U.S. SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C.  20549

                                    FORM 10-K

(Mark  One)

[x]     Annual Report pursuant to section 13 or 15(d) of the Securities Exchange
        Act  of  1934  for  the  fiscal  year  ended  December  31,  2001.

[  ]    Transition  Report  pursuant  to  section 13 or 15(d) of  the Securities
        Exchange  Act of  1934 for the  transition  period  from  ___  to  ____.

                        Commission file number 000-21463

                          Murdock Communications Corporation
                     ---------------------------------------
             (Exact name of registrant as specified in its charter)

                     Iowa                        42-1339746
                     ----                        ----------
(State  or  other  jurisdiction  of     (IRS  Employer  Identification  No.)
 incorporation  or  organization)

            701 Tama  Street,     Marion,  Iowa                     52302
            -------------------------------------------------------------
            (Address of principal executive offices)           (Zip Code)

        Registrant's telephone number, including area code:  319-447-4239
                                                             ------------

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

                                              Name  of  each  exchange
     Title  of  each  class                      on  which  registered
          NA                                             NA
          --                                             --

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

                              Common Stock, No Par Value
                              --------------------------
                                 (Title of class)

                    Redeemable Common Stock Purchase Warrants
                    -----------------------------------------
                                (Title of class)

<PAGE>
     Check  whether  the  registrant:  (1)  has filed all reports required to be
filed  by Section 13 or 15(d) of the Exchange Act during the preceding 12 months
(or  for  such  shorter  period  that  the  registrant was required to file such
reports),  and  (2) has been subject to such filing requirements for the past 90
days.  Yes  X  No
           --     --

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

     The aggregate market value of the common stock held by nonaffiliates of the
registrant as of March 1, 2002 was $456,470.  Shares of common stock held by any
executive  officer or director of the registrant and any person who beneficially
owns  10%  or  more of the outstanding common stock have been excluded from this
computation  because  such  persons  may  be  deemed  to  be  affiliates.  This
determination  of  affiliate  status is not a conclusive determination for other
purposes.

     On  March  1,  2002,  there  were  outstanding  12,514,967  shares  of  the
registrant's  no  par  value  common  stock.

DOCUMENTS  INCORPORATED  BY  REFERENCE

     None.


                                        2
<PAGE>
                                     PART I
                                     ------

ITEM  1.  BUSINESS

GENERAL

     Murdock  Communications  Corporation  ("MCC"  or  the "Company") previously
operated  as  a  holding  company  with the Company's principal assets being the
Priority  International  Communications,  Inc.  ("PIC") business segment and its
investment in Actel Integrated Communications, Inc. ("Actel").  PIC was  largely
a  reseller of call processing services.  Actel, based in Mobile, Alabama, was a
facilities-based  competitive  local exchange carrier of advanced voice and data
communications  services  to  small and medium sized enterprises.  Actel offered
advanced  end-user  services in the Southeastern United States.  Actel filed for
bankruptcy  under  Chapter  11  on  April  11,  2001.  As  a result, the Company
recorded an impairment charge of $1.6 million in 2000, due to the uncertainty of
ultimate  recovery  of  its investment in Actel.  On September 14, 2001, Actel's
case  was  converted  to  a  case  under  Chapter  7.

     Effective  July  31,  2001,  the  Company  sold  all  the  shares of PIC to
Dartwood, LLC for a total purchase price of $196,000, comprised of $100,000 cash
and  a  non-interest  bearing  promissory  note of $96,000 payable in 24 monthly
installments  of  $4,000.  The Company assigned the cash payment of $100,000 and
the promissory note to MCC Investment Company, LLC ("MCCIC"), a company owned by
Berthel  Fisher  & Company, Inc. ("Berthel") and another significant shareholder
of  the Company to repay $196,000 of outstanding debt.  Wayne Wright, a director
and  shareholder  of  the Company is related to the owner of Dartwood, LLC.  The
disposition  was recorded in the third quarter of 2001 and resulted in a gain of
approximately  $1.3  million  for  the  Company.

     At  December  31,  2001,  the  Company  has  no operating activities and no
reportable  segments.  The  Company's current strategic direction is to continue
to  negotiate  with  its  creditors  to  restructure indebtedness and to use the
Company's  public  shell  as  a  merger vehicle.   For information regarding the
Company's  proposed  merger  transaction  with  Polar  Molecular  Corporation
("Polar"),  see "Recent Developments - Merger Agreement with Polar."  Due to the
Company's  large  amount of past due debt, the Company will need to continue its
restructuring  efforts in 2002. If the Company is unable to restructure its past
due debt, or if the holders of the Company's past due debt seek to enforce their
rights, the Company would not be able to complete the proposed merger with Polar
or  to  continue  operating as a going concern.  See "- Recent Developments" and
"Management's  Discussion  and  Analysis  of  Financial Condition and Results of
Operations"  below.


                                        3
<PAGE>
     MCC  was  incorporated  as  an  Iowa  corporation  in  1989.

RECENT  DEVELOPMENTS

     MCC'S PAST DUE DEBT.  As of March 31, 2002, the Company was past due in the
payment  of approximately $12.4 million of principal and interest payments.  The
Company was also past due with its trade vendors in the payment of approximately
$777,000  as of March 31, 2002.  If the Company is unable to raise the necessary
funds  to repay its past due debt or to arrange for extensions or conversions of
such  debt,  its  creditors may sue the Company to demand payment of the amounts
past due.  Any action by the Company's creditors to demand repayment of past due
indebtedness  is  likely  to  prevent  the  Company  from  continuing as a going
concern.  See  "Management's  Discussion and Analysis of Financial Condition and
Results  of  Operations."

     The  Company's  past due debt includes approximately $11.6 million of notes
and  accrued  interest which are believed to have been pledged by the holders of
the  notes  to  a bank as collateral for loans made by the bank to such holders.
The  Federal  Deposit Insurance Corporation ("FDIC") liquidated this bank during
2000. The Company was notified in December 2000 that the FDIC sold substantially
all the loans and related collateral to a financial institution.  In March 2001,
the  Company  received  a  demand  letter  from  this  financial institution for
approximately  $575,000  of principal plus accrued interest on the notes, and on
July  5,  2001 the financial institution obtained a default judgment against the
Company  for  $781,252  plus interest at the rate of 18% per year from and after
February  6,  2001.  If  the  financial  institution seeks to enforce its rights
under  the pledged notes, the Company currently would not be able to repay these
notes.  As  a  result, any such action by the financial institution is likely to
prevent  the  Company  from  continuing  as  a  going  concern.

     The  FDIC  has notified the Company that it believes an additional $770,000
is  outstanding  representing  various  notes  payable.  Also, in July 2001, the
Company was notified that Peoples Bank had obtained a judgment against a Company
director  and shareholder in the amount of $350,000, and that the collateral was
a  Company  promissory  note in the principal amount of $350,000.  Another party
has  also asserted that he is entitled to $500,000 allegedly outstanding under a
note  payable.  Management  believes  that  the  Company  received no funds with
respect  to  these notes and that it has other defenses.  The amount of past due
debt  as  of December 31, 2001 does not include these amounts.  No assurance can
be  given  as  to  the  ultimate  outcome  of  these  matters.


                                        4
<PAGE>
     MERGER  AGREEMENT  WITH POLAR.  On December 19, 2001, Polar and the Company
entered  into an Agreement and Plan of Merger.  Under the terms of the Agreement
and  Plan  of  Merger,  the  outstanding  shares of Polar's common stock will be
converted  into  the  number  of  shares of MCC's no par value common stock (the
"Common Stock") equal to 80% of the outstanding shares of the Common Stock as of
the  effectiveness  of  the  merger  and  MCC  shareholders  will  retain  a 20%
ownership.  The  outstanding warrants and options of MCC will remain outstanding
after  the  completion of the merger and the outstanding warrants and options of
Polar  will  be converted into warrants and options to purchase the Common Stock
based  on the exchange ratio in the merger.  The proposed merger is subject to a
number  of significant conditions, including approval by the stockholders of the
parties,  filings with Securities and Exchange Commission, the conversion of the
Company's indebtedness into equity, the obtaining of debt or equity financing by
Polar  and  other  closing conditions.  Because there are significant conditions
remaining  to be satisfied with respect to the proposed merger, no assurance can
be  given  that the proposed merger will be consummated or, if consummated, that
the  terms  of  the  proposed  merger  will  be  as  presently  contemplated.

     STANDSTILL  AGREEMENT.  The  Company  historically obtained lease and other
financing  services  from  Berthel.  In  December  1999,  Berthel entered into a
Standstill  Agreement with the Company.  Under the Standstill Agreement, Berthel
indicated its intention to form a creditors committee to represent the interests
of  Berthel  and  other creditors of the Company.  The Company agreed to provide
the creditors committee with access to information regarding the Company and its
business  and  to  advise  the  creditors committee in advance regarding certain
significant  corporate  developments.  The  creditors  committee may also demand
that  the  Company take certain actions with respect to the Company's assets and
business.  The  members of the creditors committee agreed to forbear from taking
actions  to  collect  past  due  debt  owed by the Company in the absence of the
unanimous  approval  of  the  creditors  committee.  As  of  March 31, 2002, the
Company and Berthel are the only parties to the Standstill Agreement and Berthel
is  the  only  member  of  the  creditors  committee.

EMPLOYEES

     As  of  December 31, 2001, MCC had one employee.  The Company's employee is
not  subject  to  a  collective  bargaining  agreement.


                                        5
<PAGE>
ITEM  2.  PROPERTIES

     The  Company's  corporate  office  is located in Marion, Iowa.  The Company
leases  this  office  on  a  month  to  month  basis.

ITEM  3.  LEGAL  PROCEEDINGS

     On  January 17, 2001, Republic Credit I filed lawsuits in the U.S. District
Court,  Southern  District of Iowa, against each of John Rance, Robert M. Upshaw
and Stephen Rance to collect on certain promissory notes held by Republic Credit
I.  On November 23, 2001, each of John Rance, Robert M. Upshaw and Stephen Rance
filed a third party complaint against the Company and certain of its current and
former directors and officers.  The Company intends to vigorously defend against
these  claims,  but  no  assurance  can  be  given regarding the outcome of this
matter.

     In  the  normal  course of business, the Company may be involved in various
legal  proceedings  from  time  to time.  Except as set forth above, the Company
does  not  believe  it is currently involved in any claim or action the ultimate
disposition  of  which  would  have  a  material  adverse effect on the Company.

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

     No  matters  were submitted to a vote of security holders during the fourth
quarter  of  the  year  ended  December  31,  2001.

                                     PART II
                                     -------

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

HISTORICAL  TRADING  INFORMATION  AND  DIVIDEND  POLICY

     The  Common  Stock  trades on the Over the Counter Bulletin Board under the
symbol  "MURC"  and  the  Company's  Redeemable  Common  Stock Purchase Warrants
("Warrants")  trade  on  the  Over  the  Counter Bulletin Board under the symbol
"MURCW."  The following table sets forth the high and low bid quotations for the
Common  Stock  and  Warrants as reported on the Over the Counter Bulletin Board.
Such  transactions reflect interdealer prices, without retail mark-up, mark-down
or  commission  and  may  not  necessarily  represent  actual  transactions.

                                        6
<PAGE>
<TABLE>
<CAPTION>


             Common Stock     Warrants
             ------------     --------

Quarter      High  Low   High    Low
-----------  ----  ----  -----  -----
<S>          <C>   <C>   <C>    <C>

FISCAL 2000
First . . .  2.63  0.88   0.69   0.15
Second. . .  1.63  0.31   0.19   0.13
Third . . .  0.69  0.25   0.13   0.13
Fourth. . .  0.52  0.09   0.06   0.02

FISCAL 2001
First . . .  0.25  0.05   0.05   0.02
Second. . .  0.10  0.03   0.05   0.01
Third . . .  0.45  0.03   0.10   0.01
Fourth. . .  0.18  0.05  0.045  0.005

</TABLE>


     At March 31, 2002, there were approximately 134 holders of record of Common
Stock.

     The Company has not paid any cash dividends on the Common Stock in the last
three  years.  Certain  of  the  Company's  current financing agreements contain
restrictions  on  the  payment  of  dividends.  The  Company does not anticipate
paying  any  cash  dividends  in  the  foreseeable  future.

RECENT  SALES  OF  UNREGISTERED  SECURITIES

     During  2001,  the  Company  issued warrants to purchase a total of 179,600
shares of Common Stock to MCCIC in connection with advances obtained from MCCIC.
The  warrants  were  issued  at  exercise prices ranging from $0.05 per share to
$0.38  per  share  with  five  year  terms.  The warrants were issued in private
placements  exempt  from  the registration requirements of the Securities Act of
1933,  amended  (the  "Act"),  pursuant  to  Section  4(2)  of  the  Act.

ITEM  6.  SELECTED  FINANCIAL  DATA

     The following sets forth selected consolidated financial data in respect of
the  Company's  continuing  operations.  The  selected financial information set
forth  in the table below is not necessarily indicative of the results of future
operations  of  the Company and should be read in conjunction with "Management's
Discussion  and  Analysis  of Financial Condition and Results of Operations" and
the

                                        7
<PAGE>
consolidated  financial  statements,  related  notes  and  independent auditors'
report,  contained  herein.  The statement of operations data for the five years
ended  December  31,  2001  and the related balance sheet data have been derived
from  the  audited  consolidated  financial  statements  of  the Company.  These
financial  statements  were  prepared  on  a  going  concern  basis.

<TABLE>
<CAPTION>

                                                   2001      2000(a)    1999(b)    1998(c)   1997(d)
                                                 ---------  ---------  ---------  ---------  --------
                                                         (In thousands, except per share data)
<S>                                              <C>        <C>        <C>        <C>        <C>
Statement of Operations Data:
Revenues. . . . . . . . . . . . . . . . . . . .  $     22   $    191   $  4,313   $  5,263   $ 7,048
Income (loss) from continuing operations. . . .    (3,033)       152     (9,161)    (1,967)   (7,900)
Loss before extraordinary item. . . . . . . . .    (1,814)    (5,024)   (18,398)    (3,836)   (6,072)
Net loss attributable to common shareholders. .    (1,814)    (4,427)   (18,592)    (3,430)   (7,892)
Basic and diluted net loss
  per common share
    Income (loss) from continuing operations. .  $  (0.25)  $      -   $  (0.90)  $  (0.36)  $ (1.88)
    Income (loss) from discontinued operations.      0.10      (0.48)     (0.89)      0.60     (1.88)
    Extraordinary gain. . . . . . . . . . . . .         -       0.07          -          -         -
    Net loss. . . . . . . . . . . . . . . . . .  $  (0.15)  $  (0.41)  $  (1.79)  $  (0.63)  $ (1.88)

Balance Sheet Data:  (at end of year)
Total assets. . . . . . . . . . . . . . . . . .  $     14   $    277   $ 10,462   $ 12,911   $   949
Notes payable . . . . . . . . . . . . . . . . .     8,766      8,783     14,426      6,921     1,715
Long-term debt. . . . . . . . . . . . . . . . .     4,632      4,632      3,820      5,347     5,819
Total liabilities . . . . . . . . . . . . . . .    19,537     18,030     26,844     16,474    12,202
Redeemable preferred stock. . . . . . . . . . .         -          -      1,868      1,837     1,544
Shareholder's equity (deficiency) . . . . . . .   (19,522)   (17,753)   (20,132)   (11,149)   (4,474)
<FN>

(a)  Includes:  a $990,000 charge for the write-down of the Company's investment
     in  the  AcNet entities; a $1.6 million charge for impairment of investment
     in  Actel;  a  gain  of  $7.0  million  recorded  in connection with a Debt
     Restructuring  Plan; and a $722,000 extraordinary gain on extinguishment of
     debt.

(b)  Includes:  a  $3.7  million  charge  for  the  write-down  of the Company's
     investment  in  the  AcNet  entities.

(c)  Includes  a  gain  of $453,000 relating to the termination of the Company's
     agreement  with  AT&T.

(d)  Includes:  a  $1.0  million  charge on the write-off of all the assets of a
     joint  venture.
</TABLE>


                                        8
<PAGE>
ITEM  7.     MANAGEMENT'S  DISCUSSION  AND  ANALYSIS  OF FINANCIAL CONDITION AND
RESULTS  OF  OPERATIONS

OVERVIEW

     The  Company  continues  to  exist  as  a public shell for use as a reverse
merger  vehicle  with  no  operating  activities.

     Previously the Company had three reportable segments.  The Company sold its
PIC  segment  in  July  2001  and  its  Incomex segment in June 2000.  The other
reportable  segment  (MTS)  had  investments  in  the Acnet entities, which were
written  off  1999  and  2000,  and  Actel  preferred  stock  and  operated  a
telecommunications  services  business  whose  primary  asset  was sold in 2000.
Actel filed for bankruptcy under Chapter 11 on April 11, 2001.  As a result, the
Company  recorded  an  impairment  charge  of  $1.6  million in 2000, due to the
uncertainty  of  ultimate recovery of its investment in Actel.  On September 14,
2001,  Actel's  case  was  converted  to  a  case  under  Chapter  7.

     The  accompanying  statements  of operations have been reclassified so that
the  results  for  the  two  segments  sold  in  2000 and 2001 are classified as
discontinued  operations  for  all  periods  presented.

     As  of  the date of this report, the Company has a large amount of past due
debt  and  has  also  experienced  significant  cash  flow  difficulties.

     The  Company  has  an  agreement  with  an unrelated third party to use the
Company's  public shell as a reverse merger vehicle.  If this transaction is not
successful,  the  Company  may  not  be  able  to  continue operating as a going
concern.

RESULTS  OF  OPERATIONS

<TABLE>
<CAPTION>

                                        Years Ended December 31
                                         2001     2000    1999
                                        -------  ------  ------
                                             (In thousands)
<S>                                     <C>      <C>     <C>
Revenues . . . . . . . . . . . . . . .  $   22   $  191  $4,313
Cost of Sales. . . . . . . . . . . . .       -      335   2,707
Selling, general, and administrative .     742      575   3,383
Depreciation and amortization expense.       6       36     549
Interest expense . . . . . . . . . . .   2,304    3,431   3,041
Other income (expense) . . . . . . . .      (3)   7,001     226
</TABLE>

COMPARISON  OF  YEARS  ENDED  DECEMBER  31,  2001  AND  2000

SELLING,  GENERAL AND ADMINISTRATIVE EXPENSE - Consolidated selling, general and
administrative  expense  increased  $167,000  to  $742,000  for  the  year ended
December  31,  2001  from  $575,000  for  the year ended December 31, 2000.  The
increase  is  primarily  related  to  employee  severance.


                                        9
<PAGE>
DEPRECIATION  AND  AMORTIZATION  EXPENSE-  Consolidated  depreciation  and
amortization expense declined $30,000, to $6,000 for the year ended December 31,
2001  from  $36,000  for  year  ended  December 31, 2000.  The decline is due to
impairments  recorded  in  1999  and  2000.  All assets are fully depreciated at
December  31,  2001.

INTEREST EXPENSE - Consolidated interest expense, including amortization of debt
discount, declined $1,127,000 to $2,304,000 for the year ended December 31, 2001
from $3,431,000 in 2000.  The decline is due to the reduction of debt associated
with  the  sale  of  the  two business segments and the Debt Restructuring Plan.

OTHER  INCOME  -  Consolidated other income (expense) declined $7.0 million to a
$3,000 expense for the year ended December 31, 2001 from a $7,001,000 income for
the  year  ended December 31, 2000.  The decrease was primarily due to a pre-tax
gain  of  $7.0  million  recorded in connection with the Debt Restructuring Plan
completed  in  the  second  quarter  of  2000  (see Note 6 to Notes to Financial
Statements)  and a pre-tax gain of $214,000 recorded in connection with the sale
of  two  buildings  in  Cedar  Rapids,  Iowa  and  Mobile,  Alabama.

DISCONTINUED  OPERATIONS

PIC-  Effective  July  31,  2001,  the  Company  sold  all  the shares of PIC to
Dartwood, LLC for a total purchase price of $196,000, comprised of $100,000 cash
and  a  non-interest  bearing  promissory  note of $96,000 payable in 24 monthly
installments  of  $4,000.  The Company assigned the cash payment of $100,000 and
the  promissory  note  to  MCCIC  to  repay $196,000 of outstanding debt.  Wayne
Wright,  a  director  and  shareholder of the Company is related to the owner of
Dartwood,  LLC.  The  disposition  was recorded in the third quarter of 2001 and
resulted  in  a  gain  of  approximately  $1.3  million  for  the  Company.

COMPARISON  OF  YEARS  ENDED  DECEMBER  31,  2000  AND  1999

REVENUES - Consolidated revenues decreased $4.1 million to $191,000 for the year
ended  December 31, 2000 from $4.3 million for the year ended December 31, 1999.
In  February  2000,  the  Company  entered  into  a  Rental  Agreement  with
Telemanager.net providing for the operation of the Company's Telemanager system,
the MTS division's principal product, by Telemanager.net in exchange for monthly
rental  payments to the Company.  On December 20, 2000, the Company sold certain
assets,  which  were  subject  to  the  Rental  Agreement  to  Telemanager.net.
Telemanager.net  is  owned  by  former  executives  of  the  Company.

