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

                                    FORM 10-K

(Mark  One)

[x]     Annual Report pursuant to section 13 or 15(d) of the Securities Exchange
Act  of  1934  for  the  fiscal  year  ended  December  31,  2002.

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

                        Commission file number 000-21463

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


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

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

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

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

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

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

     Indicate  by  check mark whether the registrant is an accelerated filer (as
defined  in  Exchange  Act  Rule  12b-2):  Yes      No  X
                                               ---     ---

     The aggregate market value of the common stock held by nonaffiliates of the
registrant  as  of June 28, 2002 (the last business day of the registrant's most
recently completed second quarter) was $669,389.  Shares of common stock held by
any  executive  officer  or  director  of  the  registrant  and  any  person who
beneficially owns 10% or more of the outstanding common stock have been excluded
from this computation because such persons may be deemed to be affiliates.  This
determination  of  affiliate  status is not a conclusive determination for other
purposes.

     On  March  1,  2003,  there  were  outstanding  12,304,967  shares  of  the
registrant's  no  par  value  common  stock.

DOCUMENTS  INCORPORATED  BY  REFERENCE

     None.

                                        2
<PAGE>
                                     PART I

ITEM  1.  BUSINESS

GENERAL

Murdock  Communications Corporation ("MCC" or the "Company") previously operated
as a holding company with the Company's principal assets as of December 31, 2000
being  the  Priority International Communications, Inc. ("PIC") business segment
and  its investment in Actel Integrated Communications, Inc. ("Actel").  PIC was
largely  a  reseller  of  call  processing  services.  Actel,  based  in Mobile,
Alabama,  was  a facilities-based competitive local exchange carrier of advanced
voice  and  data  communications services to small and medium sized enterprises.
Actel  offered  advanced  end-user  services  in the Southeastern United States.

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

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

The  Company  has  no  operating  activities  and  no  reportable  segments. The
Company's  current  strategic  direction  is  to  continue to negotiate with its
creditors  to  restructure  indebtedness  and  to  explore  potential  merger
transactions.  For  information  regarding  the  Company's  proposed  merger
transaction with Polar Molecular Corporation ("Polar"), see "Recent Developments
- Merger Agreement with Polar." If the Company is unable to restructure its past
due debt, or if the holders of the Company's past due debt seek to enforce their
rights, the Company would not be able to complete the proposed merger with Polar
or  to  continue  operating  as a going concern. See "- Recent Developments" and
"Management's  Discussion  and  Analysis  of  Financial Condition and Results of
Operations"  below.

MCC  was  incorporated  as  an  Iowa  corporation  in  1989.


                                        3
<PAGE>
RECENT  DEVELOPMENTS

MCC'S  PAST  DUE DEBT.  As of December 31, 2002, the Company was past due in the
payment  of  approximately  $14.6  million  of  principal  and  accrued interest
payments.  The  Company  was also past due with its trade vendors in the payment
of approximately $1.1 million as of December 31, 2002.  If the Company is unable
to  raise  the  necessary  funds  to  repay  its past due debt or to arrange for
extensions  or  conversions  of  such debt, its creditors may sue the Company to
demand  payment  of the amounts past due.  Any action by the Company's creditors
to  demand  repayment  of past due indebtedness is likely to prevent the Company
from  continuing  as a going concern.  See "Management's Discussion and Analysis
of  Financial  Condition  and  Results  of  Operations."

The  Company's  past  due debt at December 31, 2002 includes approximately $12.7
million of notes and accrued interest which are believed to have been pledged by
the  holders  of the notes to a bank as collateral for loans made by the bank to
such  holders.  The  Federal  Deposit  Insurance Corporation ("FDIC") liquidated
this  bank during 2000.  The Company was notified in December 2000 that the FDIC
sold  substantially  all  the  loans  and  related collateral to Republic Credit
Corporation I ("Republic").  In March 2001, the Company received a demand letter
from  Republic  for approximately $575,000 of principal plus accrued interest on
the  notes, and on July 5, 2001 Republic obtained a default judgment against the
Company  for  $781,252  plus interest at the rate of 18% per year from and after
February  6,  2001.  A  settlement was reached on June 20, 2002 with Republic to
settle  approximately $11.2 million of principal and accrued interest related to
the  notes  as  of  December 31, 2002 for $500,000.  The terms of the settlement
required  $15,000  to  be paid to Republic upon signing of the agreement and the
remaining  $485,000  is  due  upon  consummation of the Company's pending merger
transaction with Polar, discussed below.  The settlement initially provided that
if  the  merger  transaction  with  Polar was not completed for any reason on or
before December 31, 2002, the agreement with Republic would be terminated except
that  Republic  would  retain  the $15,000 paid by the Company.  During November
2002,  the  Company  entered  into  the first extension agreement with Republic.
Under the terms of the first extension agreement the Company could request up to
three  additional  one-month  extensions  of the original settlement deadline of
December  31,  2002.  Each  one-month  extension would be granted to the Company
provided that the Company pay $10,000 prior to the first day of the month of any
such  extension  to  Republic.  The Company made an extension payment of $10,000
for  January  2003.  During  January  2003,  the Company entered into the second
extension  agreement.  Under  the  terms  of the second extension agreement, the
Company  may  request  one  additional  one-month  extension  to April 30, 2003.
Additionally,  under  the  terms  of the second extension agreement, the Company
postponed payment of the February extension fee in exchange for an extension fee
of  $25,000  which  was  due  prior  to March 1, 2003 for the February and March
extension  fees.  The  Company  was  unable  to make the $25,000 payment and has
received  notification  from  Republic  that  the  Company  has defaulted on the
agreement.  Republic  is  in  the  process of reviewing its options and remedies
under  this  agreement.  If  the  Company  is  not able to reach a new extension
agreement with Republic on terms acceptable to the Company, or if Republic takes
action  to  demand payment of the past-due debt, the Company likely would not be

