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

                                   FORM 10-KSB

(Mark  One)

[x]     Annual Report pursuant to section 13 or 15(d) of the Securities Exchange
Act  of  1934  for  the  fiscal  year  ended  December  31,  1999.

[  ]     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 small business issuer as specified in its charter)


          Iowa                                            42-1337746
          ----                                            ----------
(State  or other jurisdiction of               (IRS Employer Identification No.)
 incorporation  or  organization)

    1112 29th Avenue S.W., Cedar Rapids, Iowa               52404
    -----------------------------------------               -----
    (Address of principal executive offices)              (Zip Code)

          Issuer's telephone number, including area code:  319-362-7283
                                                         --------------

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

                                                   Name  of  each  exchange  on
     Title  of  each  class                              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 issuer (1) has filed all reports required to be filed by
Section  13  or 15(d) of the Exchange Act during the past 12 months (or for such
shorter  period  that the issuer 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-B  is not contained herein, and will not be contained, to the best of issuer's
knowledge,  in  definitive  proxy  or  information  statements  incorporated  by
reference  in  Part III of this Form 10-KSB or any amendment to the Form 10-KSB.
[    ]

     State  the issuer's revenues for its most recent fiscal year.  $35,747,000.

     The aggregate market value of the common stock held by nonaffiliates of the
issuer  as  of March 1, 2000 was $6,244,574.  Shares of common stock held by any
executive officer or director of the issuer 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, 2000, there were outstanding 10,576,012 shares of the issuer's
no  par  value  common  stock.

     Transitional Small Business Disclosure Format (check one): Yes     No  X
                                                                    ---    ---

DOCUMENTS  INCORPORATED  BY  REFERENCE

     Portions  of  the  Proxy  Statement  for  the  2000  Annual  Meeting of the
Shareholders  of  the issuer are incorporated by reference into Part III of this
report.


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<PAGE>
                                     PART I
                                     ------

ITEM  1.  DESCRIPTION  OF  BUSINESS

GENERAL

     Murdock  Communications  Corporation  ("MCC"  or  the  "Company")  provides
operator  services  and call processing to North American pay phones, 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.  Through a series of acquisitions
and  new product developments, the Company transformed itself during 1998 from a
reseller  of  AT&T network services to U.S. hotels to a provider of a wide range
of  complementary  telecommunications  services  in  North America.  The Company
currently  operates  through  two  principal  business  units:

-     Priority  International  Communications, Inc. and ATN Communications, Inc.
      (collectively,  "PIC/ATN")  are  wholly  owned subsidiaries of the Company
      which  provide operator services, call processing and related valued added
      services;  and

-     Incomex,  Inc.  ("Incomex")  is  a  wholly owned subsidiary of the Company
      which  provides  billing  and  collection services for calls to the United
      States  from  resort  hotels  in  Mexico.

     The  Company  has  also  made  investments  in:

-     Actel  Integrated  Communications,  Inc.  ("Actel"),  a  provider of local
      exchange  communications  services  as  a  facility-based carrier based in
      Mobile,  Alabama;

-     AcNet  S.A.  de  C.V.  ("AcNet  Mexico"), a provider of internet services,
      network  services  and  data communications to businesses, governments and
      consumers  in  Mexico;  and

-     AcNet  USA,  Inc.  ("AcNet USA"), a provider of internet services and data
      communications  to  businesses  and  consumers  also  featuring  a private
      network  that  links  over  400  schools,  universities and administrative
      offices  in  Texas  and  Mexico.

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

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<PAGE>
largest  business  unit,  PIC/ATN.  The  Company also entered into a non-binding
letter  of  intent  in  February  2000,  to  negotiate a merger transaction with
Floragraph  LLC ("Floragraph"), which owns Flower.com, an online floral web site
that  services  hotels  and  other  institutions  with its pre-paid "FlowerCard"
franchise.  If completed, the merger with Floragraph would position the combined
company  as  an  Internet  provider  of  flowers,  gifts  and  other  e-commerce
merchandise.

     In  connection  with the proposed merger with Floragraph and to address the
Company's  severe  debt and liquidity issues, the Company is reviewing strategic
alternatives  to  restructure  its  business  and  reduce its overall debt.  The
Company  is  considering  a  number  of  alternatives  which may include private
offerings  of  debt  or  equity financing, extensions or conversions of existing
debt  and/or the sale of significant parts of the Company's assets.  The Company
would  use  any proceeds from these initiatives to reduce the Company's debt and
to generate funds for its business after its planned merger with Floragraph.  As
of  the  date  of this report, the Company has not completed any transactions in
connection  with its restructuring efforts, except for an agreement to rent, and
a  nonbinding  memorandum  of  understanding  to  negotiate the sale of, certain
assets  relating  to the Company's Murdock Technology Services division ("MTS").
No  assurances  can  be  given  that  the  Company  will  be  successful  in its
restructuring efforts.  See "- Recent Developments" and "Management's Discussion
and  Analysis  of  Financial  Condition  and  Results  of  Operations"  below.

     MCC  was  incorporated  as  an  Iowa  corporation  in  1989.

RECENT  DEVELOPMENTS

     PROPOSED  MERGER  WITH  FLORAGRAPH  LLC.  The  Company  entered  into  a
non-binding letter of intent to merge (the "Merger") with Floragraph, which owns
Flower.com,  an  online  floral  web  site  that  services  hotels  and  other
institutions with its pre-paid "FlowerCard" franchise.  If completed, the merger
with  Floragraph  would position the combined company as an Internet provider of
flowers, gifts and other e-commerce merchandise and would leverage the Company's
relationships  in  the  hotel  and telecommunications industries.  The Merger is
subject  to the satisfaction of a number of conditions, including the completion
of  due  diligence,  the  execution  of  definitive  agreements,  the receipt of
necessary regulatory approvals, approval by the Company's shareholders and other
closing  conditions.  Because  there  are significant conditions remaining to be
satisfied  with respect to the Merger, no assurance can be given that the Merger
will  be consummated or, if consummated, that the terms of the Merger will be as
presently  contemplated.

     MCC'S  PAST DUE DEBT.  As of March 1, 2000, the Company was past due in the
payment  of  approximately  $17.8  million  of  principal and interest payments,

                                        4
<PAGE>
including  $1.4  million in lease and debt financing to Berthel Fisher & Company
and  its  subsidiaries  and their affiliated leasing partnerships (collectively,
"Berthel").  The Company was also past due with its trade vendors in the payment
of  approximately $1.3 million as of March 1, 2000.  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 $7.6 million of notes
which  have been pledged by the holders of the notes to a bank as collateral for
loans made by the bank to such holders.  The Company has been informed that this
bank is in serious financial difficulty and is currently being liquidated by the
Federal  Deposit  Insurance  Corporation ("FDIC").  If the FDIC 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 FDIC is likely to
prevent  the  Company  from  continuing  as  a  going  concern.

     The  FDIC  has  notified  the  Company  that it believes an additional $1.1
million  is outstanding representing various notes payable.  Management believes
that  no funds were received by the Company with respect to these notes and that
it has other defenses.  The amount of past due debt as of March 1, 2000 does not
include  this  amount.  No  assurance can be given as to the ultimate outcome of
this  matter.

     The  amount  of  past  due debt as of March 1, 2000, includes the Company's
$2.0  million  bridge  loan  from  New  Valley  Corporation ("New Valley").  The
Company had been past due on this loan effective July 21, 1999.  On December 17,
1999,  the  Company  amended its agreement with New Valley to extend the term of
its  $2.0 million bridge loan.  Under the amendment, the principal amount of the
bridge  loan  is  due in six monthly installments beginning on January 17, 2000,
together  with  accrued  interest.  The first five installments are $200,000 and
the  final  installment  on June 17, 2000 is $1,000,000.  New Valley also waived
all prior defaults by the Company and the interest rate under the note was reset
to  12%  per  annum (14% per annum upon a default) from the original date of the
bridge  loan.  The bridge loan is secured by a collateral pledge in the stock of
the  Company's  subsidiaries, and a security interest in the unencumbered assets
of the Company and its subsidiaries.  As of March 20, 2000, the Company was past
due  on the January, February and March payments under the Note with New Valley.
However,  on March 29, 2000, New Valley waived this default.  The effect of this
waiver  is  not  reflected  in any of the past due debt disclosures because such
disclosures  are  as  of  March  1,  2000  or  March  20,  2000.


                                        5
<PAGE>
     BAD  DEBT  AND  UNIVERSAL SERVICE FUND FEES.  During 1999, PIC/ATN recorded
bad  debt in excess of historical amounts of approximately $5.6 million relating
to collection issues for one type of call processing service provided by PIC/ATN
to its largest customer.  See "Management's Discussion and Analysis of Financial
Condition  and  Results  of  Operations."

     As  a  result of this collection issue, PIC/ATN switched to another billing
and collection firm in November 1999.  The prior billing and collection firm has
alleged  that  PIC/ATN  had  breached  its contract and has placed a lien on the
collections from calls processed by the replacement 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.  PIC/ATN may be liable for additional amounts beyond
the allowance recorded.  The Company expects that PIC/ATN will refuse to pay any
additional  amounts  to the former billing and collection firm and believes that
the  matter  will  likely be resolved through litigation.  No liability, if any,
has  been recorded in the consolidated financial statements with respect to this
matter.  See  "Management's  Discussion  and Analysis of Financial Condition and
Results  of  Operations."

     In December 1999, the Company recorded a $1.7 million liability for amounts
allegedly  due  by PIC/ATN to the Universal Service Administrative Company for a
universal  service  fund  fee.  See  "Business  -  Regulation" and "Management's
Discussion  and  Analysis  of  Financial  Condition  and Results of Operations."

     STANDSTILL  AGREEMENT.  The  Company  obtains  lease  and  other  financing
services  from  Berthel.  As of March 1, 2000, MCC owed a total of approximately
$6.3  million  under  such  lease  and  debt  financing  arrangements, including
approximately $1.4 million which is past due.  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 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 20, 2000, the
Company  and  Berthel  are  the  only  parties to the Standstill Agreement and a
creditors  committee  has  not  been  formed.


                                        6
<PAGE>
     OPTIONS  TO  ACQUIRE  ACNET.  The  Company  has  an  option  to  acquire
Intercarrier  Transport Corporation, the holder of 99% of the outstanding shares
of  AcNet  Mexico  which  expires  on  August 31, 2001.  The Company's option to
acquire  AcNet  USA  expired  on  December 31, 1999.  The options provide for an
aggregate  purchase  price  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.  In  light  of  the  proposed  merger transaction between the
Company  and  Floragraph,  the  Company is currently not pursuing its options to
acquire  the  AcNet  entities.  However,  the  Company  believes  that  a future
transaction  with  the  AcNet  entities  remains  a possible alternative for the
Company.  As  of December 31, 1999, the Company had invested $4.7 million in the
AcNet entities, including loans, interest and acquisition costs.  As a result of
the  Company's  decision  not  to  currently  pursue an acquisition of the AcNet
entities  and  due  to  cash  flow  difficulties  being experienced by the AcNet
entities,  the  Company  recorded a $3.7 million asset write-down in 1999 due to
the  uncertainty  of  ultimate  recovery  of  its  investment.  The  Company  is
currently  negotiating  with  the  AcNet  entities  regarding  the status of the
Company's  investments  and  the  proposed  acquisition  of  the AcNet entities,
although  no  assurance  can  be  given  as  to  the  outcome  of  this  matter.

     MURDOCK  TECHNOLOGY  SERVICES.  MTS was formed as a division of the Company
in  1998  to  provide  database profit management services and other value added
services  to  the  hospitality  telecommunications  management  market.  MTS's
principal  product,  the  MCC  Telemanager(TM),  is  a  proprietary software and
hardware  product  created  to  help  manage telecommunication installations and
services  in  the  hospitality market.  MTS accounted for approximately 11.4% of
the  Company's revenues 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 by TeleManager.net in exchange
for  monthly  rental  payments  to the Company.  The Company also entered into a
memorandum  of  understanding  to  negotiate  a sale of certain assets of MTS to
TeleManager.net.  TeleManager.net  is  owned  by  Colin  P.  Halford,  a current
director  and  a  former  executive  officer of the Company, and Bill Wharton, a
former  executive  officer  of  the  Company.


                                        7
<PAGE>
THE  COMPANY'S  PRINCIPAL  BUSINESS  UNITS

     PIC/ATN  OPERATOR  SERVICES.  PIC/ATN offers telecommunications services to
payphone  operators, consumer service providers, hotels, aggregators of operator
service  traffic and other institutions in the United States and Mexico. PIC and
ATN  operate  in  concert  to  provide  marketing, service delivery and customer
support  for  owners  and  aggregators  of telecommunications services.  PIC/ATN
provides  both  live  operator  services and automated call processing services.
The  operator  center,  located  in  Mobile,  Alabama, features 50 live operator
stations and automated call platforms currently generating approximately 100,000
completed  calls  and  600,000 minutes monthly.  PIC/ATN also offers credit card
billing  services,  automated  collection and messaging delivery services, voice
mail  services and telecommunications consulting.  At December 31, 1999, PIC/ATN
provided  telecommunications  services  to  and  maintained  site contracts with
approximately  99  customers  throughout  the  United  States,  compared  to 207
customers  at  December 31, 1998.  Each customer may represent from one to 2,000
telephone  numbers  that  are processed by PIC/ATN.  The total size of PIC/ATN's
database  decreased  from approximately 17,000 telephone numbers at December 31,
1998  to  approximately  16,000  telephone  numbers  at  December  31,  1999.

     INCOMEX TELECOMMUNICATIONS SERVICES.  Incomex contracts with Mexican resort
hotels  to  provide  billing  and  collection  services  for calls to the United
States.  As  of  December 31, 1999, Incomex provided telecommunications services
to  more  than  85  hotel and motel resort properties representing approximately
13,250  rooms,  compared  to  approximately 95 hotel and motel resort properties
representing  approximately 15,000 rooms at December 31, 1998.  Incomex's target
market  includes  1,300 Mexican resort hotels representing approximately 325,000
rooms.  Incomex offers value added customer services, training and technology to
enhance the profitability of the telephone departments of Mexican resort hotels.

COMPETITION

     Competition  in  the  telecommunications  industry  is  intense.  PIC/ATN
competes with numerous other providers of alternative operator services and call
processing  services.  PIC/ATN's  customers,  which include telephone owners and
aggregators,  are  extremely  attentive  to  the competitive environment and the
competitive  efforts  of  alternative  operator service providers to acquire new
customers.  Incomex  competes  with  several  competitors  who also focus on the
hotel and payphone markets in Mexico. The Company's operator and call processing
services  also  compete  with a variety of long distance interexchange carriers,
including  Sprint,  MCI and AT&T.  Each of the major long distance interexchange
carriers  provide  callers  with  the  ability  to  "dial  around"  payphones,

                                        8
<PAGE>
hotel  and  other telephone systems by using special codes such as 10-ATT, 10-10
or 1-800 phone numbers.  The Company believes that competition in its markets is
based  principally on price, quality, reliability and customer service.  Each of
the  Company's  business  units may face competition from companies with greater
financial, technical, marketing and other resources than the Company.  There can
be  no  assurance  that  the Company will be able to compete successfully in its
markets.

SIGNIFICANT  CUSTOMERS

     During  1998, the Company derived approximately 12% and 24% of its revenues
from  two  customers  for  PIC/ATN's  call processing services.  During the year
ended  December  31, 1999, the Company experienced a significant increase in bad
debt  relating  to  the Company's largest customer and recorded bad debt of $5.6
million  in excess of historical amounts relating to this customer.  The Company
derived  approximately  39.0%  of  its  revenues from this customer in 1999.  In
January  2000,  the  customer and the Company terminated the service provided by
the Company for a significant portion of the customer's business relating to the
call  traffic  associated  with  the  bad  debt.  The  Company's  second largest
customer  in  1998  terminated  its relationship with the Company effective June
1999.  The Company derived approximately 14.8% of its revenue from this customer
in  1999.  See  "Management's Discussion and Analysis of Financial Condition and
Results  of  Operations."

SALES  AND  MARKETING

     The  Company's  sales  efforts  are conducted largely by its internal sales
force.

     PIC/ATN.  PIC/ATN has an internal sales staff which consisted of one person
as  of  December 31, 1999.

     INCOMEX.  Incomex  has  an  internal  sales  staff which consisted of three
persons as of December 31, 1999.  Incomex's internal sales force is supplemented
by  five  external  sales  agents.

INTELLECTUAL  PROPERTY

     The  Company  does  not  currently  have  any  material patent or trademark
registrations.  The  Company principally relies on trade secrets and proprietary
know-how  in  the  operation  of  its  business.


                                        9
<PAGE>
REGULATION

     OVERVIEW.  The  Company's  services  are  subject  to  federal  and  state
regulation.  The  Federal  Communications  Commission  (the  "FCC")  exercises
jurisdiction over all facilities of, and services offered by, telecommunications
common carriers to the extent those facilities are used to provide, originate or
terminate  interstate  or  international  communications.  State  regulatory
commissions  retain  some  jurisdiction over the same facilities and services to
the  extent  they  are  used to originate or terminate intrastate common carrier
communications.  The  Company  holds  various  federal  and  state  regulatory
authorizations.

     FEDERAL  REGULATION.  The  Telecommunications  Act  of  1996  (the
"Telecommunications  Act")  became  effective  February  8,  1996.  The
Telecommunications  Act  preempts  state  and local laws to the extent that they
prevent  competitive entry into the provision of any telecommunications service.
Subject  to this limitation, however, state and local governments retain most of
their  existing  regulatory  authority.  The  Telecommunications  Act  imposes a
variety  of  new duties on incumbent local exchange carriers in order to promote
competition in local exchange and access services.  The Company does not believe
that  the  Telecommunications  Act has had a significant effect on the Company's
operations.

     The  Company  also makes informational filings with the FCC with respect to
all  tariffs  charged  for automated call processing and long distance services.
The FCC may request further information with respect to, or otherwise challenge,
any  tariffs that the FCC considers to be unreasonably high.  As of December 31,
1999,  the  FCC  had  not  commented  on  or  challenged  the Company's tariffs.

     In  December  1999, PIC/ATN received notice of past due amounts owed to the
Universal  Service  Administrative Company ("USAC") for a universal service fund
("USF")  fee.  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.  Management believed
that  the  billing  and  collection  firm  referred  to  above  was charging the
end-users the USF fee and remitting amounts owed to the USAC in a similar method
as  with federal and state taxes.  A demand letter was sent on behalf of PIC/ATN
to the billing and collection firm for payment.  The billing and collection firm
responded  that  it  has  collected  and  remitted  the  USF  fees  to  PIC/ATN.
Management  continues  to  believe  that the billing and collection firm has not
remitted  these  amounts,  but as the carrier, PIC/ATN is legally responsible to
pay  the  USF  fee.


