding with respect to any such acquisition.

                  Pursuing Other Growth Opportunities

                  The  Company  intends to pursue  other  growth  opportunities,
including:

                  o        identifying  a broader base of consumer  segments for
                           the Company's  prepaid phone cards,  such as business
                           employees  for their  use when away from the  office,
                           students and travelers  temporarily  living away from
                           home;

                  o        exploring  alternative  methods of prepaid phone card
                           distribution,   such  as  vending  machines  and  ATM
                           machines placed in heavily traveled locations such as
                           airports, shopping malls and amusement parks;

                  o        exploiting  alternative  technologies  for  prepaid 
                           products, such as prepaid wireless services; and

                  o        expanding  strategic  relationships  with  other 
                           telecommunications services providers.

Products and Telecommunciations Services

                  The  Company's  core  product  line  consists  of  traditional
prepaid phone cards marketed  domestically  and  internationally,  including the
Global Link Card.  The Company  also offers  custom-designed  promotional  phone
cards for business  promotional use and retail products  utilizing prepaid phone
card  technology  for  specialized  purposes,  such as  information  access  and
interactive  games.  Some of the enhanced  services  typically  offered with the
Company's phone cards include (i) customized  voice greetings (which the Company
believes to be an  attractive  feature to large  retailers and  businesses  that
utilize the Company's  promotional  phone cards),  (ii) foreign  language  voice
prompts and  instructions,  (iii) data collection  (used to gather marketing and
demographic  information),  (iv) sequential calling,  which permits customers to
place  additional  calls  without  exiting the  platform  and (v) voice mail and
conference calling (which the Company intends to begin offering to its customers
in the near future).

                  Traditional Phone Cards Marketed Domestically

                  The Company's primary  marketing and distribution  strategy is
to target retailers  directly and through  distributors  that sell the Company's
phone  cards to end  users.  The  Company  has and  will  continue  to  increase
retailers'   awareness   of   the   profit   potential   of   offering   prepaid
telecommunications  services,  the minimal  space  needed to sell the  Company's
phone cards and the  ability of the  Company's  phone cards to generate  ongoing
residuals  for  retailers  through  recharge  revenues.  In  furtherance  of its
strategy,  the Company  facilitates  the display of its phone cards by providing
(i) turnkey merchandising  materials,  which include customized cards and retail
packaging  and  complete  display and  signage  systems,  (ii) retail  promotion
programs for which the Company and the retailer  share costs and (iii) access to
marketing information generated by the Company's switching platforms.

                  Traditional  prepaid  phone cards permit users to place local,
long  distance  and  international  calls  from any  touch-tone  telephone.  The
Company's   rechargeable   traditional  phone  cards  enable  customers  to  add
additional  calling time to the phone cards at certain retail  locations and, in
some  cases,  by dialing a toll-free  number and  furnishing  major  credit card
information.  This  allows  customers  to  continue  to use the  same  PINs  and
generates  ongoing  residual sales for  retailers.  Unlike most products sold by
retailers,  the Company's  traditional  phone cards enable retailers to generate
revenues  beyond  initial  sale  of  the  cards.  The  Company  pays  additional
commissions based on the number of minutes recharged on any card

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sold by that retailer, so long as that retailer continues to offer the Company's
phone cards. The Company believes that this program  increases  retailer loyalty
and creates an incentive for retailers to sell its prepaid phone cards.

                  The  Company's  phone cards can be activated  and recharged at
the  retail  level  through  (i) a  touch-tone  system  utilizing  a  designated
telephone line and a touch-tone  telephone,  (ii) the Company's customer service
department  through a  toll-free  number  and (iii)  the  Company's  proprietary
ActiPhone(TM)  system,  which  utilizes  a  standard  credit  card  reader.  The
software-based  ActiPhone  system was designed  and  developed by the Company to
provide  detailed  sales  information  in response  to queries by the  Company's
employees,  agents and  customers,  allowing the Company to monitor sales of its
phone cards efficiently.

                  Customers utilizing the Company's  traditional phone cards can
place  international  calls to the United States from more than 28 countries and
outbound domestic and  international  long distance calls from the United States
to more than 220 countries. The Company intends to begin offering voice mail and
conference  calling in the near future,  and depending on customer demand,  will
begin offering speed dialing, message delivery and fax mail.

                  The Company intends to market traditional  prepaid phone cards
through its  Corporate+  Program to domestic and  international  businesses  for
their  employees' use when away from the office.  The Company  believes that its
phone cards can afford many businesses  substantial savings compared to standard
credit  calling cards and can enable  management to control long distance  costs
more effectively.  Additionally,  the Company's  switching  platforms can detail
information such as the length of a call, the time a call was made and locations
from and to which a call was  placed,  providing  businesses  with an  effective
mechanism  to monitor  usage.  The Company  plans to  implement  its  Corporate+
Program by increasing  the size of its sales force to focus on (i) expanding the
Company's  relationships  with its current business customers and (ii) targeting
businesses  not  presently  engaged in the sale of  prepaid  phone  cards  whose
employees spend a significant amount of time away from the office.

                  Traditional Phone Cards Marketed Internationally

                  The Company's Global Link Card and other  traditional  prepaid
phone cards are sold  internationally to business and leisure travelers destined
for the  United  States.  These  phone  cards  are  identical  to the  Company's
traditional  phone  cards  except  that,  in most  cases,  the  phone  cards are
activated by a credit card through the  Company's  switching  network  either by
following  simple automated  instructions or by calling the Company's  toll-free
customer service number. The Company's  international  phone cards generally are
packaged in a "tear-off"  format with travel  documents  that include  marketing
information about the Company's phone cards. The Company's  international  phone
cards  frequently are accompanied by an offer of free telephone time in exchange
for the customer's activation of the card for a minimum value.

                  The Company  intends to broadly  introduce its World Card(TM),
which will provide end users with convenient, competitively priced access within
and between more than 30 countries,  including the United States and Canada. The
Company  intends to target  individuals  who originate  calls outside the United
States by marketing the World Card (i) domestically  through travel agencies and
other travel-related  businesses and (ii)  internationally  through a network of
sales  agents and retail  establishments  in Europe,  South  America and the Far
East.

                  Promotional Phone Cards

                  Custom-designed  promotional phone cards featuring  companies'
logos,  products  and  customized  advertisements  are sold to  businesses  that
typically  will give  these  cards to their  customers  in  connection  with the
marketing of their  products and  services.  A business  utilizing the Company's
phone cards for promotions can access marketing and demographic data compiled by
the  Company's   switching   platforms.   The  Company   believes  that  it  has
differentiated  itself from most other  providers of promotional  phone cards by
combining  enhanced  services and  interactive  technology  with its promotional
cards.

                  The Company  believes  that its  in-house  creative and design
staffs  provide key  advantages  over  competitors  in the  business  promotions
segment of the  prepaid  phone card  industry,  allowing  the Company to design,
implement and deliver complete,  innovative  promotional packages and to respond
quickly to  changes in  customer  preferences.  The  Company  has  combined  its
enhanced  services and  interactive  technology  with its  promotional  cards to
produce business promotions unique

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to the phone card industry. In 1996, the Company conducted a promotion for Kraft
Foods  called "Kids Pick the  President,"  which  enabled  children to use a GTS
phone  card to vote for a  candidate  in the 1996  presidential  election.  This
promotion  received a Gold Medal award for  "outstanding  phone card  promotion"
from Promo  Magazine,  an advertising  industry trade  publication.  The Company
currently  is  conducting a second  promotion  for Kraft Foods called the "Kids'
Choice  Awards,"  which  enables  children to use a phone card to vote for their
favorite actor, actress,  television program and musician.  Other businesses for
which  the  Company  has  conducted  promotional  phone  card  programs  include
Microsoft,  Icelandair,  Lufthansa,  Taco Bell,  RJ Reynolds,  Meineke  Muffler,
Rollerblade,  NatWest,  Arm 'n Hammer,  Dial,  Seagrams,  The 1996  Masters Golf
Tournament and the Toronto Blue Jays.

                  Specialized Retail Phone Card Products

                  The Company  designs and markets  specialized  retail products
utilizing  prepaid phone card  technology,  which are sold to  distributors  and
retail  establishments that carry the Company's traditional prepaid phone cards,
such as Von's and ABC. The Company also sells these  products to businesses  not
presently  engaged in the sale of the  Company's  prepaid  phone cards,  such as
Eckerd Drugs. The Company's  in-house  creative staff develops these products by
expanding the  technology  utilized by the Company's  traditional  prepaid phone
cards.  Recent  examples of these products  include  Kids-In- Touch Safety Phone
Cards,  Psychic Phone Cards, Call Santa Activity Phone Cards, Marvel Superheroes
Battlepacks  (comprised of three games played using a touch-tone  telephone as a
joystick) and Sesame Street Telephone Story Tags,  created pursuant to a license
agreement with the Children's Television Workshop. Sesame Street Telephone Story
Tags enable children to call a designated  toll-free number to listen to stories
told by Sesame Street characters Elmo, Big Bird and Ernie.

Telecommunications Infrastructure

                  General

                  Each call made using the Company's  traditional  phone card is
comprised of two components:  (i) an inbound or originating call, which accesses
one of the Company's  switching  platforms  and (ii) an outbound or  terminating
call,  which connects the end user to the destination  called.  Currently,  most
customers  access the  Company's  switching  platforms  by  dialing a  toll-free
number.  This inbound  service,  purchased by the Company from  carriers such as
Sprint or MCI,  constitutes  a significant  portion of the Company's  costs with
respect  to the  telephone  call.  Once  the  Company's  switching  platform  is
accessed,  the call is  directed  by the  Company's  switching  platform  to the
network of an  interexchange  carrier  for  transport  to the  appropriate  call
destination.  Costs  incurred  by  the  Company  in  connection  with  consumers
accessing the Company's  switching platforms and the carriage of a call from the
Company's  switching  platform to the call  destination  include  variable costs
incurred in accessing the local exchange  carrier in each local access transport
area ("LATA").

                  Switching Facilities

                  The Company currently owns and operates two NACT STX switching
platforms,  one in Jersey City,  New Jersey (the "New Jersey STX") and the other
in Miami,  Florida (the "Miami STX"). The Miami STX is located at the offices of
Peoples Telephone Company,  Inc. ("Peoples") (the previous owner of Global Link)
and is maintained by the Company's  employees,  with the  assistance of Peoples'
representatives.  The New  Jersey  STX is  located  at the  offices  of NTT Data
Communications Systems Corporation, an affiliate of NTT America, Inc. ("NTT"), a
customer of the Company, and is maintained by the Company's employees,  with the
assistance  of  NTT   representatives.   These  two   switching   platforms  are
manufactured by National Applied Computer Technology, Inc. ("NACT"). The Company
and NACT have entered into agreements pursuant to which NACT  licenses  software
to  the Company and provides  technical  support and platform  maintenance.  The
Company also operates a lower capacity switching facility  in Elmont,  New York,
which it currently is phasing out. In addition to its own switching  facilities,
the Company utilizes the switching facilities  of outside  vendors  for  certain
of  its  enhanced  services  and/or  interactive  products,   including  InComm
Communications,   a  subsidiary  of  U.S.  South  Communications,  Inc.,   and 
Interactive Media Works, Inc.

                  The  Miami  STX and the New  Jersey  STX  provide  phone  card
services to the Company's domestic and international  traditional  prepaid phone
card customers and, in many  instances,  end users of the Company's  promotional
phone cards. These switching  platforms are designed for the specific purpose of
providing  prepaid phone card services,  unlike many other  switching  platforms
which  must  operate  contemporaneously  with front end  processors  functioning
outside

                                        7


<PAGE>



of the  switching  platform.  These  platforms  allow the  Company to route each
telephone  call to the least  expensive  long  distance  carrier,  determined by
either the origin of the call, or the city, country, area code or exchange where
the call will terminate.

                  The Company's  switching platforms also monitor card usage and
end user demographics and limit the Company's  exposure to fraud by alerting the
Company of situations in which multiple PINs are used from any single  telephone
number,  the same PIN is being  used from many  different  parts of the  country
within a short  period of time,  or a number of invalid  PINs are entered from a
single  telephone  number.  The  Company  believes  that its ability to minimize
unauthorized use of its cards and to provide  important  customer and card usage
information makes its Global Link Card an attractive choice for retailers.

                  Local Link Service

                  In June 1996,  the Company  introduced its Local Link service,
which  enables  callers  using  the  Company's  phone  cards  in  the  New  York
metropolitan area to receive reduced per-minute rates by accessing the Company's
New Jersey STX switching  platform through a local number instead of a toll-free
number.  The Company's costs are substantially  reduced when a customer accesses
the Company's regional switching platform in this manner or terminates a call in
a Local Link service area,  which serves to improve the  Company's  gross profit
margins and provide the Company with flexibility to withstand price competition.
Local Link service also enables the Company's  end users to terminate  telephone
calls  in  the  New  York  metropolitan  area  at  reduced  per-minute  charges.
Additionally,  if the customer  originates  the call on a local access line, the
Company can charge reduced international rates. The Company anticipates offering
its Local Link service to end users in the  Philadelphia  and New Jersey markets
commencing in the second quarter of 1997.

                  Carrier Agreements

                  The Company has carrier agreements with numerous long distance
carriers, such as Sprint and MCI, to originate toll-free access to the Company's
switching facilities  domestically and internationally and to terminate domestic
and international long distance calls over these carriers' networks. The carrier
agreement between the Company and Sprint requires the Company to satisfy certain
minimum  monthly  usage  requirements  in order to  receive  favorable  pricing.
Failure to meet such  minimum  requirements  would  obligate  the Company to pay
underutilization  charges.  The  majority of the  Company's  domestic  toll-free
origination and termination minutes currently are carried over Sprint's network.

                  The Company's  carrier  agreements with multiple  domestic and
international long distance carriers allow for redundant routing of call traffic
to ensure that if one carrier experiences  difficulties the Company's phone card
customers are able to complete their telephone calls by automatically  switching
to an unaffected carrier's network.  Moreover, these multiple carrier agreements
enable the  Company to route each  telephone  call to the least  expensive  long
distance carrier for that particular call,  whether by country,  city, area code
or exchange.  This least-cost routing allows the Company to competitively  price
its phone cards.

                  License

                  In August 1995,  the Company  obtained a  nonexclusive  patent
license from Ronald A. Katz  Technology  Licensing,  L.P. to use over 25 patents
related  to  telecommunications  processes.  The  Company is  required  to pay a
percentage of annual  activation  revenues,  subject to annual  minimum  royalty
payments.  The term of the license  continues until November 2011, when the last
patent expires.

Sales

                  The Company sells its prepaid  phone cards and other  services
to  domestic  and  international  retailers  and  distributors,  and to business
customers.  The Company also  participates in trade shows,  direct marketing and
print  advertising and develops  promotional  kits to market its promotional and
custom-designed cards to retailers and businesses.


                                        8


<PAGE>



                  Domestic Retail Sales

                  The Company sells its prepaid phone cards domestically through
an in-house  sales force  consisting of its Vice  President - Domestic Sales and
eight sales personnel,  each focusing on a distinct  geographic or niche market.
The  Company's  Global Link Card and other  traditional  prepaid phone cards are
sold (i) directly to national,  regional and independent retail  establishments,
which sell the phone  cards to a wide range of end  users,  (ii) to  independent
distributors with widespread  distribution  channels and access to a substantial
number of retailers,  such as newsstand  distributors,  food brokers and tobacco
and  confectionery  distributors  and  (iii) to other  marketing  companies  and
organizations  that sell the phone  cards to  consumers  within  specific  niche
markets. The Company's diverse domestic retail base includes convenience stores,
supermarkets,  drug stores, mass merchandisers,  maritime outlets (through which
cards are sold to  individuals  working on cruise  ships and cargo  vessels) and
similar retail outlets.

                  In marketing  the Global Link Card to  retailers,  the Company
emphasizes  profit  potential,  including  the  possible  generation  of ongoing
commissions to the retailer through payment of additional  commissions  based on
the number of minutes  recharged on any Global Link Card sold by the retailer so
long as the  retailer  continues  to offer the  Global  Link Card.  The  Company
believes that this program  increases  retailer loyalty and creates an incentive
for retailers to sell the  Company's  prepaid  phone cards.  The limited  retail
shelf space necessary to offer the Company's  products also is emphasized by the
Company in its retail  marketing  efforts.  Additionally,  the  Company  assists
retailers in promoting the Global Link Card and the Company's  other products by
providing turnkey  merchandising and marketing  materials,  including customized
retail packaging and display systems.

                  The Company has agreements  with  retailers and  distributors,
which  generally  provide for a term of one to three years and require  that the
retailer  or  distributor  sell the  Company's  phone cards  exclusively.  These
agreements also provide for wholesale prices  reflecting  discounts ranging from
20% to 50% of the retail  selling  price and  contain  customary  covenants  and
conditions,  including  indemnification,   confidentiality  and  other  standard
provisions acceptable to the Company. Additionally, the Company has arrangements
with  retailers  and  distributors  that are not embodied in written  agreements
having  specific  terms  which can be  terminated  at any time.  Certain  of the
Company's agreements with international  distributors provide for the payment of
commissions based on the number of cards sold.

                  The Company also sells its prepaid  phone cards  through seven
Company-owned  and operated retail phone centers located in urban shopping areas
in Brooklyn and Queens,  New York and South Miami Beach,  Florida.  These retail
phone centers  serve two primary  functions:  (i) to sell the Company's  prepaid
phone cards and (ii) to enable  customers to place  telephone  calls and pay for
those calls with the phone card.  As the number and type of prepaid  phone users
have grown,  the Company has  de-emphasized  the sale of phone cards through its
retail phone centers.

                  International Retail Sales

                  The Company's Global Link Card and other  traditional  prepaid
phone cards are sold  internationally to business and leisure travelers destined
for the United States,  primarily  through airlines,  tour  wholesalers,  travel
agencies, car rental agencies and other travel related businesses. International
marketing is conducted  primarily  through  approximately  110  exclusive  sales
agents  located in 27  countries,  managed by the  Company's  Vice  President  -
International Sales and International Sales Manager. The Company's international
phone  cards  currently  are sold by  international  sales  agents  such as Mike
Gurnell  &  Associates;  travel  agencies  such  as  C.A.  Ferntouristik;   tour
wholesalers  such as  Guest  International  Marketing  Services  -  Germany  and
American  Express  Vacations;  international  airlines such as United  Vacations
(United  Airlines),  Tower Air,  Air New Zealand  Holidays  and Iceland Air; and
Alamo Rent-A-Car.

                  The Company  currently is pursuing  opportunities  to grow its
existing  business in the  Canadian  phone card market.  The  emerging  Canadian
prepaid phone card market  resembles the United States prepaid phone card market
of several years ago. In building its Canadian  operations,  the Company intends
to follow the same strategy  that it utilizes in  connection  with the growth of
its operations in the United  States,  taking  advantage of the insight  derived
from the  Company's  experiences  associated  with its early  entrance  into the
United States prepaid phone card market.


                                        9


<PAGE>



                  Promotional Phone Card Sales

                  Custom-designed  promotional phone cards featuring  companies'
logos,  products  and  customized  advertisements  are sold to  businesses  that
typically  will give these cards to their  customers to enhance the marketing of
their  products and services.  A business  using the  Company's  phone cards for
promotions  also can access  marketing  and  demographic  data  compiled  by the
Company's  switching  platforms.  Businesses for which the Company has conducted
promotional  phone card  programs  include Kraft Foods,  Microsoft,  Icelandair,
Lufthansa, Taco Bell, RJ Reynolds, Meineke Muffler, Rollerblade, NatWest, Arm 'n
Hammer,  Dial,  Seagrams,  The 1996 Masters Golf Tournament and the Toronto Blue
Jays.  Although  the  Company's  promotional  phone card  business  generally is
non-recurring, the Company has conducted a second promotional phone card program
for both Kraft Foods and Dial.

Design and Manufacturing

                  The Company's  in-house design staff creates  original designs
for  promotional  and  custom-designed  cards.  Upon  completion of a phone card
design, the Company produces paper samples of such card, converts it into a film
production  sample and delivers it to a  manufacturer,  which prints the card on
plastic  sheets  and cuts the sheets  into phone  cards.  The  Company  utilizes
several  manufacturers  for the  production of its phone cards and believes that
there are adequate sources of supply and  manufacturing  capacity to address the
Company's requirements.

Customer Support and Service

                  The  Company  believes  that  effective  customer  service  is
essential to attracting and retaining reputable retail customers.  Additionally,
the Company  believes  that it must support both the end users of the  Company's
phone cards and the retail  establishments  and  distributors  that purchase the
Company's  phone  cards for resale to end users.  Accordingly,  the  Company has
established two customer service divisions.