                                        4
<PAGE>
able  to continue operating as a going concern or to complete its pending merger
transaction  with  Polar.  Until  such  time as the Company satisfies all of the
conditions  of  the settlement agreement (if extended or otherwise amended), the
notes  and related interest will remain on the books of the Company and interest
will  continue  to  be  accrued.

Buckeye Retirement Co., L.L.C. ("Buckeye") acquired loans and related collateral
from  the  FDIC and on September 1, 2002 agreed to accept payment of $100,000 in
cash  and 475,000 shares of the Company's no par value common stock (the "Common
Stock") in full satisfaction of all principal and interest due under these notes
which  totaled  $964,452  as  of December 31, 2002. The shares to be received by
Buckeye  included  225,000 shares to be issued by the Company, 100,000 shares to
be  transferred  by  Guy O. Murdock, 75,000 shares to be transferred by Larry A.
Cahill  and  75,000  shares  to be transferred by Wayne Wright. The terms of the
settlement required $25,000 to be paid to Buckeye upon signing the agreement and
$75,000  and  the shares would be due upon consummation of the Company's pending
merger  transaction with Polar. The terms of the settlement provided that if the
merger  transaction  with  Polar  was  not completed for any reason on or before
March  31,  2003,  the  agreement  with  Buckeye would be terminated except that
Buckeye  would retain the $25,000 paid by the Company. As the merger transaction
with  Polar  was  not completed by March 31, 2003, the settlement agreement with
Buckeye  has  terminated.  If the Company is not able to reach an agreement with
Buckeye  to  extend the expiration date of the settlement on terms acceptable to
the  Company, or if Buckeye takes action to demand payment of the past-due debt,
the Company likely would not be able to continue operating as a going concern or
to  complete  its  pending merger transaction with Polar. Until such time as the
Company satisfies all of the conditions of the settlement agreement (if extended
or  otherwise  amended), the notes and related interest will remain on the books
of  the  Company  and  interest  will  continue  to  be  accrued.

MCC  continues  to engage in discussions with its other creditors to restructure
indebtedness.  The  obligation of Polar to complete the merger is subject to the
condition  that  at  the effective time of the merger MCC's liabilities will not
exceed  its  assets,  each  as  determined in accordance with generally accepted
accounting  principles,  consistent  with  past practice.  Any loans extended by
Polar  to  MCC  or MCC Merger Sub Corporation ("MCC Merger Sub") and liabilities
for  professional  fees incurred directly related to the merger will be excluded
from  the amount of liabilities for purposes of this net worth test and MCC will
also  be  entitled  to  a credit against its liabilities for purposes of the net
worth  test equal to any portion of certain amounts Polar is required to loan to
MCC  that  MCC  does  not  receive or chooses not to accept.  As of December 31,
2002,  MCC's  liabilities  exceeded  its  assets by approximately $21.9 million,
excluding loans from Polar and professional fees directly related to the merger.
As of December 31, 2002, MCC had reached agreements with the holders of MCC debt
or  other obligations in the aggregate amount of approximately $21.0 million for
the  satisfaction  of such obligations in exchange for the issuance by MCC of an
aggregate  of  4,571,307  shares  of  Common  Stock and the payment by MCC of an
aggregate  of $570,000, contingent on the closing of the merger.  However, as of
March  7,  2003  the  Company  is in default on terms of one of these settlement


                                        5
<PAGE>
agreements  for  $11.2  million  requiring  a cash payment of $485,000 and as of
March  31,  2003,  another  settlement  agreement  for $964,452 requiring a cash
payment  of  $75,000  and  the  transfer  of  475,000 shares of Common Stock had
expired.  To  satisfy  the  net worth test by closing, MCC must reach additional
agreements  with  its  creditors  to forgive or convert into equity a sufficient
amount  of liabilities to cause MCC's liabilities not to exceed its assets as of
the  closing of the merger. Any conversions of liabilities to equity will dilute
the  outstanding  Common  Stock  held by current MCC shareholders. MCC also must
raise  sufficient  funds  to make all of the payments that may be required under
the  agreements  with  MCC's  creditors, and there can be no assurance that such
funds  will  be available from Polar or otherwise. If MCC is not able to satisfy
the net worth test, Polar will have the right to terminate the merger agreement.