COST  OF  SALES - Consolidated cost of sales decreased $2.4 million, to $335,000
for  the  year  ended  December  31,  2000  from $2.7 million for the year ended
December  31,  1999.  The  decrease  in  cost  of  sales  is associated with the
corresponding  decrease  in  revenue.


                                       10
<PAGE>

SELLING,  GENERAL AND ADMINISTRATIVE EXPENSE - Consolidated selling, general and
administrative  expense  decreased  $2.8  million to $575,000 for the year ended
December  31, 2000 from $3.383 million for the year ended December 31, 1999  The
reduction  in  expenses was primarily due to lowered expenses resulting from the
sale  of  the  Incomex  segment.

DEPRECIATION  AND  AMORTIZATION  EXPENSE  -  Consolidated  depreciation  and
amortization  decreased  $513,000  for  the  year  ended  December 31, 2000 from
$549,000  for  the  year ended December 31, 1999.  The decrease is attributed to
the  decline  in  depreciable  assets  due  to  impairments and sales of assets.

IMPAIRMENT  OF ASSETS - Actel filed for bankruptcy under Chapter 11 on April 11,
2001.  As a result, the Company recorded an impairment charge of $1.6 million in
2000,  due  to  the uncertainty of ultimate recovery of its investment in Actel.
On  September  14,  2001,  Actel's case was converted to a case under Chapter 7.

ACNET  BAD  DEBT  AND ACQUISITION EXPENSE - As of December 31, 1999, the Company
had  an investment of $4.7 million consisting of $3.7 million of loans, $265,000
of  interest  and  $747,000  of  costs  incurred  either related to the proposed
acquisition  of  the AcNet entities or paid on behalf of the AcNet entities.  In
light  of  the  Company's  liquidity issues and other issues involving the AcNet
entities, the Company is not pursuing its options to acquire the AcNet entities.
As a result and due to cash flow difficulties experienced by the AcNet entities,
the Company recorded a $3.7 million asset write-down in 1999 and $990,000 in the
second quarter of 2000 due to the uncertainty regarding the ultimate recovery of
the  investment  and  notes  (see  Note  4  in  Notes  to Consolidated Financial
Statements).

INTEREST EXPENSE - Consolidated interest expense, including amortization of debt
discount,  increased  $390,000,  to $3.4 million for the year ended December 31,
2000  from $3.04 million for the year ended December 31, 1999.  The increase was
primarily  due  to  additional debt incurred related to the investments in Actel
and  the  AcNet  entities, the costs associated with an earn-out settlement with
respect  to  the  acquisition  of  PIC, the Company's lower operating profit and
general  working  capital  purposes, and to an increase in the interest rates on
the  past  due  debt.

OTHER  INCOME  -  Consolidated other income increased $6.8 million to $7 million
for  the  year  ended  December  31,  2000  from  $226,000  for  the  year ended


                                       11
<PAGE>
December 31, 1999.  During the year ended December 31, 1999 the Company recorded
$245,000  as  other income for dividends accrued on its investment in Actel. The
increase  was  primarily  due  to  a  pre-tax  gain  of $7.0 million recorded in
connection  with  the Debt Restructuring Plan completed in the second quarter of
2000  (see  Note  6  to  Notes  to  Financial  Statements) and a pre-tax gain of
$214,000  recorded in connection with the sale of two buildings in Cedar Rapids,
Iowa  and  Mobile,  Alabama.

EXTRAORDINARY  ITEM  -  GAIN  ON EXTINGUISHMENT OF DEBT - In connection with the
Debt  Restructuring  Plan  the  Company began in the second quarter of 2000, the
Company  reached  a  Compromise Settlement Agreement and Mutual Release with the
FDIC on October 19, 2000 to pay $300,000 in settlement of two notes payable with
a  financial  institution with combined principal of $900,000.  As a result, the
Company  recorded  a  $722,000  Extraordinary  Gain  on  Extinguishment of Debt,
including  interest,  in  the  fourth  quarter  of  2000.

DISCONTINUED  OPERATIONS

     INCOMEX  -  Effective  June  30,  2000  the  Company sold all the shares of
Incomex, Inc., a wholly owned subsidiary, to three of the former shareholders of
Incomex,  for (a) transfer to the Company by the purchasers of 250,000 shares of
the  Company's  Common  Stock  originally  issued by the Company pursuant to the
Company's  acquisition  of  Incomex,  (b)  cancellation  and  forgiveness of all
amounts  outstanding under promissory notes in the aggregate principal amount of
$684,919,  and related accrued interest, originally issued by the Company to the
shareholders of Incomex, and (c) the cancellation of all employment compensation
and  employment  contracts  between  the Company and the purchasers. The parties
also  executed  mutual  releases relating to liabilities between the Company and
Incomex  and claims that the Company may have against the former shareholders of
Incomex.  Incomex  is primarily engaged in the business of providing billing and
collection  services  to  the  hospitality  industry  from  Mexico to the United
States.

     As  a result of the sale of Incomex described above, the Company recorded a
loss  on  disposition  of  $332,000  in  the  second  quarter  of  2000.

LIQUIDITY  AND  CAPITAL  RESOURCES

     In  January  2000,  the  Company  retained  Berthel  to  assist the Company
regarding  the  identification  and investigation of strategic alternatives that
might  be  available to the Company.  No assurance can be given that the Company
will  be  able  to  restructure  its  debt,  raise  adequate  funds  or generate
sufficient  cash  flows  to  meet  the  Company's cash needs.  If the Company is
unable  to  restructure  its  debt

                                       12
<PAGE>
or  raise the necessary funds to repay its past due debt, its creditors may seek
their legal remedies.  Any action by the Company's creditors to demand repayment
of  past  due  indebtedness  is  likely to have a material adverse effect on the
Company's  future  performance,  and  ability  to  continue  as a going concern.

     The  Company's  past due debt includes approximately $11.6 million of notes
and  accrued  interest which are believed to have been pledged by the holders of
the  notes  to  a bank as collateral for loans made by the bank to such holders.
The  Federal  Deposit Insurance Corporation ("FDIC") liquidated this bank during
2000. The Company was notified in December 2000 that the FDIC sold substantially
all the loans and related collateral to a financial institution.  In March 2001,
the  Company  received  a  demand  letter  from  this  financial institution for
approximately  $575,000  of principal plus accrued interest on the notes, and on
July  5, 2001, the financial institution obtained a default judgment against the
Company  for  $781,252  plus interest at the rate of 18% per year from and after
February  6,  2001.  If  the  financial  institution seeks to enforce its rights
under  the pledged notes, the Company currently would not be able to repay these
notes.  As  a  result, any such action by the financial institution is likely to
prevent  the  Company  from  continuing  as  a  going  concern.

     The  FDIC  has notified the Company that it believes an additional $770,000
is  outstanding  representing  various  notes  payable.  Another  party has also
asserted  that  he  is  entitled  to $500,000 allegedly outstanding under a note
payable.  Also,  in  July  2001,  the Company was notified that Peoples Bank had
obtained  a judgment against a Company director and shareholder in the amount of
$350,000, and that the collateral was a Company promissory note in the principal
amount  of  $350,000.  Management  believes  that funds were not received by the
Company  with respect to these notes and that it has other defenses.  The amount
of  past  due  debt  as  of  March  31, 2002 does not include these amounts.  No
assurance  can  be  given  as  to  the  ultimate  outcome  of  this  matter.

     The  Company's  principal  source  of  cash  during 2001 were advances from
MCCIC.  During  2001,  the  Company received advances in the aggregate amount of
$157,800 from MCCIC.  The Company issued warrants to purchase a total of 179,600
shares of Common Stock to MCCIC in connection with these advances.  The warrants
were  issued  at exercise prices ranging from $0.05 per share to $0.38 per share
with  five  year  terms.  MCCIC has no commitment to make any future advances to
the  Company.

     As  of  March  31,  2002,  the  Company  was  past  due  in  the payment of
approximately $12.4 million of principal and interest payments.  The Company was
also past due with its trade vendors in the payment of approximately $777,000 as
of  March  31,  2002.  If  the Company is unable to raise the necessary funds to
repay  its  past  due  debt  or to arrange for extensions or conversions of such
debt,  its  creditors  may sue the Company to demand payment of the amounts past
due.  Any  action  by  the  Company's  creditors to demand repayment of past due
indebtedness  is  likely  to  prevent  the  Company  from  continuing as a going
concern.


                                       13
<PAGE>

     At  December  31,  2001,  the  Company  has  no operating activities and no
reportable  segments.  The  Company's current strategic direction is to continue
to  negotiate  with  its  creditors  to  restructure indebtedness and to use the
Company's public shell as a merger vehicle.  On December 19, 2001, Polar and the
Company  entered  into  an Agreement and Plan of Merger.  The proposed merger is
subject  to  a  number  of  significant  conditions,  including  approval by the
stockholders  of  the  parties, filings with Securities and Exchange Commission,
the  conversion of the Company's indebtedness into equity, the obtaining of debt
or  equity  financing  by  Polar and other closing conditions. Because there are
significant  conditions  remaining  to be satisfied with respect to the proposed
merger,  no  assurance can be given that the proposed merger will be consummated
or,  if  consummated, that the terms of the proposed merger will be as presently
contemplated.  If  the Company is unable to restructure its past due debt, or if
the  holders  of  the  Company's past due debt seek to enforce their rights, the
Company  would  not  be  able  to  complete the proposed merger with Polar or to
continue  operating  as  a  going  concern.

IMPACT  OF  NEW  ACCOUNTING  PRONOUNCEMENTS

     In June 1998, the Financial Accounting Standards Board ("FASB") issued SFAS
No.  133,  "Accounting for Derivative Instruments and Hedging Activities."  SFAS
No.  133  establishes  standards  for  derivative instruments, including certain
derivative  instruments embedded in other contracts (collectively referred to as
derivatives)  and  for hedging activities.  It requires that an entity recognize
all  derivatives  as  either assets or liabilities in the statement of financial
position  and measure those instruments at fair value.  The recognition of gains
or  losses  resulting  from changes in the values of derivatives is based on the
use of each derivative instrument and whether it qualifies for hedge accounting.
The  Company  adopted SFAS No. 133 on January 1, 2001.  The adoption of SFAS No.
133  did  not  have  a material effect on the Company's results of operations or
financial  condition.

     In June 2001, the FASB issued SFAS 141, Business Combinations and SFAS 142,
Goodwill  and  Other Intangible Assets.  SFAS 141 addresses financial accounting
and reporting for business combinations and requires that the purchase method of
accounting  be used for all business combinations initiated after June 30, 2001.
Under  SFAS  142, goodwill and certain other intangible assets will no longer be
amortized, instead, they will be tested annually for impairment and written down
and  charged  to  income  when their recorded value exceeds their estimated fair
value.  SFAS  141 and 142 are effective for 2002.  SFAS 141 and 142 will have no
impact  on the Company since it has no goodwill or intangible assets at December
31,  2001.

FORWARD-LOOKING  STATEMENTS

     This  report  contains  statements,  including  statements  of management's
belief  or  expectation,  which  may  be  forward-looking  within the meaning of
applicable  securities  laws.  Such  statements are subject to known and unknown
risks  and uncertainties that could cause actual future results and developments
to  differ  materially  from  those  currently  projected.  Such  risks  and
uncertainties  include,  among  others,  the  following:


                                       14
<PAGE>

     -    the Company's access to adequate funds to meet the Company's financial
          needs  and  to  repay  its past due debt, and the Company's ability to
          continue  as  a  going  concern  if  it  is  unable to access adequate
          financing;

     -    the possibility that the Company's creditors may take legal action for
          the  repayment of past due indebtedness and the ability of the Company
          to  continue  as  a  going  concern  if  any  such  action  is  taken;

     -    the Company's ability to complete the proposed merger transaction with
          Polar  and  the  terms  of  such  transaction  if  completed;

     -    the  Company's  ability  to  restructure  its  past  due  debt;

     -    the  outcome  of  pending  litigation;

     -    the risk that the Company's analyses of these risks could be incorrect
          and/or the strategies developed to address them could be unsuccessful;
          and

     -    various  other  factors  discussed in this Annual Report on Form 10-K.

     The  Company  will  not  update  the forward-looking information to reflect
actual  results  or  changes  in  the  factors  affecting  the  forward-looking
information.

     The  forward-looking  information  referred  to  above includes any matters
preceded  by  the words "anticipates," "believes," "intends," "plans," "expects"
and  similar  expressions as they relate to the Company and include, but are not
limited  to:

     -    expectations  regarding  the  Company's  financial  condition  and
          liquidity,  as  well  as  future  cash  flows;  and

     -    expectations  regarding  alternatives  to  restructure  the  Company's
          business  and  reduce  its  overall  debt.

ITEM  7A.  DISCLOSURES  ABOUT  MARKET  RISK

     The  Company  does not have any foreign currency exchange risk or commodity
price  risk.  All of the Company's debt was at a fixed interest rate at December
31,  2001  and  2000  and,  therefore,  the  Company  is  not  impacted  by

                                       15
<PAGE>
changes  in  interest  rates related to the debt.  The interest rates range from
12%  to  18%.  The Company had outstanding fixed rate long-term debt obligations
with  carrying  values of $4.6 million and $4.6 million at December 31, 2001 and
2000,  respectively.  The  fair value of this debt was zero at December 31, 2001
and  2000.

ITEM  8.     FINANCIAL  STATEMENTS  AND  SUPPLEMENTARY  DATA

     The  consolidated  financial  statements  of the Company, notes thereto and
related financial information are filed under this item beginning on page F-1 of
this  report.

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

     None.

                                       16
<PAGE>
                                    PART III
                                    --------

ITEM  10.     DIRECTORS  AND  EXECUTIVE  OFFICERS  OF  THE  REGISTRANT.

     The  following sets forth certain information with respect to the directors
and  executive  officers  of  the  Company  as  of  December  31,  2001.

<TABLE>
<CAPTION>

                                                                                                                           Director
Name, Age, Principal Occupation for Past Five Years and Directorships                                                 Age    Since
--------------------------------------------------------------------------------------------------------------------  ---  -----
<S>                                                                                                                   <C>  <C>
GUY O. MURDOCK . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .   46      1989

Mr. Murdock has been a private investor since January 2000.  He served as Chairman of the Board of the Company from
1989 to January 2000, as Chief Executive Officer of the Company from 1989 to April 1997
and as President of the Company from 1989 to July 1996.

WAYNE WRIGHT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .   56      1997

Mr. Wright has served as President of Priority International Communications, Inc. (a
wholly-owned subsidiary of the Company since October 1997, until its sale in July 2001)
since March 1997 and as Chairman of the Board of Priority International Communications, Inc.
from 1996 to 1997.  Mr. Wright served as an officer of U.S. Ameriphone (an aggregator of hospitality
and pay phone businesses) from 1993 to 1996.  Effective October  2001, Mr. Wright began
serving as the Company's principal accounting officer.

DAVID KIRKPATRICK. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .   62      2000

Mr. Kirkpatrick has been a private investor since 1992.  Mr. Kirkpatrick served as a
consultant to a law firm from 1991 to 1992 and as a partner of Peat Marwick (an accounting
firm) from 1962 to 1991, most recently as Managing Partner of the Houston office.

EUGENE I. DAVIS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .   47      2000

Mr. Davis has served as Chairman of the Board and Chief Executive Officer of the Company
since May 2000, resigned October 9, 2001 and served as Interim Chairman of the Board and Interim Chief
Executive Officer of the Company from January 2000 through May 2000.  Mr. Davis resigned on October 9,
2001 as Chairman of the Board and Chief Executive Officer and remains on the Board of Directors.  He has
served as Chairman of the Board and Chief Executive Officer of Pirinate Consulting Group, LLC (a privately
held consulting firm) since 1999 and as Chief Executive Officer of SmarTalk Teleservices, Inc. (a prepaid
calling card provider) since 1999.  Mr. Davis served as Chief Operating Officer of Total-Tel USA
Communications, Inc. (a telecommunications provider) from 1998 to 1999.  Mr. Davis served
as President of Emerson Radio Corp. (a consumer electronics products distributor) from 1994 to
1997 and served as Vice Chairman of the Board until 1997 and as a director from 1992 to 1997.
</TABLE>


                                       17
<PAGE>


SECTION  16(A)  BENEFICIAL  OWNERSHIP  REPORTING  COMPLIANCE

     Section  16  (a)  of  the Exchange Act requires the Company's directors and
executive  officers  and  persons who own more than 10% of a registered class of
the  Company's  equity  securities,  to  file  with  the  SEC initial reports of
beneficial  ownership  and  reports  of  changes  in beneficial ownership of the
Company's  equity  securities.  The  rules  promulgated by the SEC under Section
16(a)  of  the  Exchange  Act  require those persons to furnish the Company with
copies  of  all  reports  filed  with  the SEC pursuant to Section 16(a).  Based
solely upon a review of such forms actually furnished to the Company and written
representations  of  certain  of the Company's directors and executive officers,
all  directors,  executive officers and 10% shareholders have filed with the SEC
on  a  timely  basis all reports required to be filed under Section 16(a) of the
Exchange  Act  during  2001.

ITEM  11.  EXECUTIVE  COMPENSATION.

     CASH  AND  OTHER  COMPENSATION.  The table which follows sets forth certain
information  concerning  compensation paid to, earned by or awarded to Eugene I.
Davis,  the  Company's  Chairman  of the Board and Chief Executive Officer until
October  2001.  Wayne  Wright  currently serves as Principal Accounting Officer,
the  Company's  only  executive  officer.  Mr.  Wright  did  not  receive  any
compensation  for  such  services  in  2001.

                                       18
<PAGE>
<TABLE>
<CAPTION>


                                SUMMARY COMPENSATION TABLE
                                                            LONG-TERM
                                                           COMPENSATION
                                                           ------------
                                                              AWARDS
                              ANNUAL COMPENSATION             ------
                              -------------------           SECURITIES
                                                            UNDERLYING     ALL OTHER
NAME AND PRINCIPAL POSITION    YEAR  SALARY ($)  BONUS ($)  OPTIONS (#)  COMPENSATION ($)
-----------------------------  ----  ----------  ---------  -----------  ----------------
<S>                            <C>   <C>         <C>        <C>          <C>

Eugene I. Davis . . . . . . .  2001       -          -            -       121,187 (2)
  Chairman of the Board and .  2000       -          -            -       181,109 (2)
  Chief Executive Officer (1)  1999       -          -            -            -


<FN>

(1) Mr. Davis  served as Chairman of the Board and Chief Executive Officer of the Company
since  May  2000.  Mr  Davis  resigned as Chief Executive Officer on October 9, 2001. Mr.
Davis  served  as Interim Chairman of the Board and Interim Chief Executive Officer  from
January  2000  through  May  2000.  Mr.  Davis' services were contracted through Pirinate
Consulting  Group,  LLC.

(2)  Represents  amounts  paid to Pirinate Consulting Group, LLC, an entity controlled by
Mr.  Davis,  during fiscal 2000 and 2001.  Included in the $121,187 is  $10,000 which was
not  paid  as  of  December  31,  2001.
</TABLE>



     OPTIONS  GRANTED  DURING  2001.  There were no stock options granted to the
named executive officers of the Company during the year ended December 31, 2001.

     FISCAL  YEAR-END  OPTION VALUES.  There were no unexercised options held by
the  named  executive  officers  at  December  31,  2001.

CONSULTING  AGREEMENT

     On  January  10,  2000,  the  Company  entered into a letter agreement with
Pirinate  Consulting  Group, LLC ("Pirinate"), an entity controlled by Eugene I.
Davis,  for the personal services of Mr. Davis as the Company's Interim Chairman
of  the  Board and Interim Chief Executive Officer.  Pirinate received $15,000 a
month,  plus  out-of-pocket  expenses,  for these services.  The initial term of
this  agreement  was  three months.  Thereafter, either party may terminate this
agreement,  with  or  without  cause,  effective  upon  sixty days prior written
notice.  The  parties  agreed in May 2000 that Mr. Davis would serve as Chairman
of the Board and Chief Executive Officer of the Company.  Effective July 1, 2001
this  agreement  was  modified  to $10,000 a month through September 30, 2001 at
which  time  the agreement terminated.  Mr. Davis resigned on October 9, 2001 as
Chief  Executive  Officer  and  remains  on  the  Board  of  Directors.


                                       19
<PAGE>
COMPENSATION  OF  DIRECTORS

     The Company pays Mr. Kirkpatrick a monthly retainer equal to the greater of
(a)  $1,000  or  (b) $1,000 for each meeting of the Board of Directors attended.
In  addition,  in  January 2000 the Company issued options to Mr. Kirkpatrick to
purchase  up to 20,000 shares of Common Stock, 10,000 of which were fully vested
at  the  time of issuance and 10,000 of which vested on January 1, 2001, with an
exercise  price of $2.25 per share.  Through its letter agreement with Pirinate,
the  Company  paid  Pirinate $15,000 per month for making Mr. Davis available to
serve  as  the Company's Chairman of the Board and Chief Executive Officer.  Mr.
Davis  resigned on October 9, 2001 as Chief Executive Officer and remains on the
Board  of  Directors.  Messrs.  Murdock  and Wright and Davis do not receive any
compensation  for  serving  on  the  Company's  Board  of  Directors.