                  The Company's customer support division, which consists of its
Vice President - Support Services and five account managers, provides support to
its retail  customers  and  distributors,  which are divided into  groups.  Each
account  manager is  assigned a  particular  group for which he or she serves as
liaison.  Each account manager uses the Company's  ActiPhone system to interface
with  the  Company's  NACT STX  switching  platforms  from  his or her  computer
terminal.  This  direct  link  provides  the  account  managers  with  real-time
information  concerning  customers'  accounts  and the ability to  activate  and
recharge customers' phone cards.

                  Each prepaid phone card contains a toll-free  customer service
number.  The Company's  customer service operators are available 24 hours a day,
seven days a week, 365 days a year to assist users of the Company's phone cards.
Additionally,  customer service  operators can address concerns  relating to the
operation  of the  Company's  phone  cards and any billing  related  question by
accessing   real-time  call  detail  records  through  the  Company's  switching
platforms.

Competition

                  The  telecommunications  services industry generally,  and the
prepaid  phone card industry  specifically,  is intensely  competitive,  rapidly
evolving and subject to constant technological change. As the prepaid phone card
industry  has grown,  industry  analysts  estimate  that the number of companies
marketing  prepaid phone cards has increased from  approximately 75 companies in
1994 to  more  than  500 in  1996,  some of  which  have  substantially  greater
resources than those of the Company.  Further, the Company's prepaid phone cards
not only compete with other  prepaid phone cards,  but also with credit  calling
cards,  collect calling services,  hotel  telephones,  public pay telephones and
other long  distance  services.  The Company  believes that it competes with any
medium by which a consumer  places a  telephone  call when away from the home or
office.

                  The Company  believes that its  established  reputation in the
prepaid  phone  card  industry  among   retailers,   distributors  and  business
customers,  its existing  telecommunications  infrastructure and its experienced
management  team provide it with  important  advantages  over  competitors.  The
Company also  believes  that the recharge  capabilities  of certain of its phone
cards provide it with important  advantages over many of its  competitors  whose
cards do not provide users with these  capabilities.  The Company  believes that
the primary  competitive  factors  affecting  the prepaid  phone card market are
price,  quality and reliability of service,  ease of use,  service  features and
name  recognition.  The Company believes that it successfully  competes in these
areas.

                                       10


<PAGE>



                  The Company's  prepaid  phone cards provide a more  convenient
and cost-effective  alternative to other long distance services intended for use
away from a consumer's home or office. The Company's phone cards are easy to use
and can be utilized from any touch-tone telephone.  Unlike credit calling cards,
prepaid  phone cards do not require  users to fill out credit  applications  and
allow consumers to budget telephone  expenses  effectively.  The Company's phone
cards provide a less expensive  alternative  to credit  calling  cards,  collect
calling  services,  hotel  telephones and public pay  telephones.  

Government Regulation

                  The provision of  telecommunications  services is regulated by
the federal and state  governments  of the United  States.  Federal laws and FCC
regulations  apply to interstate and interLATA  telecommunications,  while state
regulatory authorities have jurisdiction over  telecommunications  services that
originate and  terminate  within the same state or LATA.  Various  international
authorities also may seek to regulate telecommunications services originating or
terminating in their respective countries.

                  Federal.  On February 8, 1996,  President  Clinton signed into
law the Telecommunications Act, which allows local exchange carriers,  including
the RBOCs upon  satisfaction of certain  conditions,  to provide  interstate and
interLATA  long  distance  telecommunications  services  and  grants the FCC the
authority to deregulate  other aspects of the  telecommunications  industry.  In
order to implement the objectives and spirit of the Telecommunications  Act, the
FCC has initiated  proceedings to define the rules affecting  competition in the
telecommunications industry and the companies that participate in this industry.
While the Company believes that the Telecommunications Act will foster increased
competition in the telecommunications  industry and create new opportunities for
the Company to  participate  in various  segments of the industry,  the near and
long-term effects on the Company of the  Telecommunications Act and the rules to
be promulgated thereunder cannot be anticipated.

                  The  Telecommunications  Act governs  all  "common  carriers,"
including AT&T, MCI and Sprint, as well as entities,  such as the Company, which
resell  transmission  services  using other  common  carriers'  facilities.  The
Company has applied for and received  all  necessary  authority  from the FCC to
provide  domestic  and  international  telecommunications  services  through the
resale of switched services of U.S. facilities-based  carriers. The FCC reserves
the right to condition,  modify or revoke such  authority for  violations of the
Communications Act of 1934, as amended, or its rules.

                                       11


<PAGE>

                  Nondominant  carriers  (i.e.,  carriers  that do not  have the
power to control prices),  such as the Company,  currently must maintain tariffs
on file with the FCC for their international  services, and, as discussed below,
the  issue  of  whether  nondominant   carriers  must  file  tariffs  for  their
interstate, domestic, interexchange services currently is under review. Although
the tariffs of  nondominant  carriers and the rates and charges they specify are
subject to FCC review,  they are presumed to be lawful and are seldom contested.
In  general,  nondominant  domestic  common  carriers  are  required  to  charge
reasonable  rates and are prohibited from engaging in unreasonable  practices in
the provision of their services.  As an international  nondominant  carrier, the
Company is required to include  detailed  rate  schedules  in its  international
tariffs. The Company has filed all required tariffs with the FCC.

                  On October 31, 1996, the FCC released an order eliminating the
requirement that nondominant interstate carriers, such as the Company,  maintain
tariffs on file with the FCC for domestic interstate  services.  The FCC's rules
are pursuant to authority  granted to the FCC in the  Telecommunications  Act to
"forbear" from  regulating any  telecommunications  service  provider if the FCC
determines that the public interest will be served. Under the new rules, after a
nine-month  transition period,  nondominant  interstate  carriers need no longer
file  tariffs,  although  they have the option of  ceasing to file such  tariffs
immediately.  Petitions  for review of the FCC's order were filed by MCI,  among
others,  with the United  States  Court of Appeals for the  District of Columbia
Circuit,  which on February  13, 1997 stayed the FCC's  order.  Accordingly,  on
March 6, 1997, the FCC reinstated its prior rules requiring nondominant carriers
providing interstate, domestic, interexchange service to file tariffs.

                  Pursuant  to the  Telecommunications  Act,  the  FCC  recently
adopted new rules governing the pay telephone industry that, among other things,
establish a means by which all pay telephone  service  providers are compensated
for interstate  and  intrastate  calls  originating  from their pay  telephones,
including  calls  that  utilize  toll-free  access.  Under the new  rules,  long
distance carriers are required to compensate pay telephone owners a per-call fee
for those calls made after October 7, 1996 for which the pay telephone  owner is
not  compensated.  Until  October  8, 1997,  only long  distance  carriers  that
generate   $100  million  or  more  in  revenues  will  be  required  to  pay  a
pre-determined  monthly amount.  Those long distance  carriers have the right to
charge  phone  card  companies,  such  as  the  Company,  a fee  for  each  call
originating  from a pay telephone.  One of the Company's long distance  carriers
has  indicated  that it intends to charge the Company  such fees,  although  the
Company  currently is disputing such carrier's method of calculation of payment.
To the extent  that such  payments  cannot be passed on to card  users,  the new
rules could have a material adverse effect on the Company.

                  State.  The provision of intraLATA or intrastate long distance
telecommunications  services is subject to various  state laws and  regulations,
including prior  certification,  notification and/or registration  requirements.
The scope of such  regulation  varies from state to state,  with certain  states
requiring the filing and regulatory approval of various certifications and state
tariffs.  For example,  many states  regulate  prepaid  phone card  providers by
requiring  them to  apply  for  certification.  While  the  Company  either  has
obtained, applied or is applying for certification in the states of Florida, New
York and  California  (where  the  Company  conducts a  substantial  part of its
business),  there can be no  assurance  that  state  regulators  will  grant the
Company all  required  authorizations.  Currently,  the Florida  Public  Service
Commission   ("FPSC")  also  is  considering   implementing   other  rules  that
specifically regulate prepaid phone card providers.  The FPSC is the first state
regulatory agency that has taken an aggressive approach toward the regulation of
prepaid phone cards. The Company  believes that other state regulatory  agencies
will adopt regulations similar to those which will ultimately be adopted by the

                                       12


<PAGE>



FPSC. The Company continually  evaluates the regulations governing the provision
of intrastate telecommunications services in numerous states and seeks to obtain
operating  authority  in those states in which it provides or expects to provide
service and that require  authority.  Certificates of authority can generally be
conditioned,  modified,  canceled,  terminated  or revoked  by state  regulatory
authorities  for failure to comply with state law and/or the rules,  regulations
and policies of the state  regulatory  authorities.  Fines and other  penalties,
including, for example, the return of all monies received for intrastate traffic
from residents of a state, may be imposed for such violations.

                  The Company  believes that it is in compliance  with all laws,
rules and regulations material to its operations and has obtained,  or is in the
process of  obtaining,  all licenses,  tariffs and  approvals  necessary for the
conduct of its business. In the future,  legislation enacted by Congress,  court
decisions  relating to the  telecommunications  industry,  or regulatory actions
taken by the FCC or the states in which the  Company  operates  could  adversely
impact the  Company's  business.  Changes in existing laws and  regulations,  in
particular the currently proposed relaxation of existing regulations, may have a
significant  impact on the Company's  activities and on the Company's  operating
results.  Adoption of new statutes and regulations  and the Company's  expansion
into new  geographic  markets  could  require  the  Company to alter  methods of
operation, at costs which could be substantial,  or otherwise limit the types of
services offered by the Company. There can be no assurance that the Company will
be able to comply with  additional  applicable  laws,  regulations and licensing
requirements.

Trademarks

                  Global Link(R) and the design of the Global Link prepaid phone
card are registered trademarks of Global Link. Applications also have been filed
to register  Global  Link(R) and the design of the Global  Link(R) phone card in
several foreign  countries.  The Company also has filed  trademark  applications
with the United States Patent and Trademark Office seeking  registration for (i)
ActiPhone(TM),  (ii) Local  Link(TM) and (iii) World  Card(TM).  There can be no
assurance  that the  Company  will  receive  registrations  for any  applied for
trademarks or that any  registered  trademark  will provide the Company with any
significant marketing or industry recognition, protection, advantage or benefit.

Employees

                  As of April 11, 1997,  the Company had 63 full-time  employees
and 32  part-time  employees.  None of the  Company's  employees is covered by a
collective   bargaining   agreement.   The  Company  never  has  experienced  an
employment-related  work  stoppage and  considers  its employee  relations to be
satisfactory.

ITEM 2.  DESCRIPTION OF PROPERTY

                  In  January  1995,  Global  Link  entered  into  a  lease  for
approximately  7,500  square  feet of space  located at 5697  Rising Sun Avenue,
Philadelphia,  Pennsylvania,  which  houses the  Company's  principal  executive
offices,  computer  systems and packaging  facilities.  The term of the lease is
five years and  provides  for an annual  rent of $50,400  during  1996,  $52,900
during 1997,  $55,566  during  1998,  and $58,344  during  1999.  Global Link is
renting this space from JilJac Realty Company,  a general  partnership  owned by
Gary J. Wasserson, the Company's Chief Executive Officer.

                  In July 1995,  the Company  entered  into a sublease for 9,400
square feet of space located at 40 Elmont Road,  Elmont,  New York.  The term of
the  sublease is through  July 2000 and provides for an annual rent of $145,700,
including utilities.  In February 1997, the Company subleased this space through
July 2000 for an annual rent of $89,300 for the first 12 months, $94,000 for the
second 12 months and $98,700 for the remainder of the term.

                  In  August  1995,  the  Company   entered  into  a  lease  for
approximately  1,930  square feet of space for its sales  offices  located at 60
East 42nd  Street,  New York,  New York.  The term of the lease is 62 months and
provides for an annual rent of $45,248.

                  In  April  1997,   the  Company   entered  into  a  lease  for
approximately  2,125 square feet of space located in Roslyn  Heights,  New York.
The term of the lease is one year and provides for an annual rent of $55,781.

                  The Company  believes that its facilities are adequate for its
present  purposes.  The  Company  believes  that as it  grows,  it will  require
additional facilities, and that such facilities will be readily available.


                                       13


<PAGE>

ITEM 3.           LEGAL PROCEEDINGS

                  The Company is not a party to any material litigation.

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

                  Not applicable.
                                     PART II

ITEM 5.           MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

                  The  Company's  Common  Stock  and  publicly-traded   warrants
("Public  Warrants") are quoted on the Nasdaq SmallCap Market  ("Nasdaq")  under
the  symbols  GTST and  GTSTW,  respectively,  and  listed on the  Boston  Stock
Exchange under the symbols GTL and GTLW, respectively.  The following table sets
forth the high and low bid prices for the Common  Stock and Public  Warrants for
the periods  indicated,  as reported by Nasdaq,  which is the principal  trading
market  for  the  Company's  securities.   The  prices  represent   inter-dealer
quotations, which do not include retail mark-ups,  mark-downs or commissions and
may not necessarily represent actual transactions.


                                  Common Stock           Public Warrants
                             --------------------      --------------------
                              High          Low         High         Low
                             -------      -------      ------       -------
1995
   First Quarter .......      $   18      $11-3/8      $2-3/4        $   1
   Second Quarter ......      17-5/8      13-1/2       2-7/8         1-5/8
   Third Quarter .......      20-1/4      16-7/8       2-13/16       1-3/4
   Fourth Quarter ......      19-1/2      13-1/8       2-3/4         1-1/8

1996
   First Quarter .......      20-5/8      15-3/8              3      1-3/4
   Second Quarter ......      18-3/8      11-5/8       2-5/8         1-1/4
   Third Quarter .......          12            6      1-1/2         7/8
   Fourth Quarter ......      10-1/2            6      1-3/16        3/8

1997
   First Quarter .......      14-3/8      10-1/2       1-11/16       5/8
   April 1 - April 11 ..      10-1/4      8-7/8        7/8           1/2

                  On April 11,  1997,  the last sale prices for the Common Stock
and Public Warrants as reported by Nasdaq were $10-5/16 and $1, respectively.

                  As of April 11, 1997,  there were  1,856,448  shares of Common
Stock outstanding and Public Warrants  (including warrants ("May 1996 Warrants")
issued in  connection  with a $3,000,000  private  offering  consummated  by the
Company in May 1996 ("May 1996 Private Placement")) to purchase 1,380,560 shares
of Common Stock outstanding, held of record by 115 and 63 holders, respectively.
The Company believes that there are in excess of 500 beneficial  holders of each
of its publicly-traded securities.

Dividends

                  The Company has never  declared or paid cash  dividends on its
capital stock.  The Company  currently  intends to retain  earnings,  if any, to
finance  the growth and  development  of its  business  and does not  anticipate
paying any cash dividends in the  foreseeable  future.  Certain of the Company's
agreements  prevent the Company from  declaring or paying cash  dividends on its
capital stock.

                                       14


<PAGE>

Recent Sales of Unregistered Securities

                  During the year ended  December 31, 1996, the Company made the
following sales of unregistered securities:

<TABLE>
<CAPTION>
                                                                   Consideration Received
                                                                     and Description of                         If Option, Warrant
                                                                   Underwriting or Other                          or Convertible
                                                                    Discounts to Market      Exemption from     Security, Terms of
                                                                     Price Afforded to        Registration         Exercise or
Date of Sale               Title of Security       Number Sold           Purchasers             Claimed             Conversion
------------               -----------------       -----------           ----------             -------             ----------
<C>                     <C>                         <C>           <C>                             <C>           <C>     
1/96 - 12/96            options to purchase          104,010      options granted - no            4(2)         exercisable for five
                        Common Stock granted                      consideration received                       years from date of
                        to employees                              by Company until                             vesting or grant at
                                                                  exercise                                     exercise prices
                                                                                                               ranging from $7.875
                                                                                                               to $18.375 per share
-----------------------------------------------------------------------------------------------------------------------------------
1/96                    warrants to purchase          66,667      consulting services             4(2)         exercisable for five
                        shares of Common                                                                       years from date of
                        Stock issued to Whale                                                                  grant at an exercise
                        Securities Co., L.P.                                                                   price of $15.375 per
                        ("Whale") and its                                                                      share
                        designees
-----------------------------------------------------------------------------------------------------------------------------------
2/96                    Common Stock                 572,773      exchange of shares of           4(2)         N/A
                                                                  Global Link in
                                                                  connection with Global
                                                                  Link Merger
-----------------------------------------------------------------------------------------------------------------------------------
2/96                    options to purchase           36,642      exchange of options of          4(2)         exercisable for five
                        Common Stock granted                      Global Link in                               years from date of
                        to employees                              connection with Global                       grant at exercise
                                                                  Link Merger                                  prices ranging from
                                                                                                               $1.98 to $7.92 per
                                                                                                               share
-----------------------------------------------------------------------------------------------------------------------------------
2/96                    Common Stock                  17,602      partial satisfaction of         4(2)         N/A
                        debt owed to Peoples
                        Telephone Company,
                        Inc.
-----------------------------------------------------------------------------------------------------------------------------------
3/96                    options to purchase           23,338      options granted - no            4(2)         exercisable for ten
                        Common Stock granted                      consideration received                       years from date of
                        to directors                              by Company until                             grant at an exercise
                                                                  exercise                                     price of $15.75 per
                                                                                                               share
-----------------------------------------------------------------------------------------------------------------------------------
5/96                    Common Stock                 200,000      $3,000,000(1)                   4(2)         N/A
                        -------------------------------------                                                  --------------------
                        May 1996 Warrants          to purchase                                                 exercisable through
                                                  400,000 shares                                               December 14, 1999
                                                    of Common                                                  at an exercise price
                                                    Stock for                                                  of $12.00 per share
                                                   $12.00/share
-----------------------------------------------------------------------------------------------------------------------------------
12/96                   December 1996                1,000,000    $3,000,000(2)                   4(2)         exercisable for five
                        Warrants                                                                               years from date of
                                                                                                               grant at an exercise
                                                                                                               price of $7.50 per
                                                                                                               share
----------------------------------------------------------------------------------------------------------------------------------
<FN>
(1)      Whale served as the  placement  agent in  connection  with the May 1996
         Private  Placement and received an option to purchase  20,000 shares of
         Common Stock and May 1996 Warrants to purchase  40,000 shares of Common
         Stock at an exercise price of $300,000.

(2)      Whale was paid a finder's fee in connection  with a $3,000,000  private
         offering  consummated by the Company in December 1996  ("December  1996
         Private  Placement")  of warrants to purchase  50,000  shares of Common
         Stock  at  an  exercise  price  of  $7.50  per  share  ("December  1996
         Warrants").  Additionally,  Graubard  Mollen &  Miller,  the  Company's
         general  counsel,  received $50,000 of promissory notes ("December 1996
         Notes") and 16,667  December  1996 Warrants in payment of certain legal
         fees and expenses.
</FN>
</TABLE>
                                      15


<PAGE>

ITEM 6.           MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
                  AND RESULTS OF OPERATIONS

                  The following  discussion  should be read in conjunction  with
the Company's  Consolidated  Financial Statements,  including the Notes thereto,
appearing elsewhere in this Report. The discussion of results, causes and trends
should not be construed to imply any conclusion that such results or trends will
necessarily continue in the future.

Forward-Looking Statements

                  When used in this Report and in future  filings by the Company
with the Securities and Exchange Commission ("SEC"),  the words or phrases "will
likely result,"  "management expects" or "the Company expects," "will continue,"
"is  anticipated,"  "estimated" or similar  expressions are intended to identify
"forward-looking  statements"  within  the  meaning  of the  Private  Securities
Litigation Reform Act of 1995. Readers are cautioned not to place undue reliance
on any such forward-looking  statements, each of which speak only as of the date
made. Such statements are subject to certain risks and uncertainties  that could
cause actual results to differ  materially  from  historical  earnings and those
presently  anticipated  or projected.  The Company has no obligation to publicly
release  the result of any  revisions  which may be made to any  forward-looking
statements  to reflect  anticipated  or  unanticipated  events or  circumstances
occurring after the date of such statements.

Company Overview

                  On February 29, 1996, the Company  acquired,  through a merger
("Global Link Merger"),  all of the outstanding capital stock of Global Link for
a purchase price of approximately $11,400,000.  Prior to the Global Link Merger,
GTS  focused on  marketing  custom-designed  prepaid  phone  cards for  business
promotional  use  and  other  retail  products   utilizing  prepaid  phone  card
technology.  Global Link  marketed  primarily  traditional  prepaid  phone cards
through various retailers and distributors, including supermarkets,  convenience
stores,  travel  agencies and tour  wholesalers and  Company-owned  and operated
retail phone centers.  Capitalizing on the strengths of their prior  businesses,
GTS  and  Global  Link  have  integrated  their  operations  to  create  a  more
diversified  prepaid phone card company.  Global Link's  operating  results were
consolidated with the Company's commencing on March 1, 1996.