If  the  merger is not completed for any reason, MCC will continue to be subject
to  a  significant  amount of past-due debt and other liabilities, including the
costs  related to the proposed merger, without any source of operating cash flow
to  satisfy  its  liabilities.  MCC also would not be able to continue to borrow
from Polar, which has been MCC's principal source of cash since the beginning of
2002.  Most  of  the  agreements  that MCC has reached with creditors to forgive
debt  or  convert  debt to equity are contingent on the completion of the merger
with Polar.  MCC can make no assurance that it would be able to identify another
merger  transaction  or to reach new agreements with its creditors if the merger
is not completed, and in such event MCC would not be able to continue as a going
concern.

Based  on  agreements reached by MCC with its creditors as of December 31, 2002,
MCC  expects  that approximately $570,000 will be needed at or shortly after the
closing  of  the  merger  to make required payments to MCC's creditors. MCC must
reach  extension  or new settlement agreements with Republic and Buckeye and MCC
also  has  other  outstanding debt which MCC is attempting to restructure before
the  closing  of  the  merger,  and any agreements that MCC may reach with these
creditors may require additional payments at or shortly after the closing of the
merger.

The consolidated financial statements do not include any adjustments relating to
the  recoverability  and classification of recorded asset amounts or the amounts
and  classification of liabilities that might be necessary should the Company be
unable  to  continue  as a going concern.  The Company's continuation as a going
concern  is  dependent upon its ability to generate sufficient cash flow to meet
its  obligations  on  a  timely  basis  and  to  obtain additional financing and
refinancing as may be required.  Management's plans concerning these matters are
described  in  Note  1  to  the  consolidated  financial  statements.

MERGER  AGREEMENT  WITH  POLAR.  On  December  19,  2001,  Polar and the Company
entered  into  an  Agreement  and  Plan  of  Merger  (as  amended,  the  "Merger
Agreement").  Under the terms of the Merger Agreement, the outstanding shares of
Polar's common stock will be converted into the number of shares of Common Stock
equal  to  80%  of  the  outstanding  shares  of  the  Common  Stock  as  of the
effectiveness  of  the  merger and MCC shareholders will retain a 20% ownership.
The  outstanding  warrants  and options of MCC will remain outstanding after the


                                        6
<PAGE>
completion  of the merger and the outstanding warrants and options of Polar will
be converted into warrants and options to purchase the Common Stock based on the
exchange ratio in the merger.

Polar develops and markets fuel additives. Polar's primary product, DurAlt(R)FC,
is  a  patented  fuel  additive  that  has  been  proven  effective  at reducing
combustion  chamber  deposits  and  reducing  octane  requirement  increase  in
combustion  engines.  Polar  had  a  stockholders'  deficit  of  $4.2  million
(unaudited)  at  September 30, 2002 and revenues for its fiscal year ended March
31,  2002  were  $162,000  (unaudited).

The  proposed merger is subject to a number of significant conditions, including
approval  by the stockholders of the parties, approval of the reincorporation of
MCC  in the state of Delaware by MCC's stockholders, filings with Securities and
Exchange Commission, the conversion of the Company's indebtedness into equity, a
limit  of 1,000 shares on the number of shares of MCC or Polar common stock that
exercise  dissenters' or appraisal rights with respect to the reincorporation or
merger,  and other closing conditions.  Because there are significant conditions
remaining  to be satisfied with respect to the proposed merger, no assurance can
be  given  that the proposed merger will be consummated or, if consummated, that
the  terms  of  the  proposed  merger  will  be  as  presently  contemplated.

EMPLOYEES

As  of  December  31, 2002, MCC had one employee.  The Company's employee is not
subject  to  a  collective  bargaining  agreement.

MCC's  sole  employee  will  receive a severance payment of $3,115 in connection
with  the  termination of her employment upon the closing of the proposed merger
with  Polar.  MCC  also granted this employee stock options for 10,000 shares of
Common  Stock  at an exercise price of $0.40, contingent upon the closing of the
proposed  merger.

ITEM  2.  PROPERTIES

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

ITEM  3.  LEGAL  PROCEEDINGS

On  January  17,  2001,  Republic  filed  lawsuits  in the U.S.  District Court,
Southern  District  of  Iowa,  against  each of John Rance, Robert M. Upshaw and
Stephen  Rance and other individuals to collect on certain promissory notes held
by  Republic  Credit.  On  November  23,  2001, the three individuals previously
named,  one  of  which was a former officer and director of the Company, filed a
third party complaint against the Company, several former officers and directors
of  the  Company  and  several  related parties.  These lawsuits allege that the
named  individuals and entities devised a scheme to defraud the three plaintiffs
to  personally borrow funds from a financial institution, invest the proceeds in
the Company as a note payable with the promise of stock options and repayment of
the  notes,  and give the financial institution a security interest in the notes
under  the  Uniform