ITEM  12.  SECURITY  OWNERSHIP  OF  CERTAIN  BENEFICIAL  OWNERS  AND MANAGEMENT.

     The  following  table  sets forth information as of March 1, 2002 regarding
the  beneficial  ownership  of  shares of Common Stock by (a) each person who is
known  to  the  Company to be the beneficial owner of more that 5% of the Common
Stock,  (b)  each  director,  director  nominee  and named executive officer (as
defined  above)  and  (c)  all  directors  and  executive  officers  as a group.

     Beneficial  ownership  of Common Stock has been determined for this purpose
in  accordance  with  Rules  13d-3  and  13d-5  of  the  Securities and Exchange
Commission  ("SEC")  under  the  Securities  Exchange Act of 1934 (the "Exchange
Act"),  which  provide,  among  other  things, that a person is deemed to be the
beneficial  owner of Common Stock if such person, directly or indirectly, has or
shares  voting power or investment power with respect to the Common Stock or has
the  right  to  acquire  such  ownership  within sixty days after March 1, 2002.
<TABLE>
<CAPTION>

                                       SHARES BENEFICIALLY   PERCENT OF
NAME OF BENEFICIAL OWNER                    OWNED  (1)         CLASS
-------------------------------------  --------------------  ----------
<S>                                    <C>                   <C>
Eugene I. Davis                                        -           *
David Kirkpatrick (2)                             20,000           *
Guy O. Murdock (3)                             1,637,010        12.9
Wayne Wright (4)                               2,720,067        21.6
Berthel Fisher & Company, Inc. (5)             8,677,339        44.6
Larry A. Cahill (6)                            7,396,006        39.1
All directors and executive officers
   as a group (4 persons) (7)                  4,377,077        33.9
-------------------------------------
___________________
<FN>


*   Less  than  1%.

                                       20
<PAGE>

(1)  This  table  is  based  upon  information  supplied by directors, executive
     officers  and  principal  shareholders.  Unless  otherwise  indicated  in
     footnotes  to  this table, each of the shareholders named in this table has
     sole  voting  and  investment  power  with  respect  to the shares shown as
     beneficially  owned.

(2)  Consists  of  20,000  shares  subject  to  exercise  of  options.

(3)  Includes  195,000  shares  subject  to  exercise  of  warrants.

(4)  Includes  2,390,067 shares owned by a trust of which Mr. Wright is trustee,
     80,000  shares  subject  to exercise of warrants and 250,000 shares held by
     Mr.  Wright's  spouse.

(5)  Includes (i) 3,284,452 shares of Common Stock beneficially owned by certain
     affiliates of Berthel for which Berthel shares voting and investment power,
     including  376,879  shares  subject  to  exercise of warrants and 1,166,261
     shares subject to conversion of Convertible Notes (based upon $3,533,771 of
     principal  and  interest  outstanding under such notes as of March 1, 2002,
     divided  by  the  conversion  rate  of $3.03 per share); and (ii) 5,392,887
     shares  subject to the exercise of warrants held by MCC Investment Company,
     LLC  ("MCCIC"),  a  company  owned by Berthel and Larry A. Cahill. Reflects
     information  reported  in  a  Schedule 13D filed with the SEC by Berthel on
     January 16, 1997, as amended on June 6, 1997, January 8, 1998, May 1, 1998,
     June  22,  1998,  August  6,  1998 and January 15, 1999, as well as certain
     other  information  provided  to the Company. The address of Berthel is 701
     Tama  Street,  P.O.  Box  609,  Marion,  Iowa  52302-0609.

(6)  Includes  580,000 shares subject to exercise of warrants and 437,114 shares
     subject  to  conversion  of  Convertible  Notes  (based  upon $1,325,365 of
     principal  and  interest  outstanding under such notes as of March 1, 2002,
     divided by the conversion rate of $3.03 per share). Also includes 5,392,887
     shares  subject  to the exercise of warrants held by MCCIC, a company owned
     by  Berthel  and  Mr.  Cahill. Mr. Cahill's address is 3330 Southgate Court
     S.W.,  Cedar  Rapids,  Iowa  52404.

(7)  Includes  20,000  shares  subject to exercise of options and 275,000 shares
     subject  to  exercise  of  warrants.
</TABLE>

ITEM  13.  CERTAIN  RELATIONSHIPS  AND  RELATED  TRANSACTIONS.

     The Company obtains lease and other financing services from Berthel and its
subsidiaries  and  their  affiliated  leasing  partnerships.  Berthel  is  the
beneficial owner of approximately 44.6% of the Common Stock as of March 1, 2002.
As  of December 31, 2001, the Company owed Berthel a total of approximately $3.7
million under certain lease and debt financing arrangements and the Company owed
MCCIC  a  total  of  approximately  $654,000  under  certain  debt  financing
arrangements.  In  December  1999,  Berthel  entered into a Standstill Agreement
with  the  Company.  Under  the  Standstill  Agreement,  Berthel  indicated  its
intention to form a creditors committee to represent the interest of Berthel and
other  creditors  of  the  Company.  The Company agreed to provide the creditors
committee  with access to information regarding the Company and its business and
to  advise  the  creditors  committee  in  advance regarding certain significant
corporate  developments.  The  creditors  committee  may  also  demand  that the
Company  take certain actions with respect to the Company's assets and business.
The members of the creditors committee agreed to forebear from taking actions to
collect  past  due  debt  owed  by  the  Company in the absence of the unanimous
approval  of  the  creditors  committee.  As  of  March 1, 2002, the Company and
Berthel are the only parties to the Standstill Agreement and Berthel is the only
member  of  the  creditors  committee.


                                       21
<PAGE>
     In  January  2000,  the  Company  retained  Berthel  to  assist the Company
regarding  the  identification  and investigation of strategic alternatives that
might  be  available  to  the Company.  The Company owed various fees to Berthel
under  a placement agreement including monthly retainer and placement fees.  The
Company  paid  to  Berthel  total  fees  of  $536,000  during  2000.  If further
strategic  transactions  are  completed,  the  Company will owe a success fee to
Berthel,  depending  on  the  price  of  the  strategic  transactions.

     A  new  agreement  was  executed  in July 2001, which provides, among other
things,  for  a  monthly retainer of $20,000 to be paid to Berthel.  The Company
owes  Berthel  approximately  $219,000  for fees related to this agreement as of
December  31,  2001.

     The  Company  borrowed an aggregate of $157,800 from MCCIC, a company owned
by  Berthel  and  Mr.  Cahill,  in  2001 under a Revolving Promissory Note.  The
Revolving  Promissory Note, which bears interest at 12% per year, was amended on
June  22, 2000 to provide that all remaining principal and accrued interest were
due  on  June 21, 2001.  As of December 31, 2001, the Company owed MCCIC a total
of approximately $182,637 under the Revolving Promissory Note.  During 2001, the
Company issued warrants to purchase a total of 179,600 shares of Common Stock to
MCCIC in connection with advances obtained from MCCIC.  The warrants were issued
at  exercise  prices  ranging  from $0.05 per share to $0.38 per share with five
year  terms.

     In  January 2000, the Company entered into a letter agreement with Pirinate
which  provided  that the Company would pay Pirinate $15,000 a month in exchange
for  up  to six days per month of personal services from Eugene I. Davis.  Under
the  letter  agreement,  Mr.  Davis  served as Interim Chairman of the Board and
Interim Chief Executive Officer of the Company.  The letter agreement's term was
for  a  minimum  of  three months, and thereafter either party may terminate the
letter  agreement, with or without cause, effective upon 60 days written notice.
The  letter  agreement  also  provided  that  the  Company, upon approval by Mr.
Tunink,  the  Company's  former  Chief  Financial  Officer, would pay Mr. Davis'
out-of-pocket,  travel  and  other major expenses related to his services to the
Company.  The  parties agreed in May 2000 that Mr. Davis would serve as Chairman
of  the  Board  and  Chief  Executive  Officer of the Company.  The Company paid
$121,187  for  services  performed  under  this  agreement  in  2001.  Mr. Davis
resigned on October 9, 2001 as Chairman of the Board and Chief Executive Officer
and  remains  on  the  Board  of  Directors.

                                     PART IV
                                     -------

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

     (a)  Documents  filed  as  part  of  this  report:

          1.   Financial  Statements-  See Index to Financial Statements on page
               F-1  of  this  Report.

                                       22
<PAGE>

          2.   Financial Statement Schedules - See Index to Financial Statements
               on page F-1 of this Report. All other schedules are omitted since
               they  are  not  required,  are  inapplicable,  or  the  required
               information  is  included  in  the  financial statements or notes
               thereto.

          3.   Exhibits:

<TABLE>
<CAPTION>

EXHIBIT NUMBER                   DOCUMENT DESCRIPTION
--------------                   --------------------
<S>             <C>

          2.1  Agreement  and  Plan  of  Merger,  dated as of December 19, 2001,
               among  Murdock  Communications  Corporation,  MCC  Merger  Sub
               Corporation  and  Polar  Molecular  Corporation.  (12)

          2.2  Agreement regarding Effectiveness, dated as of December 19, 2001,
               among  Murdock  Communications  Corporation,  MCC  Merger  Sub
               Corporation  and  Polar  Molecular  Corporation.  (12)

          3.1  Restated  Articles  of  Incorporation  of  the  Company.  (1)

          3.2  First  Amendment  to  Restated  Articles  of Incorporation of the
               Company.  (2)

          3.3  Second  Amendment  to  Restated  Articles of Incorporation of the
               Company.  (2)

          3.4  Amended  and  Restated  By-Laws  of  the  Company.  (3)

          4.1  Form  of  Common  Stock  Purchase  Warrant  Agreement between the
               Company  and  Firstar  Trust  Company.  (1)

          4.2  Form  of  Redeemable  Warrant.  (1)

          4.3  First Amendment to Common Stock Purchase Warrant Agreement, dated
               as  of  September 30, 1999, between the Company and Firstar Trust
               Company.  (8)

          4.4  Second  Amendment  to  Common  Stock  Purchase Warrant Agreement,
               dated as of April 14, 2000, between the Company and Firstar Bank,
               N.A.  (13)

          4.5  Third Amendment to Common Stock Purchase Warrant Agreement, dated
               as of October 9, 2000, between the Company and Firstar Bank, N.A.
               (13)

         10.1  Murdock  Communications  Corporation  1993 Stock Option Plan. (1)
               (5)

         10.2  Murdock  Communications  Corporation  1997  Stock Option Plan, as
               amended.  (4)  (5)

                                       23
<PAGE>


         10.3  Amended and Restated Employment Agreement, dated as of October 1,
               1998,  by  and  between  the  Company and Guy O. Murdock. (4) (5)

         10.4  Employment Agreement, dated as of January 1, 1999, by and between
               the  Company  and  Colin  P.  Halford.  (4)  (5)

         10.5  Amended and Restated Employment Agreement, dated as of October 1,
               1998,  by  and between the Company and Thomas E. Chaplin. (4) (5)

         10.6  Employment Agreement, dated as of January 1, 1999, by and between
               the  Company  and  Bill  R.  Wharton.  (4)  (5)

         10.7  Employment  Agreement, dated as of November 1, 1998, by and among
               the  Company,  Priority  International  Communications, Inc., PIC
               Resources  Corp.  and  Bonner  B.  Hardegree.  (4)  (5)

         10.8  Employment  Agreement,  dated  as  of  November  16, 1998, by and
               between  the  Company  and  Paul  C.  Tunink.  (4)  (5)

         10.9  Form  of  Lease  Agreement.  (6)

        10.10  Note  and  Security  Agreement, Note #079-21846-00, dated as of
               October  28,  1997,  by  and  among  PIC  Resources  Corp.,  ATN
               Communications, Inc., Priority International Communications, Inc.
               and  Berthel  Fisher  &  Company  Leasing,  Inc.  (6)

        10.11  Note and Warrant Purchase Agreement, dated as of June 21, 1999,
               by  and among the Company, Priority International Communications,
               Inc.,  Incomex,  Inc.,  MCC  Acquisition  Corp.,  and  New Valley
               Corporation.  (6)

        10.12  Stock  Purchase Warrant dated June 21, 1999 from the Company to
               New  Valley  Corporation.  (6)

        10.13  Fixed  Rate Senior Note dated June 21, 1999 from the Company to
               New  Valley  Corporation.  (6)

        10.14  Registration  Rights  Agreement,  dated  as  of  June 21, 1999,
               between  the  Company  and  New  Valley  Corporation.  (6)

        10.15  Option  to Merge Agreement, dated as of June 9, 1999, among MCC
               Acquisition  Corp.,  the  shareholders  of Intercarrier Transport
               Corporation,  and  Intercarrier  Transport  Corporation.  (7)

        10.16  Option  to  Merge  Agreement,  dated  June  9,  1999, among MCC
               Acquisition  Corp., the shareholders of AcNet USA, Inc. and AcNet
               USA,  Inc.  (7)

        10.17  Amendment  to  Investment Agreement, dated as of June 21, 1999,
               among  ACTEL  Integrated  Communications, Inc., the Company, John
               Beck  and  Richard  Courtney.  (7)

                                       24
<PAGE>

        10.18  Waiver  and  First  Amendment  to  Note  and  Warrant  Purchase
               Agreement,  dated  as  of  December  17, 1999, among the Company,
               Priority  International Communications, Inc., ATN Communications,
               Inc.,  Incomex,  Inc.,  MCC  Acquisition  Corp.  and  New  Valley
               Corporation.  (8)

        10.19  Billing  Services  and  Advance  Funding Agreement, dated as of
               February  4, 2000, between Priority International Communications,
               Inc.  and  NCIC  Communications,  Inc.  (9)

        10.20  Stockholders Agreement, dated as of April __, 2000, among Actel
               Integrated  Communications,  Inc.,  the  Company  and  the  other
               stockholders  of  Actel  Integrated  Communications,  Inc.  (10)

        10.21  First  Amendment  to  Stockholders  Agreement  and  Consent  to
               Permitted  Transferees,  dated  as  of June 13, 2000, among Actel
               Integrated  Communications,  Inc.,  the  Company  and  the  other
               stockholders  of  Actel  Integrated  Communications,  Inc.  (10)

        10.22  Placement  Agreement, dated as of January __, 2000, between the
               Company  and  Berthel  Fisher  & Company Financial Services, Inc.
               (10)

        10.23  Form  of  Convertible Note of the Company due May 29, 2003 (10)

        10.24  Billing  and Advance Funding Agreement, dated as of February 2,
               2000,  between  Priority  International  Communications, Inc. and
               Paramount  International  Telecommunications,  Inc.  (10)

        10.25  Purchase  Agreement,  dated  as  of  June  23,  2000, among the
               Company,  MCC  Acquisition  Corp.,  John  Rance,  Michael Upshaw,
               Fernando  Ficachi  and  the other former shareholders of Incomex,
               Inc.  (11)

        10.26  Addendum  to  Employment  Agreement  for  Paul  C.  Tunink  (5)

        10.27  Letter  Agreement, dated December 24, 2000, between the Company
               and  Prentice  Services  Ltd.  (13)

        10.28  Operator  Services  Subscriber  Agreement, dated as of June 22,
               2000,  between  NCIC Operator Services and Priority International
               Communications,  Inc.  (13)

        10.29  Agreement  to  Terminate  Written  Employment  Agreement, dated
               December  20,  2000,  between  the  Company and Colin Halford (5)

        10.30  Agreement  to  Terminate  Written  Employment  Agreement, dated
               December  20,  2000,  between the Company and William Wharton (5)

        10.31  Stock Purchase Agreement, dated as of July 31, 2001, among Murdock
               Communications Corporation, MCC Acquisition Corporation, Priority
               International Communications, Inc. and Dartwood, LLC.  (14)

          21   Subsidiaries.

          24   Power  of  Attorney  (included  as  part  of  the  signature page
               hereof).


                                       25
<PAGE>
<FN>

(1)  Filed  as  an  exhibit to the Company's Registration Statement on Form SB-2
     (File  No.  333-05422C)  and  incorporated  herein  by  reference.

(2)  Filed  as  an  exhibit to the Company's Quarterly Report on Form 10-QSB for
     the  quarter ended September 30, 1997 (File No. 000-21463) and incorporated
     herein  by  reference.

(3)  Filed  as  an  exhibit to the Company's Quarterly Report on Form 10-QSB for
     the  quarter  ended  March  31,  1997 (File No. 000-21463) and incorporated
     herein  by  reference.

(4)  Filed  as  an exhibit to the Company's Annual Report on Form 10-KSB for the
     year  ended  December 31, 1998 (File No. 000-21463) and incorporated herein
     by  reference.

(5)  Management  contract  or  compensatory  plan  or  arrangement.

(6)  Filed as exhibit to the Company's registration statement on Form SB-2 (File
     No.  333-78399)  and  incorporated  herein  by  reference.

(7)  Filed  as  an  exhibit to the Company's Quarterly Report on Form 10-QSB for
     the  quarter  ended  June  30,  1999  (File No. 000-21463) and incorporated
     herein  by  reference.

(8)  Filed  as  an exhibit to the Company's Annual Report on Form 10-KSB for the
     year  ended  December 31, 1999 (File No. 000-21463) and incorporated herein
     by  reference.

(9)  Filed  as an exhibit to the Company's Quarterly Report on Form 10-Q for the
     quarter  ended  March 31, 2000 (File No. 000-21463) and incorporated herein
     by  reference.

(10) Filed  as an exhibit to the Company's Quarterly Report on Form 10-Q for the
     quarter ended June 30, 2000 (File No. 000-21463) and incorporated herein by
     reference.

(11) Filed  as  an exhibit to the Company's Current Report on Form 8-K (File No.
     000-21463)  filed with the Securities and Exchange Commission on August 30,
     2000  and  incorporated  herein  by  reference.


                                       26
<PAGE>
(12) Filed  as  an exhibit to the Company's Current Report on Form 8-K (File No.
     000-21463)  filed  with  the Securities and Exchange Commission on December
     26,  2001  and  incorporated  herein  by  reference.

(13) Filed  as  an  exhibit  to the Company's Annual Report on Form 10-K for the
     year  ended  December 31, 2000 (File No. 000-21463) and incorporated herein
     by  reference.

(14) Filed  as  an exhibit to the Company's Current Report on Form 8-K (File No.
     000-21463)  filed  with  the Securities and Exchange Commission on July 31,
     2001  and  incorporated  herein  by  reference.

</TABLE>

     (b)  Reports  on  Form  8-K.

     The  Company  filed  a  Form  8-K  on  December  6,  2001,  relating to the
announcement of the termination of its Agreement and Plan of Reorganization with
Informed  Care,  Inc.  and  Hometown  Info, Inc. d/b/a Grocery Shopping Network.

     The Company filed a report on Form 8-K on December 26, 2001 relating to the
announcement  that  it  had  entered  into  an Agreement and Plan of Merger with
Polar.

     (c)     Exhibits.

     The  response to this portion of Item 14 is submitted as a separate section
of  this  report.

     (d)     Financial  statement  schedules.

     The  response to this portion of Item 14 is submitted as a separate section
of  this  report.


                                       27
<PAGE>

                                   SIGNATURES

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

                                            MURDOCK  COMMUNICATIONS  CORPORATION

                                            By        /s/ Wayne  Wright
                                              ----------------------------------
                                                         Wayne Wright
                                                  Principal Accounting Officer

Date:  April  17,  2002

                                POWER OF ATTORNEY

     Each  person whose signature appears below hereby appoints Wayne Wright his
true  and  lawful  attorney-in-fact,  with  full  power  of  substitution  and
resubstitution,  in any and all capacities, to sign any or all amendments to the
Form  10-K  and  file the same with all exhibits thereto, and other documents in
connection therewith, with the Securities and Exchange Commission, granting unto
said attorney-in-fact and agents full power and authority to do and perform each
and  every  act  and  thing  requisite and necessary to be done in and about the
premises,  as  fully  to  all  intents  and  purposes as he might or could do in
person,  hereby  ratifying  and  confirming  all that said attorneys-in-fact and
agents,  or  their  substitutes, may lawfully cause to be done by virtue hereof.