                  The Company generates revenues from the sales of prepaid phone
cards.  Since its inception,  the Company's  annual  revenues have  consistently
increased.  However, the Company has made significant  up-front  expenditures in
connection with its continuing  expansion,  which also have caused the Company's
annual operating expenses  (including  salaries of executive,  creative,  sales,
marketing,  technical and other personnel) to steadily  increase.  Consequently,
the  Company's  expenses  have  exceeded  its  revenues,  resulting in losses of
$6,920,222 and $2,970,121,  respectively,  for the years ended December 31, 1996
and 1995.

                  The Company records  deferred revenue at the time it sells its
prepaid phone cards. The Company recognizes revenue (i) at the time the consumer
accesses long distance services utilizing the Company's phone cards or (ii) when
the phone card expires  (generally  12 to 18 months after  issuance or six to 12
months after last use).  At the time revenue is  recognized,  the costs to which
that  revenue  specifically  relates  also  are  recognized.  When  the  Company
recognizes  revenue due to the  expiration of a phone card, the Company does not
incur any long distance costs  associated with that revenue.  As of December 31,
1996 and 1995, the Company's  deferred  revenue was  $4,431,309 and  $3,513,909,
respectively (an increase of $917,400 or 26.1%).

                  The Company's primary cost of sales are the costs of providing
the long  distance  service and the design and  production  of its prepaid phone
cards.  The cost of providing long distance  service  represents  obligations to
carriers that provide  minutes of long distance over their networks and services
associated  with  the  Company's  phone  cards.   Long  distance  carrier  costs
constituted  55% and 59% of net  sales  for 1996  and  1995,  respectively.  The
Company  anticipates  that its costs of  providing  long  distance  service as a
percentage  of revenue  will  decrease as these  carriers  begin to offer volume
discounts to the Company  based on an increased  number of minutes  carried over
their networks.

                  The Company's selling and marketing expenses consist primarily
of salary and related  employment  expenses  for the  Company's  in-house  sales
force,  advertising and promotional  expenses,  and commissions payable to third
party  distributors,  sales  agents  and  brokers.  The  Company's  general  and
administrative expenses consist primarily of salaries and occupancy costs.

                                       16


<PAGE>
                  At December  31,  1996,  the Company  had net  operating  loss
carryforwards ("NOLs") aggregating approximately $14,167,000 available to offset
future taxable income.  Under Section 382 of the Internal  Revenue Code of 1986,
as amended (the "Code"), utilization of prior NOLs is limited after an ownership
change, as defined in this Section,  to an amount equal to the value of the loss
corporation's  outstanding  stock  immediately  before the date of the ownership
change, multiplied by the federal long-term tax-exempt rate in effect during the
month that the ownership change occurred. As a result of the Global Link Merger,
the Company is subject to  limitations  on the use of its NOLs as provided under
Section 382. Accordingly, there can be no assurance that a significant amount of
existing NOLs will be utilized by the Company.

Results of Operations

                  The  following  table sets  forth,  for the period  indicated,
items from the Company's  Consolidated  Statements of Operations  expressed as a
percentage of revenues:
<TABLE>
<CAPTION>
                                                   Percentage of Sales
                                       ---------------------------------------
                                                  Years Ended December 31,
                                       ---------------------------------------
                                              Actual             Pro Forma
                                       -------------------    ----------------
<S>                                       <C>       <C>       <C>       <C> 
Traditional card sales: ............      1995      1996      1995      1996
                                          ------    ------    ------    ------
 Domestic card sales ...............      33.4%     71.3%     77.2%     72.6%
 International card sales ..........       1.1       8.3       4.8       8.2
                                         ------    ------    ------    ------
    Total ..........................      34.5      79.6      82.0      80.8
Promotional card and specialized ...      65.5      20.4      18.0      19.2
  retail product sales .............       --        --        --        --
    Net sales ......................     100.0     100.0     100.0     100.0
Cost of sales ......................      92.0      66.5      75.7      66.7
                                         ------    ------    ------    ------
    Gross profit ..................       8.0      33.5      24.3      33.3
                                         ------    ------    ------    ------
Selling and marketing expenses .....      42.4      27.7      28.0      28.5
General and administrative expenses.      64.9      48.5      50.6      47.2
Depreciation and amortization ......       1.3      11.8      13.5      12.5
                                         ------    ------    ------    ------
    Operating expenses .............     108.6      88.0      92.1      88.2
                                         ------    ------    ------    ------
    Operating loss .................    (100.6)    (54.5)    (67.8)    (54.9)
                                         ------    ------    ------    ------
Interest income ....................       6.1       0.6       1.9       0.6
Interest expense ...................       0        (3.3)     (1.8)     (3.2)
Other ..............................       0         0.1       0.1       0.1
                                         ------    ------    ------    ------
    Loss before income taxes .......     (94.5)    (57.1)    (67.6)    (57.4)
Income tax expense .................       --        --        --        --
                                         ------    ------    ------    ------
    Net loss .......................     (94.5%)   (57.1%)   (67.6%)   (57.4%)
                                         ======    ======    ======    ======
</TABLE>
Pro Forma Year Ended December 31, 1996 Compared to Pro Forma Year Ended December
31, 1995

                  Pro forma net sales for the year ended  December 31, 1996 were
$13,485,000,  compared to approximately  $11,574,000 for the year ended December
31, 1995, an increase of $1,911,000 or 16.5%. Pro forma net sales of traditional
phone cards sold domestically amounted to approximately  $9,790,000 for the year
ended December 31, 1996,  compared to $8,933,000 for the year ended December 31,
1995,  an increase  of  approximately  $857,000 or 9.6%.  Pro forma net sales of
traditional   phone  cards  sold   internationally   amounted  to  approximately
$1,111,000  for the year ended  December  31,  1996,  compared to  approximately
$550,000  for the year ended  December 31,  1995,  an increase of  approximately
$561,000  or 102%.  Pro forma net sales of  promotional  cards and other  retail
products utilizing prepaid phone card technology increased to $2,584,000 in 1996
from  $2,091,000  in 1995,  an  increase of  $493,000  or 23.6%.  Gross  margins
increased to 33% of net sales for the year ended December 31, 1996,  compared to
24% of net  sales for the prior  year.  The  increase  in the gross  margin  was
primarily a result of a decrease in transmission costs as a percentage of sales.

                  The pro forma net loss for the year ended  December  31,  1996
was approximately $7,739,000, compared to $7,822,000 for the year ended December
31,  1995,  a  decrease  of  $83,000 or 1.1%.  This  decrease  was a result of a
significant  increase  in gross  profit of  approximately  $1,682,000  discussed
above,  offset by an increase in operating expenses of approximately  $1,230,000
and an increase of approximately  $370,000 in interest expense,  net of interest
income.
                                       17


<PAGE>

Year Ended December 31, 1996 Compared to Year Ended December 31, 1995

                  Net  sales  for  the  year  ended   December   31,  1996  were
$12,121,365,  compared to  $3,144,350  for the year ended  December 31, 1995, an
increase of $8,977,015,  or 285.5%.  Approximately  $8,137,000 of the total 1996
net  sales  were  derived  from  Global  Link,  whose  operating   results  were
consolidated  with  the  Company  commencing  on  March 1,  1996.  Net  sales of
traditional  phone cards sold  domestically  were  $8,642,000 for the year ended
December 31, 1996,  compared to $1,050,000 for the year ended December 31, 1995,
an increase of approximately  $7,592,000.  Net sales of traditional  phone cards
sold  internationally  to business and leisure travelers destined for the United
States were  $1,001,000  in 1996,  compared  to $35,000 in 1995,  an increase of
$966,000.  Net  sales  generated  from the sale of  promotional  cards and other
retail  products  utilizing  prepaid  phone  card  technology  during  1996 were
$2,478,000,  compared to $2,059,000 in 1995, an increase of $419,000,  or 20.3%.
The Company's  gross margins  increased to 33.5% of net sales for the year ended
December  31,  1996,  compared  to 8.0% of net  sales for the  prior  year.  The
increase  in  the  gross  margin  was  primarily  a  result  of  a  decrease  in
transmission  costs as a percentage of sales and a decrease in production  costs
as a percentage  of sales.  The  decrease in  transmission  costs was  primarily
attributable  to volume  discounts,  which were  negotiated  with the  Company's
carriers based upon a substantial increase in the minutes of use.

                  Selling and marketing  expenses were $3,355,778  (27.7% of net
sales) for the year ended  December 31, 1996,  compared to $1,332,348  (42.4% of
net sales) for the year ended December 31, 1995. Approximately $1,125,000 of the
increase  was due to increased  salaries  and  benefits of  marketing  and sales
personnel.  Additionally,  approximately  $161,000  of the  increase  was due to
additional  travel expenses,  $173,000 to commissions paid to independent  third
party distributors, sales agents and brokers, and $345,000 to an increase in the
provision for  uncollectible  accounts  receivable,  all of which increased as a
result of the significant increase in net sales.

                  General and administrative  expenses were $5,883,858 (48.5% of
net sales) for the year ended December 31, 1996,  compared to $2,041,010  (64.9%
of net sales) for the year ended  December  31, 1995.  The increase  consists of
approximately  $1,294,000 in salaries and related  benefits of other  additional
personnel  which make up the  Company's  infrastructure,  including  accounting,
legal,  customer  service  and  support and  information  technology  personnel;
approximately $407,000 of additional amortization of deferred compensation costs
with respect to warrants issued to outside consultants;  approximately  $632,000
in rent costs;  approximately $192,000 due to the write-off of the remaining net
assets of certain  retail  phone  centers  closed or scheduled to close in 1997;
$150,000 in  severance to be paid to a former  officer;  and $343,000 due to the
write-off of convertible notes receivable and accrued interest thereon.

                  Depreciation   and   amortization    expense    increased   by
approximately  $1,387,000,  primarily  due to the  amortization  of  goodwill of
$1,061,000  resulting  from  the  Global  Link  Merger  and the  acquisition  of
additional switching equipment.

                  Investment and interest  income was $73,834 for the year ended
December 31,1996, compared to $192,482 for the year ended December 31, 1995. The
decrease of $118,648 was a result of lower balances of cash and cash equivalents
on hand.

                  Interest   expense  for  the  year  ended  December  31,  1996
increased to $395,674 from $0 for the year ended  December 31, 1995, as a result
of interest on the $2,800,000 convertible debentures ("Convertible  Debentures")
and  amounts  due to  Peoples,  interest  expense on capital  lease  obligations
recorded in 1996 and the  amortization  of the  unearned  discount  and deferred
financing  costs  relating  to the  issuance  of notes  payable  pursuant to the
December 1996 Private Placement.

                  For the foregoing reasons,  the Company incurred a net loss of
$6,920,222  for the year ended  December  31,  1996,  compared  to a net loss of
$2,970,121 for the year ended December 31, 1995.

Liquidity and Capital Resources

                  At December 31, 1996 the Company had cash and cash equivalents
of  $1,352,322  and working  capital of  ($5,630,385),  compared to $928,516 and
$1,126,321, respectively, at December 31, 1995. This decrease in working capital
was primarily a result of the  assumption by the Company of certain  obligations
and other debt of Global Link in connection with the Global Link Merger.


                                       18


<PAGE>
                  In May 1996,  the  Company  consummated  the May 1996  Private
Placement from which the Company  derived gross  proceeds of $3,000,000  through
the sale of 200,000  shares of Common  Stock and May 1996  Warrants  to purchase
400,000 shares of Common Stock.

                  In December  1996, the Company  consummated  the December 1996
Private  Placement,  a private  offering  from which the Company  derived  gross
proceeds of $3,000,000  through the sale of December 1996 Notes in the aggregate
principal amount of $3,000,000 and 1,000,000 December 1996 Warrants.

                  Net cash  used in  operating  activities  for the  year  ended
December 31, 1996 of $3,601,684  was primarily due to the Company's net loss and
a decrease in accounts  payable and accrued  liabilities  and deferred  revenue,
offset by non-cash items such as  depreciation  and  amortization,  increases in
sales and excise taxes payable and a decrease in accounts  receivable.  Accounts
receivable are generated  pursuant to sales of prepaid phone cards  primarily to
distributors and retail establishments.  Typically,  the Company provides 30-day
terms (or less) to reputable  retail  establishments  that sell its phone cards.
Deferred  revenue  represents sales of prepaid phone cards for which revenue has
not yet been  recognized,  but will typically be recognized in future periods as
customers access long distance  services or at the expiration dates of the phone
cards.  Net cash used in investing  activities  for the year ended  December 31,
1996 consisted of $347,983 of capital expenditures,  net of $160,190 in net cash
acquired in the Global Link Merger.  Net cash  provided by financing  activities
consisted of  $2,611,569  of net proceeds  from the issuance of Common Stock and
May 1996 Warrants in connection with the May 1996 Private Placement,  $2,850,000
of net  proceeds  from the  issuance  of notes  payable in  connection  with the
December  1996 Private  Placement,  net of payments to Peoples of $930,707,  the
lending of $250,655 to Global Link prior to the Global Link Merger and  payments
on capital  lease  obligations  of  $55,073.  Under its carrier  agreement  with
Sprint, the Company must fulfill a $200,000 per month usage commitment.

                  During 1996, the Company  experienced  significant  losses and
negative cash flow from  operations,  particularly in the last ten months of the
year  following the Global Link Merger.  As a result,  the Company  assessed the
recoverability  of goodwill as of December  31,  1996.  In  connection  with its
assessment  of  recoverability,  management  prepared and reviewed  estimates of
future  cash  flows   (undiscounted  and  without  interest  charges)  and  also
considered  whether the 15 year amortization  period originally  assigned to the
goodwill  remained  appropriate  as of the  balance  sheet date.  The  Company's
projections  considered recent developments in the Company's business as well as
projected  growth  rates for the  prepaid  phone  card  industry  obtained  from
external  sources.  Based  on  this  assessment,  management  concluded  that no
impairment  loss was  required to be  recognized  as of December  31,  1996.  In
addition,  management  concluded that the 15 year amortization  period initially
selected  at the  time of the  Global  Link  Merger  remains  appropriate  as of
December 31, 1996.

                  The  assessment of goodwill  recoverability,  which is heavily
dependent  on projected  financial  information  and the  goodwill  amortization
period,  are  significant  accounting  estimates as contemplated by the American
Institute  of  Certified  Public   Accountants'   Statement  of  Position  94-6,
"Disclosure  of  Certain  Significant  Risks and  Uncertainties."  Further,  the
Company  operates  in an  industry  which  is  rapidly  evolving  and  extremely
competitive.  It is reasonably possible that the Company's  accounting estimates
with respect to the useful life and ultimate  recoverability  of goodwill  could
change in the near term and that the  effect of such  changes  on the  financial
statements  could be material.  While  management  currently  believes  that the
recorded amount of goodwill is not impaired,  there can be no assurance that the
Company's  future  results will confirm this  assessment  or that a  significant
write-down or write-off of goodwill will not be required in the future.

                  As indicated in the  accompanying  financial  statements,  the
Company  incurred a net loss of $6,920,222 in 1996 and is in a negative  working
capital position of approximately  $5,630,385 at December 31, 1996. Management's
projections  indicate  that the  Company  anticipates  that it will  continue to
generate  operating  losses and negative cash flow at least  through  1997.  The
Company  has  substantial  capital  requirements  resulting  from the funding of
losses from  operations and the need to finance  continued  growth.  The Company
anticipates  that it will need to raise capital during 1997 in order to meet its
capital requirements as they occur. Accordingly, the Company has entered into an
agreement  with  Wheatley  Partners,  L.P.  ("Wheatley"),  an  affiliate  of the
Company,  pursuant to which  Wheatley  has agreed  that if by June 1, 1997,  the
Company  does not  consummate  a  financing  raising  a minimum  of  $2,500,000,
Wheatley  will  exercise a minimum of 333,333 of the December 1996 Warrants that
it received in the December 1996 Private Placement,  resulting in gross proceeds
to the Company of at least $2,500,000.  The Company believes that this financing
would satisfy the Company's cash requirements until the end of 1997. The Company
does not have any other  arrangements with respect to, or sources of, additional
financing  and there  can be no  assurance  that  additional  financing  will be
available  to the  Company on  commercially  reasonable  terms,  or at all.  The
failure to obtain such  financing  could have a material  adverse  effect on the
Company.

                                       19


<PAGE>

ITEM 7.           FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

                   Index to Consolidated Financial Statements


Global Telecommunication Solutions, Inc.

  Independent Auditors' Report...........................................F-2

  Consolidated Balance Sheets at December 31, 1996
     and 1995............................................................F-3

  Consolidated Statements of Operations for the
     Years ended December 31, 1996 and 1995..............................F-4

  Consolidated Statements of Stockholders' Equity
     for the Years ended December 31, 1996 and 1995......................F-5

  Consolidated Statements of Cash Flows for the
     Years ended December 31, 1996 and 1995..............................F-6

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


                                     20

<PAGE>




                          Independent Auditors' Report


The Board of Directors and Stockholders
Global Telecommunication Solutions, Inc.:


We  have  audited  the  accompanying   consolidated  balance  sheets  of  Global
Telecommunication  Solutions,  Inc. and subsidiaries as of December 31, 1996 and
1995,  and the related  consolidated  statements  of  operations,  stockholders'
equity and cash flows for the years then  ended.  These  consolidated  financial
statements   are  the   responsibility   of  the   Company's   management.   Our
responsibility  is  to  express  an  opinion  on  these  consolidated  financial
statements based on our 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 consolidated  financial statements referred to above present
fairly,   in  all  material   respects,   the   financial   position  of  Global
Telecommunication  Solutions,  Inc. and subsidiaries as of December 31, 1996 and
1995,  and the  results of their  operations  and their cash flows for the years
then ended in conformity with generally accepted accounting principles.


                                                      /s/ KPMG Peat Marwick LLP
                                                     KPMG Peat Marwick LLP

March 21, 1997
Philadelphia, Pennsylvania

                                       F-2

<PAGE>



                    GLOBAL TELECOMMUNICATION SOLUTIONS, INC.
                                AND SUBSIDIARIES

                           Consolidated Balance Sheets
                           December 31, 1996 and 1995

<TABLE>
<CAPTION>

                                   Assets                                                  1996                 1995
                                                                                           ----                 ----
<S>                                                                                   <C>                   <C>

Current assets:
    Cash                                                                              $ 1,352,322          $   928,516
    Accounts receivable, less allowance for doubtful accounts
      of $399,000 and $165,000 in 1996 and 1995, respectively                           2,450,119            3,508,250
    Inventory                                                                             202,129              268,874
    Deferred costs                                                                      1,127,887            1,235,972
    Convertible notes receivable                                                               --              325,000
    Note receivable                                                                            --              237,000
    Prepaid royalties and patent license fees                                              95,396              292,911
    Prepaid expenses and other current assets                                             164,876              155,008
                                                                                    -------------         ------------
            Total current assets                                                        5,392,729            6,951,531
                                                                                     ------------          -----------
Goodwill, net (notes 3 and 13)                                                         18,008,599                   --
Fixed assets, net                                                                       1,948,917              428,381
Deferred financing fees, net                                                              270,219                   --
Other assets                                                                              198,901              102,052
                                                                                    -------------         ------------
            Total assets                                                              $25,819,365           $7,481,964
                                                                                      ===========           ==========
                    Liabilities and Stockholders' Equity 
Current liabilities:
    Accounts payable                                                                    3,238,666            1,819,813
    Accrued liabilities                                                                   542,965              491,488
    Deferred revenues                                                                   4,431,309            3,513,909
    Estimated sales and excise tax liability (note 8)                                   1,684,478                   --
    Amounts payable to affiliate                                                        1,073,921                   --
    Capital lease obligation, current                                                      51,775
                                                                                    -------------
            Total current liabilities                                                  11,023,114            5,825,210
                                                                                      -----------           ----------
Capital lease obligation, long-term                                                        42,002                   --
Convertible notes payable                                                               2,800,000                   --
Notes payable, net of unearned discount of $1,484,040                                   1,565,960                   --
                                                                                      -----------          -----------
            Total liabilities                                                          15,431,076            5,825,210
                                                                                      -----------          -----------
Commitments and contingencies (notes 8, 10 and 14)
Stockholders' equity:
    Preferred stock, $.01 par value, authorized 1,000,000 shares;
      none issued                                                                              --                   --
    Common stock, $.01 par value, authorized 35,000,000 shares;
      issued and outstanding 1,837,601 and 1,047,226 shares, respectively                  18,376               10,472
    Additional paid-in capital                                                         22,990,766            7,329,729
    Deferred compensation                                                               (102,498)            (197,165)
    Accumulated deficit                                                              (12,406,504)          (5,486,282)
    Cumulative foreign currency translation adjustment                                   (11,851)                   --
    Common stock note receivable                                                        (100,000)                   --
                                                                                   --------------           ----------
            Total stockholders' equity                                                 10,388,289            1,656,754
                                                                                      -----------           ----------
            Total liabilities and stockholders' equity                                $25,819,365           $7,481,964
                                                                                      ===========           ==========
</TABLE>


           See accompanying notes to consolidated financial statements

                                       F-3

<PAGE>



                    GLOBAL TELECOMMUNICATION SOLUTIONS, INC.
                                AND SUBSIDIARIES

                      Consolidated Statements of Operations
                     Years ended December 31, 1996 and 1995


<TABLE>
<CAPTION>

                                                      1996              1995
                                                      ----              ----
<S>                                              <C>               <C>
Net sales ..................................     $ 12,121,365      $  3,144,350
Cost of sales ..............................        8,066,315         2,892,580
                                                 ------------      ------------
     Gross profit ..........................        4,055,050           251,770
                                                 ------------      ------------
Selling and marketing expenses .............        3,355,778         1,332,348
General and administrative expenses ........        5,883,858         2,041,010
Depreciation and amortization ..............        1,427,296            40,859
                                                 ------------      ------------
     Operating expenses ....................       10,666,932         3,414,217
                                                 ------------      ------------
     Operating loss ........................       (6,611,882)       (3,162,447)
Interest income ............................           73,834           192,482
Interest expense ...........................         (395,674)             --
Other ......................................           14,000               344
                                                 ------------      ------------
     Loss before income taxes ..............       (6,919,722)       (2,969,621)
                                                 ------------      ------------
Income tax expense .........................              500               500
                                                 ------------      ------------
     Net loss ..............................     $ (6,920,222)       (2,970,121)
                                                 ============      ============
Net loss per share .........................     $      (4.14)     $      (2.84)
                                                 ============      ============
Weighted average shares of common stock ....        1,670,755         1,047,226
                                                 ============      ============
</TABLE>


   See  accompanying  notes  to  consolidated  financial statements.