                                       10
<PAGE>
     Notwithstanding  management's  belief that the prior billing and collection
firm  was  contractually  required to collect and remit the USF fees to USAC, in
December  1999,  the  Company  recorded a $1,700,000 liability for USF fees from
1997  through  1999  which  represents  the  period of time the liability is the
responsibility of PIC/ATN.  PIC/ATN currently is trying to resolve the issue and
gain  temporary relief from the 15-day payment demand made by USAC which expired
on  March  16, 2000 for approximately $810,000 of the fees.  PIC/ATN may also be
liable  for  penalties including $110,000 for any single violation of nonpayment
of  USF  fees  up to a maximum of $1.1 million for any continuing violation.  No
liability for penalties, if any, has been recorded in the consolidated financial
statements.  In addition, the FCC may revoke a carrier's operating authority for
failure  to  pay  such  fees.

     STATE  REGULATION.  The  Company  is also subject to various state laws and
regulations.  Most public utilities commissions subject alternative operator and
call  processing  service  providers  such  as  the  Company  to  some  form  of
certification requirement, which requires providers to obtain authority from the
state  public  utilities commission prior to the initiation of service.  In most
states,  the  Company  also is required to file tariffs setting forth the terms,
conditions  and  prices  for  services  that  are  classified as intrastate (for
example,  inter-LATA calls that are within a single state).  The Company also is
required  to  update  or amend its tariffs when it adjusts its rates or adds new
products,  and  is subject to various reporting and record-keeping requirements.
Accordingly,  each  time  the  Company  changes  its  tariffs  with  respect  to
intrastate  services, it must obtain the necessary regulatory approvals from the
state.  The  length  of  time required to obtain certification or approval for a
tariff  varies  from  state  to state, but generally does not exceed a period of
between  90  days  and  6  months.

     Many  states  also  require  prior  approval  for  transfers  of control of
certified  carriers,  corporate  reorganizations,  acquisitions  of
telecommunications  operations,  assignment  of  carrier  assets,  carrier stock
offerings  and  incurrence  by  carriers  of  significant  debt  obligations.
Certificates  of  authority  can  generally  be conditioned, modified, canceled,
terminated or revoked by state regulatory authorities for failure to comply with
state  laws  and/or  the  rules,  regulations  and  policies of state regulatory
authorities.  Fines  or other penalties also may be imposed for such violations.
There can be no assurance that state utilities commissions or third parties will
not raise issues with regard to the Company's compliance with applicable laws or
regulations.

EMPLOYEES

     As  of  December  31, 1999, MCC had 87 full-time employees and 48 part-time
employees,  including  62  full-time  employees  and  48  part time employees at
PIC/ATN, eight full-time employees at Incomex, 12 full-time employees at MTS and
five  full-time  employees  at its corporate headquarters.  The Company believes


                                       11
<PAGE>
its  relationships with its employees are good.  None of the Company's employees
is  subject  to  a  collective  bargaining  agreement.

ITEM  2.  DESCRIPTION  OF  PROPERTY

     MCC  maintains  its principal business offices in Cedar Rapids, Iowa, where
it  owns  and  occupies  approximately  8,000 square feet of combined office and
warehouse  space,  subject  to  a first mortgage held by Venture Investments, an
unrelated  third  party.  In February 2000, the Company listed this property for
sale  and  the Company intends to move its corporate staff to a smaller facility
during  the  second  quarter  of  2000.  The  Company  expects  the  staff  of
TeleManager.net  to  move  by  March  31,  2000.

     The  Company  also  has  a  Harris  Model  2020 switching center in Mobile,
Alabama,  where  it  has  purchased  an office building with 33,000 square feet,
subject to a first mortgage held by Compass Bank, of which 19,800 square feet is
currently  occupied  by  Actel.

     The  following  sets  forth  certain  information  with  respect  to  the
significant  facilities  leased  by  the  Company  through  PIC/ATN and Incomex.
<TABLE>
<CAPTION>

                                              CURRENT
                                 APPROX.      MONTHLY
LOCATION                      SQUARE FOOTAGE    RENT      LESSOR    LEASE TERMINATION
----------------------------  --------------  --------  ----------  -----------------
<S>                           <C>             <C>       <C>         <C>
Austin, Texas. . . . . . . .           2,100  $  3,240  Kucera      May 31, 2000

Huntington Beach, California             850  $  1,223  MUAA, Inc.  August 1, 2000

</TABLE>

ITEM  3.  LEGAL  PROCEEDINGS

     A lawsuit was filed in Superior Court of the State of California on October
20,  1999  claiming  conspiracy  to  defraud,  fraud  and deceit, and conversion
against  several  defendants,  including  ATN  Communications,  Inc. ("ATN"), in
connection  with  an Internal Operator Services Agreement between the plaintiffs
and  defendant  Paramount  International Telecommunications, Inc. ("Paramount").
The  Internal  Operator  Services Agreement sets out that Paramount will provide
(among  other things) calling services and billing and collection of the charges
through local exchange carriers, and Paramount would deduct agreed upon fees for
its  services  and  remit  the  balance  to the plaintiffs.  Paramount allegedly
contracted  out  operator  and  billing  services  with  ATN from May 1998 until
present.  In addition to other claims against Paramount, the plaintiffs complain
that  Paramount  and  ATN conspired to falsify call charge reports being sent to
the  plaintiffs  by  underreporting the amount of charges billed to the end user
and  keeping  the

                                       12
<PAGE>
monies  generated  therefrom,  thereby  damaging the plaintiffs for no less than
approximately  $280,000.  The  plaintiffs  also  seek  punitive  damages  in  an
unspecified  amount.  ATN  filed  its response on January 4, 2000.  ATN disputes
this claim and intends to vigorously defend its position, although no assurances
can  be  given  as  to  the  outcome  of  this  matter.

     In  the  normal  course  of  business,  the Company also 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  fiscal  year  ended  December  31,  1999.

                                     PART II
                                     -------

ITEM  5.     MARKET  FOR  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.
<TABLE>
<CAPTION>

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

Quarter      High    Low   High    Low
-----------  -----  -----  -----  -----
<S>          <C>    <C>    <C>    <C>
FISCAL 1998
First . . .  $2.63  $0.69  $0.31  $0.06
Second. . .   3.31   2.25   0.25   0.13
Third . . .   4.50   2.75   0.44   0.19
Fourth. . .   4.25   2.13   0.25   0.13

FISCAL 1999
First . . .   4.75   2.75   0.38   0.06
Second. . .   4.13   2.75   0.63   0.19
Third . . .   3.88   2.88   0.60   0.24
Fourth. . .   3.25   1.38   0.88   0.10
</TABLE>


                                       13
<PAGE>
     At  March 1, 2000, there were approximately 149 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 intends to retain any
earnings for use to repay its past due debt and in the operation of its business
and, therefore, does not anticipate paying any cash dividends in the foreseeable
future.

RECENT  SALES  OF  UNREGISTERED  SECURITIES

     During  1999,  197,872  warrants  were  converted  to 135,379 shares of the
Company's Common Stock in various cashless exercises.  193,872 of these warrants
were  held  by individuals who also held notes payable from the Company.  83,872
of  these warrants were converted into the same number of shares of Common Stock
and reduced such notes payable by $116,000 and accrued interest by $31,000.  The
remaining  warrants were converted to 51,507 shares of Common Stock.  The shares
of  Common  Stock were issued in private placements exempt from the registration
requirements  of  the  Securities Act pursuant to section 4(2) of the Securities
Act.

     In  October 1999, 1,300 warrants were exercised to purchase 2,688 shares of
the  Company's  common  stock  at  an  exercise  price of $3.14 per common share
resulting  in  total  proceeds  to  the Company of $8,448.  The shares of common
stock  were  issued  in  a  private  placement  exempt  from  the  registration
requirements  of  the  Securities Act pursuant to section 4(2) of the Securities
Act.

     During  the  second  quarter  of  1999  the Company issued notes payable to
related parties totaling $1,975,000.  In December 1999, these notes were amended
to  bear  interest at 14% from the original date of issuance.  The principal and
accrued  interest  on  these notes became due on November 30, 1999 and the notes
bear interest at the default rate of 18% from such date.  In connection with the
amendment  of the notes in December 1999, warrants to purchase 395,000 shares of
the  Company's  common  stock  were  issued in relation to the notes at exercise
prices ranging from $3.75 to $4.13.  The warrants expire at varying times during
December  2003.  Also,  during  the  second  quarter,  the Company issued a note
payable  to a related party in the amount of $500,000.  This note bears interest
at  14%  and  is due with accrued interest on May 19, 2001.  In December 1999, a
warrant  to  purchase 100,000 shares of the Company's common stock was issued in
relation  to  this  note  at an exercise price of $3.50 per share.  This warrant
expires December 6, 2003.  The warrants were issued in private placements exempt
from  the  registration  requirements  of the Securities Act pursuant to section
4(2)  of  the  Securities  Act.

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

OVERVIEW

     MCC  is  a  provider  of  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.


                                       14
<PAGE>
     From  its  inception  in 1989 through 1994, the Company's primary source of
revenue was generated by providing operator services to the hospitality industry
as  an  automated  call  processing and long distance services provider.  Due to
declining  call  volumes, caused in part by the use of proprietary calling cards
and  other  dial-around activities (such as 1-800-CALL ATT), the Company entered
into  a contract with AT&T in October 1994 to route operator services traffic to
AT&T  through  the  Lodging Partnership program.  Under the Lodging Partnership,
AT&T  processed  the  calls,  carried  call traffic and billed the end user.  In
return,  AT&T  paid  MCC  commissions  on  the  calls  dialed.

     In  light  of  the  declining  call  volumes  and  narrow  profit  margins
experienced  by the Company under the Lodging Partnership with AT&T, the Company
and  AT&T  agreed  to  terminate  the  Lodging Partnership arrangement effective
October  15,  1998.  AT&T agreed to purchase all of the customer contracts under
the  Lodging Partnership and to directly manage the existing customers under the
contracts.  As  a  result,  the  Company  recorded a one-time gain in the fourth
quarter  of  1998  of $453,000.  Revenues to the Company from the AT&T agreement
ended  in  the  fourth  quarter  of  1998.  The  Company  currently conducts its
business  through  two  principal  business  units:  (i) PIC/ATN, which provides
operator  services  and  related  valued added services, and (ii) Incomex, which
provides  billing  and  collection  services for calls to the United States from
resort  hotels  in  Mexico.  In February 2000, the Company entered into a Rental
Agreement  with  TeleManager.net  providing  for  the operation of the Company's
Telemanager system by TeleManager.net in exchange for monthly rental payments to
the  Company.  The  Company  also  entered into a memorandum of understanding to
negotiate  a  sale  of  certain  assets  of  the  Company's  MTS  division  to
TeleManager.net.

     As  of  the date of this report, the Company has a large amount of past due
debt  and  has also experienced significant operating and cash flow difficulties
at  its  largest  business  unit,  PIC/ATN.  The  Company  also  entered  into a
non-binding letter of intent in February 2000, to negotiate a merger transaction
with  Floragraph, which owns Flower.com, an online floral web site that services
hotels  and  other  institutions  with  its pre-paid "FlowerCard" franchise.  If
completed,  the merger with Floragraph would position the combined company as an
Internet  provider  of  flowers,  gifts  and  other  e-commerce  merchandise.

     In  connection  with the proposed merger with Floragraph and to address the
Company's  severe  debt and liquidity issues, the Company is reviewing strategic
alternatives  to  restructure  its  business  and  reduce its overall debt.  The
Company  is  considering  a  number  of  alternatives  which may include private
offerings  of  debt  or  equity financing, extensions or conversions of existing
debt  and/or the sale of significant parts of the Company's assets.  The Company
would  use  any proceeds from these initiatives to reduce the Company's debt and
to generate funds for its business after its planned merger with Floragraph.  As
of  the  date  of  this  report,  the  Company  has not entered into any binding
agreements  in  connection with its restructuring efforts, except for its rental
agreement  with  Telemanager.net.

     No  assurances  can  be  given  that  the Company will be successful in its
restructuring efforts.   The ability of the Company to successfully complete its
restructuring  efforts  will  have a material effect on the Company's results of
operations  and  financial  condition  in 2000.  Any inability of the Company to
repay  or  restructure  its  past due debt would likely prevent the Company from
continuing  as  a  going  concern.


                                       15
<PAGE>
RESULTS  OF  OPERATIONS

     The  following  table  sets  forth  statements  of operations items and the
percentages  that  such  items  bear  to  revenues:
<TABLE>
<CAPTION>


                                                             Years ended December 31,
                                                             ------------------------
                                                                 1999        1998
                                                             -----------  -----------
<S>                                                          <C>          <C>
Revenues                                                           100 %        100 %
Cost of sales                                                       89 %         67 %
Selling, general, and administrative                                21 %         22 %
Depreciation and amortization                                        7 %          5 %
Impairment of property and equipment and intangible assets          16 %         --
AcNet bad debt and acquisition expenses                             10 %         --
Total operating expenses                                            54 %         27 %
Operating income (loss)                                            (43)%          6 %
Gain on AT&T contract buyout                                        --            1 %
Interest expense                                                    10 %          7 %
Other income                                                         2 %         --
Net (loss)                                                         (51)%         --
</TABLE>

     The  information  for  the  year  ended December 31, 1998 in the preceding
table  includes  statement of operations data for Incomex after the consummation
of  the  Incomex  acquisition  on  February  13,  1998.

COMPARISON  OF  YEARS  ENDED  DECEMBER  31,  1999  AND  1998

     REVENUES  - Consolidated revenues increased $1.7 million, or 5.2%, to $35.7
     --------
million  for  the  year  ended  December  31, 1999 from $34.0 for the year ended
December  31,  1998.  Revenues  from  PIC/ATN  increased  $2.3  million to $23.1
million  for  the  year  ended December 31, 1999 from $20.8 million for the year
ended  December  31,  1998  due to increases in the consumer alternative dialing
revenues, partially offset by a decline in revenues from a principal customer as
discussed  below.

     During  1998,  PIC/ATN's  operator  services business unit began providing
services  to  a  principal  customer for long distance services originating from
Mexico.  During  1998,  the Company provided full service in connection with the
customer's calls including billing and collections and accordingly recognized as
revenues the value of such billed services.  The results were that 1998 revenues
from  this  customer  totaled $4.2 million or 12.0% of the total revenues of the
Company.  In  the  first  quarter of 1999, the Company modified its relationship
with  the  customer  whereby  calls  were  processed  and  billing  records were
delivered to the customer for submission to the customer's billing service.  The
Company  received  fees for its services that were recognized as revenues rather
than  the

                                       16
<PAGE>
billed  value  of  the  calls.  Accordingly,  the  revenues associated with this
customer  included  in  the  results  for  the  year  ended  December  31,  1999
represents  a  blending  of  full service revenues, representing the period from
January  1  through  February  4, 1999, and fee revenues from February 5 through
June  30,  1999.  Total  revenues  relative  to  the customer for the year ended
December  31,  1999  were  $5.3  million  or  14.8% of the total revenues of the
Company  for  the  year.  Effective  June  1999,  this  customer  terminated its
relationship  with  PIC/ATN.  Accordingly,  this relationship is not expected to
produce  further  revenues  and  margins  for  the Company.  The Company's gross
profit  related  to  this  customer  in  1999  was  $159,000.

     During 1998, PIC/ATN's operator service business unit derived revenues from
its  largest  customer that totaled $8.4 million or 24% of total revenues of the
Company,  compared  with  $14.0  million  or  39% in 1999.  PIC/ATN terminated a
significant portion of the service provided to this customer in January 2000 due
to  the  significant  bad debt expenses being experienced related to such calls.
Accordingly,  this  relationship  is  expected  to  produce  significantly lower
revenues  for  the  Company.

     Revenues  from  Incomex increased $0.6 million to $8.5 million for the year
ended  December  31, 1999 from $7.9 million for the year ended December 31,1998.
The increase was primarily due to an increase during 1999 in the number of rooms
under  contract  with  Mexican  resort  hotels and a shift toward Mexican resort
hotels  with  greater  call  traffic to the United States, partially offset by a
decline  in  revenue  per  call.

     Revenues  from MTS declined $1.2 million to $4.1 million for the year ended
December  31, 1999 from $5.3 million for the year ended December 31, 1998 due to
the  termination  of  the Lodging Partnership Program with AT&T in October 1998.
Call  processing  revenues  generated  by  MTS  through  its Lodging Partnership
Program decreased from $2.1 million for the year ended December 31, 1998 to none
for the year ended December 31, 1999.  MTS's revenue for the year ended December
31,  1999  consisted  of  revenues  from  its Telemanager services and equipment
sales.  In  February  2000,  the  Company  entered  into a Rental Agreement with
Telemanager.net  providing for the operation of the Company's Telemanager system
by  Telemanager.net in exchange for monthly rental payments to the Company.  The
Company  also  entered into a Memorandum of Understanding to negotiate a sale of
certain  assets  of  MTS to Telemanager.net.  Accordingly, this business unit is
expected  to  provide significantly lower revenues, margins and operating losses
for  the  Company.  The  Company's operating loss for this business unit in 1999
was  $1.6  million.

     COST  OF  SALES  -  Consolidated  cost  of sales increased $9.2 million, or
     ---------------
40.4%,  to $32.0 million for the year ended December 31, 1999 from $22.8 million
for  the  year  ended  December  31,  1998.  Consolidated  cost  of  sales, as a
percentage  of revenues, was 89.5% for the year ended December 31, 1999 compared
to 67.0%


                                       17
<PAGE>
for  the  year  ended  December  31,  1998.  The  increase  in  cost of sales is
primarily  attributable  to the PIC/ATN segment which experienced higher cost of
sales as a percentage of revenues due to a $5.6 million of bad debt in excess of
historical  amounts  as  discussed  below  for the year ended December 31, 1999.

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

     Due  to  the high level of these uncollectable amounts, PIC/ATN switched to
another  billing  and  collection  firm in November 1999.  The prior billing and
collection  firm has alleged that PIC/ATN had breached its contract and placed a
lien  on  the  collections  from  calls processed by the replacement 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.  PIC/ATN may be liable for additional
amounts  beyond  the  allowance  recorded.  Management  believes  that  the
uncollectable  amounts  are so far in excess of any reasonable level that either
the  billing  and collection firm or the Regional Bell Operating Company through
which  most  of  the  calls  were  billed  is likely erroneously determining the
uncollectable  amounts.  The Company expects that PIC/ATN will refuse to pay any
additional amounts to the former billing and collection firm and the matter will
likely  be resolved through litigation.  No liability, if any, has been recorded
in  the  consolidated  financial  statements  with  respect  to  this  matter.