     Pursuant  to  the requirements of the Securities Exchange Act of 1934, this
report  has  been  signed  below  by  the  following  persons  on  behalf of the
Registrant  and  in  the  capacities  and  on  the  dates  indicated.
<TABLE>
<CAPTION>

<S>                    <C>

/s/ Eugene Davis
---------------------               Director
Eugene Davis                                                  April 17, 2002

/s/ David Kirkpatrick
---------------------               Director
David Kirkpatrick                                             April 17, 2002

/s/ Guy O. Murdock
---------------------               Director
Guy O. Murdock                                                April 17, 2002

/s/ Wayne Wright
---------------------               Director and Principal
Wayne Wright                        Accounting Officer        April 17, 2002
</TABLE>


                                       28

<PAGE>
MURDOCK  COMMUNICATIONS  CORPORATION

INDEX  TO  CONSOLIDATED  FINANCIAL  STATEMENTS  AND  SCHEDULE
-------------------------------------------------------------

<TABLE>
<CAPTION>

PAGE
<S>                                                             <C>
INDEPENDENT AUDITORS' REPORT . . . . . . . . . . . . . . . . .  F-2

CONSOLIDATED FINANCIAL STATEMENTS:

  Consolidated Balance Sheets. . . . . . . . . . . . . . . . .  F-3

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

  Consolidated Statements of Shareholders' Equity (Deficiency)  F-6

  Consolidated Statements of Cash Flows. . . . . . . . . . . .  F-9

  Notes to Consolidated Financial Statements . . . . . . . . .  F-13

SCHEDULE - Valuation and Qualifying Accounts . . . . . . . . .  F-36
</TABLE>

                                      F-1
<PAGE>
INDEPENDENT  AUDITORS'  REPORT


To  the  Board  of  Directors  and  Shareholders  of
Murdock  Communications  Corporation
Cedar  Rapids,  Iowa

We  have  audited  the  accompanying  consolidated  balance  sheets  of  Murdock
Communications  Corporation  and subsidiaries (the "Company") as of December 31,
2001  and  2000,  and  the  related  consolidated  statements  of  operations,
shareholders'  equity (deficiency) and cash flows for each of the three years in
the  period  ended  December  31,  2001.  Our audits also included the financial
statement  schedule  listed  in  the  Index.  These  financial  statements  and
financial statement schedule are the responsibility of the Company's management.
Our  responsibility  is  to  express  an opinion on the financial statements and
financial  statement  schedule  based  on  our  audits.

We conducted our audits in accordance with auditing standards generally accepted
in  the  United  States  of  America.  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,  such consolidated financial statements present fairly, in all
material  respects, the financial position of Murdock Communications Corporation
and  subsidiaries  at  December  31,  2001  and  2000,  and the results of their
operations  and their cash flows for each of the three years in the period ended
December 31, 2001 in conformity with accounting principles generally accepted in
the  United  States  of America.  Also, in our opinion, such financial statement
schedule,  when  considered  in  relation  to  the  basic consolidated financial
statements  taken  as  a  whole,  presents  fairly  in all material respects the
information  set  forth  therein.

The  accompanying  consolidated financial statements have been prepared assuming
that  the  Company  will continue as a going concern.  As discussed in Note 1 to
the  consolidated  financial  statements,  the  Company's  recurring losses from
operations,  negative  working  capital,  and  shareholders'  deficiency  raise
substantial  doubt  about  its  ability  to  continue  as  a  going  concern.
Management's  plans  concerning these matters are also described in Note 1.  The
consolidated  financial  statements  do  not  include any adjustments that might
result  from  the  outcome  of  this  uncertainty.

/s/  DELOITTE  &  TOUCHE  LLP


Cedar  Rapids,  Iowa
April  8,  2002


                                      F-2
<PAGE>
MURDOCK  COMMUNICATIONS  CORPORATION

CONSOLIDATED  BALANCE  SHEETS
DECEMBER  31,  2001  AND  2000  (DOLLARS  IN  THOUSANDS)
--------------------------------------------------------

<TABLE>
<CAPTION>

ASSETS (Note 5)                                                          2001       2000
<S>                                                                    <C>        <C>
CURRENT ASSETS:
  Cash. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  $      3   $    167
  Accounts receivable, less allowances for doubtful
    accounts:  2001 - $179; 2000 - $225 . . . . . . . . . . . . . . .         -          -
  Prepaid expenses and other current assets . . . . . . . . . . . . .        11         45
                                                                       ---------  ---------
           Total current assets . . . . . . . . . . . . . . . . . . .        14        212
                                                                       ---------  ---------

FURNITURE AND EQUIPMENT:
  Furniture and equipment . . . . . . . . . . . . . . . . . . . . . .         -         35
  Accumulated depreciation. . . . . . . . . . . . . . . . . . . . . .         -        (29)
                                                                       ---------  ---------
           Furniture and equipment, net . . . . . . . . . . . . . . .         -          6
                                                                       ---------  ---------

OTHER ASSETS:
  Intangible assets, net of accumulated amortization:
    2001 - $1,288; 2000 - $1,230. . . . . . . . . . . . . . . . . . .         -         58
  Other noncurrent assets . . . . . . . . . . . . . . . . . . . . . .         1          1
                                                                       ---------  ---------
           Total other assets . . . . . . . . . . . . . . . . . . . .         1         59
                                                                       ---------  ---------

LIABILITIES  AND SHAREHOLDERS' EQUITY (DEFICIENCY)

  CURRENT LIABILITIES:
    Notes payable (Note 5). . . . . . . . . . . . . . . . . . . . . .  $  8,766   $  8,783
    Accounts payable. . . . . . . . . . . . . . . . . . . . . . . . .       614        486
    Accrued interest. . . . . . . . . . . . . . . . . . . . . . . . .     5,036      2,854
    Other accrued expenses. . . . . . . . . . . . . . . . . . . . . .       489        378
    Current portion of capital lease obligation with a related party.         -          1
                                                                       ---------  ---------
           Total current liabilities. . . . . . . . . . . . . . . . .    14,905     12,502
                                                                       ---------  ---------

  LONG-TERM LIABILITIES:
    Long-term debt with related parties (Note 6). . . . . . . . . . .     4,111      4,111
    Long-term debt, others (Note 6) . . . . . . . . . . . . . . . . .       521        521
    Net liabilities of discontinued operations (Note 3) . . . . . . .         -        896
                                                                       ---------  ---------
           Total liabilities. . . . . . . . . . . . . . . . . . . . .    19,537     18,030
                                                                       ---------  ---------

COMMITMENTS AND CONTINGENCIES (Note 10)


SHAREHOLDERS' EQUITY (DEFICIENCY) (Note 1):
  Common stock, no par or stated value (Note 8):
    Authorized - 40,000,000 shares
    Issued and outstanding:  2001 and 2000 - 12,514,967 shares. . . .    22,287     22,287
  Common stock warrants (Note 7):
    Issued and outstanding:  2001 - 10,875,312; 2000 - 10,695,712 . .     1,052      1,007
  Treasury stock at cost: 2001 and 2000 - 250,000 shares. . . . . . .       (94)       (94)
  Additional paid-in capital. . . . . . . . . . . . . . . . . . . . .       134        134
  Accumulated deficit . . . . . . . . . . . . . . . . . . . . . . . .   (42,901)   (41,087)
                                                                       ---------  ---------
           Total  shareholders' deficiency. . . . . . . . . . . . . .   (19,522)   (17,753)
                                                                       ---------  ---------

TOTAL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  $     15   $    277
                                                                       =========  =========
</TABLE>


                                      F-3
<PAGE>
<TABLE>
<CAPTION>
MURDOCK  COMMUNICATIONS  CORPORATION

CONSOLIDATED  STATEMENTS  OF  OPERATIONS
YEARS  ENDED DECEMBER 31, 2001, 2000 AND 1999 (DOLLARS IN THOUSANDS EXCEPT SHARE DATA)
--------------------------------------------------------------------------------------

                                                                       2001      2000      1999
<S>                                                                  <C>       <C>       <C>
CONTINUING OPERATIONS:

REVENUES:
  Call processing . . . . . . . . . . . . . . . . . . . . . . . . .  $    19   $   135   $    719
  Other revenue . . . . . . . . . . . . . . . . . . . . . . . . . .        3        56      3,594
                                                                     --------  --------  ---------
           Total revenues . . . . . . . . . . . . . . . . . . . . .       22       191      4,313
                                                                     --------  --------  ---------

COST OF SALES:
  Call processing . . . . . . . . . . . . . . . . . . . . . . . . .        -       330      1,232
  Other cost of sales . . . . . . . . . . . . . . . . . . . . . . .        -         5      1,475
                                                                     --------  --------  ---------
           Total cost of sales. . . . . . . . . . . . . . . . . . .        -       335      2,707
                                                                     --------  --------  ---------

GROSS PROFIT (LOSS) . . . . . . . . . . . . . . . . . . . . . . . .       22      (144)     1,606
                                                                     --------  --------  ---------

OPERATING EXPENSES:
  Selling, general and administrative expense . . . . . . . . . . .      742       575      3,383
  Depreciation and amortization expense . . . . . . . . . . . . . .        6        36        549
  Impairment of assets (Notes 1 and 4). . . . . . . . . . . . . . .        -     1,682        317
  AcNet bad debt and acquisition expenses (Note 4). . . . . . . . .        -       990      3,703
                                                                     --------  --------  ---------
           Total operating expenses . . . . . . . . . . . . . . . .      748     3,283      7,952
                                                                     --------  --------  ---------

LOSS FROM OPERATIONS. . . . . . . . . . . . . . . . . . . . . . . .     (726)   (3,427)    (6,346)
                                                                     --------  --------  ---------

NONOPERATING  INCOME (EXPENSE):
  Interest expense. . . . . . . . . . . . . . . . . . . . . . . . .   (2,304)   (3,431)    (3,041)
  Other income (expense) (Note 6) . . . . . . . . . . . . . . . . .       (3)    7,001        226
                                                                     --------  --------  ---------
           Total nonoperating income (expense). . . . . . . . . . .   (2,307)    3,570     (2,815)
                                                                     --------  --------  ---------

INCOME (LOSS) BEFORE INCOME TAXES . . . . . . . . . . . . . . . . .   (3,033)      143     (9,161)

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

INCOME (LOSS) FROM CONTINUING OPERATIONS. . . . . . . . . . . . . .   (3,033)      152     (9,161)
                                                                     --------  --------  ---------

DISCONTINUED OPERATIONS (Note 3):
  Loss from operations. . . . . . . . . . . . . . . . . . . . . . .      (95)   (4,844)    (9,237)
  Gain (loss) on disposition. . . . . . . . . . . . . . . . . . . .    1,314      (332)         -
                                                                     --------  --------  ---------
           Total discontinued operations. . . . . . . . . . . . . .    1,219    (5,176)    (9,237)
                                                                     --------  --------  ---------

LOSS BEFORE EXTRAORDINARY ITEM. . . . . . . . . . . . . . . . . . .   (1,814)   (5,024)   (18,398)

EXTRAORDINARY ITEM - GAIN ON EXTINGUISHMENT OF
  DEBT (Note 5) . . . . . . . . . . . . . . . . . . . . . . . . . .        -       722          -
                                                                     --------  --------  ---------

NET LOSS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .   (1,814)   (4,302)   (18,398)
Dividends and accretion on 8% Series A Convertible Preferred Stock.        -      (125)      (194)
                                                                     --------  --------  ---------

NET LOSS ATTRIBUTABLE TO COMMON SHAREHOLDERS. . . . . . . . . . . .  $(1,814)  $(4,427)  $(18,592)
                                                                     ========  ========  =========

                                                                                       (Continued)
</TABLE>

                                      F-4
<PAGE>
<TABLE>
<CAPTION>

MURDOCK  COMMUNICATIONS  CORPORATION

CONSOLIDATED  STATEMENTS  OF  OPERATIONS
YEARS  ENDED  DECEMBER  31,  2001,  2000  AND  1999
(DOLLARS  IN  THOUSANDS  EXCEPT  SHARE  DATA)  (CONCLUDED)
----------------------------------------------------------

                                                          2001          2000          1999
<S>                                                   <C>           <C>           <C>
BASIC AND DILUTED NET LOSS PER COMMON SHARE
 Income (loss) from continuing operations. . . . . .  $     (0.25)  $         -   $     (0.90)
 Income (loss) from discontinued operations. . . . .         0.10         (0.48)        (0.89)
                                                      ------------  ------------  ------------
 Loss before extraordinary item. . . . . . . . . . .        (0.15)        (0.48)        (1.79)
 Extraordinary item - gain on extinguishment of debt            -          0.07             -
                                                      ------------  ------------  ------------
 Net loss. . . . . . . . . . . . . . . . . . . . . .  $     (0.15)  $     (0.41)  $     (1.79)
                                                      ============  ============  ============

BASIC AND DILUTED WEIGHTED AVERAGE COMMON
  SHARES OUTSTANDING . . . . . . . . . . . . . . . .   12,264,967    10,869,511    10,392,940
                                                      ============  ============  ============

See notes to consolidated financial statements.
</TABLE>

                                      F-5
<PAGE>
<TABLE>
<CAPTION>

MURDOCK  COMMUNICATIONS  CORPORATION

CONSOLIDATED  STATEMENTS  OF  SHAREHOLDERS'  EQUITY  (DEFICIENCY)
YEARS  ENDED  DECEMBER  31,  2001,  2000  AND  1999  (DOLLAR  AND  SHARE  DATA  IN  THOUSANDS)
----------------------------------------------------------------------------------------------

                                                  8% SERIES A CONVERTIBLE                         COMMON STOCK
                                                     PREFERRED STOCK         COMMON STOCK           WARRANTS
                                                  -----------------------  ----------------   ------------------
                                                     NUMBER                NUMBER             NUMBER              ADDITIONAL
                                                       OF                    OF                 OF                  PAID-IN
                                                     SHARES     ISSUED     SHARES    ISSUED   WARRANTS    ISSUED    CAPITAL
<S>                                               <C>          <C>        <C>      <C>       <C>        <C>       <C>
BALANCES AT JANUARY 1, 1999. . . . . . . . . . .           19  $   1,837   10,330   $19,835      4,421   $   439   $     134

  Issuance of warrants in connection with
    debt financing with related parties. . . . .            -          -       -         -      1,195       223           -

  Issuance of warrants in connection with
    debt financing with lender . . . . . . . . .            -          -       -         -        500        80           -

  Conversion of notes payable, accrued
    interest and related common stock
    warrants into common stock . . . . . . . . .            -          -      84       150        (84)       (3)          -

  Conversion of common stock warrants. . . . . .            -          -
    into common stock. . . . . . . . . . . . . .           54         13    (115)       (4)         -         -           9

  Common stock issued. . . . . . . . . . . . . .            -          -       2         3          -         -           -

  Common stock options exercised by
    individuals. . . . . . . . . . . . . . . . .            -          -      19        37          -         -           -

  Accretion to conversion price of 8%
    Series A Convertible Preferred Stock . . . .            -         31       -         -          -         -           -

  Accrued dividends on 8% Series A
    Convertible Preferred Stock paid in
    common stock . . . . . . . . . . . . . . . .            -          -      87       221          -         -           -

  Warrants expired . . . . . . . . . . . . . . .            -          -       -         -        (50)     (100)          -

  Net loss for 1999. . . . . . . . . . . . . . .            -          -       -         -          -         -           -
                                                  -----------  ---------  -------  --------  ---------  --------  ---------

BALANCES AT DECEMBER 31, 1999. . . . . . . . . .           19  $   1,868  10,576   $20,259      5,867   $   635   $     134
                                                  ===========  =========  =======  ========  =========  ========  =========

See notes to consolidated financial statements.                                                                  (Continued)

                                                                 SHARE-
                                                                 HOLDERS'
                                                  ACCUMULATED     EQUITY
                                                    DEFICIT    (DEFICIENCY)
<S>                                               <C>          <C>
BALANCES AT JANUARY 1, 1999. . . . . . . . . . .  $  (18,168)  $      4,077

  Issuance of warrants in connection with
    debt financing with related parties. . . . .           -            223

  Issuance of warrants in connection with
    debt financing with lender . . . . . . . . .           -             80

  Conversion of notes payable, accrued
    interest and related common stock
    warrants into common stock . . . . . . . . .           -            147

  Conversion of common stock warrants
    into common stock

  Common stock issued. . . . . . . . . . . . . .           -              3

  Common stock options exercised by
    individuals. . . . . . . . . . . . . . . . .           -             37

  Accretion to conversion price of 8%
    Series A Convertible Preferred Stock . . . .         (31)             -

  Accrued dividends on 8% Series A
    Convertible Preferred Stock paid in
    common stock . . . . . . . . . . . . . . . .        (163)            58

  Warrants expired . . . . . . . . . . . . . . .         100              -

  Net loss for 1999. . . . . . . . . . . . . . .     (18,398)       (18,398)
                                                  -----------  -------------

BALANCES AT DECEMBER 31, 1999. . . . . . . . . .  $  (36,660)  $    (13,764)
                                                  ===========  =============

See notes to consolidated financial statements.
</TABLE>

                                      F-6
<PAGE>
<TABLE>
<CAPTION>

MURDOCK  COMMUNICATIONS  CORPORATION

CONSOLIDATED  STATEMENTS  OF  SHAREHOLDERS'  EQUITY  (DEFICIENCY)
YEARS  ENDED  DECEMBER  31,  2001,  2000  AND  1999  (CONTINUED)  (DOLLAR  AND  SHARE  DATA  IN  THOUSANDS)
-----------------------------------------------------------------------------------------------------------

                                                       8% SERIES A
                                                        CONVERTIBLE                       COMMON STOCK
                                                     PREFERRED STOCK    COMMON STOCK         WARRANTS         TREASURY STOCK
                                                    -----------------  ---------------  -------------------  ----------------
                                                    NUMBER             NUMBER            NUMBER              NUMBER
                                                      OF                 OF                OF                 OF
                                                    SHARES    ISSUED   SHARES  ISSUED   WARRANTS   ISSUED    SHARES  ISSUED
<S>                                                 <C>      <C>       <C>     <C>      <C>        <C>       <C>     <C>
BALANCES AT JANUARY 1, 2000. . . . . . . . . . . .      19   $ 1,868   10,576  $20,259     5,867   $   635        -  $     -

  Issuance of warrants in connection with
    termination of employment agreements . . . . .       -         -        -        -       150         -        -        -

  Issuance of warrants in connection with
    debt financing with lender . . . . . . . . . .       -         -        -        -     5,199       472        -        -

  Canellation of warrants. . . . . . . . . . . . .       -         -        -        -      (495)      (99)       -        -

  Conversion of common stock warrants
    into common stock. . . . . . . . . . . . . . .       -         -       19       35       (25)       (1)       -        -

  Accretion to conversion price of 8%
    Series A Convertible Preferred Stock . . . . .       -        23        -        -         -         -        -        -

  Conversion of preferred stock into common stock.     (19)   (1,891)   1,684    1,891         -         -        -        -

  Accrued dividends on 8% Series A
    Convertible Preferred Stock paid in
    common stock . . . . . . . . . . . . . . . . .       -         -      236      102         -         -        -        -

  Treasury stock acquired -Incomex sale. . . . . .       -         -        -        -         -         -      250      (94)

  Net loss for 2000. . . . . . . . . . . . . . . .       -         -        -        -         -         -        -        -
                                                    -------  --------  ------  -------  ---------  --------  ------  --------

BALANCES AT DECEMBER 31, 2000. . . . . . . . . . .       -   $     -   12,515  $22,287    10,696   $ 1,007      250  $   (94)
                                                    =======  ========  ======  =======  =========  ========  ======  ========

See notes to consolidated financial statements.

                                                                               SHARE-
                                                    ADDITIONAL                HOLDERS'
                                                     PAID-IN    ACCUMULATED    EQUITY
                                                     CAPITAL     DEFICIT     (DEFICIENCY)
<S>                                                 <C>         <C>          <C>
BALANCES AT JANUARY 1, 2000. . . . . . . . . . . .  $      134  $  (36,660)  $    (13,764)

  Issuance of warrants in connection with
    termination of employment agreements . . . . .           -           -              -

  Issuance of warrants in connection with
    debt financing with lender . . . . . . . . . .           -           -            472

  Canellation of warrants. . . . . . . . . . . . .           -           -            (99)

  Conversion of common stock warrants
    into common stock. . . . . . . . . . . . . . .           -           -             34

  Accretion to conversion price of 8%
    Series A Convertible Preferred Stock . . . . .           -         (23)             -

  Conversion of preferred stock into common stock.           -           -              -

  Accrued dividends on 8% Series A
    Convertible Preferred Stock paid in
    common stock . . . . . . . . . . . . . . . . .           -        (102)             -

  Treasury stock acquired -Incomex sale. . . . . .           -           -            (94)

  Net loss for 2000. . . . . . . . . . . . . . . .           -      (4,302)        (4,302)
                                                    ----------  -----------  -------------

BALANCES AT DECEMBER 31, 2000. . . . . . . . . . .  $      134  $  (41,087)  $    (17,753)
                                                    ==========  ===========  =============

See notes to consolidated financial statements.
</TABLE>

                                      F-7
<PAGE>
<TABLE>
<CAPTION>

MURDOCK  COMMUNICATIONS  CORPORATION

CONSOLIDATED  STATEMENTS  OF  SHAREHOLDERS'  EQUITY  (DEFICIENCY)
YEARS  ENDED  DECEMBER  31,  2001,  2000  AND  1999  (CONCLUDED)  (DOLLAR  AND  SHARE  DATA  IN  THOUSANDS)
-----------------------------------------------------------------------------------------------------------

                                                   8% SERIES A
                                                   CONVERTIBLE                       COMMON STOCK
                                                  PREFERRED STOCK  COMMON STOCK         WARRANTS       TREASURY STOCK
                                                 ----------------  ---------------  -----------------  ---------------
                                                 NUMBER            NUMBER            NUMBER            NUMBER            ADDITIONAL
                                                   OF                OF                OF               OF                PAID-IN
                                                 SHARES  ISSUED    SHARES  ISSUED   WARRANTS  ISSUED   SHARES   ISSUED    CAPITAL
<S>                                              <C>     <C>       <C>     <C>      <C>       <C>      <C>     <C>       <C>
BALANCES AT JANUARY 1, 2001 . . . . . . . . . .       -  $     -   12,515  $22,287    10,696  $ 1,007     250  $   (94)  $      134

Issuance of warrants in connection with
  debt financing. . . . . . . . . . . . . . . .       -        -        -        -       179       45       -        -            -

  Net loss for 2001 . . . . . . . . . . . . . .       -        -        -        -         -        -       -        -            -
                                                 ------  -------  -------  -------  --------  -------  ------  --------  ----------

BALANCES AT DECEMBER 31, 2001 . . . . . . . . .       -  $     -   12,515  $22,287    10,875  $ 1,052     250  $   (94)  $      134
                                                 ======  =======  =======  =======  ========  =======  ======  ========  ==========


See notes to consolidated financial statements.