                                       F-4

<PAGE>





                    GLOBAL TELECOMMUNICATION SOLUTIONS, INC.
                                AND SUBSIDIARIES

                 Consolidated Statements of Stockholders' Equity
                     Years ended December 31, 1996 and 1995


                                            

<TABLE>
<CAPTION>
                                                                                                             Cumulative     Total
                                                                                                              Foreign     Stock-
                                                      Additional                                Common        Currency    holder's
                                   Common Stock        paid-in      Deferred    Accumulated   Stock Note     Translation  equity
                              Shares        Amount     capital    compensation    deficit     receivable     Adjustment  (deficit)
                              ------        ------     --------   ------------  -----------   ----------     ----------  ----------
<S>                         <C>            <C>        <C>          <C>          <C>            <C>           <C>         <C>
Balance at January 1,
   1995                      1,047,226      10,472    7,044,729         --      (2,516,161)        --           --       4,539,040
Deferred compensation
 arising from grant of
 stock options and warrant       --           --        285,000     (285,000)         --           --           --            --
Amortization of deferred
 compensation                    --           --           --         87,835          --           --           --          87,835
Net loss for 1995                --           --           --           --      (2,970,121)        --           --      (2,970,121)
                            -----------  -----------  -----------   ----------   -----------    ---------  ----------   -----------
Balance at December 31,
  1995                       1,047,226      10,472    7,329,729     (197,165)   (5,486,282)        --           --       1,656,754
                            ===========  =========== ===========   ==========   ===========    =========   ==========   ===========
Issuance of common stock
  in connection with merger    590,375       5,904   11,033,584         --            --       (100,000)         --     10,939,488
Deferred compensation
  arising from grant of
  stock options and warrants    --           --         400,000     (400,000)         --          --            --            --
Issuance of common stock and
  warrants                    200,000        2,000    2,609,569         --            --          --            --       2,611,569
Issuance of warrants            --           --       1,617,884         --            --          --            --       1,617,884
Amortization of deferred
  compensation                  --           --           --         494,667          --          --            --         494,667
Foreign currency translation
  adjustment                    --           --           --            --            --          --         (11,851)      (11,851)
Net loss for 1996               --           --           --            --      (6,920,222)       --            --      (6,920,222)
                           -----------  -----------  -----------   -----------   -----------   ---------   ----------   -----------
                            1,837,601       18,376   22,990,766     (102,498)  (12,406,504)   (100,000)      (11,851)   10,388,289
                           ===========  ===========  ===========   ===========   ===========   =========   ==========   ===========
</TABLE>

    See   accompanying   notes  to  consolidated financial statements.

                                       F-5

<PAGE>
                    GLOBAL TELECOMMUNICATION SOLUTIONS, INC.
                                AND SUBSIDIARIES
                      Consolidated Statements of Cash Flows
                     Years ended December 31, 1996 and 1995
<TABLE>
<CAPTION>
                                                                                        1996                   1995
                                                                                        ----                   ----
<S>                                                                               <C>                      <C>
Cash flows from operating activities:
   Net loss                                                                         $(6,920,222)           $(2,970,121)
Adjustments to reconcile net loss to net cash
      used in operating activities:
          Depreciation and amortization                                               1,427,296                 40,859
          Amortization of deferred compensation                                         494,667                 87,835
          Amortization of unearned discount                                              58,004                   --
          Amortization of deferred financing fees                                        27,815                   --
          Write-off of convertible notes receivable and accrued interest                343,000                   --
Changes in operating assets and liabilities, net of effects of acquisition 
(note 3):
          Decrease (increase) in accounts receivable                                  2,014,565             (1,608,333)
          Decrease (increase) in inventory                                               76,745                (66,343)
          Decrease (increase) in deferred costs                                         108,085               (640,542)
          Decrease (increase) in prepaid royalties and patent license fees              197,515               (163,566)
          Decrease (increase) in prepaid expenses and other current assets               34,321                (72,664)
          Decrease (increase) in other assets                                            33,755                (83,434)
          Increase (decrease) in accounts payable                                      (923,342)             1,206,426
          Increase (decrease) in accrued liabilities                                   (450,989)                31,844
          Increase in sale and excise and tax liability                                 957,847                   --
          Increase (decrease) in deferred revenue                                    (1,080,746)               916,806
                                                                                  --------------            ----------
              Net cash used in operating activities                                  (3,601,684)            (3,321,233)
                                                                                  --------------            -----------

Cash flows from investing activities:
         Purchases of fixed assets                                                     (347,983)              (323,511)
         Convertible notes receivable                                                        --               (325,000)
         Net cash acquired in acquisition                                               160,190                   --
         Note receivable                                                                     --               (237,000)
                                                                                  --------------              ----------
              Net cash used in investing activities                                    (187,793)              (885,511)
                                                                                  --------------             -----------

Cash flows from financing activities:
         Net proceeds from issuance of common stock
           and warrants                                                               2,611,569                   --
         Net proceeds from issuance of promissory notes and warrants                  2,850,000                   --
         Payment of notes payable to affiliate                                         (930,707)                  --
         Increase in notes receivable from Global Link prior to merger                 (250,655)                  --
         Payments on capital lease obligation                                           (55,073)                  --
                                                                                   -------------            ----------
              Net cash provided by financing activities                               4,225,134                   --
                                                                                 --------------             ----------
              Effects of exchange rate changes on cash                                  (11,851)                  --
                                                                                 --------------             ----------
                      Net increase (decrease) in cash                                   423,806            (4,206,744)
Cash at beginning of year                                                               928,516              5,135,260
                                                                                 --------------             ----------
Cash at end of year                                                                   1,352,322                928,516
                                                                                 ==============            ===========

Supplemental disclosures:
   Interest paid during the period                                                      134,999                --
                                                                                 ==============            ===========
   Income taxes paid during the period                                                      500                    500
                                                                                 ==============            ===========
Noncash investing and financing activities:

      Issuance of Common Stock in connection with acquisition                        11,039,488                --
                                                                                 ==============            ===========
      Capital lease obligations incurred to acquire fixed assets                        148,850                --

      Deferred compensation arising from grant of stock option                   ==============            ===========    
          and warrants                                                                  400,000                285,000
                                                                                 ==============            ===========
      Issuance of notes payable in payment of certain legal fees                         50,000                --
                                                                                 ==============            ===========
      Issuance of notes payable and warrants in connection with
          private placement (note 4)                                                  1,617,884                --
                                                                                 ==============            ===========
      Exchange of notes receivable for fixed assets                                      64,000                --
                                                                                 ==============            ===========
</TABLE>
    See  accompanying  notes  to  consolidated  financial statements.
                                       F-6

<PAGE>


                    GLOBAL TELECOMMUNICATION SOLUTIONS, INC.
                                AND SUBSIDIARIES

                   Notes to Consolidated Financial Statements

                           December 31, 1996 and 1995

(1)      Business

         Global   Telecommunication   Solutions,   Inc.  (the  "Company"),   was
         incorporated  on December 23, 1992 and is engaged in the  marketing and
         distribution of prepaid phone cards.  The Company's phone cards provide
         consumers  access  to long  distance  services  through  its  switching
         facilities and long distance network arrangements.

         The  majority of the  Company's  customers  are retail  establishments,
         distributors  and businesses which sell the phone cards to the ultimate
         user,  or which  acquire the  Company's  phone  cards to promote  their
         business or products. Accounts receivable arise in the normal course of
         the Company's business of selling prepaid phone cards primarily to such
         customers.

(2)      Summary of Significant Accounting Policies

         (a)      Revenue and Cost Recognition

                  Substantially  all the prepaid phone cards sold by the Company
                  are  non-refundable  and have  expiration  dates  ranging from
                  twelve to  eighteen  months  after  issuance  or six to twelve
                  months after last use. The Company records the net sales price
                  as deferred revenue when cards are sold and recognizes revenue
                  as the ultimate consumer utilizes calling time or, in the case
                  of  promotional  phone card  programs,  during the period the
                  program is  executed.  Deferred  revenue  relating  to  unused
                  calling time remaining at each card's expiration is recognized
                  as revenue upon the expiration of such card.  Agent  discounts
                  are recorded as a reduction of gross revenue.

                  The Company's primary costs of its prepaid phone cards include
                  the cost of long distance  carrier services and the design and
                  production  of the  cards.  Costs are  expensed  as  incurred,
                  except the cost of design and  production  of the card,  which
                  are  deferred  and  expensed  when  the  related   revenue  is
                  recognized.

         (b)      Inventory

                  Inventory  consists  of phone card  production  and  packaging
                  costs and is stated at the lower of cost or market,  with cost
                  determined using the average cost method.

         (c)      Property and Equipment

                  Property and  equipment  are recorded at cost and  depreciated
                  using the straight-line method over the estimated useful lives
                  of the respective  assets.  Expenditures  for  maintenance and
                  repairs are charged to operations as incurred.

                  The estimated  useful lives used in computing  depreciation of
                  property and equipment are as follows:

                  Furniture and fixtures                              7 years
                  Machinery and equipment                       7 to 10 years
                  Computers and office equipment                      5 years
                  Vehicles                                            5 years

                  Leasehold  improvements  are  amortized  over the lives of the
                  respective  leases  or the  useful  life of the  improvements,
                  whichever is shorter.

                                       F-7

<PAGE>


                    GLOBAL TELECOMMUNICATION SOLUTIONS, INC.
                                AND SUBSIDIARIES

                   Notes to Consolidated Financial Statements

         (d)      Goodwill

                  Goodwill  represents the  unamortized  excess of the cost over
                  the fair values of the net assets  acquired in the Global Link
                  acquisition (see note 3 for a description of the acquisition).
                  Amortization expense of $1,060,501 for the year ended December
                  31, 1996 was computed by using the  straight-line  method over
                  15 years. The Company  periodically reviews goodwill to assess
                  recoverability   and  any  impairment   would  be  charged  to
                  operations  in the  period in which  such  impairment  becomes
                  evident.   The   Company's   policy   is   to   evaluate   the
                  recoverability  of goodwill  based on forecasted  undiscounted
                  cash flows from operations (See note 13).

         (e)      Deferred Financing Fees

                  Deferred  financing fees  represent  costs incurred in raising
                  capital and are  included  in other  assets.  Amortization  of
                  those  costs to  interest  expense  is  calculated  using  the
                  interest  method  and  totaled  $27,815  for  the  year  ended
                  December 31, 1996.

         (f)      Income Taxes

                  Income taxes are  accounted  for under the asset and liability
                  method. Deferred tax assets and liabilities are recognized for
                  the  future  tax  consequences   attributable  to  differences
                  between the financial  statement  carrying amounts of existing
                  assets  and  liabilities  and  their   respective  tax  bases.
                  Deferred tax assets and liabilities are measured using enacted
                  tax rates  expected to apply to taxable income in the years in
                  which those temporary differences are expected to be recovered
                  or settled.  The effect on deferred tax assets and liabilities
                  of a change in tax rates is recognized in income in the period
                  that includes the enactment date.

         (g)      Loss Per Share

                  Net loss per share is based on the weighted  average number of
                  shares of common stock  outstanding.  Common stock equivalents
                  were not  included  in the  calculation  of  weighted  average
                  common  shares  outstanding  for the years ended  December 31,
                  1996 and 1995 since their effect would be to decrease net loss
                  per share.

         (h)      Use of Estimates

                  Management  of the Company has made a number of estimates  and
                  assumptions   relating   to  the   reporting   of  assets  and
                  liabilities  and  the  disclosure  of  contingent  assets  and
                  liabilities to prepare these consolidated financial statements
                  in conformity with generally accepted  accounting  principles.
                  Actual  results  could differ from those  estimates  (See note
                  13).

         (i)      Fair Value of Financial Instruments

                  The  carrying  amounts of  accounts  receivable  and  accounts
                  payable  approximate  fair value because of the short maturity
                  of those items.  The carrying  amount of the notes  payable is
                  significantly  less than its face amount since it is presented
                  net of the unearned discount (See note 4).

         (j)      Foreign Currency Translation

                  Assets and  liabilities of the Company's  Canadian  subsidiary
                  have been  translated  at rates of  exchange at the end of the
                  period.  Revenues,  costs and expenses have been translated at
                  average exchange rates in effect during each reporting period.
                  Gains and losses resulting from foreign currency transactions

                                       F-8

<PAGE>


                    GLOBAL TELECOMMUNICATION SOLUTIONS, INC.
                                AND SUBSIDIARIES

                   Notes to Consolidated Financial Statements

                  are included in income while translation adjustments resulting
                  from   translation   of  financial   statements  are  reported
                  separately as a component of stockholders' equity.

         (k)      Stock Option Plan

                  Prior to January 1, 1996, the Company  accounted for its stock
                  option plan in  accordance  with the  provisions of Accounting
                  Principles Board ("APB") Opinion No. 25,  Accounting for Stock
                  Issued to  Employees,  and related  interpretations.  As such,
                  compensation  expense  generally would be recorded on the date
                  of grant only if the current  market  price of the  underlying
                  stock  exceeded  the  exercise  price of options  granted.  On
                  January 1, 1996, the Company adopted SFAS No. 123,  Accounting
                  for Stock-  Based  Compensation,  which  permits  entities  to
                  recognize as expense over the vesting period the fair value of
                  all  stock-based  awards on the date of grant.  Alternatively,
                  SFAS No. 123 also  allows  entities  to  continue to apply the
                  provisions  of APB  Opinion  No. 25 and  provide pro forma net
                  income  and pro  forma  earnings  per  share  disclosures  for
                  employee  stock option grants made in 1995 and future years as
                  if the  fair-value-based  method  defined  in SFAS No. 123 had
                  been applied. The Company has elected to continue to apply the
                  provisions  of APB  Opinion  No.  25 and  adopt  the pro forma
                  disclosure provisions of SFAS No. 123 (See note 11).

         (l)      Impairment  of  Long-Lived Assets and Long-Lived Assets to be
                  Disposed Of

                  The Company adopted the provisions of SFAS No. 121, Accounting
                  for the  Impairment  of Long-Lived  Assets and for  Long-Lived
                  Assets to be Disposed Of, on January 1, 1996.  This  Statement
                  requires  that  long-lived  assets  and  certain  identifiable
                  intangibles  be reviewed  for  impairment  whenever  events or
                  changes in circumstances  indicate that the carrying amount of
                  an asset may not be recoverable.  Recoverability  of assets to
                  be held and used is measured by a  comparison  of the carrying
                  amount of an asset to future  net cash  flows  expected  to be
                  generated by the asset.  If such assets are  considered  to be
                  impaired,  the  impairment to be recognized is measured by the
                  amount by which the carrying  amount of the assets exceeds the
                  fair  value  of  the  assets.  Assets  to be  disposed  of are
                  reported  at the lower of the  carrying  amount or fair  value
                  less costs to sell.  Adoption of this Statement did not have a
                  material impact on the Company's financial  position,  results
                  of operations or liquidity.

         (m)      Obligations to Long Distance Carriers

                  The  Company   has  entered   into   carrier   agreements   or
                  arrangements  with certain long  distance  carriers to provide
                  its card  users  with  access to long  distance  service.  The
                  Company accrues for the cost of long distance  services in the
                  period such services are rendered  based on contract rates and
                  call volumes per traffic reports.

         (n)      Business and Credit Concentrations

                  The   majority   of  the   Company's   customers   are  retail
                  establishments,  distributors  and  businesses  which sell the
                  phone cards to the ultimate user, or which utilize the card to
                  promote  their  business  or  products.  For  the  year  ended
                  December  31,  1996,  the  Company  had three  customers  that
                  accounted for approximately 13%, 12% and 11% of net sales. For
                  the year ended December 31, 1995,  one customer  accounted for
                  approximately 18% of net sales.

(3)      Acquisition

         On February 29, 1996, pursuant to an Agreement and Plan of Merger dated
         January  18,  1996,  the  Company  through  a wholly  owned  subsidiary
         acquired  all the issued and  outstanding  common  stock of Global Link
         Teleco  Corporation  ("Global Link"). The acquisition was accounted for
         as a purchase. Accordingly, the acquired assets and  liabilities  were

                                       F-9

<PAGE>


                    GLOBAL TELECOMMUNICATION SOLUTIONS, INC.
                                AND SUBSIDIARIES

                   Notes to Consolidated Financial Statements

         recorded at their estimated fair values at the date of acquisition and
         the  operating  results  of  Global  Link  have  been  included in the
         accompanying consolidated statement of operations from the acquisition
         date.

         In connection  with the merger,  the Company  issued  572,773 shares of
         common stock in exchange for all of the issued and  outstanding  common
         stock of Global Link. In addition,  the Company issued 17,602 shares of
         common stock to Peoples Telephone Company, Inc. ("Peoples"), a creditor
         of Global Link and an affiliate.  The total cost of the acquisition was
         approximately   $11,400,000   including  direct  transaction  costs  of
         approximately $344,000.

         The  acquisition  resulted  in  goodwill  of  $19,069,000,  based on an
         allocation of purchase price, calculated as follows:

         Fair market value of common stock issued                  $11,040,000
         Fair value of liabilities assumed                          10,811,000
         Fair value of assets acquired                              (3,126,000)
         Acquisition related costs                                     344,000
                                                                  -------------
         Goodwill                                                  $19,069,000
                                                                   ===========

         The following  unaudited  combined pro forma  information  reflects the
         results of operations  assuming the acquisition of Global Link had been
         made at the beginning of the respective years.

<TABLE>
<CAPTION>
                                                        Year ended
                                                        December 31,
                                               ---------------------------
                                                  1996               1995
                                                  ----               ----
<S>                                            <C>                <C>
Net sales                                      $13,484,000        $11,574,000
Net loss                                        (7,739,000)        (7,822,000)
Net loss per share                             $     (4.38)       $     (4.78)
</TABLE>

         Pro  forma  adjustments  include  recording   amortization  expense  on
         goodwill and the elimination of interest expense on debt of Global Link
         repaid in connection with the acquisition.

         The pro forma results of operations are not  necessarily  indicative of
         the actual  results of  operations  that  would have  occurred  had the
         purchase  been made at the  beginning of the  respective  years,  or of
         results which may occur in the future.