                                        7
<PAGE>
Commercial  Code.  Unspecified  damages sought by the plaintiffs include actual,
punitive,  and treble damages and court costs and attorney costs.  The Company's
Director  and  Officer  ("D&O")  insurance carrier has notified the Company that
because one of the plaintiffs was a former director of the Company, that the D&O
policy  will not provide coverage for the claims by that plaintiff.  The Company
believes  that  its D&O policy will provide coverage, up to the policy limit, in
this lawsuit related to the other two plaintiffs.  In November 2002, MCC entered
into  a settlement agreement providing for the issuance by MCC of 517,000 shares
of  Common  Stock  to  the three plaintiffs and one other individual who did not
file  suit.  The effectiveness of the settlement is contingent on the closing of
the  proposed  merger  with  Polar.  No  loss,  if any, has been recorded in the
consolidated  financial  statements  with  respect  to  these  matters.

As  of  December  31, 2002 the Company had been notified by several state taxing
authorities  that  approximately  $46,000  of  past  due  taxes and penalties is
allegedly  owed.  Some  of  the  states have assigned the alleged amounts due to
collection  agencies  or  filed  tax  warrants.  Management believes that it has
meritorious  defenses against these amounts.  No assurance can be given that the
Company's defenses are valid or that the Company will not be liable for any part
of  the  amounts.  No  loss,  if  any,  has  been  recorded  in the consolidated
financial  statements  with  respect  to  these  matters.

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

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

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  2002.
                                        8
<PAGE>
                                             PART  II

                                     PART II

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

HISTORICAL  TRADING  INFORMATION  AND  DIVIDEND  POLICY

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


<TABLE>
<CAPTION>

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

Quarter      High    Low    High    Low
-----------  -----  -----  ------  ------
<S>          <C>    <C>    <C>     <C>
FISCAL 2001
First . . .  $0.25  $0.05  $ 0.05  $ 0.02
Second. . .   0.10   0.03    0.05    0.01
Third . . .   0.45   0.03    0.10    0.01
Fourth. . .   0.18   0.05   0.045   0.005

FISCAL 2002
First . . .   0.18   0.08    0.01    0.01
Second. . .   0.18   0.08    0.01   0.008
Third . . .   0.23   0.06   0.008   0.008
Fourth. . .   0.48   0.18    0.02   0.005
</TABLE>



At  December  31, 2002, there were approximately 140 holders of record of Common
Stock.

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


                                        9
<PAGE>
RECENT  SALES  OF  UNREGISTERED  SECURITIES

During 2002, the Company issued warrants to purchase a total of 14,166 shares of
Common Stock to Murdock Communications Corporation Investment Company ("MCCIC"),
a company owned 50% by Berthel and 50% by another significant shareholder of the
Company,  in  connection  with  advances  obtained  from  MCCIC.

The  warrants  were  issued  at  exercise prices ranging from $0.08 per share to
$0.17  per  share  with  five  year  terms.  The warrants were issued in private
placements  exempt  from  the registration requirements of the Securities Act of
1933,  amended  (the  "Act"),  pursuant  to  Section  4(2)  of  the  Act.

ITEM  6.  SELECTED  FINANCIAL  DATA

The  following sets forth selected consolidated financial data in respect of the
Company's  continuing  operations.  The selected financial information set forth
in  the  table  below  is  not  necessarily  indicative of the results of future
operations  of  the Company and should be read in conjunction with "Management's
Discussion  and  Analysis  of Financial Condition and Results of Operations" and
the  consolidated  financial statements, related notes and independent auditors'
report,  contained  herein.  The statement of operations data for the five years
ended  December  31,  2002  and the related balance sheet data have been derived
from  the  audited  consolidated  financial  statements  of  the Company.  These
financial  statements  were  prepared  on  a  going  concern  basis.

                                       10
<PAGE>


<TABLE>
<CAPTION>


                                               2002       2001     2000 (a)    1999(b)   1998 (c)
                                             ---------  ---------  ---------  ---------  ---------
(In thousands, except per share data)
<S>                                          <C>        <C>        <C>        <C>        <C>
Statement of Operations Data:
  Total revenues. . . . . . . . . . . . . .  $      -   $     22   $    191   $  4,313   $  5,263
  Income (loss) from continuing operations.    (2,941)    (3,033)       152     (9,161)    (1,967)
  Basic and diluted net loss
    per common share
       Loss from continuing operations. . .     (0.24)     (0.25)         -      (0.90)     (0.40)


Balance Sheet Data:  (at end of year)
  Total assets. . . . . . . . . . . . . . .  $      9   $     15   $    277   $ 10,462   $ 12,911
  Notes payable . . . . . . . . . . . . . .    13,800      8,766      8,783     14,426      2,487
  Long-term debt. . . . . . . . . . . . . .         -      4,632      4,632      3,820      5,347
  Total liabilities . . . . . . . . . . . .    22,468     19,537     18,030     24,226      8,834
  Redeemable preferred stock. . . . . . . .         -          -          -      1,868      1,837
  Shareholders' equity (deficit). . . . . .   (22,459)   (19,522)   (17,753)   (15,632)     2,240
</TABLE>

(a)  Includes:  a $990,000 charge for the write-down of the Company's investment
     in  the  AcNet entities; a $1.6 million charge for impairment of investment
     in  Actel  and  a  gain  of $7.0 million recorded in connection with a Debt
     Restructuring  Plan  (See  Notes  4  and  6  to  the consolidated financial
     statements).