                                                                 SHARE-
                                                                HOLDERS'
                                                 ACCUMULATED     EQUITY
                                                  DEFICIT     (DEFICIENCY)
<S>                                              <C>          <C>
BALANCES AT JANUARY 1, 2001 . . . . . . . . . .  $  (41,087)  $    (17,753)

Issuance of warrants in connection with
  debt financing. . . . . . . . . . . . . . . .           -             45

  Net loss for 2001 . . . . . . . . . . . . . .      (1,814)        (1,814)
                                                 -----------  -------------

BALANCES AT DECEMBER 31, 2001 . . . . . . . . .  $  (42,901)  $    (19,522)
                                                 ===========  =============


See notes to consolidated financial statements.
</TABLE>

                                      F-8
<PAGE>
<TABLE>
<CAPTION>

MURDOCK  COMMUNICATIONS  CORPORATION

CONSOLIDATED  STATEMENTS  OF  CASH  FLOWS
YEARS  ENDED  DECEMBER  31,  2001,  2000  AND  1999  (DOLLARS  IN  THOUSANDS)
-----------------------------------------------------------------------------

                                                              2001      2000      1999
<S>                                                         <C>       <C>       <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
  Net loss . . . . . . . . . . . . . . . . . . . . . . . .  $(1,814)  $(4,302)  $(18,398)
  Adjustments to reconcile net loss to net cash flows
    from operating activities of continuing operations:
    Impairment of assets . . . . . . . . . . . . . . . . .        -     1,682        317
    AcNet bad debt and acquisition expenses. . . . . . . .        -       990      3,703
    Depreciation and amortization. . . . . . . . . . . . .       64       719        549
    Gain on sale of property and equipment . . . . . . . .        -      (102)        (6)
    Noncash interest expense . . . . . . . . . . . . . . .       45       464        723
    Gain on debt restructuring plan. . . . . . . . . . . .        -    (6,946)         -
    Loss on discontinued operations. . . . . . . . . . . .       95     4,844      9,237
    (Gain) loss on disposition of discontinued operations.   (1,314)      332          -
    Extraordinary gain on extinguishment of debt . . . . .        -      (722)         -
    Changes in operating assets and liabilities:
      Receivables. . . . . . . . . . . . . . . . . . . . .        -       490        215
      Other current assets . . . . . . . . . . . . . . . .       34       139       (284)
      Other noncurrent assets. . . . . . . . . . . . . . .        -        11        182
      Outstanding checks in excess of available balances .        -       (10)        18
      Accounts payable and accrued expenses. . . . . . . .    2,421     1,016      2,744
      Other liabilities. . . . . . . . . . . . . . . . . .        -       (22)        (7)
                                                            --------  --------  ---------
           Net cash flows from operating activities of
              continuing operations. . . . . . . . . . . .     (469)   (1,417)    (1,007)
           Net cash flows from discontinued operations . .      148      (357)     1,158
                                                            --------  --------  ---------
           Net cash flows from operating activities. . . .     (321)   (1,774)       151
                                                            --------  --------  ---------

CASH FLOWS FROM INVESTING ACTIVITIES:
  Purchases of property and equipment. . . . . . . . . . .        -         -       (171)
  Payments for site contracts, net . . . . . . . . . . . .        -         -       (172)
  Proceeds from sale of investments. . . . . . . . . . . .        -     4,948          -
  Proceeds from sale of subsidiary . . . . . . . . . . . .      100         -          -
  Cash paid for investments. . . . . . . . . . . . . . . .        -         -     (6,763)
  Cash advanced to joint venture . . . . . . . . . . . . .        -         -        (46)
  Proceeds from sale of property and equipment . . . . . .        -       489         13
  Issuance of note receivable. . . . . . . . . . . . . . .        -         -     (1,000)
  Payments received on note receivable . . . . . . . . . .        -       500        500
                                                            --------  --------  ---------
           Net cash flows from investing activities. . . .      100     5,937     (7,639)
                                                            --------  --------  ---------

                                                                              (Continued)
</TABLE>

                                      F-9
<PAGE>
<TABLE>
<CAPTION>

MURDOCK  COMMUNICATIONS  CORPORATION

CONSOLIDATED  STATEMENTS  OF  CASH  FLOWS
YEARS  ENDED  DECEMBER  31,  2001,  2000  AND  1999  (CONCLUDED)(DOLLARS  IN  THOUSANDS)
----------------------------------------------------------------------------------------


                                                                           2001     2000     1999
<S>                                                                       <C>     <C>       <C>
CASH FLOWS FROM FINANCING ACTIVITIES:
  Payments on capital lease obligation with a related party. . . . . . .     (1)     (472)    (301)
  Borrowings on notes payable. . . . . . . . . . . . . . . . . . . . . .    158       656    7,975
  Borrowings of long-term debt with related parties. . . . . . . . . . .      -         -      500
  Payments on notes payable. . . . . . . . . . . . . . . . . . . . . . .   (100)   (2,772)    (479)
  Payments on long-term debt with related parties. . . . . . . . . . . .      -      (429)    (512)
  Borrowings on long-term debt, others . . . . . . . . . . . . . . . . .      -         -      654
  Payments on long-term debt, others . . . . . . . . . . . . . . . . . .      -    (1,042)    (421)
  Proceeds from issuance of common stock and warrants. . . . . . . . . .      -         -        3
  Payment of dividends . . . . . . . . . . . . . . . . . . . . . . . . .      -         -      (18)
  Proceeds from exercise of stock options. . . . . . . . . . . . . . . .      -         -       37
                                                                          ------  --------  -------
           Net cash flows from financing activities. . . . . . . . . . .     57    (4,059)   7,438
                                                                          ------  --------  -------

NET INCREASE (DECREASE) IN CASH. . . . . . . . . . . . . . . . . . . . .   (164)      104      (50)

CASH AT BEGINNING OF YEAR. . . . . . . . . . . . . . . . . . . . . . . .    167        63      113
                                                                          ------  --------  -------

CASH AT END OF YEAR. . . . . . . . . . . . . . . . . . . . . . . . . . .  $   3   $   167   $   63
                                                                          ======  ========  =======

SUPPLEMENTAL DISCLOSURE:
  Cash paid during the year for interest, principally to a related party  $   -   $   853   $  764
  Cash paid during the year for income taxes . . . . . . . . . . . . . .      -         6        4

See notes to consolidated financial statements.
</TABLE>

                                      F-10
<PAGE>
MURDOCK  COMMUNICATIONS  CORPORATION


CONSOLIDATED  STATEMENTS  OF  CASH  FLOWS
YEARS  ENDED  DECEMBER  31,  2001,  2000  AND  1999
---------------------------------------------------


SUPPLEMENTAL  DISCLOSURES  OF  2001  NONCASH INVESTING AND FINANCING ACTIVITIES:

In  connection  with the sale of the Priority International Communications, Inc.
subsidiary,  the  Company received a note receivable for $96,000 and assigned it
to  MCC  Investment Company, LLC to repay outstanding debt and accrued interest.

During  the year the Company issued 179,600 common stock warrants and recorded a
$45,000  increase  to  common  stock warrants and deferred financing costs which
were  taken  to  interest  expense  due to the past due status of the underlying
debt.

SUPPLEMENTAL  DISCLOSURES  OF  2000  NONCASH INVESTING AND FINANCING ACTIVITIES:

The  Company  recorded  an  increase  to  the carrying value of the Company's 8%
Series  A  Convertible  Preferred  Stock  and a charge to accumulated deficit of
$23,000  representing  the  current  period accretion to its conversion price of
$1,891,000.  These  shares were converted into 1,683,880 shares of common stock.

During the year, common stock warrants were exercised by individuals, increasing
common  stock  by  $35,000  (18,941  shares)  in a cashless exercise through the
exchange  of  debt.

The  Company  issued  stock dividends of $102,000 representing 236,129 shares of
common  stock  recorded  as  an  increase  to  common  stock  and an increase in
accumulated  deficit.

The  Company  recorded  $94,000  representing  treasury  stock  received  in the
cashless  sale  of the Incomex subsidiary, representing 250,000 shares of common
stock  and  the net assets of the Company decreased by $1,648,000 related to the
sale.

During  the year the Company issued 5,199,121 common stock warrants and recorded
a  $472,000  increase  to  common  stock  warrants and deferred financing costs.

The  Company  transferred  1,063,584  shares of Actel Integrated Communications,
Inc. Preferred Stock, reducing the cost basis of the investment by $729,910, and
$4,600,000  of  new notes payable were issued in connection with the transaction
in  exchange  for  the  cancellation  of approximately $9,200,000 of outstanding
indebtedness  related  to  the  Debt  Refinancing  Plan.

In  December  of  2000,  the Company cancelled warrants with a recorded value of
$99,000.

                                                                     (Continued)

                                      F-11
<PAGE>
MURDOCK  COMMUNICATIONS  CORPORATION


CONSOLIDATED  STATEMENTS  OF  CASH  FLOWS
YEARS  ENDED  DECEMBER  31,  2000,  1999  AND  1998  (CONCLUDED)
----------------------------------------------------------------


SUPPLEMENTAL  DISCLOSURES  OF  1999  NONCASH INVESTING AND FINANCING ACTIVITIES:

During  1999,  199,172  common stock warrants were exercised by individuals.  Of
these,  83,872  were  converted  to the same number of common shares and reduced
notes  payable  by  $116,000  and accrued interest by $31,000.  Of the remaining
115,300  warrants,  114,000 warrants were converted into 51,507 shares of common
stock in a cashless exercise and 1,300 warrants were converted into 2,668 shares
of  common  stock  for  $8,475,  which  had not been received prior to year end.
These  warrants  had  a  carrying  value  of  $7,921.

The  Company  recorded  an  increase  to  the  carrying value of the 8% Series A
Convertible  Preferred  Stock  and  a  charge  to accumulated deficit of $31,353
representing  the  current  year's  accretion  to  its  conversion  price.

The  Company recorded an increase to accrued expense and a charge to accumulated
deficit  of  $162,559  for  cumulative dividends earned by the holders of the 8%
Series  A  Convertible  Preferred  Stock.

The  Company  issued  stock  dividends  of $220,836 which had been recognized in
current  and  prior  years through charges to retained earnings and increases in
accrued  expenses  representing  87,708  shares  of  common  stock.

The  Company  recorded  $303,000  of deferred loan costs in connection with debt
financing  of  $7,975,000  and  related  issuance  of  common  stock warrants to
purchase  1,695,000  shares of the Company's common stock.  Such costs are being
amortized  to  non-cash  interest  expense.

The  Company  recorded  a  decrease  in  common stock warrants and a decrease to
accumulated  deficit  of  $100,000  due  to  the  expiration of 50,000 warrants.

See  notes  to  consolidated  financial  statements.

                                      F-12
<PAGE>
MURDOCK  COMMUNICATIONS  CORPORATION


NOTES  TO  CONSOLIDATED  FINANCIAL  STATEMENTS
YEARS  ENDED  DECEMBER  31,  2001,  2000  AND  1999
---------------------------------------------------


1.   BUSINESS  AND  SIGNIFICANT  ACCOUNTING  POLICIES

     DESCRIPTION OF BUSINESS - Murdock Communications Corporation (individually,
     or  collectively  with  its  wholly-owned  subsidiaries  discussed  below,
     referred  to  herein  as the "Company") has been engaged in recent years in
     the  business  of  providing operator services and call processing to North
     American  payphones,  hotels  and  institutions, database profit management
     services  and  telecommunications  billing  and collection services for the
     hospitality  industry  and  outsourced  operator  services  for  the
     telecommunications  industry. The Company operated its business under three
     business units prior to the sales discussed below. At December 31, 2001 the
     Company has no operating activities and no reportable segments. The Company
     continues  to  exist as a public shell for use as a reverse merger vehicle.

     MTS  -  Murdock Technology Services ("MTS") was created in 1998 to meet the
     needs  of the hospitality telecommunications management market by providing
     database profit management services and other value added telecommunication
     services.  The  division's  main  product,  the  MCC  Telemanager  ,  was a
     proprietary  software  and  hardware  product,  created  to  help  manage
     telecommunication  installations  and  services  in the hospitality market.

     In  February  2000,  the  Company  entered  into  a  Rental  Agreement with
     Telemanager.net  providing  for  the  operation  of  MCC  Telemanager  by
     Telemanager.net  in exchange for monthly rental payments to the Company. On
     December  20,  2000,  the  Company  sold  all the primary assets which were
     subject to the Rental Agreement to Telemanager.net. Telemanger.net is owned
     by  former  executives  of  the  Company.

     Incomex  -  On  February  13,  1998,  the  Company  purchased Incomex, Inc.
     ("Incomex"),  the  Company's  second  business  unit. Incomex was primarily
     engaged in the business of providing billing and collection services to the
     hospitality  industry  from  Mexico  to the United States. The Company sold
     100% of the stock of Incomex to three of the former shareholders of Incomex
     with  an  effective  closing  date  of  June  30,  2000  (see  Note  3).

     PIC  -  On  October  31, 1997, the Company purchased Priority International
     Communications,  Inc. ("PIC"). PIC was primarily engaged in the business of
     providing  long-distance  telecommunications services to patrons of hotels,
     public  and  private  payphone  owners  and aggregators of operator service
     traffic  with  which  PIC  had contracts to provide such services. Services
     included,  but  were  not  limited  to,  credit card billing services, live
     operator  services,  automated  collection and messaging delivery services,
     voice  mail  services  and  telecommunications  consulting.

     Also,  on  October  31,  1997,  the  Company  purchased PIC Resources Corp.
     ("PIC-R").  PIC-R,  operating  through  its  wholly-owned  subsidiary  ATN
     Communications,  Incorporated  ("ATN") was merged into PIC in January 1999.
     ATN was primarily engaged in the business of providing carrier services for
     long-distance  telecommunications  companies  throughout the United States.
     ATN  handled  incoming  operator  assisted  calls  with  their operators on
     location.  Unless  otherwise  indicated, references in this report to "PIC"
     include  the  historical  operations  of  ATN.

     Effective  July  31,  2001  the  Company sold 100% of the stock of PIC to a
     third  party  who  is  related to a Director and shareholder of the Company
     (see  Note  3).

                                      F-13
<PAGE>
     BASIS  OF PRESENTATION - The accompanying consolidated financial statements
     have  been  prepared  on  a  going  concern  basis,  which contemplates the
     realization  of  assets  and  the satisfaction of liabilities in the normal
     course of business. The Company has an accumulated deficit of $42.9 million
     and  current liabilities exceed current assets by $14.9 million at December
     31,  2001.  The  Company  also  is past due in the payment of approximately
     $12.4  million  in  principal  and accrued interest payable as of March 31,
     2002.  The  Company's past due debt includes approximately $11.6 million of
     notes and accrued interest which were believed to be pledged by the holders
     of  the  notes  to  a bank as collateral for loans made by the bank to such
     holders.  This  bank  was  liquidated  by  the  Federal  Deposit  Insurance
     Corporation ("FDIC") during 2000. The Company was notified in December 2000
     that  the FDIC sold significantly all the loans and related collateral to a
     financial institution. The financial institution has issued a demand letter
     to  the  Company  for  approximately  $575,000  of  principal  plus accrued
     interest  of  the  notes,  and  on  July  5, 2001 the financial institution
     obtained  a default judgment against the Company for $781,252 plus interest
     at  the  rate  of 18% per year from and after February 6, 2001. These notes
     consist  of  several notes signed by two former officers of the Company. If
     the  financial  institution  seeks  to enforce its rights under the pledged
     notes,  the Company currently would not be able to repay these notes. These
     factors,  among others, indicate that the Company may be unable to continue
     as  a going concern for a reasonable period of time. Management's plans are
     discussed  below.

     The  consolidated  financial  statements  do  not  include  any adjustments
     relating to the recoverability and classification of recorded asset amounts
     or  the  amounts  and classification of liabilities that might be necessary
     should  the Company be unable to continue as a going concern. The Company's
     continuation  as  a going concern is dependent upon its ability to generate
     sufficient  cash  flow  to  meet  its  obligations on a timely basis and to
     obtain  additional  financing  and  refinancing  as  may  be  required.
     Management's  plans  to  accomplish  these  objectives include, but are not
     limited  to,  the  following:

     -    The  Company's  intends to continue to negotiate with its creditors to
          restructure  indebtedness and obtain financing to fund operations. The
          Company believes that possible sources of funds will primarily consist
          of  advances  from  MCC  Investment  Company, LLC ("MCCIC"), a company
          owned  by  Berthel  Fisher  &  Company,  Inc.  ("Berthel") and another
          significant shareholder of the Company. If the Company is unsuccessful
          in this strategy, the Company may not be able to continue operating as
          a  going  concern.

     -    The  Company has an agreement with an unrelated third party to use the
          Company's  public  shell  as a reverse merger vehicle. On December 19,
          2001  the  Company  and  Polar Molecular Corporation ("Polar") entered
          into  a  Definitive  Merger  Agreement  (the  "merger"). The merger is
          subject  to  a  number  of  significant closing conditions, including,
          among  others,  approval  by  the  stockholders  of  the  parties, the
          conversion  of  the  Company's  indebtedness  into  equity,  and  the
          obtaining of debt or equity financing by Polar. If this transaction is
          unsuccessful,  the  Company may not be able to continue operating as a
          going  concern.

     -    The  Company  retains  an  investment  banker  (Berthel) to assist the
          Company  regarding  the  identification and investigation of strategic
          alternatives  available  to  the  Company.

     DISCONTINUED  OPERATIONS  -  The accompanying statements of operations have
     been  reclassified for the dispositions of the Incomex subsidiary (see Note
     3)  and  the  PIC  subsidiary  (see  Note  3)  so that the results for each
     subsidiary's  operations  are classified as discontinued operations for all
     periods  presented.  The  assets  and  liabilities  of  the  discontinued
     operations  of PIC which were sold on July 31, 2001 have been classified in
     the 2000 balance sheet as "net liabilities of discontinued operations." The
     statements  of  cash  flows and related notes to the consolidated financial
     statements  have  also  been  reclassified  to  conform to the discontinued
     operations  presentation.

     PRINCIPLES  OF  CONSOLIDATION  -  The  consolidated  financial  statements
     included  the  accounts of the Company and the accounts of its wholly-owned
     subsidiaries,  PIC  and  Incomex  (prior  to  their  sale).  Significant
     intercompany  accounts  and  transactions  have  been  eliminated  in
     consolidation.

                                      F-14
<PAGE>
     USE  OF  ESTIMATES  - The preparation of financial statements in conformity
     with  accounting  principles  generally  accepted  in  the United States of
     America  requires  management to make estimates and assumptions that affect
     the reported amounts of assets and liabilities and disclosure of contingent
     assets  and  liabilities  at  the  date of the financial statements and the
     reported  amounts  of  revenues  and  expenses during the reporting period.
     Actual  results  could  differ  significantly  from  those  estimates.

     REVENUE  RECOGNITION  -  Revenue  was  recognized  as calls were placed and
     processed.  Revenue recognized on the sale of hardware occurred at the time
     of  delivery and revenues for other services was recognized at the time the
     services  were  rendered.

     FURNITURE  AND  EQUIPMENT - Furniture and equipment are stated at cost. For
     financial reporting purposes, depreciation and amortization are computed on
     these  assets  using  the  straight-line method over their estimated useful
     lives of five years. For income tax purposes, accelerated methods are used.
     All  amounts  were  fully  depreciated  at  December  31,  2001.

     IMPAIRMENT  OF  FIXED  ASSETS - The Company periodically reviews long-lived
     assets  for impairment whenever events or changes in circumstances indicate
     that  the  carrying  amount of these assets may not be recoverable. For the
     year  ended  December 31, 1999, the Company recorded impairment write-downs
     of  assets, primarily telecommunications equipment at MTS, of approximately
     $317,000. All impairments were determined based on the estimated fair value
     of  such  assets.