     In  December 1999, PIC/ATN received notice of past due amounts owed to the
Universal  Service  Administrative Company ("USAC") for a universal service fund
("USF")  fee.  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.  Management believed
that  the  billing  and  collection  firm  referred  to  above  was charging the
end-users the USF fee and remitting amounts owed to the USAC in a similar method
as  with  federal  and  state  taxes.  A  demand  letter  was  sent on behalf of

                                       18
<PAGE>
PIC/ATN  to  the  billing  and  collection  firm  for  payment.  The billing and
collection  firm  responded  that  it has collected and remitted the USF fees to
PIC/ATN.  Management  continues  to believe that the billing and collection firm
has  not  remitted  these  amounts,  but  as  the  carrier,  PIC/ATN  is legally
responsible  to  pay  the  USF  fee.

     Notwithstanding  management's  belief that the prior billing and collection
firm  was  contractually  required to collect and remit the USF fees to USAC, in
December  1999,  the Company recorded a $1.7 million liability for USF fees from
1997  through  1999  which  represents  the  period of time the liability is the
responsibility of PIC/ATN.  PIC/ATN currently is trying to gain temporary relief
from  the 15-day payment demand made by USAC which expired on March 16, 2000 for
approximately  $810,000  of  the fees.  PIC/ATN may also be liable for penalties
including  $110,000  for  any single violation of nonpayment of USF fees up to a
maximum  of  $1.1  million  for  any  continuing  violation.  No  liability  for
penalties,  if  any, has been recorded in the consolidated financial statements.
In addition, the FCC may revoke PIC/ATN's operating authority for failure to pay
such  fees.

     Excluding  the  impact  of  the  $5.6  million  of  bad  debt  in excess of
historical  amounts and universal service fees, consolidated cost of sales, as a
percentage of revenues, was 69% for the year ended December 31, 1999 compared to
67%  for the year ended December 31, 1998.  The increase in consolidated cost of
sales  as  a  percentage of revenue is primarily attributable to higher costs at
Incomex  for commissions and bad debt and lower revenues per call in the current
year.

     SELLING,  GENERAL  AND  ADMINISTRATIVE  EXPENSE  -  Consolidated  selling,
     -----------------------------------------------
general  and  administrative expense decreased $54,000, or 0.7%, to $7.4 million
for  the  year  ended  December  31,  1999  from $7.5 million for the year ended
December 31, 1998.  Selling, general and administrative expense, as a percentage
of  revenues,  was  20.7% for the year ended December 31, 1999 compared to 22.0%
for  the  year  ended  December  31,  1998.

     DEPRECIATION  AND  AMORTIZATION  EXPENSE  -  Consolidated  depreciation and
     ----------------------------------------
amortization  increased  $509,000,  or 27.5%, to $2.4 million for the year ended
December  31,  1999 from $1.9 million for the year ended December 31, 1998.  The
increase is primarily the result of additional goodwill of $7.2 million recorded
in the fourth quarter of 1998 for the settlements of the earn-outs in connection
with the Company's acquisition of PIC and Incomex, which is being amortized over
the  remaining  life  of  the  original  goodwill.  This  will decline in future
periods  due  to  the  impairments  recorded in 1999 (see the discussion below).

     IMPAIRMENT  OF  PROPERTY AND EQUIPMENT AND INTANGIBLE ASSETS -  The Company
     ------------------------------------------------------------
periodically  reviews  long-lived  assets  and  intangible assets for impairment
whenever events or changes in circumstances indicate that the carrying amount of


                                       19
<PAGE>
these  assets may not be recoverable.  While revenues have increased for Incomex
and  PIC/ATN  since acquisition by the Company, the rapidly changing competitive
environments  in  which  the  Company  operates,  the  significant  bad  debts
experienced,  the  loss of PIC/ATN's two major customers, the declining revenues
per  call,  and  the impact of cash flow constraints on attracting new customers
with  prepaid  commissions  have  prevented  the  Company  from  significantly
increasing  operating profits from levels that existed prior to the acquisition.
Accordingly, in 1999, the Company recorded an impairment write-down for goodwill
of  approximately $2.4 million related to Incomex, of approximately $3.0 million
related  to  PIC/ATN  and of approximately $0.3 million related to other assets,
primarily telecommunications equipment, based on the expected fair value of such
assets.

     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  proposed  merger  with Floragraph, the Company is
currently  not  pursuing 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 a $3.7 million asset write-down in 1999 due to the uncertainty
regarding the ultimate recovery of the investment and notes (see Note 5 in Notes
to  Consolidated  Financial  Statements.)

     GAIN  ON  AT&T  CONTRACT  BUYOUT  -  The  Company's agreement with AT&T was
     --------------------------------
amended  during  1998 to terminate as of October 15, 1998.  Under the amendment,
AT&T  will  directly  manage the existing customers under the contracts and AT&T
assumed  liability  for  all  commissions owed to the existing customers for the
period  March  1, 1998 to October 15, 1998.  As a result, the Company recorded a
one-time  gain  in  the  fourth  quarter  of  1998  of $453,000 representing the
commissions  assumed  by  AT&T  less  the  write-off  of  owned equipment at the
existing  customers  properties.

     INTEREST EXPENSE - Consolidated interest expense, including amortization of
     ----------------
debt  discount,  increased  $1.3 million, or 52.1%, to $3.7 million for the year
ended  December 31, 1999 from $2.4 million for the year ended December 31, 1998.
The  increase  was  primarily  due  to  additional  debt incurred related to the
investments  in  Actel  and  the  AcNet  entities, the costs associated with the
earn-out  settlements  with  respect to the acquisitions of PIC/ATN and Incomex,
the  Company's  lower operating profit and general working capital purposes, and
to  an increase in the interest rates on the past due debt.  As a result, higher
interest  expense  is  expected  in  future  periods.

     OTHER INCOME - Consolidated other income increased $650,000 to $659,000 for
     ------------
the  year  ended  December  31, 1999 from $9,000 for the year ended December 31,
1998.  The  increase  was  primarily  due to Incomex recording $341,000 as other


                                       20
<PAGE>

income  in 1999 as part of a settlement award based on an arbitrator's ruling on
the  proceedings  Incomex  had  commenced  against Eilco.  During the year ended
December  31,  1999  the Company recorded $245,000 as other income for dividends
accrued  on  its  investment  in  Actel.

LIQUIDITY  AND  CAPITAL  RESOURCES

     At  December  31,  1999, the Company's current liabilities of $24.2 million
exceeded  current  assets of $1.9 million resulting in a working capital deficit
of  $22.3  million. During 1999, the Company used $948,000 in cash for operating
activities, and used $7.7 million in investing activities.  The Company received
proceeds  from new debt financing of $9.5 million and repaid borrowings on notes
payable  and  made payments on capital lease obligations of $2.5 million.  These
activities  resulted  in a decrease in available cash of $1.6 million for the 12
months  ended  December  31,  1999.

     The  Company's  debt and capital lease obligations as of December 31, 1999,
including  the  current portion thereof, totaled $22.2 million compared to $15.3
million  at December 31, 1998.  The Company's current debt and lease obligations
as  of  December  31,  1999  totaled  $17.0  million compared to $9.3 million at
December  31,  1998.

     Although  in  January  2000 PIC/ATN terminated the service provided for the
call  traffic  associated  with the billing and collection issue for its largest
customer, no assurance can be given that PIC/ATN will not continue to experience
similar  billing  and  collection issues in future periods.  Any continuation of
this  issue could have a material adverse effect on the Company's cash flows and
financial  condition.  PIC/ATN's  cash  flows  in  2000  may  also  be adversely
affected  by  the lien placed by PIC/ATN's former billing and collection firm on
collections  from  calls  processed by a subsequent billing and collection firm.
The  Company  has  also  recorded  a $1,700,000 liability for USF fees from 1997
through  1999, and has received a payment demand for the first $810,000 of these
fees  with  a  deadline  which  expired  on  March  16,  2000.

     The  Company's  principal  sources  of capital to date have been public and
private  offerings  of  debt  and equity securities and lease and debt financing
arrangements  with  Berthel  to  purchase  telecommunications  equipment.  As of
December  31,  1999,  the  Company has not made the majority of the June through
December  1999  payments  to  Berthel totaling $1,022,000.  Berthel only has the
right  to  demand  that the Company cure this violation, but has not made such a
demand  as  of  March  20,  2000.


                                       21
<PAGE>
     Subsequent to year end and through March 20, 2000, the Company had borrowed
a  total  of  $306,000  with an affiliate of Berthel.  The borrowings are due on
demand  and bear interest at 12%.  Warrants will also be issued equal to 200% of
the  amount  of  the  loan.  The exercise price of such warrants will be the bid
price  of the Company's stock at the close of business on the day the funds were
received  by  the  Company.

     As  of  March  1,  2000,  the  Company  was  past  due  in  the  payment of
approximately  $17.8  million of principal and interest payments, including $1.4
million  in  lease and debt financing to Berthel.  The Company was also past due
with  its trade vendors in the payment of approximately $1.3 million as of March
1,  2000.  The  amount  of  past  due debt as of March 1, 2000, does include the
Company's  $2.0  million bridge loan from New Valley.  The Company had been past
due  on  this  loan  effective July 21, 1999.  On December 17, 1999, the Company
amended  its  agreement  with  New Valley to extend the term of its $2.0 million
bridge  loan.  Under  the  amendment, the principal amount of the bridge loan is
due  in  six  monthly  installments beginning on January 17, 2000, together with
accrued  interest.  The  first  five  installments  are  $200,000  and the final
installment  on  June  17, 2000 is $1,000,000.  New Valley also waived all prior
defaults  by  the  Company and the interest rate under the note was reset to 12%
per  annum  (14%  per annum upon a default) from the original date of the bridge
loan.  The  bridge  loan  is  secured by a collateral pledge in the stock of the
Company's  subsidiaries,  and  a security interest in the unencumbered assets of
the  Company  and  its subsidiaries.  As of March 20, 2000, the Company was past
due  on the January, February and March payments under the Note with New Valley.
However,  on March 29, 2000, New Valley waived this default.  The effect of this
waiver  is  not  reflected  in any of the past due debt disclosures because such
disclosures  are  as  of  March  1,  2000  or  March  20,  2000.

     The  Company's  existing capital and anticipated funds from operations will
not  be  sufficient  to  meet its anticipated cash needs for working capital and
debt obligations for 2000.  The Company estimates that it will need at least $25
million during 2000 to repay indebtedness that is either past due or will become
due in 2000, including accrued interest, past due amounts with trade vendors and
USF  fees  payable.  In  addition  to  cash  flows  from operations, if any, the
Company believes that the possible sources to fund its cash requirements include


                                       22
<PAGE>
raising  debt or equity financings, extending or converting existing debt and/or
the  sale of significant parts of the Company's assets.  The Company has engaged
in  discussions  with  potential  investors  regarding  proposed  debt or equity
financings.  The  Company  has  entered  into  an  advisory  agreement  with  an
investment  bank which is an affiliate of Berthel.  However, no assurance can be
given  that  the  Company  will  be  able  to  raise adequate funds through such
financings  or  generate sufficient cash flows to meet the Company's cash needs.
If  the  Company  is  unable  to 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, financial condition
and  ability  to  continue  as  a going concern.  The incurrence of any material
liability  that  could  result  from  the  resolution  of the various contingent
liabilities  discussed  previously  is  likely  to  have  a similar result.  See
"Forward-Looking  Statements"  below.

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:

-     the  Company's  access  to  adequate  debt  or  equity capital to meet the
      Company's  operating  and  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  Company's  ability  to  complete its proposed merger transaction with
      Floragraph  and  the  terms  of  such  transaction  if  completed;

-     the  Company's  ability  to  restructure  its  operations  and  to realize
      potential  value  from  its  operating  units  and  investments;


                                       23
<PAGE>
-     the  effects  of  the bad debt issues relating to PIC/ATN on the Company's
      results  of  operations  and  financial  condition  in  future  periods;

-     the Company's ability to negotiate an arrangement regarding its investment
      in  and  options  to  acquire  the  AcNet  entities;

-     the possibility of additional impairment write downs of assets, including,
      without limitation,  of  goodwill  relating  to  the  PIC/ATN  or  Incomex
      acquisitions;

-     the  Company's  ability  to  respond  to  competition  in  its  markets;

-     the  Company's  ability to sell its corporate headquarters facility during
      the  second  quarter  of  2000;

-     the  outcome  of  pending  litigation;

-     changes  in, or failure to comply with, governmental regulation, including
      telecommunications  regulations;

-     the  effect  of the alleged liability of PIC/ATN for up to $1.7 million of
      USF  fees;

-     general  economic  conditions  in  the  Company's  markets;

-     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-KSB.

     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;

                                       24
<PAGE>
-     expectations regarding sales growth, sales mix, gross  margins and related
      matters  with  respect  to  operating  results;  and

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

ITEM  7.     FINANCIAL  STATEMENTS

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

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

     Not  applicable.

                                    PART III
                                    --------

ITEM  9.     DIRECTORS,  EXECUTIVE  OFFICERS,  PROMOTERS  AND  CONTROL  PERSONS;
             COMPLIANCE  WITH  SECTION  16(A)  OF  THE  EXCHANGE  ACT

     Information  regarding  the executive officers and directors of the Company
is  incorporated  herein  by  reference  to  the  discussions under "Election of
Directors"  and "Section 16(a) Beneficial Ownership Reporting Compliance" in the
Company's Proxy Statement for the 2000 Annual Meeting of Shareholders which will
be  filed  on  or  before  May  1,  2000.

ITEM  10.     EXECUTIVE  COMPENSATION

     Incorporated  herein  by  reference  to  the  discussion  under  "Executive
Compensation"  in  the  Company's Proxy Statement for the 2000 Annual Meeting of
Shareholders  which  will  be  filed  on  or  before  May  1,  2000.

ITEM  11.     SECURITY  OWNERSHIP  OF  CERTAIN  BENEFICIAL OWNERS AND MANAGEMENT

     Incorporated  herein  by  reference  to  the  discussion  under  "Security
Ownership"  in  the  Company's  Proxy  Statement  for the 2000 Annual Meeting of
Shareholders  which  will  be  filed  on  or  before  May  1,  2000.


                                       25
<PAGE>
ITEM  12.     CERTAIN  RELATIONSHIPS  AND  RELATED  TRANSACTIONS

     Incorporated  herein  by  reference  to  the  discussions  under "Executive
Compensation--Employment  Agreements"  and  "Certain  Relationships  and Related
Transactions"  in  the  Company's Proxy Statement for the 2000 Annual Meeting of
Shareholders  which  will  be  filed  on  or  before  May  1,  2000.

ITEM  13.     EXHIBITS,  LIST  AND  REPORTS  ON  FORM  8-K

     a.     Exhibits:
            --------
<TABLE>
<CAPTION>




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

10.1            AT&T Management Company Commission
                Agreement, dated as of December 16, 1995, by and
                between the Company and AT&T Communications,
                Inc. ("AT&T"). (1) (4)

10.2            Amendment No. 1 to AT&T Management Company
                Commission Agreement, dated as of January 16,
                1996, by and between the Company and AT&T. (1)


                                       26
<PAGE>

10.3            Amendment No. 2 to AT&T Management Company
                Commission Agreement, dated as of January 16,
                1996, by and between the Company and
                AT&T. (1) (4)

10.4            Amendment No. 3 to AT&T Management Company
                Commission Agreement, executed on December 13,
                1996, by and between AT&T and the Company. (5)

10.5            AT&T Management Company Commission
                Agreement, effective as of January 16, 1998, by and
                between the Company and AT&T. (4) (6)

10.6            Amendment to AT&T Management Company
                Commission Agreement, effective as of October 15,
                1998, by and between the Company and AT&T. (7)

10.7            Stock Purchase Agreement, dated as of August 22,
                1997, among MCC Acquisition Corp., Priority
                International Communications, Inc. and certain
                shareholders of Priority International
                Communications, Inc.  (8)

10.8            First Amendment to Stock Purchase Agreement,
                dated as of October 31, 1997, among MCC
                Acquisition Corp., Priority International
                Communications, Inc. and certain shareholders of
                Priority International Communications, Inc. (8)

10.9            Second Amendment to Stock Purchase Agreement,
                dated as of February 27, 1998, among MCC
                Acquisition Corp., Priority International
                Communications, Inc. and certain shareholders of
                Priority International Communications, Inc. (6)

10.10           Stock Purchase Agreement, dated as of August 22,
                1997, among MCC Acquisition Corp., PIC
                Resources Corp., the shareholders of PIC Resources
                Corp. and ATN Communications Inc. (8)

10.11           First Amendment to Stock Purchase Agreement dated
                as of October 31, 1997, among MCC Acquisition
                Corp., PIC Resources Corp., the shareholders of PIC
                Resources Corp. and ATN Communications Inc. (8)

10.12           Second Amendment to Stock Purchase Agreement,
                dated as of February 27, 1998, among MCC
                Acquisition Corp., PIC Resources Corp., the
                shareholders of PIC Resources Corp. and ATN
                Communications, Inc. (6)


                                       27
<PAGE>

10.13           Amended and Restated Short-Term Note dated
                February 27, 1998 issued by MCC Acquisition
                Corp. to Bonner B. Hardegree, trustee for the benefit
                of Wayne Wright, and Bonner B. Hardegree. (6)

10.14           Agreement, dated as of May 21, 1998, among the
                Company, MCC Acquisition Corp., Priority
                International Communications, Inc., PIC Resources
                Corp., Wayne Wright, Bonner Hardegree and ATN
                Communications, Inc. (9)

10.15           Earn-Out Settlement Agreement, dated as of
                December 7, 1998, among the Company, MCC
                Acquisition Corp., Priority International
                Communications, Inc., PIC Resources Corp., Wayne
                Wright, Bonner Hardegree and ATN
                Communications, Inc. (7)

10.16           Stock Purchase Agreement, dated as of February 13,
                1998, among MCC Acquisition Corp., Incomex, Inc.
                and the Shareholders of Incomex, Inc. (10)

10.17           Earn-Out Settlement Agreement, dated as of
                December 1, 1998, among the Company, MCC
                Acquisition Corp., Incomex, Inc. and the
                Shareholders of Incomex, Inc. (7)

10.18           Murdock Communications Corporation 1993 Stock
                Option Plan. (1) (11)

10.19           Murdock Communications Corporation 1997 Stock
                Option Plan, as amended. (7) (11)

10.20           Amended and Restated Employment Agreement,
                dated as of October 1, 1998, by and between the
                Company and Guy O. Murdock. (7) (11)

10.21           Employment Agreement, dated as of January 1,
                1999, by and between the Company and Colin P.
                Halford. (7) (11)

10.22           Amended and Restated Employment Agreement,
                dated as of October 1, 1998, by and between the
                Company and Thomas E. Chaplin. (7) (11)

10.23           Employment Agreement, dated as of January 1,
                1999, by and between the Company and Bill R.
                Wharton. (7) (11)


                                       28
<PAGE>

10.24           Employment Agreement, dated as of November 1,
                1998, by and among the Company, Priority
                International Communications, Inc., PIC Resources
                Corp. and Bonner B. Hardegree. (7) (11)

10.25           Employment Agreement, dated as of November 16,
                1998, by and between the Company and Paul C.
                Tunink. (7) (11)

10.26           Form of Lease Agreement. (12)

10.27           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. (12)

10.28           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. (12)

10.29           Stock Purchase Warrant dated June 21, 1999 from
                the Company to New Valley Corporation. (12)

10.30           Fixed Rate Senior Note dated June 21, 1999 from the
                Company to New Valley Corporation. (12)

10.31           Registration Rights Agreement, dated as of June 21,
                1999, between the Company and New Valley
                Corporation. (12)

10.32           Option to Merge Agreement, dated as of June 9,
                1999, among MCC Acquisition Corp., the
                shareholders of Intercarrier Transport Corporation,
                and Intercarrier Transport Corporation. (13)

10.33           Option to Merge Agreement, dated June 9, 1999,
                among MCC Acquisition Corp., the shareholders of
                AcNet USA, Inc. and AcNet USA, Inc. (13)

10.34           Amendment to Investment Agreement, dated as of
                June 21, 1999, among ACTEL Integrated
                Communications, Inc., the Company, John Beck and
                Richard Courtney. (13)


                                       29
<PAGE>

10.35           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.