(4)      Financing Transactions and Debt Obligations

         In May 1996,  the Company sold 200,000  shares of the Company's  common
         stock and warrants to purchase 400,000 shares of common stock through a
         private  placement  for an  aggregate of  $3,000,000  (the "May Private
         Placement").  Costs of issuance totaled $388,431 consisting principally
         of placement  agent fees and certain  professional  fees.  Each warrant
         entitles  the holder to purchase  shares of common  stock at a price of
         $12.00 per share, subject to adjustment in certain  circumstances.  The
         warrants are  redeemable  by the Company at any time upon notice of not
         less than 30 days,  provided  that the  closing  bid  quotation  of the
         common  stock on all 20 trading  days  ending on the third day prior to
         the day on which the Company  gives  notice has been at least 187.5% of
         the then effective  exercise price of the warrants,  however,  they are
         not  redeemable  by the Company until the warrants are  registered  for
         sale and  transferred by the original  purchasers.  In connection  with
         this  private  placement,   the  Company  issued  a  warrant  to  Whale
         Securities Co., L.P., the placement agent ("Whale") to purchase through
         May 10,  2001,  up to 20,000  shares of common  stock and  warrants  to
         purchase  40,000  shares of common  stock for  $15.00 per each share of
         common stock and two warrants.


                                      F-10

<PAGE>


                    GLOBAL TELECOMMUNICATION SOLUTIONS, INC.
                                AND SUBSIDIARIES

                   Notes to Consolidated Financial Statements

         On December 20, 1996,  the Company  completed a private  placement (the
         "December  Private  Placement")  from which the Company  derived  gross
         proceeds of  $3,000,000  through the sale of  $3,000,000  of promissory
         notes and 1,000,000  common stock  purchase  warrants.  Each warrant is
         exercisable at any time during the period  commencing March 1, 1997 and
         ending on November 27, 2001,  at an exercise  price of $7.50 per share.
         The notes are payable on the earlier of November  27, 1998 and the date
         on which the Company  undergoes  a change of control.  If the notes are
         not paid upon maturity,  the outstanding principal will begin to accrue
         interest  at the rate of 12% per annum and the  principal  and  accrued
         interest will become  convertible  into common stock,  at the option of
         the  holders.  The  estimated  fair market  value of the  warrants,  as
         determined by  independent  appraisal,  of $1,516,764 was recorded as a
         discount and is being amortized over the term of the notes.

         In connection  with the December  Private  Placement,  the Company paid
         Whale a finders fee equal to $150,000 and  delivered  50,000  warrants.
         The estimated fair market value of these warrants of $75,840 along with
         the  cash  payment  totaled  $225,840  and  was  recorded  as  deferred
         financing fees and are being amortized over the term of the notes.

         In addition, the Company issued $50,000 of notes and 16,667 warrants in
         payment of certain legal fees.  The estimated  fair market value of the
         warrants of $25,280 was recorded as a discount  and is being  amortized
         over the term of the notes.

         In connection  with the Global Link  acquisition,  the Company  assumed
         $2,800,000  aggregate principal amount of convertible  debentures.  The
         convertible  debentures  are due and  payable on June 23,  1999 and are
         secured by a first lien on all assets of Global Link.  The  convertible
         debentures  bear  interest  at 6% per  annum,  payable  on May 30th and
         November  30th  of  each  year.  At  the  option  of the  holders,  the
         convertible debentures are immediately due and payable upon a change in
         control  of  Global  Link.  The  principal  amount  of the  convertible
         debentures is convertible at the option of the holders at any time into
         shares of common stock at a conversion  price of $9.264 per share.  The
         Company  may force the  conversion  of the  convertible  debentures  if
         certain  conditions are met. The Company has reserved 292,081 shares of
         common stock for issuance upon conversion of the debentures.

         Certain  of the  Company's  debt  agreements  contain  provisions  that
         prevent the Company from declaring or paying dividends.

(5)      Fixed Assets

         Fixed assets consist of the following:
<TABLE>
<CAPTION>

                                             1996              1995
                                             ----              ----

<S>                                        <C>               <C>
Furniture and fixtures                     404,918           166,546
Machinery and equipment                    218,044           159,339
Computers and office equipment           1,514,262           157,899
Leasehold improvements                     419,928            10,410
                                         ----------        ----------
                                         2,557,152           494,194
Less accumulated depreciation            (608,235)          (65,813)
                                         ----------        ----------
                                         1,948,917           428,381
                                         ==========         =========
</TABLE>

(6)      Convertible Notes Receivable and Note Receivable

         In March and May 1995,  the Company  advanced  $200,000  and  $125,000,
         respectively,  to Fone America,  Inc. ("Fone") evidenced by convertible
         promissory  notes bearing  interest at 10% per annum. The principal and
         accrued  interest thereon was due and payable on June 23, 1995 and July
         14, 1995,  respectively.  The Company has the option of converting  any
         part of the  principal  into shares of Fone's common stock on the basis
         of two shares for each $1.00 of  principal.  Fone has also agreed that,
         at the Company's option, Fone will repay the

                                      F-11

<PAGE>


                    GLOBAL TELECOMMUNICATION SOLUTIONS, INC.
                                AND SUBSIDIARIES

                   Notes to Consolidated Financial Statements

         notes by  allowing  the  Company  to utilize  services  which Fone will
         provide. Such services consist of access to Fone's switching platforms,
         the utilization of Fone's network personnel and the sale and service of
         phone card vending machines. During 1996, the Company obtained software
         with a fair market value of $64,000 as partial  repayment of the notes.
         Although   management   intends  to  pursue  the   collection  of  this
         receivable,  in the fourth  quarter of 1996 the  Company  wrote off the
         note receivable and the remaining accrued interest thereon  aggregating
         $343,000 due to the uncertainty regarding its ultimate recoverability.

         In  November  1995,  the  Company  advanced  $237,000  to  Global  Link
         evidenced by a promissory  note and guaranteed by certain  stockholders
         of  Global  Link.  As a result  of the  consummation  of the  merger on
         February 29, 1996 (note 3), the guaranty was terminated.

(7)      Amounts Payable to Affiliate

         Simultaneously with the execution of the merger agreement,  Global Link
         executed an agreement with Peoples,  a  shareholder,  pursuant to which
         Peoples agreed to accept $1,050,000  ($550,000 of which was paid on the
         date of the merger  with the  balance of  $500,000  payable on June 28,
         1996) and 17,602 shares of GTS common stock in full satisfaction of any
         and all amounts owed by Global Link to Peoples,  except for $954,630 in
         trade payables (due in four equal quarterly installments  commencing in
         January  1997).  In August  1996,  the Company and Peoples  executed an
         agreement (the "First Amendment") whereby Peoples agreed to restructure
         the  payment  terms of the  remaining  $500,000  as  follows:  $100,000
         payable  upon  execution  of the  agreement  and a monthly  payment  of
         $33,333  beginning in November 1996 until all amounts including accrued
         interest at 8% per annum are paid.

         In November  1996,  the Company and Peoples  executed an agreement (the
         "Second  Amendment")  whereby Peoples agreed to restructure the payment
         terms of the  remaining  principal  balance of $366,667 at such date as
         follows:  $187,731  payable upon  execution of the  agreement  with the
         remaining  balance of $178,936 plus accrued  interest  payable in three
         monthly installments  beginning on December 27, 1996. In addition,  the
         agreement provides for certain  prepayments of the trade payable in the
         event the Company obtains additional financing or the occurrence of any
         change of control.

(8)      Tax Obligations and Compliance

         At December 31,  1996,  the Company has not  remitted  certain  amounts
         previously collected for sales, use, and excise taxes to various taxing
         jurisdictions.  Further,  the  Company  has not  filed  sales  and use,
         excise, income or franchise tax returns in certain of the jurisdictions
         in which it does  business.  Management  is in the process of reviewing
         the Company's tax  collection,  remittance and compliance  policies and
         procedures and has recorded a reserve for estimated tax obligations and
         compliance  issues.  Depending  on the  ultimate  resolution  of  these
         matters,  it is  reasonably  possible  that the amount of reserve could
         require  adjustment in the near term and the amount of such  adjustment
         could be material.

         In the  opinion of the  Company's  management  and legal  counsel,  the
         Company is not subject to "escheat" laws of various  states  pertaining
         to unclaimed payments or deposits.  Accordingly,  no provision has been
         made in the  accompanying  financial  statements for potential  escheat
         assessments.


                                      F-12

<PAGE>
                    GLOBAL TELECOMMUNICATION SOLUTIONS, INC.
                                AND SUBSIDIARIES

                   Notes to Consolidated Financial Statements

(9)      Income Taxes
         Income  tax  expense  consists  of the  following  for the years  ended
December 31, 1996 and 1995:
<TABLE>
<CAPTION>

                                                1996            1995
                                                ----            ----
<S>                                            <C>              <C>
Current:
  Federal                                        --               --
  State                                         500              500
                                                ----            ----
                                                500              500
Deferred income tax                              --               --
                                                ----            ----
                                                500              500
                                                ====            ====
</TABLE>
         The actual income tax expense  differs from the  "expected" tax benefit
         for 1996 and 1995,  computed by applying the U.S. Federal corporate tax
         rate of 34 percent to loss before income taxes, as follows:
<TABLE>
<CAPTION>
                                                      1996             1995
                                                      ----             ----
<S>                                                 <C>              <C>        
Computed "expected" tax benefit ..............      (2,352,705)      (1,009,671)
Increase (reduction) in income
 taxes resulting from:
 state income taxes, net of
  federal benefit ............................             330              330
Increase in valuation allowance
 (net of effect of acquisition) ..............       2,421,822          990,689
Other ........................................         (68,947)          19,152
                                                    ----------       ----------
                                                           500              500
                                                    ==========       ==========
</TABLE>
         The tax effect of temporary  differences  that give rise to significant
         portions of the deferred tax assets and  deferred  tax  liabilities  at
         December 31, 1996 and 1995 is as follows:
<TABLE>
<CAPTION>
                                                      1996             1995
                                                      ----             ----
<S>                                                 <C>               <C>    
Deferred tax assets:
   Benefit of net operating loss
     carryforward ............................       4,816,655        1,756,952
   Capital loss carryforward .................         116,620             --
   Allowance for uncollectible
     accounts receivable .....................         135,660           56,100
   Deferred revenue ..........................         892,050          441,508
   Deferred compensation .....................         249,051           28,164
   Sales and excise tax liability ............         572,723             --
   Less: valuation allowance .................      (6,289,986)      (1,836,280)
                                                    ----------       ----------
           Net deferred tax asset ............         492,773          446,444
Deferred tax liabilities:
   Deferred costs ............................        (383,482)        (420,230)
   Depreciation on fixed assets ..............         (88,492)         (16,113)
   Other .....................................         (20,799)         (10,101)
                                                    ----------       ----------
           Net deferred income taxes .........            --               --
                                                    ==========       ==========
</TABLE>
         In  assessing  the  realizability  of deferred  tax assets,  management
         considers  whether it is more likely than not that some  portion or all
         of the deferred tax asset will be realized. The ultimate realization of
         the  deferred  tax asset is  dependent  upon the  generation  of future
         taxable income during the periods in which temporary differences or net
         operating loss carryforwards  become deductible.  Management  considers
         scheduled  reversals  of deferred  tax  liabilities,  projected  future
         taxable income, and tax planning strategies which can be implemented by
         the  Company  in  making  this  assessment.  Based  upon the  Company's
         historical  operating  losses and  scheduled  reversal of deferred  tax
         liabilities,  the Company has  established  a  valuation  allowance  of
         approximately $6,289,986 at December 31, 1996.
                                      F-13

<PAGE>


                    GLOBAL TELECOMMUNICATION SOLUTIONS, INC.
                                AND SUBSIDIARIES

                   Notes to Consolidated Financial Statements

         At December 31, 1996, the Company had net operating loss  carryforwards
         ("NOLs") aggregating  approximately  $14,167,000 expiring in years 2008
         through 2011.  Under Section 382 of the Internal  Revenue Code of 1986,
         as amended (the "Code"),  utilization of prior NOLs is limited after an
         ownership change, as defined in such Section 382, to an amount equal to
         the  value  of the loss  corporation's  outstanding  stock  immediately
         before the date of the  ownership  change,  multiplied  by the  federal
         long-term tax-exempt rate in effect during the month that the ownership
         change  occurred.  As a result of the Company's  acquisition  of Global
         Link,  the Company is subject to  limitations on the use of its NOLs as
         provided under Section 382. Accordingly, there can be no assurance that
         a significant amount of existing NOLs will be available to the Company.

 (10)    Commitments

         (a)      Leases

                  The Company's  future  minimum  annual rental  commitments  at
                  December 31, 1996 under  operating  leases for various calling
                  center locations, office space and equipment are approximately
                  as follows:


                    Year                              Amount
                    ----                              --------
                    1997                              $534,000
                    1998                               398,000
                    1999                               348,000
                    2000                               228,000
                    2001 and thereafter                117,000

                  The Company has the right to  terminate  certain of the leases
                  given sufficient advance written notice.  Rent expense for the
                  year  ended   December   31,   1996  and  1995   amounted   to
                  approximately $747,704 and $115,236 respectively.

                  In addition,  the Company  leases space from an officer of the
                  Company.  The lease, which is for a five year period beginning
                  January 1,  1995,  provides  for  escalating  rental  payments
                  throughout the term of the lease. The total future  commitment
                  under the lease is  $166,810.  The Company also has the option
                  to extend the lease for five years. In addition to the rental,
                  the Company pays for improvements and maintenance  relating to
                  the leased  property.  The rent paid to this  officer  for the
                  year ended December 31, 1996 amounted to $50,400.

         (b)      Employment Agreements

                  The Company has entered into  employment  agreements  with six
                  officers  of the Company  which  provide  for  aggregate  base
                  salaries of $735,000 per annum. The agreements which expire on
                  varying dates, also provide for annual bonuses,  as determined
                  by the  Board of  Directors,  and  covenants  not-to-  compete
                  during the employment term and for two years thereafter.

         (c)      Carrier Arrangements

                  The  Company's   arrangements   with  long  distance   service
                  providers  obligate  the Company to generate  certain  minimum
                  monthly or annual  usage  through  each  network  and,  if not
                  attained, the Company is subject to underutilization  charges.
                  No such charges were incurred through December 31, 1996.

                  The Company is  obligated to provide  access to long  distance
                  telephone services through its switching  platforms for issued
                  cards  until  those  cards  expire.  The costs  related to the
                  potential utilization of the

                                      F-14

<PAGE>


                    GLOBAL TELECOMMUNICATION SOLUTIONS, INC.
                                AND SUBSIDIARIES

                   Notes to Consolidated Financial Statements

                  minutes  sold  have  not  been  accrued  in  the  accompanying
                  financial statements, but are expensed as incurred.

         (d)      License

                  In August 1995, the Company  obtained a  nonexclusive  license
                  from a third  party  relating  to various  patents  related to
                  telecommunications  processes.  The  term  of the  license  is
                  through  November  2011,  when the last  patent  expires.  The
                  Company  is  obligated  to make  minimum  payments  or $50,000
                  annually  over  the  term of the  Agreement.  Royalty  expense
                  amounted  to  approximately  $49,203  and $13,020 for the year
                  ended December 31, 1996 and 1995, respectively.


(11)     Stock Options and Warrants

         The Company has reserved  500,000 shares of unissued common stock under
         its 1994  incentive and  nonqualified  stock option plan ("1994 Plan").
         The 1994 Plan  authorizes  the  granting of stock  options,  restricted
         stock awards,  deferred stock awards and stock  appreciation  rights to
         key employees, officers, directors and consultants. All qualified stock
         options  which will be granted by the  Company,  with the  exception of
         those options  granted to persons  holding more than ten percent of the
         voting  common  stock in the  Company on the date of grant,  expire ten
         years after grant and are issued at exercise  prices which are not less
         than the fair  market  value of the common  stock on the date of grant.
         Qualified  options  granted to persons holding more than ten percent of
         the voting common stock of the Company on the date of grant expire five
         years after grant and are issued at exercise  prices which are not less
         than 110 percent of the fair  market  value of the stock on the date of
         grant.  Nonqualified  stock options  granted under the 1994 Plan may be
         granted at any price determined by the Board of Directors, however, the
         price may not be less than the fair market value of the common stock on
         the date of grant.  Stock options vest over a period  determined by the
         Board of Directors.  The 1994 Plan contains  certain  change in control
         provisions,  which  include  those that could  cause  options to become
         immediately exercisable.

         A summary of activity under the 1994 Plan is as follows:
<TABLE>
<CAPTION>

                                              Number        Weighted Average
                                             of shares       Exercise Price
                                             ---------      ----------------
<S>                                            <C>            <C> 
Outstanding at January 1, 1995 ..........      67,338         $   15.00

Granted .................................     102,008         $   15.20
Canceled ................................     (21,335)        $   15.00
                                               ------
Outstanding at December 31, 1995 ........     148,011         $   15.14
                                               ------

Granted .................................      69,014         $   10.54
Canceled ................................     (31,170)        $   15.33
                                               ------
Outstanding at December 31, 1996 ........     185,855         $   13.40
                                              ======
</TABLE>

         At December 31, 1996,  143,653 options were  exercisable and options to
         purchase 314,145 shares were available for future grant.

         Non-plan options:

         In October  1994,  the Board of Directors  granted to certain  officers
         and/or directors  immediately  exercisable ten-year options to purchase
         25,000 shares of common stock at an exercise price of $9.99 per share.


                                      F-15

<PAGE>


                    GLOBAL TELECOMMUNICATION SOLUTIONS, INC.
                                AND SUBSIDIARIES

                   Notes to Consolidated Financial Statements

         In March 1995, the Company  granted  non-qualified  options to purchase
         33,334 shares of common stock at an exercise  price of $15.00 per share
         to an officer of the  Company.  The options will vest 33 1/3% per annum
         commencing  March 20, 1996 and will remain  exercisable for a period of
         five years from the date of vesting.

         In April 1995,  the Board of Directors  granted to certain  consultants
         nonqualified  stock options to purchase an aggregate of 2,500 shares of
         common stock at an exercise price of $16.50 per share. Such options are
         immediately exercisable and expire five years from date of grant.

         In February 1996, the Company granted non-qualified options to purchase
         an aggregate of 58,334  shares of common stock at an exercise  price of
         $18.375 per share to officers of the Company.  The options will vest in
         three annual  installments  commencing in February 1997 and will remain
         exercisable for a period of five years from the date of vesting.

         In connection with the merger, options and warrants to purchase 145,000
         shares of common  stock of Global Link were  converted  into options to
         purchase an aggregate of 36,642 shares of the Company's common stock at
         exercise prices ranging from $1.98 to $7.92. Options to purchase 32,852
         shares of common stock are currently  exercisable.  Such options expire
         at various dates through 2003.

         At December 31, 1996, the weighted average  remaining  contractual life
         of the  outstanding  options  was 6.25 years and the  weighted  average
         exercise price of exercisable options at December 31, 1996 and 1995 was
         $9.57 and $17.625, respectively.

         The Company  applies APB Opinion No. 25 in accounting for stock options
         and,  accordingly,  no  compensation  cost has been  recognized for its
         stock options in the financial  statements.  Had the Company determined
         compensation  cost  based on the fair  value at the grant  date for its
         stock  options  under SFAS No. 123, the Company's net income would have
         been reduced to the pro forma amounts indicated below:

<TABLE>
<CAPTION>
                                               1996                1995
                                               ----                ----
<S>                                         <C>               <C>         
Net loss                    As reported     $(6,920,222)      $(2,970,121)
                            Pro forma        (7,297,311)       (3,099,721)
Net loss per share          As reported          $(4.14)           $(2.84)
                            Pro forma            $(4.37)           $(2.96)
</TABLE>

         The per share  weighted-average  fair  value of stock  options  granted
         during 1996 and 1995 was $6.60 and $8.28 on the date of grant using the
         Black Scholes option-pricing model with the following  weighted-average
         assumptions: 1996 - expected dividend yield 0%, risk-free interest rate
         of  6.3%,  expected  life  of 6 years  and  volatility  of 22%;  1995 -
         expected dividend yield 0%, risk-free  interest rate of 7.0%,  expected
         life of 7 years and volatility of 22%.

         Pro forma net loss  reflects  only  options  granted  in 1996 and 1995.
         Therefore,  the full impact of calculating  compensation cost for stock
         options  under SFAS No. 123 is not  reflected in the pro forma net loss
         amounts presented above because compensation cost is reflected over the
         options vesting period and compensation  cost for options granted prior
         to January 1, 1995 is not considered.

         In connection with its initial public offering, the Company sold to the
         underwriter for an aggregate of $150, warrants to purchase up to 50,000
         shares of common  stock at a purchase  price of $24.15 per share and/or
         50,000 warrants at a purchase price of $.483 per warrant. Such warrants
         being exercisable at $12.00 per warrant through December 14, 1999.