     INTANGIBLE  ASSETS  - Intangible assets relate to deferred financing, lease
     and loan restructuring costs. Financing, lease and loan restructuring costs
     incurred  have  been  deferred  and  are  being  amortized  over the new or
     restructured  lease  and  loan agreement terms using the effective interest
     method.  All  amounts  were  fully  amortized  at  December  31,  2001.

     INVESTMENTS  -  The  Company  owned  convertible  preferred  stock of Actel
     Integrated Communications, Inc. ("Actel") which was not readily marketable.
     This  investment  was  accounted for at cost. This investment experienced a
     decline  in value that was other than temporary in 2000 due to Actel filing
     for  bankruptcy  in  April 2001. The Company recorded an impairment loss of
     $1.6  million in 2000 which was equal to the stock's cost basis at December
     31,  2000.

     INCOME  TAXES  -  The  Company  files  a  consolidated  federal and certain
     consolidated state income tax returns with its subsidiaries. Some states do
     not  allow  the  filing  of a consolidated state tax return, and therefore,
     certain  subsidiaries  file  a  separate  state income tax return. Deferred
     income  taxes  are  provided  for  the  tax consequences in future years of
     temporary  differences  between the tax basis of assets and liabilities and
     their  financial reporting amounts, based on enacted tax laws and tax rates
     applicable  to  the periods in which the differences are expected to affect
     taxable  income.  Valuation  allowances  are  established when necessary to
     reduce  deferred  tax assets to the amounts expected to be realized. Income
     tax  expense  is  the  tax  payable  for the year and the change during the
     period  in  deferred  tax  assets  and  liabilities.

                                      F-15
<PAGE>
     ACCRETION  ON  PREFERRED  STOCK  -  Up  to  September 30, 2000, the date of
     conversion,  the  Company  accreted  the  carrying value of the 8% Series A
     Convertible  Preferred  Stock  (net  of  offering  costs  incurred)  to the
     conversion  price  by  the  effective  interest  method.

     CUMULATIVE  DIVIDENDS  ON  PREFERRED  STOCK - Up to September 30, 2000, the
     date  of  conversion,  cumulative  dividends  on  the Company's 8% Series A
     Convertible  Preferred  Stock  were  recorded  as  a  charge to accumulated
     deficit  as  the  dividends  were  earned  by  the  holders  and an accrued
     liability  was  recorded.

     STOCK-BASED  COMPENSATION  -  The Company measures stock-based compensation
     cost with employees as the excess of the fair value of the Company's common
     stock at date of grant over the amount the employee must pay for the stock.
     The  Company measures stock-based compensation with other than employees as
     the  fair  value of the goods or services received or the fair value of the
     equity  instrument  issued,  whichever  is  more  reliably  measurable.

     NET LOSS PER COMMON SHARE - Basic net loss per common share is based on the
     weighted  average  number  of shares of common stock outstanding during the
     year.  Diluted  net loss per common share is the same as basic net loss per
     share  due  to the antidilutive effect on net loss per share of any assumed
     conversion  of  convertible securities or exercise of options and warrants.

     Potential  common  shares  excluded  from the per share computation because
     they  were  antidilutive  are  as  follows:

<TABLE>
<CAPTION>

                              YEARS ENDED DECEMBER 31,
                              ------------------------
                              2001   2000    1999
<S>                          <C>     <C>   <C>
Convertible preferred stock    -      -    1,681,776
Options . . . . . . . . . .    -      -      355,918
Warrants. . . . . . . . . .  45,454   -    1,189,000
                             ------  ----  ---------
Total . . . . . . . . . . .  45,454   -    3,226,694
                             ======  ====  =========
</TABLE>

     The  exercise  prices  on  all  outstanding options and warrants exceed the
     market  price  of the Company's common stock at December 31, 2001, 2000 and
     1999,  except  as  noted  above.

     RECLASSIFICATIONS  -  Certain  amounts  in  the  2000 and 1999 consolidated
     financial  statements  have  been  reclassified  to  conform  with the 2001
     presentation.

     IMPACT  OF  NEW  ACCOUNTING  PRONOUNCEMENTS  -  In June 1998, the Financial
     Accounting  Standards  Board  ("FASB")  issued  Statement  of  Financial
     Accounting  Standards  ("SFAS") 133, "Accounting for Derivative Instruments
     and  Hedging  Activities."  SFAS  133  establishes standards for derivative
     instruments,  including  certain  derivative  instruments embedded in other
     contracts  (collectively  referred  to  as  derivatives),  and  for hedging
     activities.  It requires that an entity recognize all derivatives as either
     assets  or  liabilities  in the statement of financial position and measure
     those  instruments  at  fair  value.  The  recognition  of  gains or losses
     resulting  from changes in the values of derivatives is based on the use of
     each  derivative  instrument and whether it qualifies for hedge accounting.
     The  Company  adopted SFAS 133 on January 1, 2001. The adoption of SFAS 133
     did  not  have  a material effect on the Company's results of operations or
     financial  condition.

                                      F-16
<PAGE>
     In  June  2001,  the  FASB issued SFAS 141, Business Combinations, and SFAS
     142,  Goodwill  and  Other  Intangible Assets. SFAS 141 addresses financial
     accounting  and  reporting  for business combinations and requires that the
     purchase  method  of  accounting  be  used  for  all  business combinations
     initiated  after  June 30, 2001. Under SFAS 142, goodwill and certain other
     intangible  assets will no longer be amortized, but will be tested annually
     for  impairment  and written down and charged to income when their recorded
     value  exceeds  their  estimated fair value. SFAS 141 and 142 are effective
     for  2002. SFAS 141 and 142 will have no impact on the Company since it has
     no  goodwill  or  intangible  assets  at  December  31,  2001.

2.   BAD  DEBT  EXPENSE  AND  UNIVERSAL  SERVICE  FUND  FEES  RELATED  TO  PIC

     During 1999, PIC recorded bad debt charges primarily relating to collection
     issues  for  one  type  of  call  processing service provided by PIC to its
     largest  customer  totaling  approximately  $5.6  million  in  excess  of
     historical  amounts.  PIC  used an independent billing and collection firm,
     which  advanced  funds  to PIC, for calls handled by PIC, before collecting
     from  the  end-user by billing through a Regional Bell Operating Company or
     other  local telephone company. This billing and collection firm reconciled
     amounts  ultimately  collected  from the end-user with the initial advances
     made  and remitted the additional amount collected or reduced advances, for
     any  deficiency, to PIC in future periods. This process took 12 - 18 months
     to  complete.  PIC  used its historical experience to estimate the ultimate
     collections  to  be  received.  During  1999,  PIC experienced an amount of
     reductions  in these payments significantly in excess of PIC's and industry
     historical  experience.

     Due  to  the high level of these uncollectible amounts, PIC contracted with
     another billing and collection firm in November 1999. The prior billing and
     collection  firm  alleged  that  PIC had breached its contract and placed a
     lien  on  the  collections  from  calls  processed  by  the new billing and
     collection  firm.  At  December 31, 1999, the Company recorded an allowance
     for  100%  of all receivables from both billing and collection firms due to
     the  uncertainty  regarding  their  collection.

     On  January  25,  2001,  the  Company  reached  a settlement with the prior
     billing  and collection firm and the new billing and collection firm. Under
     this  settlement:  (a) PIC and ATN were relieved from any further liability
     allegedly owed to either billing and collection firm, (b) PIC agreed to pay
     a  nominal  amount  and  to  relinquish its claims to funds held by the new
     billing  and collection firm, (c) PIC and ATN released any potential claims
     that  they  had  against  the  prior billing and collection firm, including
     claims  that  ATN may have for the alleged failure by the prior billing and
     collection  firm  to  assess  Universal  Service  Fund ("USF") contribution
     charges  (see  discussion  below) on certain traffic, as well as any claims
     that  ATN  may have against the prior billing and collection agency for its
     role  in  the  excessive bad debt charges recorded in 1999, and (d) PIC and
     ATN released any potential claims that they had against the new billing and
     collection  firm.

     In  December  1999,  ATN  received  notice  from  the  Universal  Service
     Administrative  Company  ("USAC")  that  USF  fees  were  due. A carrier of
     interstate/intrastate  calls  is  required  to  pay  a  USF  fee based on a
     percentage  of  total  call revenue. The USF fee is applicable to all calls
     carried  after  January  1,  1997.  The  notice  was  the  first  time that
     management  became  aware  of  any  liability  to  this  agency.  It  was
     management's  belief  that  these USF fees had been charged to the end-user
     and  remitted  to  USAC by its prior billing and collection firm. The prior
     billing  and collection firm's position was that they had collected the USF
     fees  and remitted them to ATN. As ATN is legally responsible for USF fees,
     in December 1999 it recorded an estimated liability of $1.7 million. During
     the  first  two  months  of 2001, ATN received credit memos from USAC which
     reflected  a  balance  due to USAC of $806,000. Accordingly, ATN recorded a
     $894,000  credit  for  universal service fund fees in the fourth quarter of
     2000  based  on  the  new  information  from  USAC.  The  Company reached a
     settlement  agreement with the prior billing and collection firm on January
     25,  2001 which included the USF fees (see discussion above). Any liability
     related  to  USF fees was transferred to the purchaser of PIC (see Note 3).


                                      F-17
<PAGE>
3.   DISCONTINUED  OPERATIONS

     Effective June 30, 2000 the Company sold all the shares of Incomex to three
     of  the  former shareholders of Incomex for (a) the transfer to the Company
     by  the  purchasers  of  250,000  shares  of  the  Company's  common  stock
     originally  issued  by the Company pursuant to the Company's acquisition of
     Incomex,  (b) cancellation and forgiveness of all amounts outstanding under
     promissory notes in the aggregate principal amount of $684,919, and related
     accrued  interest,  originally issued by the Company to the shareholders of
     Incomex,  and  (c)  the  cancellation  of  all  employment compensation and
     employment  contracts  between  the Company and the purchasers. The parties
     also  executed  mutual releases relating to liabilities between the Company
     and  Incomex  and  claims  that  the  Company  may  have against the former
     shareholders  of  Incomex.

     Summary  operating results of the discontinued operations of Incomex are as
     follows  for  the  years  ended  December  31, 2001, 2000 and 1999 (amounts
     expressed  in  thousands):

<TABLE>
<CAPTION>

                                   2001     2000      1999
<S>                                <C>    <C>       <C>
Revenues. . . . . . . . . . . . .  $   -  $ 2,987   $  8,284
Expenses. . . . . . . . . . . . .      -   (4,162)   (10,713)
Taxes . . . . . . . . . . . . . .      -        -        472
                                   -----  --------  ---------
Loss from discontinued operations  $   -  $(1,175)  $ (1,957)
                                   =====  ========  =========
</TABLE>

     The  loss  from  discontinued  operations  includes goodwill impairment and
     fixed asset charges of approximately $4.3 million for 2000 and $3.0 million
     for  1999.

     Effective  July  31,  2001,  the  Company  sold  all  the  shares of PIC to
     Dartwood, LLC for a total purchase price of $196,000, comprised of $100,000
     cash  and  a  noninterest  bearing promissory note of $96,000 payable in 24
     monthly installments of $4,000. The Company assigned the promissory note to
     MCCIC to repay $96,000 of outstanding debt and accrued interest. A Director
     and  significant  shareholder  of  the  Company  is related to the owner of
     Dartwood,  LLC.

     Summary  operating  results  of  the discontinued operations for PIC are as
     follows  for  the  years  ended  December  31, 2001, 2000 and 1999 (amounts
     expressed  in  thousands):

<TABLE>
<CAPTION>

                                    2001      2000      1999
<S>                                <C>      <C>       <C>
Revenues. . . . . . . . . . . . .  $2,438   $ 8,246   $23,150
Expenses. . . . . . . . . . . . .   2,533    11,915    30,430
                                   -------  --------  --------
Loss from discontinued operations  $  (95)  $(3,669)  $(7,280)
                                   =======  ========  ========
</TABLE>

     The loss from discontinued operations includes charges (credits) related to
     the following items for the years ended December 31, 2000 and 1999 (amounts
     expressed  in  thousands):

<TABLE>
<CAPTION>

                                                     2000     1999
<S>                                                 <C>      <C>
Bad debts in excess of historical amounts (Note 2)  $    -   $ 5,600
Goodwill impairment. . . . . . . . . . . . . . . .   3,300     3,000
USF fees (Note 2). . . . . . . . . . . . . . . . .    (894)    1,700
Telecommunications equipment impairment. . . . . .     600         -
                                                    -------  -------
Total. . . . . . . . . . . . . . . . . . . . . . .  $3,006   $10,300
                                                    =======  =======
</TABLE>


                                      F-18
<PAGE>
     A  summary of the net liabilities of the discontinued operations of PIC are
     as  follows  (amounts  expressed  in  thousands):

<TABLE>
<CAPTION>

                                                              DECEMBER 31,
                                                                  2000
<S>                                                           <C>
Assets:
  Cash . . . . . . . . . . . . . . . . . . . . . . . . . . .  $          -
  Accounts receivable, less allowance for doubtful accounts.           582
  Prepaid expense and other current assets . . . . . . . . .            11
                                                              ------------
  Total current assets . . . . . . . . . . . . . . . . . . .           593
                                                              ------------


  Property and equipment, net. . . . . . . . . . . . . . . .           137
                                                              ------------
  Total noncurrent assets. . . . . . . . . . . . . . . . . .           137
                                                              ------------
Total assets . . . . . . . . . . . . . . . . . . . . . . . .           730
                                                              ------------

Liabilities:
  Accounts payable . . . . . . . . . . . . . . . . . . . . .           239
  Accrued universal service fund fees. . . . . . . . . . . .           806
  Other accrued expenses . . . . . . . . . . . . . . . . . .           111
  Current portion of long-term debt, with related parties. .           220
                                                              ------------
  Total current liabilities. . . . . . . . . . . . . . . . .         1,376
  Long-term debt, with related parties, less current portion           250
                                                              ------------
Total liabilities. . . . . . . . . . . . . . . . . . . . . .         1,626
                                                              ------------

Net liabilities. . . . . . . . . . . . . . . . . . . . . . .  $        896
                                                              ============
</TABLE>

4.   INVESTMENTS

     During  1998,  the  Company reached an agreement to invest in Actel. Actel,
     based in Mobile, Alabama, was a facilities-based competitive local exchange
     carrier  of  advanced  voice  and data communications services to small and
     medium sized enterprises. As of June 21, 1999 the Company had invested $3.0
     million  in  Actel.  Effective June 21, 1999, the Company and Actel entered
     into  an  agreement to amend the terms of the original investment agreement
     with  respect  to the Company's investment in Actel. This agreement amended
     certain  provisions  of  the  investment  agreement  including limiting the
     Company's  investment in Actel to $3.0 million. During the third quarter of
     1999,  the  $3.0  million investment was converted into 4,371,428 shares of
     Actel's  Series  A Convertible Preferred Stock as allowed by the investment
     agreement.  Each  share  of  Series A Convertible Preferred Stock accrued a
     cumulative  10%  dividend  per  annum  through  March  10,  2002  and  was
     convertible into 3 shares of Actel's common stock at any time at the option
     of  the  Company, subject to certain restrictions. The share and conversion
     information  have  been  retroactively  restated  for  a stock split of the
     Series A Convertible Preferred Stock and common stock by Actel during 2000.
     In  addition, the Company loaned $1.0 million to Actel under the terms of a
     promissory  note dated June 23, 1999. The note was repaid during the second
     quarter  of  2000  and  had  a  balance  at  December 31, 1999 of $500,000.

     During  the  second  quarter  of  2000,  the  Company  undertook  a  Debt
     Restructuring  Plan  which  resulted  in  the Company selling or exchanging
     2,213,198  shares  of Actel Series A Convertible Preferred Stock in private
     placements. Following these transactions, the Company held 2,158,230 shares
     of  Actel  Series  A  Convertible  Preferred  Stock.

     During  late  2000,  Actel began experiencing cash flow difficulties and on
     April  11, 2001, Actel filed for bankruptcy protection under Chapter 11. On
     September  14,  2001  the bankruptcy proceeding was converted to Chapter 7.
     The  Company recorded an impairment charge of approximately $1.6 million in
     2000,  due  to  the  uncertainty  of  ultimate  recovery of the investment.


                                      F-19
<PAGE>
     During  1998,  the  Company reached an initial lending/investment agreement
     with  AcNet  S.A. de C.V. of Mexico ("AcNet Mexico"). The initial agreement
     was  revised  in June 1999, whereby the Company entered into two agreements
     providing  the  Company  with  separate options to acquire (i) Intercarrier
     Transport  Corporation  ("ITC"),  the  holder  of  approximately 99% of the
     outstanding shares of AcNet Mexico, and (ii) AcNet USA, Inc. ("AcNet USA"),
     an  affiliate  of AcNet Mexico, for an aggregate of 2,325,000 shares of the
     Company's  common  stock,  $200,000  in  closing  costs  and  an additional
     $550,000  to pay off certain debt and accounts payable. The option with ITC
     expired  on  August  31,  2001  and  the  option  with AcNet USA expired on
     December  31,  1999.  As  of December 31, 2000, the Company had loaned $3.7
     million  to  the AcNet entities, recorded $264,000 of interest and incurred
     $729,000  of  costs  either related to the acquisition or paid on behalf of
     the  AcNet  entities.

     In  light  of the Company's liquidity issues and other issues involving the
     AcNet entities, the Company did not pursue the options to acquire the AcNet
     entities.  As  a result and due to cash flow difficulties being experienced
     by the AcNet entities, the Company recorded asset write-downs of $3,703,000
     in  1999 and $990,000 in the second quarter of 2000 due to the write-off of
     costs  associated  with  the  proposed  acquisition  and the uncertainty of
     ultimate  recovery  of  the  investment. The Company commenced legal action
     against  the  AcNet  entities  in  April  2000  to collect its advances and
     interest.  On March 29, 2001, AcNet USA filed for bankruptcy protection and
     the  Company  has  been  informed  that  AcNet  Mexico  is in receivership.

     On  May  31,  2001,  the  AcNet entities filed a motion with the Iowa state
     court  seeking  permission  to  untimely  file  a counter-claim against the
     Company,  and  asked  for  damages against the Company of approximately $20
     million  plus  punitive  damages.  The  AcNet  entities alleged the Company
     breached an oral agreement, committed fraudulent misrepresentation, and the
     AcNet  entities  also  filed  counts  for common counts, action for account
     stated,  and  negligent misrepresentation. On September 6, 201, the Company
     entered  into  a Compromise Settlement Agreement and Full and Final Release
     with  the  AcNet  entities.  Under  the  terms  of the Agreement, the AcNet
     entities  paid  a  nominal  consideration  to  the Company and both parties
     exchanged  releases  on  all  claims  against  the  other  party.