21              Subsidiaries.

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

27              Financial Data Schedule.

<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)     Portions  of  these  exhibits were granted confidential treatment by the
Securities  and  Exchange  Commission.

(5)     Filed  as  an  exhibit to the Company's Annual Report on Form 10-KSB for
the year ended December 31, 1996 (File No. 000-21463) and incorporated herein by
reference.

(6)     Filed  as  an  exhibit to the Company's Annual Report on Form 10-KSB for
the year ended December 31, 1997 (File No. 000-21463) and incorporated herein by
reference.

(7)     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.

(8)     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 November 7,
1997  and  incorporated  herein  by  reference.

(9)     Filed as an exhibit to the Company's Quarterly Report on Form 10-QSB for
the  quarter ended June 30, 1998 (File No. 000-21463) and incorporated herein by
reference.

(10)     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 February 13,
1998  and  incorporated  herein  by  reference.

(11)     Management  contract  or  compensatory  plan  or  arrangement.

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

(13)     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.

(b)     Reports  on  Form  8-K.
</TABLE>

     The Company did not file any reports on Form 8-K for the three months ended
December  31,  1999.

                                       30
<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/ Eugene Davis
                                      ------------------------------------------
                                      Eugene Davis
                                      Acting Chief Executive Officer

                                      Date:  March  30,  2000

     Each  person whose signature appears below hereby appoints Eugene Davis and
Paul  C.  Tunink,  and  each  of  them  individually,  his  true  and  lawful
attorney-in-fact,  with  power  to  act  with or without the other and with full
power of substitution and resubstitution, in any and all capacities, to sign any
or  all  amendments  to  the  Form  10-KSB  and  file the same with all exhibits
thereto,  and  other  documents in connection therewith, with the Securities and
Exchange  Commission, granting unto said attorneys-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>                            <C>

/s/ Eugene Davis       Acting Chief Executive         March 30, 2000
---------------------
Eugene Davis           Officer and Director
                       (Principal Executive Officer)

/s/ Paul C. Tunink     Vice President and Chief       March 30, 2000
---------------------
Paul C. Tunink         Financial Officer (Principal
                       Financial Officer and
                       Principal Accounting Officer)



                                       31
<PAGE>
                       Director                       March 30, 2000
---------------------
Steven R. Ehlert

/s/ Thomas E. Chaplin  Director                       March 30, 2000
---------------------
Thomas E. Chaplin

/s/ Colin P. Halford   Director                       March 30, 2000
---------------------
Colin P. Halford

/s/ David Kirkpatrick  Director                       March 30, 2000
---------------------
David Kirkpatrick

/s/ Guy O. Murdock     Director                       March 30, 2000
---------------------
Guy O. Murdock

/s/ Wayne Wright       Director                       March 30, 2000
---------------------
Wayne Wright
</TABLE>


                                       32

<PAGE>
     MURDOCK  COMMUNICATIONS  CORPORATION
     Consolidated  Financial  Statements  for  the
     Years  Ended  December  31,  1999  and  1998  and
     Independent  Auditors'  Report


<PAGE>

MURDOCK  COMMUNICATIONS  CORPORATION

TABLE  OF  CONTENTS
<TABLE>
<CAPTION>

                                                                PAGE
<S>                                                             <C>
INDEPENDENT AUDITORS' REPORT . . . . . . . . . . . . . . . . .  F-1

CONSOLIDATED FINANCIAL STATEMENTS:

  Consolidated Balance Sheets. . . . . . . . . . . . . . . . .  F-2

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

  Consolidated Statements of Shareholders' Equity (Deficiency)  F-4

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

  Notes to Consolidated Financial Statements . . . . . . . . .  F-8
</TABLE>


<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,
1999  and  1998,  and  the  related  consolidated  statements  of  operations,
shareholders'  equity  (deficiency)  and  cash  flows  for the years then ended.
These  financial  statements are the responsibility of the Company's management.
Our  responsibility is to express an opinion on these financial statements based
on  our  audits.

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

In  our  opinion,  such consolidated financial statements present fairly, in all
material  respects, the financial position of Murdock Communications Corporation
and  subsidiaries  at  December  31,  1999  and  1998,  and the results of their
operations  and  their  cash  flows  for the years then ended in conformity with
generally  accepted  accounting  principles.

The  accompanying  consolidated financial statements have been prepared assuming
that  the  Company  will continue as a going concern.  As 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
March  20,  2000


                                      F-1
<PAGE>
MURDOCK  COMMUNICATIONS  CORPORATION

CONSOLIDATED  BALANCE  SHEETS
DECEMBER  31,  1999  AND  1998  (DOLLARS  IN  THOUSANDS)
--------------------------------------------------------
<TABLE>
<CAPTION>



ASSETS (Notes 6, 7 and 18)                                                          1999       1998
<S>                                                                               <C>        <C>
CURRENT ASSETS:
  Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  $     76   $  1,722
  Accounts receivable, less allowances for doubtful
    accounts: 1999 - $3,372; 1998 - $655 (Note 2). . . . . . . . . . . . . . . .       982      1,752
  Note receivable (Note 5) . . . . . . . . . . . . . . . . . . . . . . . . . . .       500          -
  Prepaid expenses and other current assets. . . . . . . . . . . . . . . . . . .       312        281
                                                                                  ---------  ---------
           Total current assets. . . . . . . . . . . . . . . . . . . . . . . . .     1,870      3,755
                                                                                  ---------  ---------
PROPERTY AND EQUIPMENT:
  Land and building. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .     1,446      1,172
  Telecommunications equipment . . . . . . . . . . . . . . . . . . . . . . . . .     8,938      9,013
  Furniture and equipment. . . . . . . . . . . . . . . . . . . . . . . . . . . .       839        748
                                                                                  ---------  ---------
                                                                                    11,223     10,933
  Accumulated depreciation . . . . . . . . . . . . . . . . . . . . . . . . . . .    (8,734)    (8,097)
                                                                                  ---------  ---------
                                                                                     2,489      2,836
  Telecommunications equipment under capital lease,
    net of accumulated amortization:  1999 - 3,352;
    1998 - $3,326. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .       121        182
                                                                                  ---------  ---------
           Property and equipment, net . . . . . . . . . . . . . . . . . . . . .     2,610      3,018
                                                                                  ---------  ---------
OTHER ASSETS:
  Goodwill, net of accumulated amortization:
    1999 - $2,004; 1998 -  $697 (Notes 1, 3 and 4) . . . . . . . . . . . . . . .     5,002     11,644
  Cost of purchased site contracts, net of accumulated amortization:
    1999 - $736;  1998 - $670. . . . . . . . . . . . . . . . . . . . . . . . . .        48        174
  Other intangible assets, net of accumulated amortization:
    1999 - $619; 1998 - $348 . . . . . . . . . . . . . . . . . . . . . . . . . .       197        659
  Investments, at cost (Note 5). . . . . . . . . . . . . . . . . . . . . . . . .     4,277      1,500
  Prepaid commissions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .     1,633      1,704
  Other noncurrent assets. . . . . . . . . . . . . . . . . . . . . . . . . . . .        12        224
                                                                                  ---------  ---------
           Total other assets. . . . . . . . . . . . . . . . . . . . . . . . . .    11,169     15,905
                                                                                  ---------  ---------
TOTAL. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  $ 15,649   $ 22,678
                                                                                  =========  =========

LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIENCY)
  CURRENT LIABILITIES:
    Outstanding checks in excess of available balances . . . . . . . . . . . . .  $    104   $      -
    Notes payable (Note 6) . . . . . . . . . . . . . . . . . . . . . . . . . . .    14,443      7,401
    Accounts payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .     2,270      1,206
    Accrued interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .     2,010        314
    Accrued universal service fund fees (Note 2) . . . . . . . . . . . . . . . .     1,700          -
    Other accrued expenses . . . . . . . . . . . . . . . . . . . . . . . . . . .     1,112      1,745
    Current portion of capital lease obligations
      principally with a related party (Note 12) . . . . . . . . . . . . . . . .     1,553        869
    Current portion of long-term debt with related parties (Note 7). . . . . . .       647        828
    Current portion of long-term debt, others (Note 7) . . . . . . . . . . . . .       371        199
                                                                                  ---------  ---------
           Total current liabilities . . . . . . . . . . . . . . . . . . . . . .    24,210     12,562

  LONG-TERM LIABILITIES:
    Capital lease obligations principally with a related party,
      less current portion (Note 12) . . . . . . . . . . . . . . . . . . . . . .     2,148      3,133
    Long-term debt with related parties, less current portion (Note 7) . . . . .     2,122      2,105
    Long-term debt, others, less current portion (Note 7). . . . . . . . . . . .       911        725
    Other. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .        22         76
                                                                                  ---------  ---------
           Total liabilities . . . . . . . . . . . . . . . . . . . . . . . . . .    29,413     18,601
                                                                                  ---------  ---------
COMMITMENTS AND CONTINGENCIES (Notes 2 and 12)

SHAREHOLDERS' EQUITY (DEFICIENCY) (Note 1):
  8% Series A Convertible Preferred Stock, $100 stated value (Note 8):
    Authorized - 1,000,000 shares
    Issued and outstanding: 18,920 shares ($1,892 liquidation value) . . . . . .     1,868      1,837
  Common stock, no par or stated value (Note 10):
    Authorized - 40,000,000 shares (20,000,000 shares in 1998)
    Issued and outstanding:  1999 - 10,576,012 shares; 1998 - 10,329,867 shares.    20,259     19,835
  Common stock warrants (Note 9):
    Issued and outstanding:  1999 - 5,866,591; 1998 - 4,420,763. . . . . . . . .       635        439
  Additional paid-in capital . . . . . . . . . . . . . . . . . . . . . . . . . .       134        134
  Accumulated deficit. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .   (36,660)   (18,168)
                                                                                  ---------  ---------
           Total  shareholders' equity (deficiency). . . . . . . . . . . . . . .   (13,764)     4,077
                                                                                  ---------  ---------
TOTAL. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  $ 15,649   $ 22,678
                                                                                  =========  =========
</TABLE>

See  notes  to  consolidated  financial  statements.

                                      F-2
<PAGE>
MURDOCK  COMMUNICATIONS  CORPORATION

CONSOLIDATED  STATEMENTS  OF  OPERATIONS
YEARS  ENDED DECEMBER 31, 1999 AND 1998 (DOLLARS IN THOUSANDS EXCEPT SHARE DATA)
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>



                                                                           1999         1998
<S>                                                                    <C>           <C>
REVENUES:
  Call processing . . . . . . . . . . . . . . . . . . . . . . . . . .  $    32,708   $   32,387
  Other revenue . . . . . . . . . . . . . . . . . . . . . . . . . . .        3,039        1,601
                                                                       ------------  -----------
           Total revenues . . . . . . . . . . . . . . . . . . . . . .       35,747       33,988
                                                                       ------------  -----------

COST OF SALES:
  Call processing . . . . . . . . . . . . . . . . . . . . . . . . . .       18,971       18,538
  Other cost of sales . . . . . . . . . . . . . . . . . . . . . . . .        1,657          516
  Bad debt expense and universal service fund fees (Note 2) . . . . .       11,358        3,711
                                                                       ------------  -----------
           Total cost of sales. . . . . . . . . . . . . . . . . . . .       31,986       22,765
                                                                       ------------  -----------

GROSS PROFIT. . . . . . . . . . . . . . . . . . . . . . . . . . . . .        3,761       11,223
                                                                       ------------  -----------

OPERATING EXPENSES:
  Selling, general and administrative expense . . . . . . . . . . . .        7,414        7,468
  Depreciation and amortization expense . . . . . . . . . . . . . . .        2,358        1,849
  Impairment of property and equipment and intangible assets (Note 1)        5,652            -
  AcNet bad debt and acquisition expenses (Note 5). . . . . . . . . .        3,703            -
                                                                       ------------  -----------
           Total operating expenses . . . . . . . . . . . . . . . . .       19,127        9,317
                                                                       ------------  -----------

INCOME (LOSS) FROM OPERATIONS . . . . . . . . . . . . . . . . . . . .      (15,366)       1,906
                                                                       ------------  -----------

NONOPERATING  INCOME (EXPENSE):
  Gain on AT&T contract buyout (Note 17). . . . . . . . . . . . . . .            -          453
  Interest expense. . . . . . . . . . . . . . . . . . . . . . . . . .       (3,691)      (2,426)
  Other income. . . . . . . . . . . . . . . . . . . . . . . . . . . .          659            9
                                                                       ------------  -----------
           Total nonoperating expense . . . . . . . . . . . . . . . .       (3,032)      (1,964)
                                                                       ------------  -----------
LOSS BEFORE INCOME TAX EXPENSE AND JOINT VENTURE LOSS . . . . . . . .      (18,398)         (58)

Loss from joint venture . . . . . . . . . . . . . . . . . . . . . . .            -           42
Income tax expense (Note 11). . . . . . . . . . . . . . . . . . . . .            -           74
                                                                       ------------  -----------
NET LOSS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .      (18,398)        (174)

Dividends and accretion on 8% Series A Convertible Preferred Stock. .         (194)        (175)
                                                                       ------------  -----------

NET LOSS ATTRIBUTABLE TO COMMON SHAREHOLDERS. . . . . . . . . . . . .  $   (18,592)  $     (349)
                                                                       ============  ===========

BASIC AND DILUTED NET LOSS PER COMMON SHARE . . . . . . . . . . . . .  $     (1.79)  $     (.06)
                                                                       ============  ===========

WEIGHTED AVERAGE COMMON SHARES OUTSTANDING. . . . . . . . . . . . . .   10,392,940    5,422,783
                                                                       ============  ===========

See notes to consolidated financial statements.
</TABLE>


                                      F-3
<PAGE>

MURDOCK  COMMUNICATIONS  CORPORATION

CONSOLIDATED  STATEMENTS  OF  SHAREHOLDERS'  EQUITY  (DEFICIENCY)
YEARS  ENDED  DECEMBER  31,  1999  AND 1998 (DOLLAR AND SHARE DATA IN THOUSANDS)
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>


                                                  8%  SERIES  A  CONVERTIBLE                               COMMON  STOCK
                                                         PREFERRED STOCK              COMMON STOCK             WARRANTS
                                                  ------------------------------  ---------------------  ----------------------
                                                      NUMBER                       NUMBER                 NUMBER
                                                        OF                           OF                     OF
                                                      SHARES          ISSUED       SHARES      ISSUED    WARRANTS    ISSUED
<S>                                               <C>              <C>            <C>        <C>         <C>         <C>
BALANCES AT JANUARY 1, 1998. . . . . . . . . . .               16  $       1,544      4,458  $   11,343      2,149   $     316

  Issuance of 8% Series A Convertible
    Preferred Stock, net of issuance costs
    of $5. . . . . . . . . . . . . . . . . . . .                3            262          -           -          -           -
  Issuance of common stock and warrants
    in connection with the acquisition of
    Incomex (Note 4) . . . . . . . . . . . . . .                -              -      1,900       2,494        156          30
  Exercise of warrants by a related
    party. . . . . . . . . . . . . . . . . . . .                -              -      1,100       1,753     (1,100)       (322)
  Issuance of warrants in connection with
    debt financing with a related party. . . . .                -              -          -           -        350         165
  Issuance of warrants in connection with
    debt financing (Note 6). . . . . . . . . . .                -              -          -           -      2,700         221
  Issuance of warrants in lieu of director
    and consulting fees. . . . . . . . . . . . .                -              -          -           -         45           5
  Issuance of warrants in lieu of agent
    fees to a related party (Note 6) . . . . . .                -              -          -           -        121          24
  Issuance of common stock in connection
    with the acquisition of PIC (Note 3) . . . .                -              -      2,872       4,245          -           -
  Accretion to conversion price of 8%
    Series A Convertible Preferred Stock . . . .                -             31          -           -          -           -
  Accrued dividends on 8% Series A
    Convertible Preferred Stock. . . . . . . . .                -              -          -           -          -           -
  Net loss for 1998. . . . . . . . . . . . . . .                -              -          -           -          -           -
                                                  ---------------  -------------  ---------  ----------  ----------  ----------

BALANCES AT DECEMBER 31, 1998. . . . . . . . . .               19  $       1,837     10,330  $   19,835      4,421   $     439
                                                  ===============  =============  =========  ==========  ==========  ==========

  Issuance of warrants in connection with
    debt financing with related parties (Note 6
    and 7) . . . . . . . . . . . . . . . . . . .                -              -          -           -      1,195         223
  Issuance of warrants in connection with
    debt financing with lender (Note 6). . . . .                -              -          -           -        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)
  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
                                                  ===============  =============  =========  ==========  ==========  ==========


See notes to consolidated financial statements.
                                                                                 SHARE-
                                                  ADDITIONAL                     HOLDERS'
                                                   PAID-IN      ACCUMULATED      EQUITY
                                                   CAPITAL        DEFICIT     (DEFICIENCY)
<S>                                               <C>           <C>           <C>
BALANCES AT JANUARY 1, 1998. . . . . . . . . . .  $        134  $   (17,819)  $     (4,482)

  Issuance of 8% Series A Convertible
    Preferred Stock, net of issuance costs
    of $5. . . . . . . . . . . . . . . . . . . .             -            -            262
  Issuance of common stock and warrants
    in connection with the acquisition of
    Incomex (Note 4) . . . . . . . . . . . . . .             -            -          2,524
  Exercise of warrants by a related
    party. . . . . . . . . . . . . . . . . . . .             -            -          1,431
  Issuance of warrants in connection with
    debt financing with a related party. . . . .             -            -            165
  Issuance of warrants in connection with
    debt financing (Note 6). . . . . . . . . . .             -            -            221
  Issuance of warrants in lieu of director
    and consulting fees. . . . . . . . . . . . .             -            -              5
  Issuance of warrants in lieu of agent
    fees to a related party (Note 6) . . . . . .             -            -             24
  Issuance of common stock in connection
    with the acquisition of PIC (Note 3) . . . .            -            -           4,245
  Accretion to conversion price of 8%
    Series A Convertible Preferred Stock . . . .             -          (31)             -
  Accrued dividends on 8% Series A
    Convertible Preferred Stock. . . . . . . . .             -         (144)          (144)
  Net loss for 1998. . . . . . . . . . . . . . .             -         (174)          (174)
                                                  ------------  ------------  -------------
BALANCES AT DECEMBER 31, 1998. . . . . . . . . .  $        134  $   (18,168)  $      4,077
                                                  ============  ============  =============
  Issuance of warrants in connection with
    debt financing with related parties (Note 6
    and 7) . . . . . . . . . . . . . . . . . . .             -            -            223
  Issuance of warrants in connection with
    debt financing with lender (Note 6). . . . .             -            -             80
  Conversion of notes payable, accrued
    interest and related common stock
    warrants into common stock . . . . . . . . .             -            -            147
  Conversion of common stock warrants
    into common stock. . . . . . . . . . . . . .             -            -              9
  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. . . . . . . . . .  $        134  $   (36,660)  $    (13,764)
                                                  ============  ============  =============

See notes to consolidated financial statements.