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

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



                                       11
<PAGE>
ITEM 7.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF  OPERATIONS

OVERVIEW

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

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

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

The  Company  has an agreement with Polar for a proposed merger transaction.  If
this  transaction  is  not  successful,  the Company may not be able to continue
operating  as  a  going concern.  See "- Liquidity and Capital Resources" below.


                                       12
<PAGE>
<TABLE>
<CAPTION>


RESULTS  OF  OPERATIONS
                                       Years ended December 31,
                                       ------------------------

                                        2002    2001     2000
                                       ------  -------  ------
<S>                                    <C>     <C>      <C>
Revenues . . . . . . . . . . . . . .   $    -  $   22   $  191
Cost of sales. . . . . . . . . . . .        -       -      335
Selling, general, and administrative      709     742      575
Depreciation and amortization. . . .        -       6       36
Impairment of assets . . . . . . . .        -       -    2,672
Interest expense . . . . . . . . . .    2,235   2,304    3,431
Other income (expense) . . . . . . .        3      (3)   7,001

</TABLE>


COMPARISON  OF  YEARS  ENDED  DECEMBER  31,  2002  AND  2001

SELLING,  GENERAL AND ADMINISTRATIVE EXPENSE - Consolidated selling, general and
administrative  expense  decreased  $33,000  to  $709,000  for  the  year  ended
December  31,  2002  from  $742,000  for  the year ended December 31, 2001.  The
decrease  is  primarily  related  to  lower  rents  and  consulting  fees.

DEPRECIATION  AND  AMORTIZATION  EXPENSE  -  Consolidated  depreciation  and
amortization expense declined $6,000 to $0 for the year ended December 31, 2002.
The  decline  is due to all assets being fully depreciated at December 31, 2001.

INTEREST EXPENSE - Consolidated interest expense, including amortization of debt
discount,  declined  $69,000  to $2,235,000 for the year ended December 31, 2002
from  $2,304,000  in  2001.  The  decrease  is  due  to  the  reduction  of debt
associated  with  the  sale  of  PIC.

OTHER INCOME (EXPENSE) - Consolidated other income (expense) increased $6,000 to
$3,000 income for the year ended December 31, 2002 from a $3,000 expense for the
year  ended  December  31,  2001.  The  increase  is  due  to funds from workers
compensation  insurance  received  in  2002.


                                       13
<PAGE>
COMPARISON  OF  YEARS  ENDED  DECEMBER  31,  2001  AND  2000

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

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

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

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

DISCONTINUED  OPERATIONS

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

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

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


                                       14
<PAGE>
LIQUIDITY  AND  CAPITAL  RESOURCES

At  December  31,  2002,  MCC's  current  liabilities  of $22.5 million exceeded
current  assets  of  $8,000,  resulting  in  a  working capital deficit of $22.5
million.  During the year ended December 31, 2002, MCC used $404,000 in cash for
operating  activities  of continuing operations.  The Company's principal source
of  cash  during  2002 were loans from Polar.  During 2002, the Company received
loans in the aggregate amount of $394,787 from Polar.  The Company also received
advances  in  the  aggregate  amount  of  $7,083 from MCCIC.  The Company issued
warrants  to  purchase  a  total  of  14,166  shares of Common Stock to MCCIC in
connection  with  these  advances.  The  warrants were issued at exercise prices
ranging from $0.08 per share to $0.17 per share with five year terms.  MCCIC has
no  commitment  to  make  any  future  advances  to  the  Company.

The  Company  must  raise sufficient funds to make payments that may be required
under  agreements  with the Company's creditors.  The Company also must fund its
current  operations which average $50,000 per month and expenses associated with
completing  the proposed merger with Polar.  MCC's only future source of cash is
expected  to  come from Polar.  MCC has no operating activities and no source of
operating  cash  flow.  If MCC is unsuccessful in continuing to obtain financing
from  Polar,  MCC  may  not  be  able  to  continue  as  a  going  concern.

The  Company's debt totaled $13.8 million as of December 31, 2002, compared with
$13.4 million as of December 31, 2001.  As of December 31, 2002, the Company was
past  due in the payment of approximately $14.6 million of principal and accrued
interest  payments.  The Company was also past due with its trade vendors in the
payment  of  approximately $1.1 million as of December 31, 2002.  If the Company
is  unable to raise the necessary funds to repay its past due debt or to arrange
for extensions or conversions of such debt, its creditors may sue the Company to
demand  payment  of the amounts past due.  Any action by the Company's creditors
to  demand  repayment  of past due indebtedness is likely to prevent the Company
from  continuing  as  a  going  concern.