     Investments  at  December  31,  2000  are  summarized  as  follows (amounts
     expressed  in  thousands):

<TABLE>
<CAPTION>

                                              2000
<S>                                         <C>
Actel Series A Convertible Preferred Stock  $ 1,481
Accrued dividends. . . . . . . . . . . . .      100
Impairment reserve for Actel . . . . . . .   (1,581)
AcNet entities loans and related costs . .    4,429
Accrued interest . . . . . . . . . . . . .      264
Allowance for AcNet entities . . . . . . .   (4,693)
                                            --------
Investments. . . . . . . . . . . . . . . .  $     -
                                            ========
</TABLE>


                                      F-20
<PAGE>
5.   NOTES  PAYABLE

     Notes payable as of December 31, 2001 and 2000, consisted of the following:

<TABLE>
<CAPTION>

                                                                     (DOLLARS IN THOUSANDS)
                                                                     ----------------------
                                                                        2001       2000
<S>                                                                  <C>         <C>
Past due notes payable to individuals, $200,000 of which has
  been provided by related parties, bearing interest at
  the default rate of 18%, due March 5, 1999.  Warrants
  to purchase 500,000 shares of the Company's common
  stock were issued, 400,000 of which were issued to related
  parties, at an exercise price of $1.44 per share which expire,
  if unexercised, on March 31, 2003.  A warrant to purchase
  10,000 shares of the Company's common stock was issued
  to Berthel at an exercise price of $1.44 per share which
  expires if unexercised, on March 31, 2003.. . . . . . . . . . . .  $      300  $      300

Past due notes payable to individuals, $225,000 of which has
  been provided by related parties, bearing interest at the
  default rate of 18%, due March 31, 1999.  Warrants to
  purchase 1,486,000 shares of the Company's common
  stock were issued, 225,000 of which were issued to related
  parties, at an exercise price of $1.75 per share which
  expire, if unexercised, on March 31, 2003.  Warrants
  to purchase 121,100 shares of the Company's common stock
  were issued to Berthel in connection with the offering with terms
  substantially similar to the warrants issued in the offering. . .         275         275

Past due notes payable to individuals, $5,995,000 of which has
  been provided by related parties, bearing interest at the default
  rate of 18%, due November 30, 1999.  Warrants to purchase
  1,379,000 shares of the Company's common stock were
  issued, 1,199,000 of which were issued to related parties.
  The warrants were issued at exercise prices ranging
  from $2.50 to $4.13 and, if unexercised, expire on
  dates ranging from November 2003 to December 2003.. . . . . . . .       6,895       6,895

Past due note payable to consultant bearing interest at 14%, due
  March 31, 1999.  Warrants to purchase 25,000 shares
  of the Company's common stock were issued at an
  exercise price of $1.75 per share which expire, if
  unexercised, on March 31, 2003. . . . . . . . . . . . . . . . . .          25          25

Past due uncollateralized notes payable to a related party
  individual, bearing interest at 14%, due May 19, 2001.
  A warrant to purchase 100,000 shares of the Company's
  common stock was issued.  The warrant has an exercise
  price of $3.50 and, if unexercised, expires December 6, 2003. . .         500         500
</TABLE>

                                      F-21
<PAGE>
<TABLE>
<CAPTION>

                                                                     (DOLLARS IN THOUSANDS)
                                                                     ----------------------
                                                                         2001      2000
<S>                                                                   <C>        <C>
Past due note payable to MCCIC bearing interest at 12%,
  due June 21, 2001.  Warrants to purchase 4,289,897 shares
 of the Company's common stock were issued at a weighted
  average exercise price of $1.99 per share which, if unexercised,
  expire December 20, 2004.  The note is collateralized by
  substantially all assets of the Company (see additional terms
  below and see Note 6). . . . . . . . . . . . . . . . . . . . . . .        388         388

Past due revolving promissory note payable to MCCIC bearing
  interest at 12%, due June 21, 2001.  In 2001 warrants to purchase
  179,600 shares of the Company's common stock were issued at
  a weighted average exercise price of $.13 per share which, if
  unexercised, expire December 20, 2004.  In 2000 warrants to
   purchase 909,224 shares of the Company's common stock
  were issued at a weighted average exercise price of $1.99
  per share which, if unexercised, expire December 20, 2004.
  The note is collateralized by substantially all assets of the
  Company (see additional terms below and see Note 6). . . . . . . .        183        200

Past due notes payable to Berthel, bearing interest at 12%
  due June 21, 2001. . . . . . . . . . . . . . . . . . . . . . . . .        200        200
                                                                      ---------  ---------

Total. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  $   8,766  $   8,783
                                                                      =========  =========
</TABLE>

     On June 17, 1999, the Company completed a bridge financing in the amount of
     $2.0  million  with  New Valley Corporation ("New Valley"). Pursuant to the
     bridge financing, the Company issued a note in the principal amount of $2.0
     million (the "Note"). This principal and all unpaid accrued interest at 12%
     per  annum  were  due  July 21, 1999. The Company was past due on this note
     effective  July  21,  1999.  Warrants  to  purchase  250,000  shares of the
     Company's  common  stock  were  issued  in  connection  with the Note at an
     exercise  price  of $3.50 per share and may be exercised at anytime through
     June  21,  2009.  Because the Company did not repay the Note on or prior to
     September  21,  1999,  the warrants may be exercised to purchase a total of
     500,000  shares  of  the  Company's common stock. On December 17, 1999, the
     Company  amended  the terms of the agreement with New Valley. The amendment
     reset  the  interest rate to 12% since inception (14% upon default) and was
     due  in  5  monthly  payments of $200,000 beginning January 17, 2000 with a
     final  payment  of  $1.0  million  on  June  17, 2000. Waivers of any prior
     violations were included as part of the amendment. The Note was convertible
     into  shares  of common stock of the Company at the option of New Valley at
     any  time  up  to the maturity date. The number of shares in the conversion
     was  to  be obtained by dividing the principal amount of the Note converted
     by  the  conversion  price  of  $3.00.

     The  January,  February and March 2000 payments under the Note were paid on
     behalf  of  the  Company  by  MCCIC, a company owned by Berthel and another
     significant  shareholder  of  the  Company.  On  April  6, 2000, the entire
     interest  of  New  Valley in this loan was purchased by MCCIC. The terms of
     the  note  and  warrant  purchase agreement with MCCIC, bearing interest at
     12%,  was  amended on June 22, 2000 with payment of all remaining principal
     and  interest  due  on  June  21,  2001.

     During 2000, the Company also entered into a Revolving Promissory Note with
     MCCIC,  bearing interest at 12% with payment of all remaining principal and
     all  accrued  interest  due  on  June  21,  2001.

                                      F-22
<PAGE>
     Effective  May  29,  2000,  the  Company  issued  warrants  to  purchase an
     aggregate  of  5,199,121 shares of the Company's common stock at a weighted
     average  exercise  price of $1.99 per share to MCCIC in connection with the
     Company's borrowings under the Revolving Promissory Note and the New Valley
     loan.  Deferred  financing  costs  of  $472,000  were recorded for the fair
     values  of  the  warrants  issued  and  were amortized over the life of the
     related  debt.  In  2001  the  Company  issued 179,600 warrants to purchase
     shares  of  the Company's common stock at a weighted average exercise price
     of $.13 per share to MCCIC in connection with borrowings under the past due
     Revolving  Promissory  Note.  Financing  costs of $45,000 were amortized to
     interest  expense at the time of issuance due to the past due status of the
     underlying  debt.

     The  Company  reached  a Compromise Settlement Agreement and Mutual Release
     with  the  FDIC  on  October  19, 2000 to pay $300,000 in settlement of two
     notes  payable  with  a  financial  institution  with combined principal of
     $900,000.  As  a result, the Company recorded a $722,000 extraordinary gain
     on  extinguishment  of  debt,  including interest, in the fourth quarter of
     2000.

6.   LONG-TERM  DEBT

     Long-term  debt,  others  as of December 31, 2001 and 2000 consisted of the
     following:

<TABLE>
<CAPTION>

                                                                    (DOLLARS IN THOUSANDS)
                                                                    ----------------------
                                                                        2001       2000
<S>                                                                 <C>         <C>
Uncollateralized convertible notes payable to individuals, bearing
  interest at 12% due May 29, 2003.. . . . . . . . . . . . . . . .  $      521  $      521
                                                                    ==========  ==========
</TABLE>

     Long-term debt with related parties at December 31, 2001 and 2000 consisted
     of  the  following:

<TABLE>
<CAPTION>

                                                                    (DOLLARS IN THOUSANDS)
                                                                    ----------------------
                                                                        2001       2000
<S>                                                                 <C>         <C>
Uncollateralized convertible notes payable to individuals, bearing
  interest at 12% due May 29, 2003.. . . . . . . . . . . . . . . .  $    1,190  $    1,190

Uncollateralized convertible notes payable to Berthel, bearing
  interest at 12% due May 29, 2003.. . . . . . . . . . . . . . . .       2,921       2,921
                                                                    ----------  ----------

Total. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  $    4,111  $    4,111
                                                                    ==========  ==========
</TABLE>

                                      F-23
<PAGE>
     During  the second quarter of 2000, the Company undertook a plan ("the Debt
     Restructuring  Plan")  designed to restructure a significant portion of the
     Company's principal amount of debt and accrued interest under the Company's
     past  due debt. In connection with the Debt Restructuring Plan, the Company
     recorded  a  pre-tax  gain of approximately $7.0 million as a result of the
     sale of shares of Actel's Series A Convertible Preferred Stock for cash and
     cancellation  of  debt  as  discussed  below.

     The Debt Restructuring Plan consisted of (i) a private offering (the "Actel
     Share Offering") by the Company of shares of Series A Convertible Preferred
     Stock  (the  "Actel Shares") of Actel for cash, and (ii) a private offering
     (the  "Unit  Offering")  by  the  Company to certain holders of outstanding
     indebtedness  of  the  Company  of  units  consisting  of  Actel Shares and
     convertible  notes  of  the  Company  (the  "Convertible  Notes").

     During  the second quarter of 2000, the Company sold 1,149,614 Actel Shares
     for  gross  proceeds of $4.9 million in the Actel Share Offering, resulting
     in  a  gain  of approximately $3.7 million. Proceeds were partially used to
     (i)  reduce  a total of $2.2 million of the amounts owed to MCCIC under the
     Company's bridge loan originally obtained from New Valley and the Company's
     Revolving  Promissory Note from MCCIC, (ii) reduce $1.0 million of past due
     notes  and  lease  payables  to Berthel, (iii) pay placement fees and other
     offering  expenses  of  $444,000,  and  (iv)  pay  $479,000 to certain note
     holders  upon conversion in the Unit Offering in partial payment of amounts
     owed  to  such  note  holders. The remaining proceeds were used for general
     working  capital.

     During  the second quarter of 2000, the Company transferred 1,063,584 Actel
     Shares  and  issued  Convertible  Notes in an aggregate principal amount of
     $4.6  million  in  the  Unit  Offering  in exchange for the cancellation of
     outstanding indebtedness in the amount of $9.2 million, resulting in a gain
     of approximately $3.3 million. The Convertible Notes accrue interest at the
     rate  of  12%  annually, with principal and accrued interest due on May 29,
     2003,  and are convertible into shares of the Company's no par value common
     stock  at a conversion price of $3.03 per share (330 shares for each $1,000
     due  under  the  Convertible  Notes).  The  Convertible Notes are unsecured
     obligations  of  the  Company. The Company paid $479,000 in satisfaction of
     25%  of  the  outstanding  principal  and interest to holders of promissory
     notes  originally  issued  by the Company in April and May of 1998 with the
     remaining  balance  of  these  promissory notes being converted in the Unit
     Offering.

     The  Company  sold  its buildings in Cedar Rapids, Iowa and Mobile, Alabama
     during  the second quarter of 2000 resulting in a pre-tax gain of $214,000.
     Proceeds  were  used  to  pay  related  indebtedness  of  $1.0  million.

     Maturities of long-term debt subsequent to December 31, 2001 are as follows
     (dollars  in  thousands):

<TABLE>
<CAPTION>

      RELATED
      PARTIES   OTHER   TOTAL
<S>   <C>       <C>     <C>
2003  $  4,111  $  521  $4,632
      ========  ======  ======
</TABLE>

     Also  see  Note  13  with  respect to the estimated fair value of long-term
     debt.


                                      F-24
<PAGE>
7.   COMMON  STOCK  WARRANTS

     A  summary of common stock warrant activity during the years ended December
     31,  2001,  2000  and  1999  is  as  follows:

<TABLE>
<CAPTION>

                                                                  WEIGHTED
                                                                  AVERAGE
                                                      WARRANT     WARRANT
                                          WARRANT     PRICE        PRICE     EXPIRATION
                                          SHARES     PER SHARE   PER SHARE      DATE
<S>                                     <C>          <C>         <C>         <C>
Balance at January 1, 1999 . . . . . .   4,420,763   $1.12-9.75  $     2.86  1999-2003
Warrants issued with notes payable to
  related parties. . . . . . . . . . .     795,000    3.25-4.13        3.63       2003
Warrants issued with notes payable to
  financial institution (Note 5) . . .     500,000         3.50        3.50       2009
Warrants issued with notes payable to
  related party. . . . . . . . . . . .     400,000         3.31        3.31       2004
Warrants expired . . . . . . . . . . .     (50,000)        2.88        2.88
Warrants exercised . . . . . . . . . .      (1,300)        3.14        3.14
Warrants exercised by related party. .      (4,000)        1.44        1.44
Warrants exercised . . . . . . . . . .    (193,872)        1.75        1.75
                                        -----------
Balance at December 31, 1999 . . . . .   5,866,591    1.12-9.75        3.05  2002-2009
Warrants issued with termination of
  employment agreements. . . . . . . .     150,000         1.00        1.00       2003
Warrants issued with notes payable to
  MCCIC (Note 5) . . . . . . . . . . .   5,199,121    0.94-2.44        1.99  2004-2005
Warrants exercised . . . . . . . . . .     (25,000)        1.75        1.75
Warrants cancelled . . . . . . . . . .    (495,000)   3.50-4.13        3.88
                                        -----------

Balance at December 31, 2000 . . . . .  10,695,712    1.12-9.75        2.44  2002-2009

Warrants issued in connection with
  MCCIC advances (Note 5). . . . . . .     179,600    0.05-0.38        0.13       2006
                                        -----------

Balance at December 31, 2001 . . . . .  10,875,312    0.05-9.75        2.40  2002-2009
                                        ===========
</TABLE>

     The  weighted  average  remaining life of the warrants was 2.3, 3.1 and 3.0
     years  at  December  31,  2001,  2000  and  1999,  respectively.


                                      F-25
<PAGE>
     Warrants  outstanding and exercisable at December 31, 2001 were as follows:

<TABLE>
<CAPTION>

EXERCISE PRICE   WARRANTS
<S>              <C>
0.05-$0.38 . .     179,600
0.94. . . . . .     435,467
1.00. . . . . .     150,000
1.12. . . . . .     229,279
1.25. . . . . .     200,000
1.31. . . . . .     884,804
1.44. . . . . .      21,000
1.50. . . . . .     100,000
1.75. . . . . .   1,918,228
2.09. . . . . .     499,600
2.19. . . . . .      40,000
2.25. . . . . .     831,467
2.44. . . . . .   2,207,783
2.50-3.00 . . .      90,000
3.01-3.25 . . .   1,798,084
3.26-3.60 . . .   1,210,000
9.75. . . . . .      80,000
                 ----------
                 10,875,312
                 ==========
</TABLE>

     On  March  22,  2001, the Company extended the expiration date of 1,939,228
     warrants  from March 31, 2001 to March 31, 2002. Subsequently, on March 21,
     2002  these  warrants  were  extended  to  March  31,  2003.

8.   STOCK  OPTION  PLANS

     The  Company  adopted  the 1993 Stock Option Plan (the "1993 Plan") whereby
     options  may  be  granted  to  employees  to purchase up to an aggregate of
     272,529 shares of the Company's common stock. The 1993 Plan is administered
     by  the  Board  of  Directors,  which  determines  to  whom options will be
     granted.  The  1993  Plan provides for the grant of incentive stock options
     (as  defined  in  Section 422 of the Internal Revenue Code) to employees of
     the  Company.  The  exercise  price of stock options granted under the 1993
     Plan  is  established  by  the  Compensation  Committee  or  the  Board  of
     Directors,  but  the  exercise  price  may not be less than the fair market
     value  of the common stock on the date of grant of each option. Each option
     shall  be for a term not to exceed ten years after the date of grant, and a
     participant's  right  to  exercise  an  option  vests at the rate of twenty
     percent  on the date of grant and each anniversary date until the option is
     fully  vested.

                                      F-26
<PAGE>
     A  summary  of  stock  option activity under the 1993 Plan during the years
     ended  December  31,  2001,  2000  and  1999,  is  summarized  as  follows:

<TABLE>
<CAPTION>

                                                           WEIGHTED                WEIGHTED
                                                            AVERAGE                AVERAGE
                                                            OPTION                 OPTION
                                OPTIONS     OPTION PRICE    PRICE       OPTIONS     PRICE
                              OUTSTANDING   PER SHARE     PER SHARE   EXERCISABLE  PER SHARE
<S>                           <C>           <C>           <C>         <C>          <C>
Balance at January 1, 1999 .      240,601   $  1.88-2.25  $     2.04      163,026  $     1.97
  Exercised. . . . . . . . .      (18,500)          1.88
  Exercised. . . . . . . . .       (1,000)          2.25
                              ------------
Balance at December 31, 1999      221,101      1.88-2.25        2.06      182,564        2.02
  Cancelled. . . . . . . . .      (20,299)          1.88
  Cancelled. . . . . . . . .      (15,523)          1.88
  Cancelled. . . . . . . . .       (5,000)          2.25
  Cancelled. . . . . . . . .       (8,836)          2.00
                              ------------
Balance at December 31, 2000      171,443      1.88-2.25        2.09      171,443        2.09
  Cancelled. . . . . . . . .      (67,899)          1.88
  Cancelled. . . . . . . . .       (8,836)          2.00
  Cancelled. . . . . . . . .      (94,708)          2.25
                              ------------
Balance at December 31, 2001            -              -           -            -           -
                              ============
</TABLE>

     At  December 31, 2001, options for 272,529 shares were available for future
     grants  and  the weighted average remaining life of the options outstanding
     was  five years. The Company has reserved 272,529 shares of common stock in
     connection  with  the  1993  Plan.

     The  Company has adopted the 1997 Stock Option Plan (the "1997 Stock Option
     Plan").  During  1998,  the  Company  amended the 1997 Stock Option Plan to
     increase  the  number  of  shares  authorized  to 1,727,471. The 1997 Stock
     Option Plan is also administered by the Compensation Committee or the Board
     of Directors which determines to whom the options will be granted. The 1997
     Stock  Option  Plan  provides  for the grant of incentive stock options (as
     defined  in Section 422 of the Internal Revenue Code) or nonqualified stock
     options  to  executives or other key employees of the Company. The exercise
     price  of  the  stock  options  granted under the 1997 Stock Option Plan is
     established  by  the  Compensation Committee or the Board of Directors, but
     the exercise price may not be less than the fair market value of the common
     stock  on the date of the grant of each option for incentive stock options.
     Each  option  shall be for a term not to exceed ten years after the date of
     grant  for  non-employee directors and five years for certain shareholders.
     Options  cannot be exercised until the vesting period, if any, specified by
     the  Compensation  Committee  or  the  Board  of  Directors  has  expired.


                                      F-27
<PAGE>
     A summary of stock option activity under the 1997 Stock Option Plan for the
     years  ended  December  31,  2001,  2000  and  1999,  is  as  follows:

<TABLE>
<CAPTION>

                                                           WEIGHTED                WEIGHTED
                                                           AVERAGE                 AVERAGE
                                                           OPTION                   OPTION
                                OPTIONS     OPTION PRICE    PRICE     OPTIONS        PRICE
                              OUTSTANDING    PER SHARE    PER SHARE   EXERCISABLE  PER SHARE
<S>                           <C>           <C>           <C>         <C>          <C>
Balance at January 1, 1999 .    1,374,957   $  2.00-4.16  $     2.65      893,561  $     2.62
  Cancelled. . . . . . . . .       (7,000)          3.13
  Cancelled. . . . . . . . .      (90,000)          2.81
  Granted at market. . . . .        2,000           3.88
  Granted at market. . . . .        5,500           2.56
  Ganted at market . . . . .        4,500           2.75
                              ------------
Balance at December 31, 1999    1,289,957      2.00-4.16        2.64    1,106,259        2.63
  Cancelled. . . . . . . . .     (323,236)     2.25-2.75
  Cancelled. . . . . . . . .     (600,000)     2.25-3.50
  Cancelled. . . . . . . . .       (1,164)          2.00
  Cancelled. . . . . . . . .      (15,000)     3.13-4.16
  Cancelled. . . . . . . . .      (15,000)     3.13-4.16
  Cancelled. . . . . . . . .      (10,000)          3.13
  Cancelled. . . . . . . . .       (2,000)          3.88
  Cancelled. . . . . . . . .       (5,500)          2.56
  Cancelled. . . . . . . . .       (4,500)          2.75
  Granted at market. . . . .       20,000           2.25
                              ------------
Balance at December 31, 2000      333,557      2.00-2.81        2.58      323,557        2.58
  Cancelled. . . . . . . . .       (1,164)          2.00
  Cancelled. . . . . . . . .     (102,393)          2.25
  Cancelled. . . . . . . . .     (135,000)          2.75
                              ------------
Balance at December 31, 2001       95,000      2.25-2.81        2.69       95,000        2.69
                              ============
</TABLE>

     At  December  31,  2001, options for 95,000 shares were exercisable, and an
     additional  1,632,471  shares  were  available  for  future  grants and the
     weighted  average remaining life of the options outstanding was five years.
     The  Company  has  reserved  1,727,471 shares of common stock in connection
     with  the  1997  Stock  Option  Plan.

                                      F-28
<PAGE>
     No  compensation  expense  was  recorded  in  connection  with the grant of
     options for the years ended December 31, 2001, 2000 and 1999, respectively.
     The  Company accounts for stock option grants and awards to employees using
     the  intrinsic  value  method. If compensation cost for stock option grants
     and  awards  had been determined based on fair value at the grant dates for
     options  consistent with the method prescribed by SFAS 123, "Accounting for
     Stock  Based  Compensation,"  the Company's net loss and net loss per share
     would  have  been the pro forma amounts indicated below for the years ended
     December  31,  2001,  2000 and 1999 (dollars in thousands, except per share
     data):

<TABLE>
<CAPTION>

                                           2001      2000      1999
<S>                        <C>           <C>       <C>       <C>
Net loss attributable to   As reported   $(1,814)  $(4,427)  $(18,592)
  common shareholders      Pro forma      (1,837)   (4,731)   (19,207)

Net loss per common share  As reported   $ (0.15)  $ (0.41)  $  (1.79)
                           Pro forma       (0.15)    (0.44)    (1.85)
</TABLE>

     The  weighted  average  fair  values  at  date of grant for options granted
     during  2000  and  1999  were  estimated  to  be  $45,000  and  $27,000,
     respectively.  The Company's calculations were made using the Black-Scholes
     option  pricing  model with the following weighted average assumptions: ten
     year  expected  life;  stock  volatility  of 221% in 2000 and 102% in 1999;
     risk-free  interest rate of 5.2% in 2000 and 6.4% in 1999; and no dividends
     during  the  expected term. No options were granted during 2001 and the pro
     forma  amounts  reflect  options  vesting  during  the  year.