</TABLE>


                                      F-4
<PAGE>

MURDOCK  COMMUNICATIONS  CORPORATION

CONSOLIDATED  STATEMENTS  OF  CASH  FLOWS
YEARS  ENDED  DECEMBER  31,  1999  AND  1998  (DOLLARS  IN  THOUSANDS)
----------------------------------------------------------------------
<TABLE>
<CAPTION>

                                                                                             1999         1998
<S>                                                                                      <C>           <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
  Net loss. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  $   (18,398)  $     (174)
  Adjustments to reconcile net loss to net cash flows from operating activities:
    Impairment of property and equipment and intangible assets. . . . . . . . . . . . .        5,652            -
    AcNet bad debt and acquisition expense write down . . . . . . . . . . . . . . . . .        3,703            -
    Depreciation and amortization . . . . . . . . . . . . . . . . . . . . . . . . . . .        2,358        1,849
    Gain on sale of fixed assets. . . . . . . . . . . . . . . . . . . . . . . . . . . .           (6)           -
    Noncash interest expense. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .          723          272
    Noncash commission expense. . . . . . . . . . . . . . . . . . . . . . . . . . . . .            -           71
    Loss from joint venture . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .            -           42
    Changes in operating assets and liabilities, excluding the effects of acquisitions:
      Receivables . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .          779         (728)
      Other current assets. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .          (31)         (60)
      Prepaid commissions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .           71         (730)
      Other noncurrent assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . .          182          261
      Outstanding checks in excess of available balances. . . . . . . . . . . . . . . .          104         (247)
      Accounts payable. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .        1,064         (718)
      Accrued expenses. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .        1,158         (541)
      Accrued universal service fund fees . . . . . . . . . . . . . . . . . . . . . . .        1,700            -
      Deferred income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .           (7)         (37)
                                                                                         ------------  -----------
           Net cash flows from operating activities . . . . . . . . . . . . . . . . . .         (948)        (740)
                                                                                         ------------  -----------

CASH FLOWS FROM INVESTING ACTIVITIES:
  Purchases of property and equipment . . . . . . . . . . . . . . . . . . . . . . . . .         (706)        (766)
  Cash paid for acquisitions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .            -         (130)
  Payments for site contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . .          (10)          (3)
  Cash paid for investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .       (6,480)      (1,500)
  Cash advanced to joint venture. . . . . . . . . . . . . . . . . . . . . . . . . . . .          (46)        (362)
  Cash acquired with acquisitions . . . . . . . . . . . . . . . . . . . . . . . . . . .            -           16
  Proceeds from sale of fixed assets. . . . . . . . . . . . . . . . . . . . . . . . . .           13            -
  Issuance of note receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . . .       (1,000)           -
  Payments received on note receivable. . . . . . . . . . . . . . . . . . . . . . . . .          500            -
                                                                                         ------------  -----------
           Net cash flows from investing activities . . . . . . . . . . . . . . . . . .       (7,729)      (2,745)
                                                                                         ------------  -----------

CASH FLOWS FROM FINANCING ACTIVITIES:
  Payments on capital lease obligations, primarily to a related party . . . . . . . . .         (301)        (265)
  Proceeds from capital lease obligations with a related party. . . . . . . . . . . . .            -          710
  Borrowings on notes payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . .        7,992        5,406
  Borrowings of long-term debt with related parties . . . . . . . . . . . . . . . . . .          500            -
  Payments on notes payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .         (835)      (1,656)
  Payments on long-term debt with related parties . . . . . . . . . . . . . . . . . . .         (705)        (719)
  Borrowings on long-term debt, others. . . . . . . . . . . . . . . . . . . . . . . . .        1,029            -
  Payments on long-term debt, others. . . . . . . . . . . . . . . . . . . . . . . . . .         (671)        (152)
  Proceeds from issuance of common stock and warrants . . . . . . . . . . . . . . . . .            3        1,430
  Payment of dividends. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .          (18)           -
  Proceeds from exercise of stock options . . . . . . . . . . . . . . . . . . . . . . .           37            -
  Proceeds from issuance of 8% Series A Convertible Preferred Stock . . . . . . . . . .            -           50
  Payments for offering costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . .            -         (145)
                                                                                         ------------  -----------
           Net cash flows from financing activities . . . . . . . . . . . . . . . . . .        7,031        4,659
                                                                                         ------------  -----------

NET INCREASE (DECREASE) IN CASH . . . . . . . . . . . . . . . . . . . . . . . . . . . .       (1,646)       1,174

CASH AT BEGINNING OF YEAR . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .        1,722          548
                                                                                         ------------  -----------

CASH AT END OF YEAR . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  $        76   $    1,722
                                                                                         ============  ===========

SUPPLEMENTAL DISCLOSURE:
  Cash paid during the year for interest, principally to a related party                 $       824   $    2,183
  Cash paid during the year for income taxes                                                       4           24

See notes to consolidated financial statements.
</TABLE>

                                      F-5
<PAGE>

MURDOCK  COMMUNICATIONS  CORPORATION

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

SUPPLEMENTAL  DISCLOSURES  OF  1999  NONCASH  OPERATING, 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.  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 of $100,000 due to the
expiration  of  50,000  warrants  previously  recorded  at their fair value to a
financial  institution.

See  notes  to  consolidated  financial  statements.


                                      F-6
<PAGE>
MURDOCK  COMMUNICATIONS  CORPORATION

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

SUPPLEMENTAL  DISCLOSURES  OF  1998  NONCASH  OPERATING, INVESTING AND FINANCING
ACTIVITIES:

The  Company  recorded the following increases as a result of its acquisition of
Incomex  (dollars  in  thousands):
<TABLE>
<CAPTION>

<S>                                                 <C>
Accounts receivable. . . . . . . . . . . . . . . .  $ 179
Other current assets . . . . . . . . . . . . . . .    111
Telecommunications equipment . . . . . . . . . . .      3
Furniture and equipment. . . . . . . . . . . . . .     53
Accumulated depreciation . . . . . . . . . . . . .    (14)
Goodwill . . . . . . . . . . . . . . . . . . . . .    921
Commission advances. . . . . . . . . . . . . . . .    974
Other assets . . . . . . . . . . . . . . . . . . .     10
Notes payable. . . . . . . . . . . . . . . . . . .   (822)
Outstanding checks in excess of available balances    (16)
Accounts payable . . . . . . . . . . . . . . . . .   (134)
Accrued expenses . . . . . . . . . . . . . . . . .   (827)
Common stock . . . . . . . . . . . . . . . . . . .   (422)
                                                    ------
Cash acquired with acquisition . . . . . . . . . .  $  16
                                                    ======
</TABLE>

The  Company  recorded  deferred  loan  costs of $445,901 in connection with the
issuance of warrants to purchase 3,171,000 shares of common stock in the Company
in  connection  with  debt  financing  and 155,384 shares of common stock in the
Company  in  connection  with  the  Incomex  earnout.

The  Company  recorded  a  note  payable  of  $25,000  in  exchange  for accrued
consulting  fees.

The  Company  recorded a note payable of $5,000 in exchange for accrued director
fees.

The  Company  recorded  an  increase  to  the  carrying value of the 8% Series A
Convertible  Preferred  Stock  and  a  charge  to accumulated deficit of $31,191
representing  the  current  year's  accretion  to  its  conversion  price.

The  Company recorded an increase in accrued expense and a charge to accumulated
deficit of $143,322 for the cumulative dividends earned by the holders of the 8%
Series  A  Convertible  Preferred  Stock.

The  Company  recorded  prepaid  commissions of $180,000 and accrued expenses of
$37,000  in  connection  with  the  issuance  of  2,170  shares  of  8% Series A
Convertible  Preferred  Stock.

The Company recorded long-term debt, others and land and building of $525,000 in
connection  with  the  purchase  of  ATN's  building.

The  Company  recorded  goodwill  of  $3,916,889,  accounts payable of $135,000,
accrued expenses of $153,059, common stock of $4,244,731 and decreased long-term
debt  by  $527,389  and issued 571,428 shares of common stock in connection with
the  PIC  earnout  as  discussed  in  Note  3.

The Company recorded goodwill of $4,103,776, accrued expenses of $59,187, issued
notes  payable  of  $1,084,915 and common stock of $2,469,609 in connection with
the  Incomex  purchase  as  discussed  in  Note  4.

See  notes  to  consolidated  financial  statements.

                                      F-7
<PAGE>
MURDOCK  COMMUNICATIONS  CORPORATION

NOTES  TO  CONSOLIDATED  FINANCIAL  STATEMENTS
YEARS  ENDED  DECEMBER  31,  1999  AND  1998
--------------------------------------------

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")  is  engaged  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.

Through  a  series of acquisitions and new product development in 1997 and 1998,
the  Company  transformed  itself  from a long distance reseller of AT&T network
services  to  U.S.  hotels  to  being a communications service provider in North
America.

The  Company  operated  its  business under three business units during 1998 and
1999.  Murdock  Technology  Services  ("MTS"),  formerly  the  operating unit of
Murdock  Communications  Corporation,  was the unit responsible for marketing of
AT&T  operator  services.  In light of the declining volume and narrow margin of
the  AT&T  business,  and the Company's refocused business strategy, the Company
reached  an agreement with AT&T to terminate their marketing agreement effective
October  15,  1998  (see  Note  17).

The  MTS  division  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  Telemanager,  is  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.  The
Company  also  entered into a memorandum of understanding to negotiate a sale of
certain  assets  of  MTS  to Telemanager.net.  Telemanger.net is owned by former
executives  of  the  Company.

On  October  31,  1997,  the  Company  purchased  Priority  International
Communications,  Inc.  ("PIC").  PIC  is  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 has contracts to provide such services.  Services include, but are not
limited  to,  credit  card  billing  services, live operator services, automated
collection  and  messaging  delivery  services,  voice  mail  services  and
telecommunications  consulting.  At  December  31,  1999,  PIC  maintains  site
contracts  with  and provides services for approximately 99 customers throughout
the  United  States  (207  customers  at  December  31,  1998).

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 is primarily
engaged  in  the  business  of  providing  carrier  services  for  long-distance
telecommunications companies throughout the United States.  ATN handles incoming
operator assisted calls with their operators on location.  Together, PIC and ATN
comprise  the  second  business  unit,  known  as  "PIC/ATN".

                                      F-8
<PAGE>
On  February  13,  1998,  the  Company  purchased Incomex, Inc. ("Incomex"), the
Company's third business unit (see Note 4).  Incomex is primarily engaged in the
business  of  providing  billing  and  collection  services  to  the hospitality
industry  from  Mexico  to  the  United  States.  At  December 31, 1999, Incomex
maintains  contracts  with  approximately  85  hotel and resort hotel properties
located  in  Mexico  compared  with  approximately  95  at  December  31,  1998.

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 $36.7 million, and current liabilities
exceed  current  assets by $22.3 million at December 31, 1999.  The Company also
is  past due in the payment of approximately $15.8 million of indebtedness as of
March 20, 2000.  The Company's past due debt includes approximately $7.6 million
of  notes  which  have  been  pledged  by  the holders of the notes to a bank as
collateral  for  loans  made  by the bank to such holders.  The Company has been
informed  that  this  bank  is  in serious financial difficulty and is currently
being  liquidated by the Federal Deposit Insurance Corporation ("FDIC").  If the
FDIC  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 to sustain operations are discussed below.

The  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,  to  obtain  additional  financing  and
refinancing  as may be required, and ultimately to attain profitable operations.
Management's  plans  to accomplish these objectives include, but are not limited
to,  the  following:

-     The  Company  has  retained  an  investment  banker  to assist the Company
      regarding  the  identification and investigation of strategic alternatives
      to  the  Company (see Note 18). The strategic alternatives may include the
      possible refinancing of the Company through new debt or equity financings,
      extending or converting existing debt and the sale of all or a part of the
      Company's  existing  business  units  and  other  assets.

-     The  Company  entered  into  a  nonbinding  letter of intent to merge with
      Floragraph  LLC, which owns Flower.com, an online floral website (see Note
      18).

PRINCIPLES  OF CONSOLIDATION - The consolidated financial statements include the
accounts  of  Murdock Communications Corporation and the accounts of PIC/ATN and
Incomex,  its  wholly-owned subsidiaries.  Significant intercompany accounts and
transactions  have  been  eliminated  in  consolidation.

USE  OF  ESTIMATES  - The preparation of financial statements in conformity with
generally  accepted  accounting principles requires management to make 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.  Material  estimates that are particularly susceptible to significant
change  in  the  near-term  relate to the determination of the collectibility of
receivables, impairment of long-lived assets and liability for universal service
fund  fees.

CERTAIN  RISK  CONCENTRATIONS  - The Company derived 39% and 15% in 1999 and 24%
and  12%  in  1998  of  its  revenue from two customers of PIC/ATN.  The Company
terminated  a  significant  portion  of  the  service  provided to the Company's
largest  customer  in January 2000 due to the significant bad debt expense being
experienced  related  to  such calls (see Note 2).  The Company's second largest
customer  terminated  its  relationship  with  the  Company effective June 1999.
Also,  substantially  all of the Company's leasing arrangements are with Berthel
Fisher & Company and its subsidiaries, and their affiliated leasing partnerships
("Berthel").  Berthel  owned 14.4% and 14.8% of the Company's outstanding common
stock  at  December  31,  1999  and  1998,  respectively.


                                      F-9
<PAGE>
OFF  BALANCE  SHEET  CREDIT  RISK - The Company is a party to various agreements
with  off  balance  sheet  credit risk as part of its normal course of business.
The  Company  receives  funds  from  independent billing and collection firms or
other third parties, which advances funds before collecting from the end-user by
billing  through  a  Regional  Bell  Operating  Company or other local telephone
company.  Amounts  not  ultimately  collected  from the end-user may be deducted
from future advance payments (see Note 2).  These agreements involve elements of
credit  risk  which  are  not  recognized  in the Company's consolidated balance
sheet.

REVENUE  RECOGNITION  - Revenues derived from processing long-distance telephone
calls  reflect gross charges for these calls which are recognized as revenues by
the  Company as the calls are placed.  At the same time, amounts are recorded as
cost  of  services  for  long distance charges from the carrier of the calls, as
well  as  charges for processing the calls, bad debts and commissions to be paid
based  on  the  Company's  prior  experience  for  these  items.

Revenues  derived  in  1998  from the AT&T commission agreement related to calls
were  recognized  as  revenues  as  the  calls were placed.  Additional bonuses,
primarily  for reaching the number of contracted rooms or calls specified in the
agreement,  were  recognized  when  the  specified  criteria  had  been  met.

PROPERTY  AND  EQUIPMENT  -  Property  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
ranging  from  3  to 28 years.  For income tax purposes, accelerated methods are
used.  Amortization  of  telecommunications  equipment  under  capital  lease is
included  with  depreciation  expense.

The  Company  accounts  for  its  telecommunications equipment leases as capital
leases  under  the  provisions  of  Statement  of Financial Accounting Standards
("SFAS")  No.  13.  Accordingly,  the  cost of the leased assets and the related
obligations  under  the  lease  agreements  are recorded at the inception of the
lease.  The  leases  are  generally  for  four  to  five  years.

GOODWILL  -  Goodwill  is  amortized  on the straight-line method over 10 years.

IMPAIRMENTS  - The Company periodically reviews long-lived assets and intangible
assets  for impairment whenever events or changes in circumstances indicate that
the carrying amount of these assets may not be recoverable.  While revenues have
increased  for Incomex and PIC/ATN since acquisition by the Company, the rapidly
changing competitive environments in which the Company operates, the significant
bad  debts  experienced,  the  loss  of  its  two major customers, the declining
revenues  per  call,  and  the impact of cash flow constraints on attracting new
customers  with  prepaid  commissions  has prevented the Company from increasing
operating  profits  from levels that existed prior to acquisition.  Accordingly,
in  1999,  the Company recorded an impairment write-down for goodwill related to
Incomex  of approximately $2,360,000 and PIC/ATN of approximately $2,975,000 and
a  write-down  of  other  assets,  primarily  telecommunications  equipment,  of
approximately  $317,000.  All impairments were determined based on the estimated
fair  value  of  such  assets.