         In addition,  the Company has 980,560 public warrants outstanding as of
         December 31, 1996. Each public warrant  entitles the holder to purchase
         one share of common stock at a price of $12.00,  subject to  adjustment
         in certain circumstances,  at any time commencing June 14, 1995 through
         December 14, 1999. The public warrants are redeemable by the Company at
         any time after becoming exercisable, upon notice of not less than

                                      F-16

<PAGE>
                    GLOBAL TELECOMMUNICATION SOLUTIONS, INC.
                                AND SUBSIDIARIES

                   Notes to Consolidated Financial Statements

         30 days,  at a price  of $.30 per  public  warrant,  provided  that the
         closing bid quotation of the common stock on all 20 trading days ending
         on the third day prior to the day on which the Company gives notice has
         been at least 187.5% of the then effective exercise price of the public
         warrants.

         As of December  31,  1996,  the Company has  reserved an  aggregate  of
         3,358,209  shares of common  stock for  issuance  upon the  exercise of
         options and warrants and conversion of the convertible  debentures (See
         note 4).

(12)     Deferred Compensation

         (a)      Consulting Agreement

                  The Company entered into consulting agreements with two of the
                  Company's  stockholders,  pursuant  to which the  stockholders
                  will provide consulting services to the Company for a two-year
                  period  ending  February  1997.  As  consideration  for  these
                  services, the Company issued options to purchase 33,334 shares
                  of common stock at $14.25 per share to each stockholder. These
                  options  became   exercisable  in  February  1996  and  remain
                  exercisable  for a  period  of five  years  from  the  date of
                  vesting.  The estimated  fair market value of these options of
                  $168,000 was recorded as deferred compensation and the Company
                  has recorded compensation expense of $157,500 to date.

         (b)      Warrants

                  In April  and  October  1995,  the  Company  issued  five-year
                  warrants to Whale to purchase an aggregate of 33,334 shares of
                  common  stock  at  $15.00  per  share  in  consideration   for
                  providing the Company the right of first refusal to pursue any
                  prospective acquisition target in the phone card industry that
                  Whale  identifies  through  February  1998. The estimated fair
                  market  value of these  warrants of $117,000  was  recorded as
                  deferred  compensation and the Company has recorded an expense
                  of $58,337 to date.

                  In January  1996,  the Company  issued  five-year  warrants to
                  Whale and/or its  designees to purchase an aggregate of 66,667
                  shares of common  stock at $15.375 per share in  consideration
                  for  consulting  services.  The estimated fair market value of
                  these   warrants   of  $400,000   was   recorded  as  deferred
                  compensation  and the  Company  has  recorded  an  expense  of
                  $366,665 to date.

         (c)      Employment Agreement

                  In connection with the termination of an employment agreement,
                  the Company entered into an arrangement  with a former officer
                  whereby the Company agreed to pay the former officer  $150,000
                  in 12 equal monthly  installments  without interest commencing
                  March 1997.  The Company has accrued the total  obligation  of
                  $150,000 as of December 31, 1996.

(13)     Goodwill

                  During 1996, the Company  experienced  significant  losses and
                  negative cash flow from  operations,  particularly in the last
                  ten months of the year following the Global Link  acquisition.
                  As a  result,  the  Company  assessed  the  recoverability  of
                  goodwill as of  December  31,  1996.  In  connection  with its
                  assessment of recoverability  management prepared and reviewed
                  estimates  of future  cash  flows  (undiscounted  and  without
                  interest  charges)  and also  considered  whether  the 15 year
                  amortization   period  originally  assigned  to  the  goodwill
                  remained  appropriate  as  of  the  balance  sheet  date.  The
                  Company's  projections  considered recent  developments in the
                  Company's  business as well as projected  growth rates for the
                  prepaid calling card industry  obtained from external sources.
                  Based  on  this  assessment,   management  concluded  that  no
                  impairment  loss was required to be  recognized as of December
                  31, 1996. In addition,  management  concluded that the 15 year
                  amortization  period  initially  selected  at the  time of the
                  Global Link acquisition remains appropriate as of December 31,
                  1996.

                                      F-17

<PAGE>


                    GLOBAL TELECOMMUNICATION SOLUTIONS, INC.
                                AND SUBSIDIARIES

                   Notes to Consolidated Financial Statements

                  The  assessment of goodwill  recoverability,  which is heavily
                  dependent on projected financial information, and the goodwill
                  amortization  period are significant  accounting  estimates as
                  contemplated  by the American  Institute  of Certified  Public
                  Accountants'   Statement  of  Position  94-6,  "Disclosure  of
                  Certain  Significant Risks and  Uncertainties."  Further,  the
                  Company  operates in an industry which is rapidly evolving and
                  extremely  competitive.  It is  reasonably  possible  that the
                  Company's accounting estimates with respect to the useful life
                  and ultimate  recoverability  of goodwill  could change in the
                  near term and that the effect of such changes on the financial
                  statements  could  be  material.  While  management  currently
                  believes that the recorded amount of goodwill is not impaired,
                  there can be no assurance  that the Company's  future  results
                  will confirm this assessment or that a significant  write-down
                  or write-off of goodwill will not be required in the future.

(14)     Liquidity

                  As indicated in the  accompanying  financial  statements,  the
                  Company  incurred a net loss of $6,920,222 in 1996 and is in a
                  negative working capital position of approximately  $5,630,385
                  at December 31, 1996.  Further,  the Company is  delinquent on
                  certain  vendor  obligations  as of the  balance  sheet  date.
                  Management's projections indicate that the Company anticipates
                  that  it  will  continue  to  generate  operating  losses  and
                  negative cash flow at least through 1997. As such, the Company
                  anticipates that it will need to raise  additional  capital in
                  1997,  in the form of debt or  equity  financing,  in order to
                  meet its  obligations as they come due. The Company  currently
                  intends to raise capital during 1997, however, there can be no
                  assurance that the Company will be successful.

                  On March 14, 1997, the Company  obtained a commitment  from an
                  existing  investor  to infuse a  minimum  of $2.5  million  of
                  additional  equity  capital  into the  Company by June 1, 1997
                  should the  Company be unable to raise at least this amount of
                  capital from other sources. In the opinion of management,  the
                  availability  of committed  financing from this  investor,  as
                  well as cash from other  sources,  such as the  collection  or
                  factoring of accounts  receivable,  will enable the Company to
                  satisfy its obligations through at least December 31, 1997.

(15)     Subsequent Events

                  In  February  1997,  the  Board of  Directors  of the  Company
                  approved an amendment to its Amended and Restated  Certificate
                  of  Incorporation  to  effect a  one-for-three  reverse  stock
                  split.  All per share data and  references to number of shares
                  have been retroactively restated in these financial statements
                  to give effect to the reverse stock split.



                                      F-18

<PAGE>

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

                  None.

                                                         PART III

ITEM 9.           DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

                  The current executive officers, key employees and directors of
the Company are as follows:
<TABLE>
<CAPTION>
           Name                      Age                Position
        ---------                   -----              ----------
<S>          <C>                     <C>    <C>                      
Shelly Finkel(1) ...............     52     Chairman of the Board
Gary J. Wasserson(2) ...........     41     Chief Executive Officer and Director
John P. McCabe .................     45     President and Director
Cory Eisner ....................     41     Vice President - Enhanced Services
Robert Teale ...................     42     Vice President - Domestic Sales
Lon Torman .....................     56     Vice President - International Sales
Mary Berger ....................     38     Vice President - Support Services
David S. Tobin .................     32     General Counsel and Secretary
Maria Bruzzese .................     33     Chief Financial Officer
Alan W. Kaufman(1)(2) ..........     58     Director
Donald L. Ptalis(2) ............     54     Director
Jack N. Tobin(1) ...............     55     Director

-----------------------------
<FN>
(1)      Member of Compensation Committee
(2)      Member of Audit Committee
</FN>
</TABLE>

                  Shelly  Finkel has been the  Chairman of the Board since April
1993 and was the Chief Executive  Officer of the Company from April 1993 through
March 1995. Mr. Finkel has been active in the promotional  field since June 1965
and has been the President of Shelly Finkel  Management,  Inc., a New York-based
personal management firm, since 1980.

                  Gary J. Wasserson has been the Chief  Executive  Officer and a
director  of the  Company  since  March 1996 and has been the  President,  Chief
Executive  Officer and  Chairman of the Board of  Directors of Global Link since
its inception in March 1994. From June 1992 to February 1993, Mr.  Wasserson was
the interim  President,  consultant and a director of Robin  Enterprises Inc., a
company  organized to rehabilitate,  develop,  manage and lease  residential and
commercial properties located in Moscow, Russia. From 1984 to December 1993, Mr.
Wasserson was the principal stockholder, Chairman and Chief Executive Officer of
Sterling  Supply  Corporation  ("Sterling"),  a cleaning  supply  and  equipment
distribution  company  serving  the laundry  and  textile  industries.  In 1992,
Sterling  filed a  voluntary  petition  in  bankruptcy  under  Chapter 11 of the
Federal Bankruptcy Code.

                  John P. McCabe has been the  President  of the  Company  since
March 1996 and a director of the Company since  October 1995.  From October 1995
through February 1996, Mr. McCabe was the Chief Executive Officer of the Company
and from March 1995 to October 1995,  he was the President of the Company.  From
June 1987 to March 1995, Mr. McCabe was employed by National Westminster Bank in
various capacities,  including Senior Vice President of its credit card division
(January  1994  through  March  1995),  Senior Vice  President  of its  business
strategies division (July 1991 through December 1993), and Senior Vice President
of its processing and custody services division (June 1987 through June 1991).


                                       37


<PAGE>



                  Cory Eisner has been the Company's  Vice  President - Enhanced
Services since October 1994.  From 1977 to October 1994, Mr. Eisner was employed
by Phone Programs,  Inc., a  telepromotions  agency  specializing in interactive
phone services, most recently as Executive Vice President of Sales.

                  Robert Teale has been the Company's  Vice President - Domestic
Sales  since May 1996.  From  November  1995 to April  1996,  Mr.  Teale  held a
national sales position with Tara  Pharmaceuticals.  From July 1976 to May 1995,
Mr.  Teale  was  a  Senior  District  Sales  Manager  with  SmithKline   Beecham
Pharmaceuticals.

                  Lon  Torman  has  been  the   Company's   Vice   President   -
International  Sales since March 1996 and has held the same position with Global
Link since  February  1995.  From January 1993 to February 1995, Mr. Torman held
the same  position at PTC  Services,  a division of Peoples and from May 1992 to
January 1993,  he worked in the cellular  phone  division at PTC Services.  From
January  1990 to May 1992,  Mr.  Torman was the  Managing  Director  of Carifone
Cellular Phone Rental, Inc., which was sold to Peoples in May 1992.

                  Mary Berger has been the  Company's  Vice  President - Support
Services  since March 1996 and has held the same position with Global Link since
February 1995.  From 1992 to February 1995, Ms. Berger held the same position at
PTC  Services,  a division of Peoples,  where she  developed  customer  support,
technical support and management information system services.

                  David S. Tobin has been the General  Counsel and  Secretary of
the Company since March 1996 and General  Counsel of Global Link since  February
1995.  From April 1992 to February  1995,  Mr. Tobin was the  Assistant  General
Counsel of  Peoples,  where he was  responsible  for  acquisitions  and  general
corporate  matters.  From 1990 to April 1992,  Mr. Tobin was an associate of the
law firm of Ruden,  McClosky,  Smith,  Schuster and Russell, P.A. David Tobin is
the son of Jack N. Tobin, a director of the Company.

                  Maria  Bruzzese  has  been the  Chief  Financial  Officer  and
Treasurer of the Company since  October  1994.  From April 1994 to October 1994,
Ms. Bruzzese was Chief Financial  Officer of The Netplex Group,  Inc.  (formerly
CompLink,  Ltd.), a developer of computer  software  products  primarily for the
office automation market.  From 1986 to March 1994, Ms. Bruzzese was employed by
KPMG Peat Marwick LLP, an international, full service accounting firm, where she
specialized in the  information  and  communications  industry and most recently
served as a senior manager.  Ms. Bruzzese is a certified public accountant and a
member of the American  Institute of Certified  Public  Accountants  and the New
York State Society of Certified Public Accountants.

                  Alan W.  Kaufman  has been a  director  of the  Company  since
November  1994.  From April 1986 to December  1996,  Mr.  Kaufman  held  various
positions, including Vice President of Marketing and Vice President of Sales and
Marketing,  and most  recently  Executive  Vice  President  of Sales of Cheyenne
Software,  Inc. Mr. Kaufman was the founding  President of the New York Software
Industry Association.

                  Donald L.  Ptalis has been a  director  of the  Company  since
March 1996.  Since  January  1995,  Mr.  Ptalis has been the President of Masque
Sound & Recording  Corp., a sound equipment  rental  company.  From June 1993 to
December 1995, Mr. Ptalis  managed his personal  investments.  From 1987 to June
1993, Mr. Ptalis was the President and Chief Executive Officer of Desks Inc., an
office furniture supply company.

                  Jack N. Tobin has been a director of the  Company  since March
1996.  Since  March  1989,  Mr.  Tobin has been the  President  of Jack  Tobin &
Associates,  Inc.,  a marketing,  public  relations  and  lobbying  firm that he
founded.  Since  November  1982,  Mr.  Tobin  has been a member  of the State of
Florida House of  Representatives.  As a member of the House of Representatives,
Mr. Tobin has served as the Chairman of the Health and Rehabilitative  Services,
Science  Industry and  Technologies  and Business  and  Professional  Regulation
committees.  Since  November  1989,  Mr. Tobin has chaired the full committee or
subcommittee which regulates  telecommunications  companies operating within the
state.  Jack  Tobin is the  father  of David  Tobin,  the  General  Counsel  and
Secretary of the Company.

Board of Directors

                  The Board of  Directors  of the Company is divided  into three
classes,  each of which serves for a term of three years, with only one class of
directors  being elected in each year. The term of the first class of directors,
currently consisting of Shelly Finkel and Gary J. Wasserson,  will expire at the
annual meeting of stockholders to be held in 1997;

                                       38


<PAGE>



the term of the  second  class of  directors,  currently  consisting  of Alan W.
Kaufman and Donald L. Ptalis,  will expire at the annual meeting of stockholders
to be held in 1998;  and the term of the  third  class of  directors,  currently
consisting  of John P.  McCabe  and Jack N.  Tobin,  will  expire at the  annual
meeting of  stockholders  to be held in 1999.  In each case,  each director will
hold office until the next annual meeting of  stockholders at which his class of
directors  is to be  elected  or  until  his  successor  is duly  qualified  and
appointed. Executive officers serve at the discretion of the Board.

                  The members of the Company's Board of Directors do not receive
any cash  compensation for serving as directors.  On March 31st of each calendar
year,  each person who is then a director of the Company is granted  immediately
exercisable  ten-year  options to purchase  3,334  shares of Common Stock at the
fair market value thereof at the time of grant.
See "Executive Compensation -- 1994 Performance Equity Plan."

                  The Company  has  appointed a  Compensation  Committee  and an
Audit  Committee  of  the  Board  of  Directors.   The  Compensation  Committee,
consisting  of Shelly  Finkel,  Alan W.  Kaufman and Jack N. Tobin,  reviews the
salaries and other compensation of the Company's executive officers. The role of
the Audit Committee, consisting of Gary J. Wasserson, Alan W. Kaufman and Donald
L.  Ptalis  is to  review  (i) the  scope of  Company's  annual  audit and other
services  provided  by the  Company's  independent  auditors  and (ii) the audit
results  and the  auditors'  recommendations  regarding  policies,  systems  and
controls.

Indemnification and Exculpation Provisions

                  The  Company's  Certificate  of  Incorporation   provides  for
indemnification  of officers and  directors to the fullest  extent  permitted by
Delaware law. In addition, under the Company's Certificate of Incorporation,  no
director  shall be liable  personally  to the  Company or its  stockholders  for
monetary  damages for breach of fiduciary duty as a director;  provided that the
Certificate of Incorporation  does not eliminate the liability of a director for
(i)  any  breach  of the  director's  duty  of  loyalty  to the  Company  or its
stockholders;  (ii)  acts  or  omissions  not in good  faith  or  which  involve
intentional misconduct or a knowing violation of law; (iii) acts or omissions in
respect  of  certain  unlawful   dividend   payments  or  stock  redemptions  or
repurchases;  or (iv) any transaction  from which such director derives improper
personal benefit.

Compliance with Section 16 of the Securities Exchange Act of 1934

                  Section  16(a) of the  Securities  Exchange  Act of  1934,  as
amended,   requires  the  Company's  directors  and  officers  and  persons  who
beneficially  own more than ten percent of the  Company's  Common  Stock to file
with the SEC, Nasdaq and the Boston Stock Exchange  initial reports of ownership
and reports of changes in ownership  of Common  Stock in the Company.  Officers,
directors  and  greater-than-ten   percent  shareholders  are  required  by  SEC
regulation  to furnish the Company with copies of all Section 16(a) reports they
filed. To the Company's knowledge,  based solely on review of the copies of such
reports  furnished  to the  Company  and  written  representation  that no other
reports were  required,  during the fiscal year ended  December  31, 1996,  such
persons complied with all Section 16(a) filing requirements.



                                       39


<PAGE>



ITEM 10.          EXECUTIVE COMPENSATION

                  The  following   table  sets  forth   information   concerning
compensation of the Company's  Chief Executive  Officer and the three other most
highly  compensated  executive  officers  (collectively,  the  "Named  Executive
Officers") for 1994, 1995 and 1996.
<TABLE>
<CAPTION>


                          SUMMARY COMPENSATION TABLE(1)
-------------------------------------------------------------------------------
                                                Annual          
                                                Compen-          Long Term
                                                sation         Compensation
                                               -----------  -------------------
                                                            Restricted  Options
Name and Principal                       Fiscal              Stock     (No. of  
Position During Period                    Year   Salary ($)  Awards($)  Shares)
----------------------                   ------  ----------  --------- --------
-------------------------------------------------------------------------------
<S>                                      <C>     <C>           <C>     <C>   
Gary J. Wasserson ...................    1996    125,000       --      45,000
Chief Executive Officer .............    1995     --           --        --
                                         1994     --           --        --
-------------------------------------  -------  -------      -------   -------

John P. McCabe ......................    1996   150,000        --       3,334
President ...........................    1995   121,154        --      33,334
                                         1994     --           --        --
-------------------------------------  ------   -------      -------   -------

Cory Eisner .........................    1996   155,000        --       5,000
Vice President ......................    1995    93,750        --       3,334
                                         1994    22,500        --       8,334
-------------------------------------  ------   -------     -------   -------

David S. Tobin ......................    1996  116,667         --      29,303
General Counsel and Secretary .......    1995     --           --        --
                                         1994     --           --        --

-----------------------------
<FN>
(1)      No other executive officer received aggregate  compensation equal to or
         exceeding   $100,000  during  1994,  1995  or  1996.  None  of  Messrs.
         Wasserson,  McCabe,  Eisner  or  Tobin  received  noncash  compensation
         benefits having a value exceeding 10% of his cash  compensation  during
         1994, 1995 or 1996.
</FN>
</TABLE>



                                       40


<PAGE>
                  The following  table  summarizes  the number of shares and the
terms of stock options granted to the Named Executive Officers in 1996:
<TABLE>
<CAPTION>
                             OPTIONS/SHARES DURING YEAR ENDED DECEMBER 31, 1996
---------------------------------------------------------------------------------------------------------------------------
                                          Individual Grants
---------------------------  --------------------------------------------  ------------- ---------------- -----------------
                                                       % of Total
                                 Options/        Options/Shares Granted      Exercise      Market Price
Name and Position                 Shares            to Employees in            Price        on Date of       Expiration
During Period                     Granted             Fiscal Year            ($/Share)      Grant ($)           Date
-------------                    ---------           -------------           ---------      ---------           ----
---------------------------  ----------------- --------------------------  ------------- ---------------- -----------------
<S>                               <C>                     <C>                  <C>            <C>           <C> <C>
Gary J. Wasserson                 3,334(1)                35.3%                15.75          15.75             3/30/06
Chief Executive Officer          41,667                                        18.375         18.37         1/3 2/29/02;
                                                                                                            1/3 2/29/03;
                                                                                                            1/3 2/29/04
---------------------------  ----------------- --------------------------  ------------- ---------------- -----------------

John P. McCabe                    3,334(1)                 2.6%                15.75          15.75             3/30/06
President
---------------------------  ----------------- --------------------------  ------------- ---------------- -----------------
Cory Eisner                       5,000                    3.9%                 7.875          7.875            8/24/01
Vice President
---------------------------  ----------------- --------------------------  ------------- ---------------- -----------------

David S. Tobin                   16,667                   13.1%                18.375         18.37         1/3 2/29/02;
General Counsel and                                                                                         1/3 2/29/03;
Secretary                                                                                                   1/3 2/29/04

-----------------------------
<FN>
(1)      Represents immediately  exercisable options to purchase 3,334 shares of
         Common  Stock  granted  pursuant  to the  terms of the  Company's  1994
         Performance Equity Plan ("1994 Plan"),  which provides for stock option
         grants for 3,334  shares to be made to each  director of the Company on
         March  31st  of  each  year.  See  "Executive   Compensation   --  1994
         Performance Equity Plan."
</FN>
</TABLE>
                  The following  table  summarizes the number of exercisable and
unexercisable options held by the Named Executive Officers at December 31, 1996,
and their value at that date if such options were in-the-money.
<TABLE>
<CAPTION>
                         AGGREGATE YEAR-END OPTION VALUES AT DECEMBER 31, 1996
------------------------------------------------------------------------------------------------------------------------------
                                               Number of unexercised options            Value of unexercised in-the-money
Name and Position During Period                     at December 31, 1996               options at December 31, 1996 ($)(1)
-------------------------------                     --------------------               -----------------------------------
----------------------------------------  ---------------------------------------- -------------------------------------------
                                             Exercisable         Unexercisable        Exercisable           Unexercisable
----------------------------------------  ------------------  -------------------- ------------------  -----------------------
<S>                                              <C>               <C>                  <C>                 <C>                
Gary J. Wasserson                                3,334             41,667                 --                     --
Chief Executive Officer
----------------------------------------  ------------------  -------------------- ------------------  -----------------------

John P. McCabe                                  14,445             22,222                 --                     --
President
----------------------------------------  ------------------  -------------------- ------------------  -----------------------

Cory Eisner                                      9,584              7,083               $3,125                $6,250
Vice President
----------------------------------------  ------------------  -------------------- ------------------  -----------------------

David S. Tobin                                  12,636             16,667              $23,124                  --
General Counsel and Secretary
========================================  ==================  ==================== ==================  =======================
                                                                                                 (footnote on following page)
</TABLE>
                                       41


<PAGE>

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

(1)      Represents  the  difference  between  the  aggregate  market  value  at
         December 31, 1996 of the Common Stock  underlying the options (based on
         a last sale  price of $9.75 on that  date) and the  options'  aggregate
         exercise price.