The  Company's  past  due debt at December 31, 2002 includes approximately $12.7
million of notes and accrued interest which are believed to have been pledged by
the  holders  of the notes to a bank as collateral for loans made by the bank to
such  holders.  The  FDIC  liquidated  this  bank  during 2000.  The Company was
notified  in  December  2000  that the FDIC sold substantially all the loans and
related  collateral  to  Republic.  In March 2001, the Company received a demand
letter  from  Republic  for  approximately  $575,000  of  principal plus accrued
interest  on the notes, and on July 5, 2001 Republic obtained a default judgment
against  the Company for $781,252 plus interest at the rate of 18% per year from
and  after  February  6,  2001.  A  settlement was reached on June 20, 2002 with
Republic to settle approximately $11.2 million of principal and accrued interest
related  to  the  notes  as of December 31, 2002 for $500,000.  The terms of the
settlement required $15,000 to be paid to Republic upon signing of the agreement
and  the  remaining  $485,000  is due upon consummation of the Company's pending
merger  transaction  with  Polar.  The settlement initially provided that if the
merger  transaction  with  Polar  was  not completed for any reason on or before


                                       15
<PAGE>
December  31,  2002, the agreement with Republic would be terminated except that
Republic would retain the $15,000 paid by the Company. During November 2002, the
Company  entered  into  the  first  extension agreement with Republic. Under the
terms  of  the  first  extension agreement the Company could request up to three
additional  one-month extensions of the original settlement deadline of December
31, 2002. Each one-month extension would be granted to the Company provided that
the  Company  pay  $10,000  prior  to  the  first  day  of the month of any such
extension  to  Republic.  The  Company  made an extension payment of $10,000 for
January 2003. During January 2003, the Company entered into the second extension
agreement.  Under  the  terms of the second extension agreement, the Company may
request  one  additional  one-month  extension  to April 30, 2003. Additionally,
under the terms of the second extension agreement, the Company postponed payment
of  the February extension fee in exchange for an extension fee of $25,000 which
was  due  prior  to March 1, 2003 for the February and March extension fees. The
Company  was  unable  to  make the $25,000 payment and has received notification
from  Republic  that  the Company has defaulted on the agreement. Republic is in
the  process  of reviewing its options and remedies under this agreement. If the
Company  is  not  able to reach a new extension agreement with Republic on terms
acceptable  to the Company, or if Republic takes action to demand payment of the
past-due  debt,  the Company likely would not be able to continue operating as a
going  concern  or  to complete its pending merger transaction with Polar. Until
such  time  as  the  Company  satisfies  all of the conditions of the settlement
agreement  (as  it  may be extended or otherwise amended), the notes and related
interest  will  remain on the books of the Company and interest will continue to
be  accrued.

Buckeye  acquired loans and related collateral from the FDIC and on September 1,
2002  agreed  to accept payment of $100,000 in cash and 475,000 shares of Common
Stock  in  full satisfaction of all principal and interest due under these notes
which  totaled  $964,452  as  of December 31, 2002. The shares to be received by
Buckeye  included  225,000 shares to be issued by the Company, 100,000 shares to
be  transferred  by  Guy O. Murdock, 75,000 shares to be transferred by Larry A.
Cahill  and  75,000  shares  to be transferred by Wayne Wright. The terms of the
settlement required $25,000 to be paid to Buckeye upon signing the agreement and
$75,000  and  the shares would be due upon consummation of the Company's pending
merger  transaction with Polar. The terms of the settlement provided that if the
merger  transaction  with  Polar  was  not completed for any reason on or before
March  31,  2003,  the  agreement  with  Buckeye would be terminated except that
Buckeye  would retain the $25,000 paid by the Company. As the merger transaction
with  Polar  was  not completed by March 31, 2003, the settlement agreement with
Buckeye  has  terminated.  If the Company is not able to reach an agreement with
Buckeye  to  extend the expiration date of the settlement on terms acceptable to
the  Company, or if Buckeye takes action to demand payment of the past-due debt,
the Company likely would not be able to continue operating as a going concern or
to  complete  its  pending merger transaction with Polar. Until such time as the
Company satisfies all of the conditions of the settlement agreement (if extended
or  otherwise  amended), the notes and related interest will remain on the books
of  the  Company  and  interest  will  continue  to  be  accrued.