COST  OF  PURCHASED  SITE  CONTRACTS  -  The cost of obtaining site contracts is
amortized  over the term of the related contracts, generally one to three years,
using  the  straight-line  method.

OTHER  INTANGIBLE  ASSETS - Other intangible assets relate to deferred lease and
loan  restructuring  costs.

Deferred  lease  and  loan restructuring costs incurred, net of amortization, in
connection  with lease and loan modification agreements of $197,008 and $659,155
at  December  31,  1999 and 1998, respectively, have been deferred and are being
amortized  over  the  restructured  lease  and  loan  agreement  terms using the
effective  interest  method.

                                      F-10
<PAGE>
INVESTMENTS  - The Company owns convertible preferred stock which is not readily
marketable.  This  investment  is accounted for at cost.  Should this investment
experience  a  decline  in  value that is other than temporary, the Company will
recognize  a  loss  to  reflect  such  decline.

PREPAID  COMMISSIONS  -  Prepaid  commissions included in other assets represent
advances to hotel customers of Incomex.  Such advances are repaid as commissions
are  earned  by  the  hotels  and  are reviewed periodically for collectibility.

INCOMEX  FUNCTIONAL CURRENCY - All contracts Incomex has entered into with their
customers  are  denominated  in  United  States  dollars.

INVESTMENT IN JOINT VENTURE - The Company's 50% investment in a joint venture is
accounted  for  under  the  equity  method.  Losses  in  excess of the Company's
investment  are recorded when the Company has a legal obligation or is otherwise
committed  to  provide  additional  financial  support.

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.

ACCRETION  ON  PREFERRED  STOCK  -  Up  to  the  date of conversion, the Company
accretes  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 - Cumulative dividends on the 8% Series
A Convertible Preferred Stock are recorded as a charge to accumulated deficit as
the  dividends  are  earned by the holders and an accrued liability is recorded.
As  of  December 31, 1999 all cumulative dividends have either been paid in cash
or  common  stock.

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,
                               ------------------------

                                   1999       1998
                                 ---------  ---------
<S>                              <C>        <C>

    Convertible preferred stock  1,681,776  1,681,776
    Options . . . . . . . . . .    355,918    146,502
    Warrants. . . . . . . . . .  1,189,000    950,937
                                 ---------  ---------
    Total . . . . . . . . . . .  3,226,694  2,779,215
-------------------------------  =========  =========
</TABLE>

RECLASSIFICATIONS  -  Certain  amounts  in  the  1998  consolidated  financial
statements  have  been  reclassified  to  conform  with  the  current  year's
presentation.

                                      F-11
<PAGE>
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.  In June 1999, the
FASB  issued SFAS No. 137, which deferred the effective date of adoption of SFAS
No.  133 for one year.  The Company will adopt SFAS No. 133 in the first quarter
of  calendar  year  2001.  The Company has not yet determined the effect of SFAS
No.  133  on  the  consolidated  financial  statements.

2.     BAD  DEBT  EXPENSE  AND  UNIVERSAL  SERVICE  FUND  FEES

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

Due  to  the  high level of these uncollectable amounts, PIC/ATN contracted with
another  billing  and  collection  firm in November 1999.  The prior billing and
collection firm alleged that PIC/ATN had breached its contract and placed a lien
on  the  collections  from  calls  processed  by  the  replacement  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.  PIC/ATN may be liable for additional amounts beyond
the  allowance  recorded  if  the  Company's  most  recent collection experience
continues  throughout the remaining open collection period.  Management believes
that the uncollectable amounts are so far in excess of any reasonable level that
either  the  billing  and collection firm or the Regional Bell Operating Company
through  which most of the calls were billed must be erroneously determining the
uncollectable  amounts.  The Company expects that PIC/ATN will refuse to pay any
additional amounts to the former billing and collection firm and the matter will
likely  be resolved through litigation.  No liability, if any, has been recorded
in  the  financial  statements  with  respect  to  this  matter.

In  December  1999,  PIC/ATN  received  notice  of  past due amounts owed to the
Universal  Service  Administrative Company ("USAC") for a universal service fund
("USF")  fee.  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.

Management  believed  that the billing and collection firm referred to above was
charging  the  end-users  the USF fee and remitting amounts owed to the USAC, as
required  by  the contract, in a similar method as with federal and state taxes.
A demand letter was sent on behalf of PIC/ATN to the billing and collection firm
for  payment.  The  billing  and collection firm responded that it has collected
and  remitted the USF fees to PIC/ATN.  Management continues to believe that the
billing  and collection firm has not remitted these amounts, but as the carrier,
PIC/ATN  is  legally  responsible  to  pay  the  USF  fee.


                                      F-12
<PAGE>
Notwithstanding  management's  belief that the prior billing and collection firm
was  contractually  required  to collect and remit USF fees to USAC, in December
1999,  the  Company  recorded a $1,700,000 liability at the PIC/ATN unit for USF
fees from 1997 through 1999 which represents the period of time the liability is
the responsibility of PIC/ATN.  PIC/ATN currently is trying to resolve the issue
and  gain  temporary  relief  from the 15-day payment demand made by USAC, which
expired  on March 16, 2000, for approximately $810,000 of the fees.  PIC/ATN may
also  be  liable  for  penalties  including $110,000 for any single violation of
nonpayment  of  USF  fees  up  to  a  maximum of $1.1 million for any continuing
violation.  No  liability  for  penalties,  if  any,  has  been  recorded in the
consolidated  financial statements.  In addition, the FCC may revoke a carrier's
operating  authority  for failure to pay such fees.  The amount of fees, if any,
PIC/ATN  may  receive  from the billing and collection firm cannot be determined
and  no  amounts  have  been  recognized.

3.     ACQUISITION  OF  PIC  AND  PIC-R

Effective October 31, 1997, the Company purchased all of the outstanding capital
stock  of  PIC and PIC-R in exchange for a cash payment at closing, the issuance
of  debt  and  the issuance of an aggregate of 300,000 shares of common stock of
the  Company.  The Stock Purchase Agreements also provided for certain recession
and  earn-out  rights.  The acquisitions were recorded under the purchase method
for  financial  reporting  purposes.  Goodwill of $4,203,709 was associated with
the  acquisitions  (see  Note  1  for  impairment).

Effective May 21, 1998, the Company and the former shareholders of PIC and PIC-R
entered  into  an  agreement  to  amend the terms of the original Stock Purchase
Agreements with respect to the Company's acquisition of PIC and PIC-R.  Pursuant
to the Stock Purchase Agreements, the former PIC and PIC-R shareholders received
certain  special  default  rights  to rescind the acquisitions of PIC and PIC-R.
The  May  21, 1998 amendment terminated the special default rights.  Pursuant to
the  amendment,  the  Company  also  issued  571,428 shares of common stock as a
prepayment  of  $1,000,000 of promissory notes due in installments through April
30,  1999  (the  "Long-Term  Notes").

Effective  December  7, 1998, the Company and the former shareholders of PIC and
PIC-R  entered into an Earn-Out Settlement Agreement.  This Agreement terminated
the  May  21, 1998 Agreement.  Pursuant to the Earn-Out Settlement Agreement, in
full  and final settlement of the earn-out rights for the former shareholders of
PIC  and  PIC-R,  the  Company issued 2,300,000 shares of common stock; issued a
$300,000  note  payable  in  24 monthly installments commencing January 7, 1999;
assumed  $135,000  of costs associated with the defense and settlement of a suit
related  to brokerage fees in connection with the PIC acquisition; and agreed to
pay  in full the total outstanding balances on the Long-Term Notes issued to the
principal  shareholders.  The  principal  balance  on  the Long-Term Notes as of
December  31, 1998 was $338,138.  Goodwill of $3,916,889 was associated with the
amended  terms  of  the  agreement  (see  Note  1  for  impairment).

4.     ACQUISITION  OF  INCOMEX

On  February  13, 1998, the Company entered into an agreement to purchase all of
the  outstanding  shares  of  common  stock  of Incomex, in exchange for 400,000
shares  of  common stock of the Company, valued at $422,500.  The agreement also
provided  for  the  Company  to pay the selling shareholders an aggregate amount
equal  to  60%  of the income before income taxes of Incomex, as defined, during
the  period  from  February 1, 1998 through July 31, 1998.  The Company had also
agreed  to  issue  common  stock  of the Company equal to an aggregate quarterly
average market value of $1.50 for each dollar of income before taxes of Incomex,
as  defined,  earned  in  excess  of  $400,000  during  the two 12 month periods
beginning  August,  1998.  The  Incomex  acquisition has been recorded under the
purchase  method.  Goodwill of $901,219 was associated with the acquisition (see
Note  1  for  impairment).

                                      F-13
<PAGE>
Effective  December  7, 1998, the Company and the former shareholders of Incomex
entered  into  an Earn-Out Settlement Agreement.  This Agreement amended certain
provisions of the Purchase Agreement to provide full and final settlement of the
earn-out  rights for the former shareholders of Incomex.  Under the terms of the
Earn-Out  Settlement  Agreement,  the  Company issued 1,500,000 shares of common
stock;  issued  $744,915 in notes payable maturing in one year at an annual rate
of  14%  and  which  included  a  1%  origination  fee;  issued 155,384 warrants
associated with the notes payable entitling the holder to purchase the Company's
common  stock  at  an  exercise  price of $3.25 which expire, if unexercised, on
December  31,  2003; issued $340,000 in notes payable due no later than April 1,
1999  and  recorded  cash  obligations  of $117,479.  Goodwill of $3,319,389 was
associated  with the amended terms of the agreement (see Note 1 for impairment).

Pro  forma  results  of  operations  (unaudited)  for the Company reflecting the
Incomex  acquisition for the year ended December 31, 1998, as if the acquisition
had  occurred  on  January  1, 1998, are as follows (dollars in thousands except
share  data):
<TABLE>
<CAPTION>

                                                           1998
<S>                                                     <C>
Total revenues . . . . . . . . . . . . . . . . . . . .  $   34,468
Cost of sales. . . . . . . . . . . . . . . . . . . . .      23,059
                                                        -----------
Gross profit . . . . . . . . . . . . . . . . . . . . .      11,409
Selling, general and administrative expense. . . . . .       7,596
Depreciation and amortization expense. . . . . . . . .       2,453
                                                        -----------
Income from operations . . . . . . . . . . . . . . . .       1,360
Gain on AT&T contract buyout . . . . . . . . . . . . .         453
Interest expense . . . . . . . . . . . . . . . . . . .      (2,766)
                                                        -----------
Loss before income tax expense and joint venture loss.        (953)
Loss from joint venture. . . . . . . . . . . . . . . .          42
Income tax expense . . . . . . . . . . . . . . . . . .          74
                                                        -----------
Net loss . . . . . . . . . . . . . . . . . . . . . . .  $   (1,069)
                                                        ===========
Pro forma net loss attributable to common shareholders  $   (1,243)
                                                        ===========
Pro forma net loss per common share. . . . . . . . . .  $     (.13)
                                                        ===========
Pro forma weighted average common shares outstanding .   9,232,881
                                                        ===========
</TABLE>

                                      F-14
<PAGE>
5.     INVESTMENTS

During  1998,  the  Company  reached  an agreement to invest in Actel Integrated
Communications,  Inc.  ("Actel").  As  of  December  31,  1998  the  Company had
invested $694,067.  As of December 31, 1999 the Company had invested $3,000,000,
incurred  investment  related costs of $31,829 and recorded accrued dividends of
$244,765,  as  discussed  below.  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  $3,000,000.  During the third quarter, the
$3,000,000  investment  was  converted into 3,000,000 shares of Actel's Series A
Convertible  Preferred Stock as allowed by the Investment Agreement.  Each share
of  Series  A  Convertible Preferred Stock accrues a cumulative 10% dividend per
annum  through  March  10,  2002  and may be converted to 1.46 shares of Actel's
common  stock  at  any  time  on  or  before March 10, 2002 at the option of the
Company,  subject  to  certain  restrictions.  In  addition,  the Company loaned
$1,000,000  to  Actel  under the terms of a promissory note dated June 23, 1999.
As  of  December  31, 1999, $500,000 had been received by the Company in partial
payment of the promissory note.  According to the terms of the note, the balance
remaining will continue as a loan due on demand with an interest rate of 18% per
annum  for  the  unpaid  balance.

Actel,  based  in  Mobile,  Alabama,  is  a  facilities-based  competitive local
exchange carrier of advanced voice and data communications services to small and
medium  sized  enterprises.  Actel offers advanced end-users services in Mobile,
Alabama;  New  Orleans,  Louisiana;  and  Birmingham,  Alabama.

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 expires August 31, 2001 and the option with AcNet
USA  expired  on  December  31,  1999.  As of December 31, 1999, the Company had
loaned  $3,692,000, recorded $264,000 of interest and incurred $747,000 of costs
either  related  to  the  acquisition  or  paid on behalf of the AcNet entities.

In  light  of the proposed merger with Floragraph LLC (see Note 18), the Company
is  not pursuing 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  a  $3,703,000  asset  write-down  in  1999  due  to the uncertainty of
ultimate  recovery of the investment.  However, the Company believes the options
to  acquire  the  AcNet  entities  remain  as  an  alternative.

The AcNet entities provide internet services and network services to businesses,
governments  and  consumers,  primarily  in  Mexico  and  Texas.

                                      F-15
<PAGE>
6.     NOTES  PAYABLE

Notes  payable  as  of  December  31, 1999 and 1998, consisted of the following:
<TABLE>
<CAPTION>

                                                                           (DOLLARS IN THOUSANDS)
                                                                           ----------------------
                                                                              1999        1998
<S>                                                                        <C>         <C>
Past due notes payable to individuals, $400,000 of which has
  been provided by related parties, bearing interest at the default
  rate of 18% (14% at December 31, 1998), 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 $1.75 per share which expire, if
  unexercised, on March 31, 2001.  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, 2001.                                                       $      500  $     500

Past due notes payable to individuals, $225,000 of which has
  been provided by related parties, bearing interest at the default
  rate of 18% (14% at December 31, 1998), 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, 2001.  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.                 1,371      1,486

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% (14% at December 31, 1998), 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      3,420

Past due notes payable to the former owners of Incomex bearing
  interest at 14% due November 15, 1999.                                          735        745

Noninterest-bearing notes payable to the former owners of
  Incomex due April 1, 1999.                                                        -        340

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, 2001.                                                  25         25

                                      F-16
<PAGE>

Note payable to director bearing interest at 14%,
  due March 31, 1999.  A warrant to purchase 5,000 shares
  of the Company's common stock was issued at an
  exercise price of $1.75 per share which expires, if
  unexercised, on March 31, 2000.                                          $        -  $       5

Notes payable to leasing company bearing interest ranging
  from 24.9% to 33.4% due in periods ranging from
  December 1999 to April 2002.                                                      -        480

Past due note payable to financial institution bearing interest at
  10.5% due March 30, 2000 collateralized by substantially all the
  assets of MTS and an assignment of leasehold interests.  Due to
  a cross-collateralization agreement with the financial institution,
  this note became due on March 28, 1999.                                         500          -

Past due note payable to financial institution bearing interest at 2%
  over the bank's prime rate (combined rate of  9.75% at December 31,
  1999 and 1998), due March 28, 1999, collateralized by substantially
  all the assets of MTS and an assignment of leasehold interests.                 400        400

Past due convertible note payable to financial institution bearing
  interest at 12% (14% upon default) due in five monthly installments
  of $200,000 beginning January 17, 2000 with a final payment of
  $1,000,000 due  June 17, 2000.  Warrants to purchase 500,000 shares
  of the Company's common stock were issued at an exercise price of $3.50
  per share  which, if unexercised, expire June, 2009.  The note is
  collateralized by 3,000,000 shares of Actel Series A preferred stock and
  substantially all assets of the Company (see additional terms below).         2,000          -

Note payable to related party bearing interest at 12% and due
  February 9, 2000.  A warrant to purchase 400,000 shares of the
  Company's common stock was issued at an exercise price of
  $3.31 per share which, if unexercised, will expire August 2004.
  The note subsequently became past due on February 9, 2000.                    2,000          -

Note payable to related party with interest at 18%, due on demand.                 17          -
                                                                           ----------  ---------

Total                                                                      $   14,443  $   7,401
                                                                           ==========  =========
</TABLE>

Also see Note 15 with respect to the estimated fair value of notes payable.  Due
to  the issuance of the warrants, all notes payable issued with warrants have an
effective  interest  rate  of  18%.

                                      F-17

<PAGE>

<PAGE>
On  June  17,  1999,  the  Company completed a bridge financing in the amount of
$2,000,000  with  New Valley Corporation ("New Valley").  Pursuant to the bridge
financing,  the Company issued a note in the principal amount of $2,000,000 (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.  Effective  July  22,  1999,  as  provided  for  in the terms of the note,
interest accrued on the unpaid balance at 14% per annum from July 22, 1999 until
August  20, 1999, at 16% per annum from August 21, 1999 until September 21, 1999
and  at  18%  per  annum from September 22, 1999 until such principal is paid in
full.  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 is due in 5 monthly payments of $200,000 beginning January 17, 2000
with  a  final  payment  of  $1,000,000  on June 17, 2000.  Waivers of any prior
violations were included as part of the amendment.  The Note is convertible into
shares of common stock of the Company at the option of New Valley at any time up
to  the  maturity  date,  in  any portion in multiples of $1,000.  The number of
shares  in  the conversion is to be obtained by dividing the principal amount of
the  Note  converted by the conversion price of $3.00.  As of March 20, 2000 the
Company  was past due on the January, February and March payments under the Note
with  New  Valley.