1994 Performance Equity Plan

                  In  October  1994,  the  Board  of  Directors  of the  Company
adopted, and the stockholders  approved,  the 1994 Plan. The 1994 Plan currently
authorizes the granting of awards of up to 500,000 shares of Common Stock to the
Company's key employees, officers, directors and consultants.  Awards consist of
stock  options  (both  nonqualified  options and options  intended to qualify as
incentive stock options under Section 422 of the Internal  Revenue Code of 1986,
as amended),  restricted stock awards, deferred stock awards, stock appreciation
rights and other  stock-based  awards,  as described in the 1994 Plan.  The 1994
Plan is administered by the Board of Directors,  which determines the persons to
whom awards will be granted, the number of awards to be granted and the specific
terms of each grant, including the vesting thereof, subject to the provisions of
the 1994 Plan.

                  On March  31st of each  calendar  year  during the term of the
1994 Plan,  assuming  there are enough shares then available for grant under the
1994 Plan,  each person who is then a director  of the Company is awarded  stock
options to  purchase  3,334  shares of the  Company's  Common  Stock at the fair
market value thereof (as  determined in accordance  with the 1994 Plan),  all of
which  options are  immediately  exercisable  as of the date of grant and have a
term of ten years.  These are the only awards which may be granted to a director
of the Company under the 1994 Plan.

                  Each stock option may be granted at a price  determined by the
Board of  Directors,  not to be less than 100% of the fair  market  value of the
Common  Stock on the date of grant (or 110% of the fair market value in the case
of  qualified  stock  options  granted  to a  holder  of  more  than  10% of the
outstanding stock of the Company). The aggregate fair market value of shares for
which  qualified  stock  options  are  exercisable  for the  first  time by such
employee during any calendar year may not exceed  $100,000.  Generally,  options
granted to employees are  exercisable as to 50% of the shares covered thereby on
the first anniversary of the date of grant and 25% of the shares covered thereby
on each of the second and third  anniversaries  of the date of such  grant.  The
1994 Plan also contains certain change in control provisions,  which could cause
options and other awards to become immediately  exercisable and restrictions and
deferral limitations applicable to other awards to lapse in the event any person
(excluding certain stockholders of the Company) acquires beneficial ownership of
more than 25% of the Company's outstanding shares of Common Stock.

                  As of the date of this Report,  options to purchase a total of
234,188  shares of Common  Stock are  outstanding  under the 1994 Plan.  Options
outstanding  under the 1994 Plan  include  options  to  purchase  32,500  shares
granted to officers, at exercise prices ranging from $7.875 to $17.25 per share.
In  addition,  pursuant to the terms of the 1994 Plan,  on March 31,  1995,  the
Company granted to each director of the Company immediately exercisable ten-year
options to  purchase  3,334  shares for $17.625  per share,  on March 31,  1996,
immediately exercisable ten-year options to purchase 3,334 shares for $15.75 per
share  and on March  31,  1997,  immediately  exercisable  ten-year  options  to
purchase  3,334 shares for $11.125 per share.  In February  1995,  in connection
with their respective consulting  agreements with the Company,  Barry Rubenstein
and Eli Oxenhorn,  stockholders of the Company,  each were granted options under
the 1994 Plan to purchase  33,334 shares of Common Stock at an exercise price of
$14.25 per share.  These options vested in February 1996 and remain  exercisable
until February 2001. In January 1997, in connection  with the extension of their
respective  consulting  agreements,  Messrs.  Rubenstein  and Oxenhorn were each
granted options under the 1994 Plan to purchase 25,000 shares of Common Stock at
an exercise price of $9.00 per share.  These options vested in February 1997 and
remain  exercisable  until  February  2002.  The  exercise  prices of all of the
foregoing  options are equal to the fair market value of the Common Stock on the
date of grant.

Other Options and Warrants

                  In October  1994,  the  Company  granted  ten-year  options to
purchase an aggregate of 25,000  shares of Common Stock at an exercise  price of
$9.99 per share to three  individuals,  10,000 of which  were  granted to Shelly
Finkel, Chairman of the Board of the Company.

                                       42


<PAGE>


                  In  December   1994,  in   connection   with  its  serving  as
underwriter of the Company's initial public offering ("IPO"), the Company issued
and  sold to Whale  and its  designees,  for  nominal  consideration,  five-year
warrants to purchase up to 50,000 shares of Common Stock at a purchase  price of
$24.15 per share  and/or  Public  Warrants to  purchase  up to 50,000  shares of
Common Stock,  which Public  Warrants are  exercisable  at a price of $12.00 per
share.

                  In March 1995,  in  connection  with his  employment  with the
Company,  John McCabe was granted  options to purchase  33,334  shares of Common
Stock at an  exercise  price of $15.00 per share (the fair  market  value of the
Common  Stock on the date of grant).  These  options  vest in three equal annual
installments  commencing in March 1996 and will remain  exercisable for a period
of five years from the date of vesting.

                  In April 1995, in connection with consulting services rendered
to the Company, two individuals were granted options to purchase an aggregate of
2,500 shares of Common Stock at an exercise  price of $16.50 per share (the fair
market value of the Common Stock on the date of grant).

                  In April 1995,  the  Company  issued  five-year  warrants to a
designee of Whale to purchase 16,667 shares of Common Stock at an exercise price
of $15.00 per share (the fair  market  value of the Common  Stock on the date of
grant) in  consideration  of Whale's  granting  the  Company  the right of first
refusal to pursue any prospective  acquisition target in the phone card industry
that Whale  identifies  prior to February  1998.  In October  1995,  the Company
issued five-year warrants to another designee of Whale to purchase 16,667 shares
of Common Stock at an exercise  price of $15.00 per share (the fair market value
of the Common Stock on the date of grant).  In January 1996,  the Company issued
five-year warrants to Whale and two of its designees to purchase an aggregate of
66,667  shares at an exercise  price of $15.375 per share (the fair market value
of the  Common  Stock on the  date of  grant)  in  consideration  of  consulting
services provided to the Company.

                  In February 1996, in connection with their employment with the
Company,  Messrs.  Gary J.  Wasserson and David S. Tobin,  the  Company's  Chief
Executive Officer and General Counsel and Secretary,  respectively, were granted
options to purchase 41,667 and 16,667 shares, respectively, at an exercise price
of $18.375 per share (the fair market  value of the Common  Stock on the date of
grant).  These  options vest in three equal annual  installments  commencing  in
February  1997 and will remain  exercisable  for a period of five years from the
date of vesting.

                  In connection with the acquisition of Global Link,  options to
purchase  48,334  shares of  common  stock of Global  Link were  converted  into
options to purchase  36,642 shares of Common Stock,  at exercise  prices ranging
from $1.98 to $7.92 per share.  In addition,  warrants issued in connection with
the issuance of the  Convertible  Debentures  were  converted  into  warrants to
purchase 7,085 shares of Common Stock.

                  In May 1996,  the  Company  consummated  the May 1996  Private
Placement,  a $3,000,000  private  offering in which it sold 30 Units ("Units"),
each Unit  consisting  of 6,667 shares of Common Stock and May 1996  Warrants to
purchase  13,334 shares of Common Stock.  Whale served as the placement agent in
connection  with the May 1996  Private  Placement  and  received  an  option  to
purchase three Units (an aggregate of 20,000 shares of Common Stock and May 1996
Warrants to purchase  40,000 shares of Common Stock),  which Units are identical
to the Units sold in the May 1996  Private  Placement,  at an exercise  price of
$100,000 per Unit, exercisable until May 10, 2001.

                  In December  1996, the Company  consummated  the December 1996
Private  Placement,  a private  offering  from which the Company  derived  gross
proceeds of $3,000,000  through the sale of December 1996 Notes in the aggregate
principal amount of $3,000,000 and 1,000,000  December 1996 Warrants.  Whale was
paid a finder's fee in connection  with the December  1996 Private  Placement of
50,000  December 1996  Warrants.  Additionally,  Graubard  Mollen & Miller,  the
Company's  general  counsel,  received $50,000 of December 1996 Notes and 16,667
December 1996 Warrants in payment of certain legal fees and expenses.

Employment Agreements

                  The Company has  entered  into employment agreements with each
of Shelly Finkel, its Chairman  of  the  Board,  Gary  J.  Wasserson,  its Chief
Executive Officer, John P. McCabe,  its President,  David S. Tobin,  its General
Counsel and Secretary, Cory Eisner,  its Vice President - Enhanced Services, and

                                       43


<PAGE>


Maria  Bruzzese,  its  Chief  Financial  Officer.  Mr. Finkel and Ms. Bruzzese's
employment  agreements  each provide for an initial  term  through  December 14,
1997. Messrs.  Wasserson's and Tobin's employment agreements each provide for an
initial term through March 1, 1999. Mr. McCabe's  employment  agreement provides
for an initial term through March 1, 1998.  Mr.  Eisner's  employment  agreement
provides for an initial term through December 31, 1999. Mr. Finkel's  employment
agreement  requires  him to  devote  at least  50% of his  business  time to the
management  and  operations of the Company and provides for a base annual salary
of  $75,000.  Messrs.  McCabe,  Wasserson,  Tobin and Eisner and Ms.  Bruzzese's
employment  agreements  require  each  of them to  work  for  the  Company  on a
full-time  basis and  provide for base annual  salaries of  $150,000,  $150,000,
$140,000, $125,000 and $95,000, respectively, during the term of the agreements.
Messrs.  Wasserson's and Tobin's employment  agreements each provide that if his
employment is terminated  without cause, he shall receive his salary due through
the later of February  28, 1999 and one year from the date of  termination.  Mr.
Eisner's  employment  agreement  provides  that if his  employment is terminated
without  cause,  he shall  receive  salary due through the later of December 31,
1999 and one year from the date of  termination.  All of these officers also may
be granted annual  bonuses at the discretion of the Board of Directors.  Each of
the agreements contains a provision prohibiting the employee from competing with
the  Company  during  the  term of  employment  and for a  period  of two  years
thereafter.

Consultants

                  In February 1995, the Company entered into two-year consulting
agreements  with  each of  Barry  Rubenstein,  a  principal  stockholder  of the
Company,  and Eli  Oxenhorn.  In January  1997,  such  agreements  were extended
through  February 1999. Each of Messrs.  Rubenstein and Oxenhorn has held senior
executive  positions and directorships  with numerous  publicly-held  companies,
including  Cheyenne  Software,  Inc.,  a computer  company  that Mr.  Rubenstein
founded  and for which  Mr.  Oxenhorn  served  as  Chairman  of the  Board.  Mr.
Rubenstein  also was a founder of Novell,  Inc.,  a computer  software  company.
Messrs.  Rubenstein  and Oxenhorn  have  knowledge and expertise in founding and
developing  technology-based  companies  and  in  negotiating  and  consummating
mergers  and  acquisitions  and  establishing  commercial  relationships,  which
abilities  the Company  believes will be valuable in the pursuit of its strategy
of  rapid  growth.   Pursuant  to  the  terms  of  their  respective  consulting
agreements,  Messrs.  Rubenstein and Oxenhorn are to render consulting  services
for a maximum  of eight  hours per month  with a  principal  focus on  potential
mergers,  acquisitions and other business  combinations and business development
activities.   Each  of  Messrs.   Rubenstein  and  Oxenhorn  agreed  to  certain
noncompetition  provisions  and agreed to refer to the Company  any  opportunity
presented to him to acquire or enter into a business relationship with an entity
engaged in  activities  similar  to or  synergistic  with those of the  Company,
without the receipt of any finder's fee. In February 1995,  the Company  granted
to each of Messrs.  Rubenstein and Oxenhorn,  in consideration for the specified
consulting  services,  options to purchase  33,334  shares of Common Stock at an
exercise  price  $14.25 per share (the fair market  value of the Common Stock on
the date of grant), which options became exercisable in February 1996 and remain
exercisable  until  February  2001.  In January  1997,  in  connection  with the
extension of their respective consulting agreements,  each of Messrs. Rubenstein
and Oxenhorn were granted  options to purchase  25,000 shares of Common Stock at
an exercise  price of $9.00 per share (the fair market value of the Common Stock
on the date of grant).  These options  became  exercisable  in February 1997 and
remain exercisable until February 2002.




                                       44


<PAGE>



ITEM 11.          SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

                  The following  table presents  certain  information  regarding
beneficial  ownership of the Company's  Common Stock as of December 31, 1996, by
(i) each person known by the Company to be the beneficial  owner of more than 5%
of the  outstanding  shares of Common Stock,  (ii) each director of the Company,
(iii) each Named Executive  Officer and (iv) all directors and executive  offers
as a group. Unless otherwise indicated, each person in the table has sole voting
and investment power as to the shares shown.

<TABLE>
<CAPTION>

                                                           Shares
                                                       Beneficially
Name and Address of Beneficial Owner                     Owned(1)       Percent
------------------------------------                     --------       -------
<S>                                                     <C>              <C>  
Shelly Finkel ......................................    315,912(2)       16.4%
      c/o Shelly Finkel Management, Inc. 
      60 East 42nd Street, Suite 464
      New York, New York 10165
Gary J. Wasserson ..................................    150,731(3)        8.0%
      c/o Global Telecommunication Solutions, Inc. 
      5697 Rising Sun Avenue
      Philadelphia, Pennsylvania 19120
John P. McCabe .....................................     28,890(4)        1.5%
      c/o Global Telecommunication Solutions, Inc. 
      40 Elmont Road
      Elmont, New York 11003
Alan W. Kaufman ....................................     13,334(5)        *
      1150 Park Avenue #9A
      New York, New York 10177
Jack N. Tobin ......................................      6,667(6)        *
      7759 Highlands Circle
      Margate, Florida 33063
Donald L. Ptalis ...................................     12,432(7)        *
      16 Ross Avenue
      Emerson, New Jersey 07630
Cory Eisner ........................................     10,250(8)        *
      c/o Global Telecommunication Solutions, Inc. 
      40 Elmont Road
      Elmont, New York 11003
David S. Tobin .....................................     18,192(9)        *
      c/o Global Telecommunication Solutions, Inc. 
      5697 Rising Sun Avenue
      Philadelphia, Pennsylvania 19120
Laifer Capital Management, Inc. ....................    150,069(10)       7.5%
      45 West 45th Street
      New York, New York 10036
Eli Oxenhorn .......................................    141,780(11)       7.3%
      56 The Intervale
      Roslyn Estates, New York 11576
</TABLE>

                                       45


<PAGE>

<TABLE>
<CAPTION>
                                                     Shares
                                                   Beneficially
Name and Address of Beneficial Owner                 Owned(1)           Percent
------------------------------------                 --------          -------
<S>                                                  <C>                 <C>  
Barry Rubenstein ................................    952,780(12)         34.7%
      68 Wheatley Road
      Brookville, New York 11545
Peoples Telephone Company, Inc. .................    212,289             11.4%
      2300 N.W. 89th Place
      Miami, Florida 33172
Paul Silverstein ................................    105,800(13)          5.5%
      32 Edgewood Avenue
      Larchmont, New York 10538
Whale Securities Co., L.P. ......................    243,334(14)         12.0%
      650 Fifth Avenue
      New York, New York 10019
Wheatley Partners LLC ...........................    666,667(15)         26.4%
      80 Cuttermill Road
      Great Neck, New York 11021
All executive officers and directors as a group .    563,150(16)         27.7%
      (9 persons)
</TABLE>

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

*        Less than 1%.

(1)      A person is deemed to be the beneficial owner of voting securities that
         can be  acquired  by such  person  within 60 days from the date of this
         Report  upon  the   exercise  of  options,   warrants  or   convertible
         securities.  Each beneficial owner's percentage ownership is determined
         by assuming that convertible  securities,  options or warrants that are
         held by such person (but not those held by any other  person) and which
         are  exercisable  within 60 days of the date of this  Report  have been
         exercised.  Unless  otherwise  noted,  the  Company  believes  that all
         persons named in the table have sole voting and  investment  power with
         respect to all shares of Common Stock beneficially owned by them.

(2)      Includes (i) 16,667  shares of Common Stock  underlying  December  1996
         Warrants,  (ii) 20,000 shares of Common Stock issuable upon exercise of
         currently  exercisable  options and (iii) an aggregate of 30,873 shares
         of Common Stock underlying Public Warrants.

(3)      Represents  130,175  shares of Common Stock which are owned  jointly by
         Mr. Wasserson and his spouse and 20,556 shares of Common Stock issuable
         upon exercise of currently exercisable options. Does not include 27,778
         shares of Common Stock underlying options, 50% of which vest in each of
         February 1998 and 1999.

(4)      Represents  shares of Common Stock  issuable upon exercise of currently
         exercisable  options.  Does not include  11,111  shares of Common Stock
         underlying options which vest in March 1998.

(5)      Includes 1,667 shares of  Common  Stock  underlying Public Warrants and
         10,000 shares  of  Common  Stock  issuable  upon  exercise of currently
         exercisable options.

(6)      Represents  shares of  Common Stock issuable upon exercise of currently
         exercisable options.

                                       46


<PAGE>



(7)      Includes  5,398  shares of Common Stock  issuable  upon  conversion  of
         $50,000  principal  amount of  Convertible  Debentures,  127  shares of
         Common Stock  issuable upon  exercise of warrants  issued in connection
         with the  Convertible  Debentures  and 6,667  shares  of  Common  Stock
         issuable upon exercise of currently exercisable options.

(8)      Includes  334 shares of Common  Stock  underlying  Public  Warrants and
         9,584  shares of Common  Stock  issuable  upon  exercise  of  currently
         exercisable  options.  Does not include  7,083  shares of Common  Stock
         underlying options,  1,667 of which vest in August 1997, 2,917 of which
         vest in October  1997,  1,667 of which  vest in August  1998 and 833 of
         which vest in October 1998.

(9)      Represents  18,192  shares of Common Stock  issuable  upon  exercise of
         currently exercisable options. Does not include 11,111 shares of Common
         Stock  underlying  options,  50% of which vest in each of February 1998
         and 1999.

(10)     Includes   139,922  shares  issuable  upon  conversion  of  Convertible
         Debentures held by entities for which Laifer Capital  Management,  Inc.
         ("Laifer") acts as an investment  adviser  registered under Section 203
         of the Investment  Advisers Act of 1940. Such  information was obtained
         by the Company from a Schedule 13G filed by Laifer with the  Commission
         on February 6, 1997.