                                       16
<PAGE>
MCC  continues  to engage in discussions with its other creditors to restructure
indebtedness.  The  obligation of Polar to complete the merger is subject to the
condition  that  at  the effective time of the merger MCC's liabilities will not
exceed  its  assets,  each  as  determined in accordance with generally accepted
accounting  principles,  consistent  with  past  practice. Any loans extended by
Polar  to  MCC  or MCC Merger Sub and liabilities for professional fees incurred
directly  related  to the merger will be excluded from the amount of liabilities
for  purposes  of  this net worth test and MCC will also be entitled to a credit
against  its liabilities for purposes of the net worth test equal to any portion
of certain amounts Polar is required to loan to MCC that MCC does not receive or
chooses  not  to accept. As of December 31, 2002, MCC's liabilities exceeded its
assets  by  approximately  $21.9  million,  excluding  loans  from  Polar  and
professional  fees  directly related to the merger. As of December 31, 2002, MCC
had  reached agreements with the holders of MCC debt or other obligations in the
aggregate  amount  of  approximately  $21.0 million for the satisfaction of such
obligations  in  exchange  for  the issuance by MCC of an aggregate of 4,571,307
shares  of  Common  Stock  and  the  payment by MCC of an aggregate of $570,000,
contingent  on  the  closing  of  the  merger.  However, as of March 7, 2003 the
Company  is  in default on terms of one of these settlement agreements for $11.2
million  requiring  a cash payment of $485,000 and as of March 31, 2003, another
settlement  agreement  for  $964,452 requiring a cash payment of $75,000 and the
transfer of 475,000 shares of Common Stock had expired. To satisfy the net worth
test  by  closing,  MCC  must  reach additional agreements with its creditors to
forgive or convert into equity a sufficient amount of liabilities to cause MCC's
liabilities  not  to  exceed  its  assets  as  of the closing of the merger. Any
conversions  of  liabilities  to equity will dilute the outstanding Common Stock
held  by  current MCC shareholders. MCC also must raise sufficient funds to make
all  of  the  payments  that  may  be  required  under the agreements with MCC's
creditors,  and there can be no assurance that such funds will be available from
Polar or otherwise. If MCC is not able to satisfy the net worth test, Polar will
have  the  right  to  terminate  the  merger  agreement.

If  the  merger is not completed for any reason, MCC will continue to be subject
to  a  significant  amount of past-due debt and other liabilities, including the
costs  related to the proposed merger, without any source of operating cash flow
to  satisfy  its  liabilities.  MCC also would not be able to continue to borrow
from Polar, which has been MCC's principal source of cash since the beginning of
2002.  Most  of  the  agreements  that MCC has reached with creditors to forgive
debt  or  convert  debt to equity are contingent on the completion of the merger
with Polar.  MCC can make no assurance that it would be able to identify another
merger  transaction  or to reach new agreements with its creditors if the merger
is not completed, and in such event MCC would not be able to continue as a going
concern.

Based  on  agreements reached by MCC with its creditors as of December 31, 2002,
MCC  expects  that approximately $570,000 will be needed at or shortly after the
closing  of  the  merger to make required payments to MCC's creditors.  MCC must
reach  extension  or new settlement agreements with Republic and Buckeye and MCC
also  has  other  outstanding debt which MCC is attempting to restructure before
the  closing  of  the  merger,  and any agreements that MCC may reach with these
creditors may require additional payments at or shortly after the closing of the
merger.


                                       17
<PAGE>
CRITICAL  ACCOUNTING  POLICIES  AND  ESTIMATES

The  preparation  of  financial statements in accordance with generally accepted
accounting principles requires management to make estimates and assumptions that
affect  the  reported  amounts  of  assets  and  liabilities  and disclosures of
contingent  assets  and  liabilities at the date of the financial statements and
the  reported  expenses  during  the  reporting  period.  Management  bases  its
estimates  on  historical  experience  and  on  various  other  assumptions  and
information  that  it  believes  to  be  reasonable under the circumstances, the
results  of  which form the basis for making judgments about the carrying values
of  assets  and  liabilities.  Actual  results  may  differ from estimates under
different  assumptions  or  conditions.

Management  believes  that there are not any particular accounting policies that
are  more  significant  than  others  that  are  used  in the preparation of the
consolidated  financial  statements  as  the Company does not currently have any
continuing  operations.  Accounting  policies are further disclosed in Note 1 to
the  consolidated  financial  statements.

IMPACT  OF  NEW  ACCOUNTING  PRONOUNCEMENTS

In  April  2002,  the  Financial  Accounting  Standards  Board  ("FASB")  issued
Statement of Financial Accounting Standard No. 145.  This statement, among other
things,  significantly limits the situations whereby the extinguishments of debt
is  treated  as  an  extraordinary  item  in  the statement of operations.  This
statement  requires  reclassification  of  all  prior period extraordinary items
related to debt extinguishments.  The provisions of this statement are effective
for  fiscal  years  beginning  after  May  15,  2002.

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

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

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


                                       18
<PAGE>
-    the  Company's  ability  to  restructure  its  past  due  debt;

-    risks  relating  to  Polar's  business  operations;

-    the  Company's  ability  to  continue  as  a  going  concern  if  it cannot
     restructure  its  past  due debt or complete the pending merger transaction
     with  Polar;

-    the  outcome  of  pending  litigation;

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

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

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

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

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

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

ITEM  7A.  QUANTITATIVE  AND  QUALITATIVE  DISCLOSURES  ABOUT  MARKET  RISK

The  Company does not have any foreign currency exchange risk or commodity price
risk.  All  of  the  Company's debt was at a fixed interest rate at December 31,
2002 and 2001 and, therefore, the Company is not impacted by changes in interest
rates  related  to  the  debt.  The  interest  rates range from 10% to 18%.  The
Company  had  outstanding  fixed  rate  long-term debt obligations with carrying
values  of  $0  million  and  $4.6  million  at  December  31,  2002  and  2001,
respectively.  The  fair  value  of  this debt was zero at December 31, 2002 and
2001.