                                      F-18
<PAGE>
7.     LONG-TERM  DEBT

Long-term  debt,  others  as  of  December  31,  1999  and 1998 consisted of the
following:
<TABLE>
<CAPTION>


                                                                              (DOLLARS IN THOUSANDS)
                                                                              ----------------------
                                                                                  1999       1998
<S>                                                                           <C>          <C>
Mortgage note payable to partnership due in monthly
  installments of $3,299, including interest at 8.5%,
  until September 15, 2000, when the balance is due.
  The note is collateralized by a first mortgage on the
  Company's corporate office facilities and land.                             $       245  $     262

Notes payable to financial institution bearing interest at 11.25%,
  repaid in 1999.                                                                       -          9

Note payable to financial institution.  The note is collateralized by a
  security interest in a contract the Company has to provide operated
  assisted calls for a facility in Mexico.  Monthly payments are to be
  made at the greater of $10,500 or $1.05 per operated assisted call
  through the facility.  The note is due October, 2002 and has an
  effective interest rate of 33.7%.                                                   250          -

Mortgage note payable to partnership due in monthly installments of
  $6,500, including interest at 9%, due September 2008, collateralized by
  ATN's office facilities and land.  This note was repaid during 1999
  through a financing at another financial institution.                                 -        514

Note payable to financial institution to refinance an existing note on
  ATN's building and upgrade the building for the purpose of leasing a
  portion to Actel, due in monthly installments of $7,834, including
  interest at 8.4% until October 2004, when the balance is due.
  The note is collateralized by ATN's office facilities and land.                     774          -

Uncollateralized note payable to financial institution due in monthly
  installments of $12,353, including interest at the financial institution's
  prime rate (8.5% and 8.75% at December 31, 1999 and 1998,
  respectively), until January 2000, when the balance is due.                          13        139
                                                                              -----------  ---------

Total                                                                               1,282        924
Less current portion                                                                  371        199
                                                                              -----------  ---------
Long-term debt, others                                                        $       911  $     725
                                                                              ===========  =========
</TABLE>


                                      F-19
<PAGE>
Long-term  debt  with related parties at December 31, 1999 and 1998 consisted of
the  following:
<TABLE>
<CAPTION>

                                                                         (DOLLARS IN THOUSANDS)
                                                                         ----------------------
                                                                             1999       1998
<S>                                                                      <C>         <C>
Uncollateralized notes payable to Berthel due January 31, 2005,
  (net of discount of $299,648 and $341,010 at December 31, 1999
  and 1998, respectively).  Interest payable quarterly at 4%,
  beginning March 31, 1995 until maturity, when the balance
  is due (effective interest rate of 11.5%).                             $      700  $      659

Uncollateralized note payable to Berthel, due in five monthly
  installments of $9,494 including interest at 14% beginning
  on March 30, 1998, then fifty-five installments of $20,130
  including interest at 14% until February 28, 2003.                            702         759

Non-interest bearing, uncollateralized note payable to the
  owner of PIC (net of discount of $13,656 and $46,738 at December 31,
  1999 and 1998, respectively) due in monthly installments of $12,500,
  beginning January 1999 through January 2001 (effective interest rate
  of 19.6%).                                                                    136         253

Note payable to Berthel due in monthly installments of $23,528
  beginning December 1, 1997 until November 1, 2002 when
  the balance is due including interest at 14.5%, collateralized
  by all telecommunications equipment owned by PIC.                             699         840

Uncollateralized notes payable to 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           -

Non-interest bearing notes payable to the former owners of
  PIC, due in quarterly installments of $190,999, beginning on
  January 31, 1998 through January 31, 1999 and a balloon
  payment due at maturity of $955,005 on April 30, 1999, collateralized
  by a pledge of the common stock of PIC.  During 1998, 571,428
  shares of common stock were issued in exchange for $1 million
  of the principal balance as discussed in Note 3, with the remaining
  balance bearing interest at 12% and due December 31, 1998.
  The note was repaid in January 1999.                                            -         338

Uncollateralized, noninterest bearing demand notes payable to
  related parties.                                                               32          84
                                                                         ----------  ----------

Total                                                                         2,769       2,933
Less current portion                                                            647         828
                                                                         ----------  ----------
Long-term debt with related parties                                      $    2,122  $    2,105
                                                                         ==========  ==========
</TABLE>




                                      F-20
<PAGE>
Maturities  of  long-term debt for each of the five years subsequent to December
31,  1999  are  as  follows  (dollars  in  thousands):
<TABLE>
<CAPTION>

                    RELATED
            OTHER   PARTIES     TOTAL
<S>         <C>     <C>         <C>
2000 . . .  $    371  $    647  $  1,018
2001 . . .       116       922     1,038
2002 . . .       119       460       579
2003 . . .        39        39        78
2004 . . .       637         -       637
Thereafter         -       701       701
            --------  --------  --------
Total. . .  $  1,282  $  2,769  $  4,051
            ========  ========  ========
</TABLE>

Also  see  Note  15  with respect to the estimated fair value of long-term debt.

8.     PREFERRED  STOCK

On  July 2, 1997, the Company amended its articles of incorporation to authorize
1,000,000  shares  of  a  new  class  of  "blank  check"  preferred  stock.

On August 1, 1997, the Company authorized the issuance of up to 50,000 shares of
Series  A  Convertible  Preferred  Stock  (the  "Convertible  Preferred").  The
Convertible  Preferred  has  a liquidation preference, subject to adjustment, of
$100  per  share and accrues cumulative dividends at an annual rate of 8% of the
liquidation preference.  Dividends are payable quarterly at the Company's option
in  cash  or  in common stock.  Payments to holders of shares of the Convertible
Preferred  with  respect  to  liquidation or dividends must be made prior to any
payments  to  the  holders  of  shares  of  the  Company's  common  stock.  The
Convertible  Preferred  has  no  voting rights, except as required by applicable
law.  The  Convertible Preferred may also be converted into common stock, at the
holder's  option  at the conversion rate of $1.125 per share of Common Stock and
is  automatically  converted into Common Stock three years after issuance at the
same  conversion  rate  per  share  of  Common  Stock.

On  February  26,  1998, the Company agreed to issue 2,170 shares of Convertible
Preferred  to an affiliate of Berthel in exchange for the prepayment of $180,000
of  commissions  and  the payment of $37,000 of commissions then currently owed.
This  transaction  was  completed  and  the  shares  issued  on  June  19, 1998.


                                      F-21
<PAGE>
9.     COMMON  STOCK  WARRANTS

A  summary  of common stock warrant activity during the years ended December 31,
1999  and  1998  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 December 31, 1997                       2,149,279   $1.12-$9.75  $     2.91   1999-2002

Warrants issued in connection with Incomex
  Earn-Out settlement (Note 4)                       155,384          3.25        3.25        2003
Warrants issued with note payable (Note 6)         1,486,000          1.75        1.75        2001
Warrants issued with note payable (Note 6)           500,000          1.75        1.75        2001
Warrants issued with note payable (Note 6)           684,000     2.50-3.25        3.17        2003
Warrants issued with note payable (Note 6)             5,000          1.75        1.75        2000
Warrants issued with note payable (Note 6)            25,000          1.75        1.75        2001
Warrants issued with offering agreement
   (Note 6)                                           10,000          1.44        1.44        2001
Warrants issued with short-term notes payable         15,000          1.44        1.44        2001
Warrants issued with offering agreement
  (Note 6)                                           121,100          1.75        1.75        2001
Warrants issued with notes payable to related
  party                                              350,000          1.44        1.44
Warrants exercised by related party               (1,100,000)         1.44        1.44
Warrants issued with consulting agreements            20,000     3.00-3.60        3.30        2003
                                                  -----------

Balance at December 31, 1998                       4,420,763     1.12-9.75        2.86

Warrants issued with notes payable to related
  parties (Note 6 and 7)                             795,000     3.25-4.13        3.63        2003
Warrants issued with notes payable to financial
  institution (Note 6)                               500,000          3.50        3.50        2009
Warrants issued with notes payable to related
  party (Note 6)                                     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
                                                  ===========
</TABLE>



The  weighted  average  remaining  life  of  the warrants was 3 and 2.5 years at
December  31,  1999  and  1998,  respectively.

                                      F-22
<PAGE>
Warrants  outstanding  and  exercisable  at  December  31, 1999 were as follows:
<TABLE>
<CAPTION>

EXERCISE PRICE    SHARES
<S>              <C>
$1.12. . . . .    229,279
$1.44. . . . .     21,000
$1.75. . . . .  1,943,228
$2.50-$3.00. .     90,000
$3.01-$3.25. .  1,798,084
$3.26-$3.60. .  1,705,000
$9.75. . . . .     80,000
                 ---------
                 5,866,591
                 =========
</TABLE>

The  Company  issued  880,000  common  stock  warrants  in  conjunction with the
Company's  initial  public offering during 1996.  Each warrant is exercisable to
purchase one share of common stock.  As a result of the anti-dilutive provision,
the  exercise  price  at  December  31, 1998 was adjusted in accordance with the
agreement  to  $3.14.  During  1999  the  expiration  date of these warrants was
extended  from October 21, 1999 to April 21, 2000.  During this extension period
the  Company  will  not  be  obligated  to  make  any further adjustments to the
exercise  price  of  the warrants or the number of shares for which the warrants
may  be  exercised  under  the  anti-dilution  terms  of  the warrant agreement.

During  1999  193,872  warrants  were  exercised by certain individuals who held
notes  payable  from  the  Company  in  various  cashless  exercises.  Of  these
warrants,  83,872 were converted to the same number of common shares and reduced
such  notes  payable by $116,000 and accrued interest by $31,000.  The remaining
warrants  were  converted  to  51,500  shares  of  the  Company's  common stock.

10.     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 Compensation
Committee  of  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, 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-23
<PAGE>
A  summary  of  stock option activity under the 1993 Plan during the years ended
December  31,  1999  and  1998,  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 December 31, 1997      223,929   $  1.88-$4.00  $     2.51       79,279  $     1.88
  Granted at market. . . . .       30,927            2.00
  Cancelled. . . . . . . . .       (1,000)           3.25
  Cancelled. . . . . . . . .      (13,255)           2.00
                              ------------
Balance at December 31, 1998      240,601       1.88-4.00        2.04      163,026        1.97

  Exercised. . . . . . . . .      (18,500)           1.88
  Exercised. . . . . . . . .       (1,000)           2.25
                              ------------

Balance at December 31, 1999      221,101       1.88-4.00        2.06      182,564        2.02
                              ============
</TABLE>

At  December  31,  1999, options for 182,564 shares were exercisable (163,026 at
December 31, 1998), an additional 31,928 shares were available for future grants
and  the  weighted  average  remaining  life  of the options outstanding was six
years.  The  Company  has  reserved 272,529 shares of common stock in connection
with  the  1993  Plan  at  December  31,  1999  and  1998.

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 of 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,
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  has  expired.

                                      F-24
<PAGE>
A  summary  of  stock  option  activity under the 1997 Stock Option Plan for the
years  ended  December  31,  1999  and  1998,  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 December 31, 1997      255,629   $  3.13-$4.16  $     3.28      100,000  $     2.57
  Granted at market. . . . .      400,000       2.25-3.50
  Granted at market. . . . .       17,000            3.13
  Granted at market. . . . .      165,000            2.81
  Granted at market. . . . .      535,000            2.75
  Granted at market. . . . .        4,073            2.00
  Granted at market. . . . .      225,629            2.25
  Cancelled. . . . . . . . .     (225,629)           3.25
  Cancelled. . . . . . . . .       (1,745)           2.00
                              ------------
Balance at December 31, 1998    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
  Granted 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
                              ============
</TABLE>

At  December 31, 1999, options for 1,106,259 shares were exercisable (893,561 at
December  31,  1998),  an  additional  437,514  shares were available for future
grants  and  the  weighted average remaining life of the options outstanding was
eight  years.  The  Company  has  reserved  1,727,471  shares of common stock in
connection  with  the  1997  Stock  Option  Plan  at December 31, 1999 and 1998.

Options outstanding and exercisable at December 31, 1999 under the 1993 and 1997
plans  were  as  follows:
<TABLE>
<CAPTION>

                                                 OPTIONS
             OPTIONS OUTSTANDING               EXERCISABLE
             --------------------              -----------
                                  WEIGHTED
                                   AVERAGE
                                  REMAINING
                                 CONTRACTUAL
                                    LIFE
EXERCISE PRICE        SHARES     (IN YEARS)    SHARES
<S>                   <C>        <C>          <C>

1.88. . . . . . . .     83,422            4      83,422
2.00-$2.25. . . . .    615,636            7     576,401
2.50-$3.00. . . . .    695,000            8     513,333
3.13-$4.16. . . . .    117,000            8     115,667
                      ---------               ----------
                      1,511,058                1,288,823
                      =========               ==========
</TABLE>


                                      F-25
<PAGE>
No compensation expense was recorded in connection with the grant of options for
the  years ended December 31, 1999 and 1998, 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 Statement of Financial Accounting Standards No. 123,
"Accounting  for  Stock  Based Compensation" ("SFAS No. 123"), 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, 1999 and 1998 (dollars in thousands,
except  per  share  data):
<TABLE>
<CAPTION>

                                                             1999       1998
<S>                                           <C>          <C>        <C>
Net loss attributable to common shareholders  As reported  $(18,592)  $  (349)
                                              Pro forma     (19,207)   (2,348)

Net loss per common share. . . . . . . . . .  As reported  $  (1.79)  $  (.06)
                                              Pro forma       (1.85)     (.43)
</TABLE>

The  weighted  average  fair  values at date of grant for options granted during
1999  and  1998 were estimated to be $614,923 and $1,999,363, 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 102% in 1999 and 153% in 1998; risk-free interest rate of 6.4% in
1999  and  6%  in  1998;  and no dividends during the expected term.  During the
initial phase-in period, as required by SFAS No. 123, the pro forma amounts were
determined  based  on  stock  option grants and awards since 1996 only.  The pro
forma  amounts for compensation cost may not be indicative of the effects on net
loss  and  net  loss  per  share  for  future  years.

11.     INCOME  TAXES

The  provision  for  income taxes consisted of the following for the years ended
December  31,  1999  and  1998  (dollars  in  thousands):
<TABLE>
<CAPTION>

                  1999   1998
<S>               <C>    <C>
Current:
  Federal. . . .  $   -  $   -
  State. . . . .      -     74
                  -----  -----
           Total  $   -  $  74
                  =====  =====
</TABLE>

The provision for income taxes for the years ended December 31, 1999 and 1998 is
less than the amounts computed by applying the statutory federal income tax rate
of  35%  to  the loss before income taxes due to the following items (dollars in
thousands):
<TABLE>
<CAPTION>

                                                  1999     1998
<S>                                             <C>       <C>
Computed expected amount . . . . . . . . . . .  $(6,439)  $ (35)
Amortization and write-down of goodwill. . . .    2,253     295
Meals and entertainment. . . . . . . . . . . .        9      12
Officer's life insurance . . . . . . . . . . .        -       6
State income taxes, net of federal tax benefit      (69)     74
Change in valuation allowance. . . . . . . . .    4,246    (278)
                                                --------  ------
  Income tax provision . . . . . . . . . . . .  $     -   $  74
                                                ========  ======
</TABLE>




                                      F-26
<PAGE>
At  December  31,  1999  the  Company  has  net operating loss carryforwards for
federal  income  tax  purposes  of  approximately  $20  million  ($13 million at
December  31, 1998) to use to offset future taxable income.  These net operating
losses  will  expire,  if  unused,  from  December  31,  2008  through  2019.

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.  The  annual  limitation  may be
increased for any built-in gains recognized within five years of the date of the
ownership  change.

Significant  components  of the Company's deferred tax assets and liabilities as
of  December  31,  1999  and  1998  are  as  follows  (dollars  in  thousands):
<TABLE>
<CAPTION>



                                                               1999       1998
<S>                                                          <C>        <C>
Deferred tax assets:
  Current:
    Allowance for doubtful accounts receivable. . . . . . .  $    150   $   150
                                                             ---------  --------

  Noncurrent:
    Intangible asset amortization and valuation allowance .       155       213
    Differences in net book value of property and equipment       446       700
    Capital lease adjustment. . . . . . . . . . . . . . . .       298       242
    Interest and other accruals . . . . . . . . . . . . . .       523         -
    Unrealized loss on investments. . . . . . . . . . . . .     1,389         -
    Carryforward of net operating loss. . . . . . . . . . .     7,507     4,917
                                                             ---------  --------
                                                               10,318     6,072
                                                             ---------  --------
Total deferred tax assets . . . . . . . . . . . . . . . . .    10,468     6,222
Valuation allowance for deferred tax assets . . . . . . . .   (10,468)   (6,222)
                                                             ---------  --------
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.


                                      F-27
<PAGE>
12.     COMMITMENTS  AND  CONTINGENCIES

The  Company  is  obligated under long-term capital leases for telecommunication
equipment.  Substantially  all  of  the  leases  are  with Berthel and have been
capitalized  and  are  personally guaranteed by the Company's former Chairman of
the  Board.  The  Company is responsible for all property taxes, maintenance and
insurance.  The  Company  also  leases certain of its facilities under operating
leases.  At  December  31,  1999,  future  minimum  rental  payments  on  lease
obligations  are  as  follows  (dollars  in  thousands):
<TABLE>
<CAPTION>

                                                CAPITAL LEASES
                                                --------------      OPERATING
                                          BERTHEL   OTHER   TOTAL     LEASES
<S>                                       <C>       <C>     <C>     <C>
Years ending December 31:
      2000 . . . . . . . . . . . . . . .  $  2,229  $    3  $2,232  $      98
      2001 . . . . . . . . . . . . . . .     1,232       1   1,233         33
      2002 . . . . . . . . . . . . . . .     1,065       -   1,065         20
      2003 . . . . . . . . . . . . . . .       177             177         14
                                          --------  ------  ------  ---------
      Minimum rental payments. . . . . .     4,703       4   4,707  $     165
                                                                    =========
      Less amounts representing interest     1,006       -   1,006
                                          --------  ------  ------
                                             3,697       4   3,701
      Less amounts due within one year .     1,550       3   1,553
                                          --------  ------  ------
      Capital lease obligations due
        after one year . . . . . . . . .  $  2,147  $    1  $2,148
                                          ========  ======  ======
</TABLE>

Rent  expense  under  operating leases for the years ended December 31, 1999 and
1998  was  $168,203  and  $215,148,  respectively.

As  of  December 31, 1999, the Company had an unpaid balance past due to Berthel
of  approximately  $1,021,836.  Subsequent to year end, the Company has not made
certain  of  its  January,  February  and March 2000 payments totaling $398,370.
Berthel  only  has the right to demand that the Company cure this violation, but
has  not  made  such  a  demand  as  of  March  20,  2000.

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 and restrict
the  payment  of  dividends  and  other  capital  distributions.  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  20,  2000,  the  Company  and Berthel are the only parties to the
Standstill  Agreement.

The  Company  has  guaranteed  a facility lease between Actel and a third party.
The lease expires in June 2009 and total remaining noncancellable lease payments
were  $855,000 at December 31, 1999.  Actel was current on its lease payments as
of  December  31,  1999.

Subsequent  to  year  end, 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
believes that an additional $1,125,000 is outstanding representing various notes
with a significant shareholder and creditor.  Some of these notes appear to have
been  signed  by  an  officer of the Company.  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 as to the ultimate outcome of this matter.
No  loss,  if any, has been recorded in the financial statements with respect to
this  matter.