(11)     Includes  334  shares of  Common  Stock and 334  shares  issuable  upon
         exercise of Public  Warrants owned by Mr.  Oxenhorn's  son, of which he
         disclaims beneficial ownership,  31,390 shares of Common Stock issuable
         upon  exercise  of Public  Warrants  and 58,334  shares  issuable  upon
         exercise of currently exercisable options.

(12)     Includes  334 shares of Common  Stock  owned by The  Marilyn  and Barry
         Rubenstein Family  Foundation,  a tax exempt  organization of which Mr.
         Rubenstein  is a trustee,  and 6,667  shares of Common  Stock  owned by
         Marilyn Rubenstein,  Mr. Rubenstein's  spouse. Mr. Rubenstein disclaims
         beneficial  ownership  over all of such shares.  Also includes  101,667
         shares of  Common  Stock  (including  13,334  shares  of  Common  Stock
         underlying Public Warrants and 66,667 shares  underlying  December 1996
         Warrants) owned by Woodland Partners, a New York general partnership of
         which Mr.  Rubenstein  is a partner.  Also  includes  36,334  shares of
         Common  Stock  (including  33,334  shares  of Common  Stock  underlying
         December 1996 Warrants) owned by the Woodland  Venture Fund, a New York
         limited partnership of which Mr. Rubenstein is a general partner.  Also
         includes  33,334  shares  of  Common  Stock  underlying  December  1996
         Warrants owned by Seneca  Ventures,  a New York limited  partnership of
         which Mr.  Rubenstein is a general  partner.  Also includes 626,667 and
         40,000 shares of Common Stock  underlying  December 1996 Warrants owned
         by Wheatley and Wheatley Foreign Partners,  L.P. ("Wheatley  Foreign"),
         respectively.  Mr.  Rubenstein  is a member  and  officer  of  Wheatley
         Partners LLC, a Delaware limited liability company which is the general
         partner of Wheatley,  and also a general  partner of Wheatley  Foreign.
         Mr. Rubenstein  disclaims  beneficial ownership of the securities owned
         by Woodland Partners,  Woodland Venture Fund, Seneca Ventures, Wheatley
         and  Wheatley  Foreign  except  to the  extent of his  equity  interest
         therein. Also includes 18,057 shares of Common Stock owned individually
         by Barry  Rubenstein,  13,334  shares of Common  Stock  held in his IRA
         Rollover  account,  18,057  shares of Common  Stock  underlying  Public
         Warrants  and  58,334  shares   issuable  upon  exercise  of  currently
         exercisable options.

(13)     Includes 16,667 shares issuable upon exercise of currently  exercisable
         options and 5,834 shares of Common Stock  underlying  Public  Warrants.
         Mr. Silverstein was an executive officer of the Company until May 1996.
         Pursuant to the terms of Mr. Silverstein's  termination agreement,  the
         Company  agreed  to pay  him an  aggregate  of  $150,000  of  severance
         payments over a 12-month period commencing in March 1997.

(14)     Does not include shares held in Whale's trading  account.  Includes (i)
         33,334 shares  underlying  warrants issued to Whale in consideration of
         certain  investment  banking  services  rendered to the  Company,  (ii)
         50,000 shares  underlying  December  1996  Warrants  issued to Whale in
         connection  with the  December  1996  Private  Placement,  (iii) 20,000
         shares of Common Stock and May 1996 Warrants to purchase  40,000 shares
         of Common Stock  issuable  upon exercise of a purchase  option  ("UPO")
         issued to Whale in connection  with the May 1996 Private  Placement and
         (iv) 50,000 shares of Common Stock and 50,000 shares  underlying Public
         Warrants  issuable to Whale  pursuant to the warrant issued to Whale in
         connection with the Company's IPO  ("Underwriter's  Warrant").   All of

                                       47


<PAGE>



         the shares  underlying the UPO and the Underwriter's  Warrant  are held
         in the  name of Whale  Securities  Co.,  L.P.  for  the  account of its
         equity  owners and  certain of its  employees, pending transferability
         of  such warrants pursuant to the rules of the National Association of 
         Securities Dealers, Inc.

(15)     Represents  626,667  and  40,000  shares  of  Common  Stock  underlying
         December  1996  Warrants  owned  by  Wheatley  and  Wheatley   Foreign,
         respectively.  Such entities are controlled by Wheatley Partners LLC, a
         Delaware  limited  liability  company  which is the general  partner of
         Wheatley and a general partner of Wheatley Foreign.

(16)     Includes  those shares of Common Stock deemed to be included in Messrs.
         Finkel,  Wasserson,  McCabe, Kaufman, Tobin, Ptalis, Eisner and Tobin's
         respective beneficial ownership as described in notes 2, 3, 4, 5, 6, 7,
         8 and 9 above. Also includes 7,917 shares of Common Stock issuable upon
         exercise of currently exercisable options held by Maria Bruzzese, Chief
         Financial  Officer of the Company.  Also  includes 334 shares of Common
         Stock and 334 shares underlying Public Warrants  beneficially  owned by
         Ms. Bruzzese.  Does not include 5,418 shares underlying options granted
         to Ms.  Bruzzese,  1,667 of which vest in August  1997,  2,084 of which
         vest in October 1997 and 1,667 of which vest in August 1998.


ITEM 12.          CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

General

                  In March 1994,  Gary J. Wasserson  purchased  shares of common
stock of Global Link with a promissory note in the aggregate principal amount of
$100,000  bearing  interest at a rate of five  percent per annum.  Although  the
promissory  note  becomes due and payable on March 31, 1997 (on which date there
will be $15,000  of  accrued  and  unpaid  interest  on the note),  the Board of
Directors extended the payment of such note until March 31, 1998.

                  In  February  1995,  the  Company   entered  into   consulting
agreements with each of Barry  Rubenstein and Eli Oxenhorn,  which were extended
in January 1997. See "Executive Compensation -- Consultants."

                  The principal executive offices of the Company are leased from
JilJac  Realty Company,  a  general  partnership owned by Gary J. Wasserson, the
Company's Chief Executive Officer.  See "Description of Property."

                  In February 1996,  the Company and two groups of  stockholders
entered into a voting agreement, pursuant to which, until February 28, 1999, the
Company  is  obligated  to  nominate  four  persons  designated  by one group of
stockholders  and three persons  appointed by a second group of stockholders for
election to the Board of Directors at the various stockholders meetings, so long
as each group of  stockholders  continues to hold an aggregate of 183,334 shares
of Common Stock.  Further,  these two groups of stockholders have agreed to vote
for the other group's designees as directors of the Company.  See "-- The Global
Link Merger."

                  In May 1996,  the  Company  consummated  the May 1996  Private
Placement. Among the purchasers in the May 1996 Private Placement were a limited
partnership in which Mr. Rubenstein is a general partner (6,667 shares of Common
Stock and May 1996  Warrants to purchase  13,334 shares of Common Stock) and Mr.
Oxenhorn  (6,667 shares of Common Stock and May 1996 Warrants to purchase 13,334
shares of Common Stock).

                  In December  1996, the Company  consummated  the December 1996
Private  Placement.  Among the purchasers in the December 1996 Private Placement
were Shelly  Finkel,  Chairman of the Board of the Company  ($50,000 of December
1996 Notes and 16,667 December 1996 Warrants), and limited partnerships in which
Mr. Rubenstein is either a general partner or an officer and member of a limited
liability  company that is a general partner  ($2,400,000 of December 1996 Notes
and 800,000 December 1996 Warrants).

                  In March 1997,  the Company  entered  into an  agreement  with
Wheatley,  pursuant  to which  Wheatley  agreed  that,  if by June 1, 1997,  the
Company  does not  consummate  a  financing  raising  a minimum  of  $2,500,000,


                                       48


<PAGE>


Wheatley would exercise a minimum of 333,333 of the December  1996 Warrants that
it received in the December 1996 Private Placement,  resulting in gross proceeds
to the Company of at least $2,500,000.

                  The Company  believes that each of the foregoing  transactions
were on terms no less  favorable to the Company than those which could have been
obtained from  unaffiliated  third parties.  All future  transactions  and loans
between the Company and its officers,  directors and principal  stockholders  or
their  affiliates will be on terms no less favorable than could be obtained from
unaffiliated  third  parties  and will be  approved  by a  majority  of the then
disinterested directors of the Company.

The Global Link Merger

                  On January 18, 1996, the Company,  Link  Acquisition  Corp., a
wholly-owned  subsidiary of the Company ("Merger Sub"), and Global Link executed
an  Agreement  and Plan of Merger (the  "Merger  Agreement"),  pursuant to which
Merger  Sub was  merged  with and into  Global  Link and  Global  Link  became a
wholly-owned  subsidiary of the Company.  The Global Link Merger was consummated
on February 29, 1996 (the  "Merger  Date").  The purchase  price paid for Global
Link was approximately $11,400,000.

                  In connection with the Global Link Merger,  the Company agreed
to issue to the  holders  of  Global  Link's  common  stock  (the  "Global  Link
Shares"),  upon surrender of such shares,  an aggregate of 572,773 shares of the
Company's Common Stock.  Outstanding  options to purchase an aggregate of 48,334
Global Link Shares were  automatically  converted  into the right to purchase an
aggregate of 36,642 shares of Common Stock.

                  Pursuant  to the  Merger  Agreement,  the  Company  agreed  to
register the shares of Common Stock issued in the Global Link Merger, as well as
the  Conversion  Shares (as defined  below) and the  Peoples  Shares (as defined
below),  by means of a registration  statement  which was declared  effective on
September  30, 1996.  Notwithstanding  the  foregoing,  each  stockholder  to be
included in such registration statement executed a lock-up agreement prohibiting
his sale of such  shares for a period of one year after the Merger  Date  (which
period  has  expired)  and  limiting  sales  to  25%  of his  holdings  in  each
three-month  period  during the second  year  after the Merger  Date.  There are
certain  exceptions to these lock-up  agreements which will allow the holders of
the Convertible  Debentures to sell that aggregate  number of Conversion  Shares
equal to the  aggregate  amount of shares of Common  Stock sold by the GTS Major
Stockholders (as defined below) during the one-year period immediately following
the Merger Date in excess of 53,334 shares of Common Stock.

                  In addition,  the holders of  $2,800,000  aggregate  principal
amount of  Convertible  Debentures  executed a  securities  purchase  agreement,
pursuant to which such  holders  consented  to the Global Link Merger and waived
certain rights. The Convertible  Debentures are due and payable on June 23, 1999
and are secured by a first lien on all assets of Global  Link.  The  Convertible
Debentures bear interest at 6% per annum,  payable on May 30th and November 30th
of each year.  At the option of the  holders,  the  Convertible  Debentures  are
immediately due and payable upon a change in control of Global Link. The Company
has guaranteed the payment of principal and interest owed under the  Convertible
Debentures. The principal amount of the Convertible Debentures is convertible at
the  option  of the  holders  at any time  into  shares  of  Common  Stock  (the
"Conversion  Shares") at a conversion price of $9.264 per share. The Company may
force the  conversion  of the  Convertible  Debentures  if (i) the  Company  has
received  aggregate  gross  proceeds of not less than  $5,000,000  from  certain
private  placements or public offerings of its securities at a price equal to or
greater than $12.00 per share;  (ii) the Conversion Shares are the subject of an
effective  registration  statement  under the Securities Act or are eligible for
sale  under an  exemption  therefrom;  (iii)  the  Common  Stock is  traded on a
national  securities  exchange or quoted on Nasdaq; (iv) the price of the Common
Stock has been at least  $10.50  for 30 days  prior to the  consummation  of the
offering  referred to in (i); and (v) the lock-up  agreements of the Convertible
Debenture  holders  are  terminated.  Global  Link may  prepay  the  Convertible
Debentures,  subject to the  holders'  right of  conversion,  if the  Conversion
Shares are  registered  under the  Securities  Act or an exemption  therefrom is
available,  the Common  Stock is listed on a  national  securities  exchange  or
quoted on Nasdaq and the lock-up  agreements  of the holders of the  Convertible
Debentures are terminated.

                  Also in  connection  with the Global Link Merger,  Global Link
and Peoples  executed an agreement,  pursuant to which, as amended,  Peoples was
paid (i) $550,000 on the Merger Date, (ii) $500,000 plus accrued interest at the
rate of 8% per annum in increments  over the  ten-month  period after the Merger
Date and  (iii)  17,602  shares  of  Common  Stock  ("Peoples  Shares")  in full
satisfaction  of any and all monies  owed by Global  Link to Peoples  other than


                                       49


<PAGE>



$954,630 of trade receivables ("Trade  Receivables"). The agreement, as amended,
provides  for  Certain  prepayments of  the Trade  Receivables in the event the 
Company obtains additional financing or the occurrence of any change of control.

                  On the Merger Date,  the Company  entered  into an  employment
agreement with each of Gary J. Wasserson and David S. Tobin,  who were the Chief
Executive  Officer and General Counsel,  respectively,  of Global Link, and then
became the Chief  Executive  Officer and General  Counsel and  Secretary  of the
Company, respectively. See "Executive Compensation -- Employment Agreements."

                  In connection with the Global Link Merger,  a group consisting
of Shelly Finkel, James Koplik, Paul Silverstein and Joseph Clark (collectively,
the "GTS Major Stockholders"), who hold an aggregate of 398,580 shares of Common
Stock,  and another group consisting of Gary J. Wasserson,  Jody Frank,  Bernard
Frank, Edward Marx, Joel D. Hornstein and members of their respective  immediate
families  (collectively,  the  "Global  Link Major  Stockholders"),  who hold an
aggregate of 346,692  shares of Common Stock,  entered into a voting  agreement,
pursuant to which the Company  agreed to  nominate  and use its best  efforts to
have elected to its Board of Directors and the Board of Directors of Global Link
three  designees  ("Global  Link  Designees")  selected by the Global Link Major
Stockholders  and four  designees  ("GTS  Designees")  selected by the GTS Major
Stockholders.  Each of the GTS  Major  Stockholders  agreed  to vote  all of his
shares  of Common  Stock  for the  election  of each of the  three  Global  Link
Designees and each of the Global Link Major  Stockholders  agreed to vote all of
his  shares  of  Common  Stock  for the GTS  Designees.  The term of the  voting
agreement expires on February 28, 1999.


ITEM 13.          EXHIBITS AND REPORTS ON FORM 8-K

(a)      Exhibits Filed.

                  See Exhibit Index appearing later in this Report.

(b)      Reports on Form 8-K

                  Current  Report on Form 8-K,  dated  December 20, 1996,  filed
                  with the  Securities  and Exchange  Commission on December 26,
                  1996.



                                       50


<PAGE>



                                   SIGNATURES

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


Dated: April 14, 1997                 GLOBAL TELECOMMUNICATION SOLUTIONS, INC.

                                      By:  /s/ Shelly Finkel
                                          ------------------------------------
                                          Shelly Finkel, Chairman of the Board
                                          of Directors


                  In  accordance  with Section 13 or 15(d) of the Exchange  Act,
this  report has been  signed  below by the  following  persons on behalf of the
registrant and in the capacities and on the dates indicated.



 /s/ Shelly Finkel      Chairman of the Board of Directors      April 14, 1997
-------------------
Shelly Finkel


/s/ Gary J. Wasserson   Chief Executive Officer and Director    April 14, 1997
---------------------
Gary J. Wasserson


/s/ John McCabe        President and Director                   April 14, 1997
--------------------
John McCabe


/s/ Alan W. Kaufman    Director                                April 14, 1997
-------------------
Alan W. Kaufman


/s/ Jack N. Tobin      Director                                April 14, 1997
-------------------
Jack N. Tobin


/s/ Donald L. Ptalis   Director                                April 14, 1997
--------------------
Donald L. Ptalis


/s/ Maria Bruzzese   Chief Financial Officer                   April 14, 1997
------------------   (and principal accounting officer)
Maria Bruzzese 

                                       51


<PAGE>
                                  EXHIBIT INDEX
Exhibit
Number         Description
---------      ------------ 
3.1        A   Certificate of Incorporation

3.2        A   Amendment to Certificate of Incorporation

3.3        A   By-Laws

3.4        C   Certificate of Merger of Merger Sub into Global Link

4.1        A   Form of Common Stock Certificate

4.2        A   Form of Redeemable Warrant Certificate

4.3        A   Warrant Agreement between the Company and Whale

4.4        A   Underwriter's Warrant issued to Whale

4.5        D   Placement Agent Warrant dated May 10, 1996 issued to Whale

4.6        F   Warrant Agreement dated April 15, 1995 between the Company and 
               Craig Shapiro

4.7        F   Warrant Agreement dated October 26, 1995 between the Company and
               Frog Hollow Partners

4.8        F   Warrant Agreement dated January 22, 1996 between Company and 
               Whale

4.9        E   Form of Subscription Agreement for December 1996 Private 
               Placement

4.10       E   Form of Warrant issued in the December 1996 Private Placement

4.11       E   Form of Promissory Note issued in the December 1996 Private 
               Placement

10.1       A   Sublease for 342 Madison Avenue, New York, New York

10.2       A   Sublease for additional space at 342 Madison Avenue, New York, 
               New York

10.3       A   Employment Agreement between the Company and Shelly Finkel

10.4       A   Employment Agreement between the Company and Maria Bruzzese

10.5       A   Stock Option Agreement between the Company and Shelly Finke

10.6       A   Stock Option Agreement between the Company and Paul Silverstein

10.7       A   Stock Option Agreement between the Company and James Koplik

10.8       B   Stock Option Agreement between the Company and John McCabe

10.9       A   1994 Performance Equity Plan

10.10      A   Service Agreement between the Company and MCI Telecommunications
               Corporation

10.11      A   Service Agreement between the Company and Sprint Corporation

10.12      A   Service Agreement between Independent Properties Sales 
               Corporation ("IPSC") and Metromedia Communications Corporation 
               ("Metromedia," which was later acquired by WorldCom)

10.13      A   Consent between IPSC and Metromedia allowing the assignment to 
               the Company of IPSC's right to receive services from Metromedia.

10.14      B   Employment Agreement between the Company and John McCabe

10.15      B   Consulting Agreement between the Company and Barry Rubenstein

                                       52


<PAGE>

Exhibit
Number         Description
-------        -------------
10.16      B   Consulting Agreement between the Company and Eli Oxenhorn

10.17      C   Merger Agreement by and among the Company, Merger Sub and Global
               Link

10.18      C   Directors Voting Agreement

10.19      C   Peoples Agreement, together with the Company's Guaranty of 
               Peoples Second Payment

10.20      C   Ancillary Agreement between Global Link and Peoples regarding 
               payment of the Peoples Accounts Receivable, together with Holding
               Corp's Guaranty of such payment

10.21      C   Amended and Restated Securities Purchase Agreement

10.22      C   The Company's Guaranty of Debentures

10.23      C   Employment Agreement between the Company and Gary Wasserson

10.24      C   Employment Agreement between the Company and David Tobin

10.25      C   Stock Option Agreement between the Company and Gary Wasserson

10.26      C   Stock Option Agreement between the Company and David Tobin

10.27      A   Sublease for space at 40 Elmont Road, Elmont, New York

10.28      D   Form of Registration Rights Agreement for May 1996 Private 
               Placement

10.29      D   Agency Agreement between the Company and Whale for May 1996 
               Private Placement

10.30      D   Placement Agent Warrant Agreement for May 1996 Private Placement

10.31      F   Consulting Agreement dated January 22, 1996 between the Company 
               and Whale

10.32      F   First Amendment to Peoples Agreement, dated August 14, 1996

10.33      F   Second Amendment to Peoples Agreement, dated November 27, 1996

10.34      E   Finder's fee agreement between the Company and Whale relating to
               the December 1996 Private Placement

10.35      *   Extension of Consulting Agreement between the Company and Barry 
               Rubenstein

10.36      *   Extension of Consulting Agreement between the Company and Eli 
               Oxenhorn

23         *   Consent KPMG Peat Marwick LLP

27         *   Financial Data Schedule

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

*        Filed herewith.

A        Incorporated by reference to the Company's Registration Statement on 
         Form SB-2 (No. 33-85998).

B        Incorporated by reference to the Company's Annual Report on Form 10-KSB
         for the year ended December 31, 1994.

C        Incorporated by reference to the Company's  Current Report on Form 8-K,
         filed with the Commission on March 15, 1996.


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D        Incorporated by reference to Post-Effective Amendment No. 2 to the 
         Company's Registration Statement on Form SB-2 on Form S-3 
         (No. 33-85998).

E        Incorporated by reference to the Company's  Current Report on Form 8-K,
         filed with the Commission on December 26, 1996.

F        Incorporated by reference to the Company's Registration Statement on 
         Form S-3 (No. 333-19005)


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