9.   INCOME  TAXES

     The  provision  for  (benefit from) income taxes consisted of the following
     for  the  years  ended  December  31,  2001,  2000  and  1999  (dollars  in
     thousands):

<TABLE>
<CAPTION>

                            2001    2000    1999
<S>                         <C>    <C>     <C>
Continuing operations -
  Current, state . . . . .  $   -  $  (9)  $ 472
                                -
Discontinued operations -
  Current, state . . . . .      -      -    (472)
                            -----  ------  ------
Total expense (benefit). .  $   -  $  (9)  $   -
                            =====  ======  ======
</TABLE>


                                      F-29
<PAGE>
     The  provision  for  (benefit from) income taxes from continuing operations
     for  the  years  ended  December  31,  2001, 2000 and 1999 is less than the
     amounts  computed  by applying the statutory federal income tax rate of 35%
     to  the income (loss) before income taxes from continuing operations due to
     the  following  items  (dollars  in  thousands):

<TABLE>
<CAPTION>

                                                   2001      2000      1999
<S>                                              <C>       <C>       <C>
Computed expected amount. . . . . . . . . . . .  $(1,062)  $    50   $(3,206)
Amortization and write-down of goodwill . . . .        -     1,313     1,875
Other . . . . . . . . . . . . . . . . . . . . .        -         -         9
State income taxes, net of federal tax benefit.        -        (9)      (69)
Change in valuation allowance . . . . . . . . .    1,062    (1,363)    1,863
                                                 --------  --------  --------
  Income tax provision (benefit). . . . . . . .  $     -   $    (9)  $   472
                                                 ========  ========  ========
</TABLE>

     At  December  31, 2001 the Company has net operating loss carryforwards for
     federal  income  tax purposes of approximately $38 million to use to offset
     future  taxable income. These net operating losses will expire between 2008
     and  2021.

     Certain  restrictions  under the Tax Reform Act of 1986, caused by a change
     in  ownership  resulting  from  sales  of  common  stock,  limit the annual
     utilization  of  net  operating  loss  carryforwards.  The  initial  public
     offering  of  the  Company's  common  stock  during 1996 resulted in such a
     change  in  ownership.  The  Company estimates that the post-change taxable
     income  that  may  be  offset  with  the  pre-change  net  operating  loss
     carryforward  of  approximately  $4.5  million  will be limited annually to
     approximately  $600,000.

     Significant components of the Company's deferred tax assets and liabilities
     as  of  December  31,  2001 and 2000 are as follows (dollars in thousands):

<TABLE>
<CAPTION>

                                                               2001       2000
<S>                                                          <C>        <C>
Deferred tax assets:
  Current:
    Allowance for doubtful accounts receivable. . . . . . .  $     62   $     79
                                                             ---------  ---------

  Noncurrent:
    Differences in net book value of property and equipment         -         66
    Interest and other accruals . . . . . . . . . . . . . .     1,521        795
    Carryforward of net operating loss. . . . . . . . . . .    13,224     10,058
                                                             ---------  ---------
                                                               14,745     10,919
                                                             ---------  ---------
Total deferred tax assets . . . . . . . . . . . . . . . . .    14,807     10,998
Valuation allowance for deferred tax assets . . . . . . . .   (14,807)   (10,998)
                                                             ---------  ---------
Net deferred tax assets . . . . . . . . . . . . . . . . . .  $      -   $      -
                                                             =========  =========
</TABLE>

     A  valuation  allowance  for  the entire balance of deferred tax assets has
     been  recorded  because management believes it is more likely than not that
     such  assets will not be realized due to the Company's history of operating
     losses.

                                      F-30
<PAGE>
10.  COMMITMENTS  AND  CONTINGENCIES

     At December 31, 2001 the Company's only operating lease is a month to month
     lease of office space with a related party in the amount of $500 per month.
     Rent  expense under operating leases for the years ended December 31, 2001,
     2000  and  1999  was  $20,000,  $95,000  and  $168,000,  respectively.

     The  Company  guaranteed  a facility lease between Actel and a third party.
     The  lease  expires  in  June 2009 and total remaining noncancellable lease
     payments were $765,000 at December 31, 2000. Actel was current on its lease
     payments  as  of  December 31, 2000. However, on April 11, 2001 Actel filed
     for  Chapter  11  bankruptcy protection which was subsequently converted to
     Chapter  7.  The  Company  has  not  received  any  notification  from  the
     bankruptcy  trustee or the third party regarding the guarantee during 2001.
     No loss, if any, has been recorded in the consolidated financial statements
     with  respect  to  this  matter.

     The Company was notified by the FDIC of discrepancies between the amount of
     the  Company's notes payable pledged as collateral by a note holder and the
     amount  of  notes  payable  recorded  by  the  Company. The FDIC originally
     indicated  to  the  Company  that  an  additional $1,125,000 is outstanding
     representing various notes with a significant shareholder and creditor. The
     FDIC  notified  the  Company  on May 10, 2000, that the discrepancies total
     only  $770,000.  Also,  in July 2001, the Company was notified that Peoples
     Bank  had obtained a judgment against a Company director and shareholder in
     the  amount  of  $350,000, and that the collateral was a Company promissory
     note  in  the principal amount of $350,000. Another party has asserted that
     he  is  entitled  to  $500,000  allegedly outstanding under a note payable.
     Management believes that no funds were received by the Company with respect
     to  these  notes  and that it has other defenses. No assurance can be given
     that  the  Company's  defenses  are  valid  or that the Company will not be
     liable  for any part or all of the amounts allegedly due under these notes.
     No loss, if any, has been recorded in the consolidated financial statements
     with  respect  to  these  matters.

     On  November  23, 2001 three individuals, one of which was a former officer
     and  director  of  the  Company,  and the purchasers of Incomex, filed suit
     against  the  Company, several former officers and directors of the Company
     and  several  related  parties.  These  lawsuits  allege  that  the  named
     individuals  and  entities devised a scheme to defraud the three plaintiffs
     to  personally  borrow  funds  from  a  financial  institution,  invest the
     proceeds in the Company as a note payable with the promise of stock options
     and  repayment  of the notes, and give the financial institution a security
     interest  in  the  notes  under  the  Uniform  Commercial Code. Unspecified
     damages  sought  by  the  plaintiffs  include  actual, punitive, and treble
     damages  and  court  costs  and  attorney costs. The Company's Director and
     Officer ("D&O") insurance carrier has notified the Company that because one
     of the plaintiffs was a former director of the Company, that the D&O policy
     will  not  provide  coverage. The Company believes that its D&O policy will
     provide  coverage,  up  to the policy limit, in this lawsuit related to the
     other  two  plaintiffs.  Management  believes  that it has several defenses
     against  these  claims  and will vigorously defend itself. The parties have
     not  yet  commenced  discovery  in  this  case.  No  loss, if any, has been
     recorded  in  the  consolidated  financial statements with respect to these
     matters.

     As  of  December  31,  2001  the Company has been notified by several state
     taxing  authorities  that  approximately  $45,000  of  past  due  taxes and
     penalties  is  owed.  Management  believes that it has meritorious defenses
     against  these  amounts.  No  assurance  can  be  given  that the Company's
     defenses  are  valid or that the Company will not be liable for any part of
     the  amounts.  No  loss,  if  any,  has  been  recorded in the consolidated
     financial  statements  with  respect  to  these  matters.


                                      F-31
<PAGE>
     The Company has divested certain of its businesses during 2001 and 2000. As
     a result of such divestitures, there may be lawsuits, claims or proceedings
     instituted  or  asserted against the Company related to the period that the
     businesses were owned by the Company. No loss, if any, has been recorded in
     the  consolidated  financial  statements  with  respect  to  these matters.

     On  November 16, 1998 the Company entered into an Employment Agreement with
     Paul  C.  Tunink,  Chief  Financial Officer. The Employment Agreement had a
     term  through November 30, 1999 and renewed automatically from year to year
     thereafter,  unless  terminated by either party, and provided a base salary
     of  not  less than $128,000. The Employment Agreement contained a provision
     restricting competition with the Company for a period of one year following
     termination  of employment. Mr. Tunink's Employment Agreement provided that
     if  his  employment was terminated by the Company for any reason other than
     cause,  Mr. Tunink would be entitled to receive severance at an annual rate
     of  $128,000 for one year and continuation of health insurance coverage for
     one  year.  During  the fourth quarter of 2001, Mr. Tunink's employment was
     terminated in an effort to control costs. The Company recorded a payable of
     approximately  $146,000  as  of December 31, 2001 related to this severance
     agreement.

11.  RELATED  PARTY  TRANSACTIONS

     The  Company  conducts  a  significant  amount of business with Berthel and
     other  affiliated  entities.  Berthel  provided  lease  and other financing
     services,  including  investment  banking,  to  the  Company.

     In  December  1999,  Berthel  entered  into a Standstill Agreement with the
     Company. Under the Standstill Agreement, Berthel indicated its intention to
     form  a creditors committee to represent the interests of Berthel and other
     creditors  of  the  Company.  The  Company  agreed to provide the creditors
     committee with access to information regarding the Company and its business
     and  to  advise  the  creditors  committee  in  advance  regarding  certain
     significant corporate developments. The creditors committee may also demand
     that  the Company take certain actions with respect to the Company's assets
     and business. The creditors committee agreed to forbear from taking actions
     to  collect  past  due  debt  owed  by  the  Company  in the absence of the
     unanimous  approval  of  the creditors committee. As of March 31, 2002, the
     Company  and  Berthel  are the only parties to the Standstill Agreement and
     Berthel  is  the  only  member  of  the  creditors  committee.

     In  January  2000,  the  Company  retained  Berthel  to  assist the Company
     regarding  the  identification  and investigation of strategic alternatives
     that  might  be  available to the Company. The Company owed various fees to
     Berthel  under  the  Placement  Agreement  including a monthly retainer and
     placement  fees.  The Company paid to Berthel total fees of $536,000 during
     2000. If any further strategic transactions are completed, the Company will
     owe  a  success  fee  to  Berthel,  depending on the price of the strategic
     transactions. This agreement was revised on July 1, 2001 for a period of 12
     months  with  annual  renewal  options.  The agreement allows for a monthly
     retainer  fee  of  $20,000  and other success fees defined in the agreement
     based  on  the  strategic  event  that  occurs.  The expense related to the
     previous  agreement  and the revised agreement for 2001 was $218,980. As of
     December  31, 2001 the Company owes Berthel $218,980 under both agreements.

     The  Company  borrowed  money during 2001 and 2000 from MCCIC (see Note 5).

     The  Company  also  undertook  the  Debt  Restructuring  Plan in 2000 which
     included  restructuring  certain  debt  and  accrued  interest with related
     parties  (see  Note  6).


                                      F-32
<PAGE>
     On  July  1,  1994,  the  Company entered into an agreement with a minority
     shareholder  to  provide  telecommunication  services  to  hotels owned and
     managed  by  Larken,  Inc.,  a company 50% owned by a minority shareholder.
     Revenues  of  $0,  $109,000 and $412,000 were generated from such agreement
     for  the  years  ended  December  31,  2001,  2000  and 1999, respectively.
     Further,  the  Company  had  call  processing  receivables  from the hotels
     included  under  the  agreement of $0, $0 and $55,000 at December 31, 2001,
     2000  and 1999, respectively. The agreement provided for a fixed payment of
     $30,000  per  month  in commissions to be paid to the minority shareholder.
     This  agreement  was  terminated  effective  May  1,  2000.

     The  Company  has  also  paid consulting expenses to a former member of the
     Company's  Board of Directors, had loans with related parties (see Note 5),
     and  pays  monthly  fees  to  certain  of  the  Company's  directors.

     In  January 2000, the Company entered into a letter agreement with Pirinate
     which  provided  that  the  Company  would  pay Pirinate $15,000 a month in
     exchange  for  up to six days per month of personal services from Eugene I.
     Davis.  In  May  2000  Mr. Davis became the Chairman of the Board and Chief
     Executive  Officer of the Company. Mr. Davis resigned on October 9, 2001 as
     Chief  Executive  Officer  and  remains  on  the  Board  of  Directors.

     On  December  24,  2000,  the  Company  signed a consulting services letter
     agreement  with Prentice Services LTD ("Prentice"), an entity controlled by
     Wayne  Wright,  a  member  of  the  Company's  Board  of  Directors  and  a
     significant shareholder. The agreement provided that Mr. Wright would serve
     as  President  of  PIC  and  would  provide  consulting services to PIC, as
     directed  by  the  Company's  Chief  Executive  Officer.  Prentice received
     $15,000  a month, plus out-of-pocket expenses, for these services. Also, at
     the  sole  discretion  of  the Company's Board of Directors, Prentice would
     receive  additional success fees and bonuses. The Company paid $105,000 and
     $15,000  under  this  agreement  in  2001  and  2000,  respectively.

     A summary of transactions with related parties for the years ended December
     31,  2001,  2000  and  1999  is  as  follows  (dollars  in  thousands):

<TABLE>
<CAPTION>

                                                           2001    2000    1999
<S>                                                       <C>     <C>     <C>
Consulting expense - Prentice (included in discontinued
  operations). . . . . . . . . . . . . . . . . . . . . .  $  105  $   15  $    -
Consulting expense - current directors . . . . . . . . .      12      12       -
Consulting expense - former directors. . . . . . . . . .       -       -      58
Consulting expense - Pirinate. . . . . . . . . . . . . .     121     181       -
Interest expense on related party notes payable. . . . .   1,464   1,620   1,171
Interest expense on notes payable to Berthel . . . . . .     377     243     138
Interest expense on notes payable to MCCIC . . . . . . .      68      36       -
Commissions to minority shareholder. . . . . . . . . . .       -     180     360
Commissions and related fees to Berthel. . . . . . . . .       -       -     130
Investment banking and placement fees to Berthel . . . .     219     536       -
Lease payments to Berthel. . . . . . . . . . . . . . . .       -     840     507
Rent expense on lease with Berthel . . . . . . . . . . .       2       -       -
</TABLE>


                                      F-33
<PAGE>
12.  PROFIT  SHARING  PLAN

     The  Company has a profit sharing plan under Section 401(k) of the Internal
     Revenue  Code.  Employees  are  eligible  to  participate in the plan after
     completing  three  months  of service. There were no contributions required
     and  no  discretionary  contributions  made to the plan for the years ended
     December  31,  2000  and  1999.

     Effective  November  15,  2000,  the Company terminated the plan due to low
     participation  and  high  administrative  expenses.

13.  FAIR  VALUE  OF  FINANCIAL  INSTRUMENTS

     The  fair  value amounts disclosed below are based on estimates prepared by
     the  Company  utilizing valuation methods appropriate in the circumstances.
     Accounting principles generally accepted in the United States of America do
     not  require  disclosure  for  lease  contracts.  The  carrying  amount for
     financial  instruments included among cash, receivables, notes payable, and
     other  short-term  payables  approximates  their  fair value because of the
     short  maturity  of  those  instruments.  The estimated fair value of other
     significant  financial  instruments  are  based  principally  on discounted
     future  cash  flows at rates commensurate with the credit and interest rate
     risk  involved  and  the  timing of when the instruments were entered into.

     The  estimated  fair  values  of  the Company's other significant financial
     instruments  at  December  31,  2001  and  2000  are as follows (dollars in
     thousands):

<TABLE>
<CAPTION>

                      2001               2000
                -----------------  -----------------
                CARRYING    FAIR   CARRYING    FAIR
                 AMOUNT    VALUE    AMOUNT    VALUE
<S>             <C>        <C>     <C>        <C>
Long-term debt  $   4,632  $    -  $   4,632  $    -
</TABLE>

14.  SUBSEQUENT  EVENT

     During  the first quarter of 2002, the Company borrowed $125,000 from Polar
     (see  Note  1). The note is payable on March 14, 2003 and bears interest at
     10%.

                                      F-34
<PAGE>
15.  QUARTERLY  RESULTS  OF  OPERATIONS  (UNAUDITED)

     The  following  is a summary of the quarterly results of operations for the
     years  ended  December  31,  2001 and 2000 (dollars in thousands except per
     share  data).  These  quarterly  results  have been reclassified from those
     previously  reported  in form 10-Q's filed with the Securities and Exchange
     Commission  to  reflect the results of operations for Incomex that was sold
     effective  June  30, 2000 and PIC that was sold effective July 31, 2001, as
     discontinued  operations  for  all  periods  presented.

<TABLE>
<CAPTION>

                                                       FIRST     SECOND      THIRD     FOURTH
                                                      QUARTER    QUARTER    QUARTER    QUARTER    TOTAL
<S>                                                  <C>        <C>        <C>        <C>        <C>
2001
---------
Revenues. . . . . . . . . . . . . . . . . . . . . .  $     21   $      1   $      -   $      -   $    22
Gross profit. . . . . . . . . . . . . . . . . . . .        21          1          -          -        22
Income (loss) from continuing operations. . . . . .      (733)      (776)      (546)      (978)   (3,033)
Income (loss) before extraordinary item . . . . . .      (832)      (858)       854       (978)   (1,814)
Net income (loss) . . . . . . . . . . . . . . . . .      (832)      (858)       854       (978)   (1,814)

Basic and diluted earnings (loss) per common share
  Income (loss) before extraordinary item . . . . .  $  (0.07)  $  (0.07)      0.07   $  (0.07)  $ (0.15)
  Net (income) loss . . . . . . . . . . . . . . . .     (0.07)     (0.07)      0.07      (0.07)    (0.15)
</TABLE>

     The  third  quarter  includes  a  $1,314,000 gain on the sale of PIC in net
     income.  The  fourth  quarter includes a $146,000 severance accrual in loss
     from  continuing  operations.

<TABLE>
<CAPTION>

                                                       FIRST     SECOND      THIRD     FOURTH
                                                      QUARTER    QUARTER    QUARTER    QUARTER    TOTAL
<S>                                                  <C>        <C>        <C>        <C>        <C>
2000
---------
Revenues. . . . . . . . . . . . . . . . . . . . . .  $    165   $     51   $     64   $    (89)  $   191
Gross profit. . . . . . . . . . . . . . . . . . . .       (21)       (91)        33        (65)     (144)
Income (loss) from continuing operations. . . . . .    (1,363)     5,011     (1,407)    (2,089)      152
Income (loss) before extraordinary item . . . . . .    (2,206)     2,043     (1,407)    (3,454)   (5,024)
Net income (loss) . . . . . . . . . . . . . . . . .    (2,206)     2,043     (1,407)    (2,732)   (4,302)

Basic and diluted earnings (loss) per common share
  Income (loss) before extraordinary item . . . . .  $  (0.21)  $   0.19   $  (0.14)  $  (0.28)  $ (0.48)
  Net (income) loss . . . . . . . . . . . . . . . .     (0.21)      0.19      (0.14)     (0.22)    (0.41)
</TABLE>

     The first quarter includes a loss from discontinued operations of $843,000.
     The  second  quarter  includes a $342,000 charge for impairment of property
     and  equipment  and intangible assets, a $490,000 charge for the write-down
     of  the Company's investment in the AcNet entities, and a $7.0 million gain
     recorded  in  connection  with  the  Company's Debt Restructuring Plan. The
     second  quarter  also  reflects a loss on the operations and disposition of
     discontinued  operations  of  approximately  $3 million. The fourth quarter
     includes  a  $500,000 charge for the write-down of the Company's investment
     in  the  AcNet  entities,  an  impairment  charge  of  $1.6 million for the
     write-down  of  the  Company's  investment  in  Actel,  and  a  $722,000
     extraordinary  gain  on  the  extinguishment  of  debt.  The fourth quarter
     reflects  additional  losses  from discontinued operations of $1.4 million.

     Per  share  information  is calculated for each quarterly and annual period
     using  average outstanding shares for the period. Therefore, the sum of the
     quarterly per share amounts will not necessarily equal the annual per share
     amounts  presented.

                                    * * * * *

                                      F-35
<PAGE>

<TABLE>
<CAPTION>

MURDOCK  COMMUNICATIONS  CORPORATION

SCHEDULE  -  VALUATION  AND  QUALIFYING  ACCOUNTS
YEARS  ENDED  DECEMBER  31,  2001,  2000  AND  1999
---------------------------------------------------

                                                   NET
                                   BALANCE AT    CHARGES                  BALANCE AT
                                   BEGINNING   TO COSTS AND                 END OF
                                   OF YEAR       EXPENSES    DEDUCTIONS     OF YEAR
<S>                                <C>         <C>           <C>          <C>
Year ended December 31, 2001
  Allowance for doubtful accounts  $      225  $       (46)  $         -  $      179

Year ended December 31, 2000
  Allowance for doubtful accounts         152           98            25         225

Year ended December 31, 1999
  Allowance for doubtful accounts         123           64            35         152
</TABLE>


                                      F-36