                                      F-28
<PAGE>
The  Company's  wholly-owned  subsidiary,  PIC,  is  involved  in  an  adversary
proceeding  filed  in  connection  with  two  jointly  administered  Chapter  11
proceedings  in  the United States Bankruptcy Court for the Southern District of
Florida.  On  May  13,  1997,  a  joint  motion  of  the Chapter 11 Trustees and
Strategica  Capital  Corporation  ("Strategica")  was filed for an order to show
cause why certain individuals and entities, including PIC, should not be held in
civil  contempt of court; for relief under Rule 70 of the Federal Rules of Civil
Procedure  and  Rule  7070 of the Federal Rules of Bankruptcy Procedure; and for
the  entry  of  an  order  of  criminal referral for criminal conduct of certain
individuals  and  entities,  including  PIC.  The  proceeding does not specify a
dollar  amount  of  damages.  The  contempt  motion was denied by the Bankruptcy
Court  on November 4, 1998.  Strategica filed a motion for rehearing on November
16,  1998,  which  was  denied  by  the  Bankruptcy  Court  on December 2, 1998.
Strategica  filed a notice of appeal of the adverse ruling on December 11, 1998.
PIC  filed  a  motion  for attorneys' fees and costs on November 24, 1998, and a
hearing  was  conducted by the Bankruptcy Court on January 28, 1999 with respect
to  PIC's  motion.  Strategica's appeal and PIC's motion for attorneys' fees and
costs  are  both currently pending.  Strategica filed its brief in the appeal on
March  2,  1999;  ATN and PIC filed their reply briefs in May and June 1999; and
Strategica  filed its responses in August 1999.  PIC additionally filed a motion
to  dismiss and for sanctions on August 18, 1999 which was denied.  No assurance
can  be  given  as to the ultimate outcome of this matter.  No loss, if any, has
been  recorded  in  the  consolidated  financial statements with respect to this
matter.

Incomex commenced an arbitration proceeding against EILCO Leasing Services, Inc.
("Eilco"),  a  creditor  of  Incomex,  to  resolve  a  dispute  regarding a loan
agreement  between  Incomex  and  Eilco.  Eilco  claimed  that  Incomex  was  in
violation  of  certain  covenants  of  the  loan agreement, including provisions
relating  to  certain  obligations of Incomex to make payments to Eilco based on
Incomex's  income from telecommunications services provided to a group of hotels
in  Mexico.  Incomex  disputed  these  claims  and  initiated the arbitration to
resolve  the  dispute.  An  arbitration  hearing  with  respect  to  this matter
commenced  on April 21, 1999.  On June 4, 1999, the arbitrator ruled that, after
a  credit  for  the  remaining principal balance of $341,444, Eilco owes Incomex
damages  in  the sum of $231,162, plus $3,161 for arbitration fees and expenses.
Subsequent  to  June  30,  1999,  Incomex  filed  a  petition  against  Eilco in
California state court for confirmation of the arbitration award and Eilco filed
a  petition  asserting  that the arbitrator exceeded his authority in making the
arbitration award.  On September 24, 1999 Incomex received a judgment confirming
the  arbitration  award.  As  of  December  31,  1999,  the  full  amount of the
arbitration  award  has  been recorded as other income, net of a reserve for the
entire  amount  due  from  Eilco  due  to  the  uncertainty  of  collection.

On July 20, 1998, Operator Communications, Inc. ("Oncor") filed a lawsuit in the
District  Court  of  Dallas  County,  Texas against the Company, Incomex, and an
unrelated  third party.  Oncor alleged that the defendants improperly terminated
a  long  distance  service  agreement  with  Oncor  and claimed damages based on
amounts  which  Oncor  alleged to have advanced to the Company, lost profits for
the  period  in  which  the  Company  is  alleged to have breached the contract,
attorneys'  fees  and  for  interference  with  contractual  relations  in  an
unspecified  amount  of  not  less  than  $100,000.  The  Company  asserted  a
counterclaim  for  accounting, breach of contract, misrepresentation and payment
of  attorneys'  fees.   The  Company  agreed  with Oncor to settle this claim on
April  21,  1999.  Under  the  settlement, the Company paid $150,000 to Oncor in
return  for  a  release  by  Oncor  of  its  claims  against  the  Company.

W.B.  McKee  Securities,  Inc.  ("McKee") filed suit against the Company in U.S.
District  Court  for  the  District  of Arizona alleging breach of an investment
banking  agreement  relating  to finders' fees for the PIC/ATN acquisition.  The
Company  and  McKee  entered into a settlement agreement in the first quarter of
1999  with  respect  to  this  matter.  Pursuant  to the settlement, the Company
agreed  to  pay  $100,000  to McKee in installments over a three-month period in
return  for  a general release of all claims by McKee.  The settlement amount of
$100,000  was  accrued  by the Company as of December 31, 1998 and paid in 1999.


                                      F-29
<PAGE>
A  lawsuit was filed in Superior Court of the State of California on October 20,
1999  claiming  conspiracy  to defraud, fraud and deceit, and conversion against
several  defendants,  including  ATN,  in  connection  with an Internal Operator
Services  Agreement between the plaintiffs and defendant Paramount International
Telecommunications,  Inc.  ("Paramount").  The  Internal  Operator  Services
Agreement  sets  out  that  Paramount  will provide (among other things) calling
services  and  billing  and  collection  of  the  charges through local exchange
carriers, and Paramount would deduct agreed upon fees for its services and remit
the  balance to the plaintiffs.  Paramount allegedly contracted out operator and
billing  services  with  ATN  from May 1998 until present.  In addition to other
claims  against  Paramount,  the  plaintiffs  complain  that  Paramount  and ATN
conspired  to  falsify  call  charge  reports  being  sent  to the plaintiffs by
underreporting  the  amount  of  charges  billed to the end user and keeping the
monies  generated  therefrom,  thereby  damaging the plaintiffs for no less than
approximately  $280,000.  The  plaintiffs  also  seek  punitive  damages  in  an
unspecified  amount.  ATN  filed  its response on January 4, 2000.  ATN disputes
this claim and intends to vigorously defend its position, although no assurances
can  be  given  as  to  the  outcome  of this matter.  No loss, if any, has been
recorded  in  the consolidated financial statements with respect to this matter.

On  October 1, 1998, the Company entered into an Amended and Restated Employment
Agreement  with Thomas C. Chaplin, its former Chief Executive Officer and Guy O.
Murdock,  its  former  Chairman  of the Board.  Each of the Amended and Restated
Employment  Agreements  has  a  term through December 31, 2001.  Pursuant to the
Amended  and  Restated  Employment  Agreements, Messrs. Chaplin and Murdock will
receive  base salaries of not less than $250,000 and $150,000, respectively.  In
addition,  each  of  them will be eligible to participate in the Company's bonus
plan  and  other  executive  compensation  plans.  Each  Amended  and  Restated
Employment  Agreement  contains  a  provision  restricting  competition with the
Company  for  a  period  of  two years following termination of employment.  Mr.
Chaplin's  Amended  and  Restated  Employment  Agreement  provides  that  if his
employment is terminated by the Company for any reason other than for cause, Mr.
Chaplin  will be entitled to receive severance at an annual rate of $150,000 for
two  years,  provided,  however,  that  if  his  employment is terminated by the
Company  or  by  Mr.  Chaplin for any reason within 180 days after a sale of the
Company, Mr. Chaplin will be entitled to continuation of his then effective base
salary for three years.  Mr. Murdock's Amended and Restated Employment Agreement
provides  that  if  his  employment is terminated by the Company for any reason,
including  for  cause,  Mr.  Murdock will be entitled to receive severance at an
annual rate of $150,000 for two years, provided, however, that if his employment
is  terminated  by  the Company or by Mr. Murdock for any reason within 180 days
after a sale of the Company, Mr. Murdock will be entitled to continuation of his
then  effective  base  salary for three years.  Subsequent to December 31, 1999,
Mr.  Murdock  and Mr. Chaplin resigned as officers and employees of the Company.
The  Company  is currently negotiating Mr. Murdock's and Mr. Chaplin's severance
packages.

On  November 16, 1998 the Company entered into an Employment Agreement with Paul
C. Tunink, Chief Financial Officer.  The Employment Agreement has a term through
November  30, 1999 and renews automatically from year to year thereafter, unless
terminated by either party and provides a base salary of not less than $128,000.
In  addition,  Mr. Tunink is eligible to participate in the Company's bonus plan
and  other  executive  compensation  plans.  The Employment Agreement contains a
provision  restricting  competition  with  the  Company for a period of one year
following termination of employment.  Mr. Tunink's Employment Agreement provides
if  his employment is terminated by the Company for any reason other than cause,
Mr.  Tunink  will be entitled to receive severance at an annual rate of $128,000
for  one  year  and  continuation  of  health  insurance  coverage for one year.

The  Company  has  other  employment  agreements  with  certain  key  members of
management  that  provide  for  aggregate minimum annual base compensation as of
December 31, 1999 of $430,000 expiring on various dates through 2001.  Under the
terms of these employment agreements, if employment is terminated by the Company
for  any  reason  other  than  cause,  the employees will be entitled to receive
severance  at  the  current  base  compensation  rate  for  two  years.

                                      F-30
<PAGE>
13.     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  underwriting,  to  the Company.  The Company has also paid consulting
expenses  to  a  former member of the Company's Board of Directors and had loans
with  related  parties.

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
$412,156  and  $463,976  were  generated from such agreement for the years ended
December  31,  1999  and  1998,  respectively.  Further,  the  Company  had call
processing  receivables  from the hotels included under the agreement of $55,151
and  $246,983  at  December  31,  1999  and  1998,  respectively.  The agreement
provides  for  a fixed payment of $30,000 per month in commissions to be paid to
the  minority  shareholder.

A  summary of transactions with related parties for the years ended December 31,
1999  and  1998  is  as  follows  (dollars  in  thousands):
<TABLE>
<CAPTION>

                                                  1999   1998
<S>                                              <C>     <C>
Consulting expense. . . . . . . . . . . . . . .  $   58  $  74
Interest expense on related party notes payable   1,171    290
Commissions to minority shareholder . . . . . .     360    360
Interest expense on notes payable to Berthel. .     138    134
Lease payments to Berthel . . . . . . . . . . .     507    840
Commissions and related fees to Berthel . . . .     130    142
</TABLE>

14.     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,
1999  and  1998.

15.     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.  Generally
accepted  accounting  principles  do not require disclosure for lease contracts.
The  carrying amount for financial instruments included among cash, receivables,
notes  receivable,  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.

The  estimated  fair  values  of  the  Company's  other  significant  financial
instruments at December 31, 1999 and 1998 are as follows (dollars in thousands):
<TABLE>
<CAPTION>


                                   1999                1998
                           -----------------  -----------------
                            CARRYING    FAIR   CARRYING    FAIR
                             AMOUNT    VALUE    AMOUNT    VALUE
<S>                        <C>        <C>     <C>        <C>
Long-term note receivable  $   1,000  $1,000  $     806  $  806
Long-term debt. . . . . .      4,051   3,504      3,857   3,367
</TABLE>



                                      F-31
<PAGE>
16.     BUSINESS  SEGMENT  INFORMATION

The  Company's  reportable  segments  are  structured  into  a  decentralized
organizational  structure  resulting in three stand-alone business units.  While
all  three  business  units  are  engaged  in  the  business  of  providing
telecommunications  services  to  hospitality  and payphone businesses, they are
managed separately largely due to a series of acquisitions the Company completed
in  1997  and  1998,  as  discussed  in  Notes  3  and  4.

The  Company's  three  reportable  segments  at  December  31, 1999 and 1998 are
PIC/ATN, Incomex and MTS.  The Company provides long-distance telecommunications
services to hotels, payphone owners, aggregators of operator service traffic and
other  institutions in the United States and Mexico through the PIC/ATN business
unit.  The  services  include,  but  are not limited to, live operator services,
credit  card  billing  services,  automated  collection  and  messaging delivery
services,  voice  mail  services,  telecommunications  consulting  and providing
carrier  services  for long-distance telecommunications companies.  The incoming
operator  assisted  calls  are processed with the PIC/ATN operators on location.
The Incomex business unit provides international operator services to hotels and
payphone  owners  in  Mexico  on  international  calls from Mexico to the United
States.  The  MTS  business  unit  was  created in 1998 to meet the needs of the
hospitality  telecommunications  management  market by providing database profit
management  services  and other value added services.  The MTS business unit was
formerly  the  operating  unit  of the Company responsible for marketing of AT&T
operator services until the contract was terminated during the fourth quarter of
1998.  The  Company  entered  into a Rental Agreement in February 2000 regarding
the  principal  product  of  MTS,  as  discussed  in  Note  1.

The accounting policies of the reportable segments at December 31, 1999 and 1998
are  the  same  as  those  described  in  Note  1.  The  Company  evaluates  the
performance  of  its  operating  units  based  on income (loss) from operations.

Summarized  financial  information  concerning the Company's reportable segments
(net  of  intercompany eliminations) is shown in the following table (dollars in
thousands).  The  "Other"  column  includes  corporate  related  items.
<TABLE>
<CAPTION>

                                        PIC/ATN    INCOMEX     MTS      OTHER      TOTAL
<S>                                    <C>        <C>        <C>       <C>       <C>
1999:
Revenues. . . . . . . . . . . . . . .  $ 23,150   $  8,534   $ 4,063   $     -   $ 35,747
Income (loss) from operations . . . .    (6,254)    (2,388)   (1,642)   (5,082)   (15,366)
Total assets. . . . . . . . . . . . .     6,370      3,097     1,328     4,854     15,649
Depreciation and amortization expense     1,339        470       549         -      2,358
Capital expenditures. . . . . . . . .       561         35       110         -        706

1998:
Revenues. . . . . . . . . . . . . . .  $ 20,804   $  7,921   $ 5,263   $     -   $ 33,988
Income (loss) from operations . . . .     2,077      1,796      (669)   (1,298)     1,906
Total assets. . . . . . . . . . . . .    11,079      6,274     3,542     1,783     22,678
Depreciation and amortization expense       903        174       772         -      1,849
Capital expenditures. . . . . . . . .       800        134       357         -      1,291
</TABLE>




                                      F-32
<PAGE>
Financial  information  relating  to the Company's operations by geographic area
was  for  the  years  ended  December  31,  1999 and 1998 as follows (dollars in
thousands):
<TABLE>
<CAPTION>

                                             1999     1998
<S>                                         <C>      <C>
Revenues:
  United States. . . . . . . . . . . . . .  $27,213  $26,067
  Mexico . . . . . . . . . . . . . . . . .    8,534    7,921
                                            -------  -------
           Total . . . . . . . . . . . . .  $35,747  $33,988
                                            =======  -------

Long-lived assets (excluding investments):
  United States. . . . . . . . . . . . . .  $ 7,869  $15,719
  Mexico . . . . . . . . . . . . . . . . .    1,633    1,704
                                            -------  -------
           Total . . . . . . . . . . . . .  $ 9,502  $17,423
                                            =======  =======
</TABLE>

17.     AT&T  COMMISSION  AGREEMENT

Under its agreement with AT&T, the Company received monthly commissions based on
the number of calls made, bonuses of up to $400,000 based on the number of calls
processed  during the year and monthly compliance incentive bonuses based on the
number of calls processed each month.  The agreement included provisions for the
refund  of the bonus payments should the Company terminate the agreement or fail
to  comply  with  the  agreement.  AT&T  was  responsible for determining if the
Company was in compliance with certain standards, as set forth in the agreement.
AT&T  reserved  a  number  of  grounds  to  terminate the agreement prior to its
expiration,  with  or  without  cause.

During  1998,  the  Company  and  AT&T agreed to terminate the agreement with an
effective  date  of  October  15,  1998.  The Company based this decision on the
declining  volume  and narrow margins of the AT&T business, and on the Company's
refocused  business  strategy.  AT&T  agreed  to  pay  certain hotel commissions
otherwise  payable  by  the  Company  and,  as  a result, the Company recorded a
one-time  gain  in  the  fourth  quarter  of  1998  of  $453,396.

18.     SUBSEQUENT  EVENTS

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,  including a possible refinancing of the Company, a
possible  sale  of  its  existing  operating  units and other assets or possible
repositioning of the Company through a merger.  The Company subsequently entered
into  a nonbinding letter of intent to merge with Floragraph LLC (see discussion
below).  No  other strategic transactions have been negotiated to date and there
can  be  no  assurance that any such strategic transactions will be consummated.
If  any strategic transactions are completed, the Company will owe a success fee
to  Berthel,  depending  on  the  price  of  the  strategic  transactions.

In  February  2000,  the  Company  entered into a nonbinding letter of intent to
merge with Floragraph LLC, which owns Flower.com, an online floral website.  The
merger  is  subject to the satisfaction of a number of conditions, including the
completion of due diligence, the execution of definitive agreements, the receipt
of  necessary  regulatory  approvals, approval by the Company's shareholders and
other closing conditions.  Because there are significant conditions remaining to
be  satisfied  with  respect to the merger, no assurance can be given the merger
will  be consummated or, if consummated, that the terms of the merger will be as
presently  contemplated.  Under  the  terms  of the agreement, the parties shall
negotiate in good faith to finalize and execute the agreement prior to March 31,
2000  with  closing  as soon as practicable, and in any event, prior to June 30,
2000.

                                      F-33
<PAGE>
In  February  2000,  the Company entered into a billing services advance funding
agreement  with  two independent billing and collection firms (the "Companies").
These  agreements  allow  for  the  Company  to  sell  certain  call records for
processing,  billing  and  collection  at  an advance funding rate of 70% of the
gross  billable  call  value.  These  amounts  are  remitted  to  the  Company
approximately  9  days  after  submission.  The  Company  will  then  receive an
additional  5%  or  8%  of  the  gross  billable  call  value  six  months after
submission.  Under  the  agreements, if the Companies experience charges for bad
debt,  customer  service  credits  and  other fees in excess of a stated amount,
these  additional  amounts  may  be  withheld  from  the  5%  or 8% amounts.  In
consideration  for the agreement, one of the billing and collection firms loaned
the Company $150,000, of which $60,000 has been repaid as of March 20, 2000. The
term  of the agreements are for 36 months and the $150,000 advance is personally
guaranteed  by  the  President  of  PIC/ATN  and  a  stockholder of the Company.

Subsequent  to  year  end and through March 20, 2000, the Company had borrowed a
total  of  $306,000  with  an  affiliate  of Berthel.  The borrowings are due on
demand  and bear interest at 12%.  Warrants will also be issued equal to 200% of
the  amount  of  the  loan.  The exercise price of such warrants will be the bid
price  of the Company's stock at the close of business on the day the funds were
received by the Company.


                                    * * * * *

                                      F-34