ITEM  8.  FINANCIAL  STATEMENTS  AND  SUPPLEMENTARY  DATA

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


                                       19
<PAGE>
ITEM  9.  CHANGES  IN  AND  DISAGREEMENTS  WITH  ACCOUNTANTS  ON  ACCOUNTING AND
FINANCIAL  DISCLOSURE

None.

                                    PART III

ITEM  10.  DIRECTORS  AND  EXECUTIVE  OFFICERS  OF  THE  REGISTRANT.

The  following  sets  forth  certain  information  with respect to the directors
and  executive  officers  of  the  Company  as  of  December  31,  2002.

<TABLE>
<CAPTION>


                                                                                           DIRECTOR
NAME, AGE, PRINCIPAL OCCUPATION FOR PAST FIVE YEARS AND DIRECTORSHIPS                 AGE  SINCE
------------------------------------------------------------------------------------  ---  --------
<S>                                                                                   <C>  <C>
GUY O. MURDOCK . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .   47    1989
Mr. Murdock has been a private investor since January 2000.  He served as
Chairman of the Board of the Corporation from  1989 to January 2000, as Chief
Executive Officer of the Corporation from 1989 to April 1997 and as President of the
 Corporation from 1989 to July 1996.

WAYNE WRIGHT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .   57    1997
Mr. Wright served as President of Priority International Communications, Inc. (a
wholly-owned subsidiary of the Corporation from October 1997 to July 2001) from
March 1997 to July 2001 and as Chairman of the Board of Priority International
Communications, Inc. from 1996 to 1997.  Effective October 2001, Mr. Wright began
serving as the Company's Principal Accounting Officer.

DAVID KIRKPATRICK. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .   63    2000
Mr. Kirkpatrick has been a private investor since 1992.  Mr. Kirkpatrick served as a
consultant to a law firm from 1991 to 1992 and as a partner of Peat Marwick (an
accounting firm) from 1962 to 1991, most recently as Managing Partner of the
Houston office.

EUGENE I. DAVIS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .   48    2000
Mr. Davis has served as Chairman of the Board and Chief Executive Officer since
August 2002.  Previously Mr. Davis served as Chairman of the Board and Chief
Executive Officer from May 2000 to October 9, 2001 when he resigned, but remained
on the Board.  Mr. Davis served as Interim Chairman of the Board and Interim Chief
Executive Officer of the Corporation from January 2000 through May 2000.  He has
served as Chairman of the Board and Chief Executive Officer of Pirinate Consulting
Group, LLC (a privately held consulting firm) since 1999 and as Chief Executive
Officer of SmarTalk Teleservices, Inc. (a prepaid calling card provider) since 1999.
Mr. Davis served as Chief Operating Officer of Total-Tel USA Communications, Inc.
(a telecommunications provider)  from 1998 to 1999.  Mr. Davis served as President
of Emerson Radio Corp. (a consumer electronics products distributor) from 1994 to
1997 and has served as Vice Chairman of the Board until 1997 and as a director from
1992 to 1997.
</TABLE>


                                       20
<PAGE>
SECTION  16(A)  BENEFICIAL  OWNERSHIP  REPORTING  COMPLIANCE

Section  16  (a)  of  the  Exchange  Act  requires  the  Company's directors and
executive  officers  and  persons who own more than 10% of a registered class of
the  Company's  equity  securities,  to  file  with  the  SEC initial reports of
beneficial  ownership  and  reports  of  changes  in beneficial ownership of the
Company's  equity  securities.  The  rules  promulgated by the SEC under Section
16(a)  of  the  Exchange  Act  require those persons to furnish the Company with
copies  of  all  reports  filed  with  the SEC pursuant to Section 16(a).  Based
solely upon a review of such forms actually furnished to the Company and written
representations  of  certain  of the Company's directors and executive officers,
all  directors,  executive officers and 10% shareholders have filed with the SEC
on  a  timely  basis all reports required to be filed under Section 16(a) of the
Exchange  Act  during  2002.

ITEM  11.  EXECUTIVE  COMPENSATION.

CASH  AND  OTHER  COMPENSATION.  The  table  which  follows  sets  forth certain
information  concerning  compensation paid to, earned by or awarded to Eugene I.
Davis, the Company's Chairman of the Board and Chief Executive Officer and Wayne
Wright,  the  Company's  Principal Accounting Officer.  Mr. Davis and Mr. Wright
are  referred  to  in  this  report  as  the  "named  executive  officers."


<TABLE>
<CAPTION>

                                           Summary Compensation Table

                                                                                Long-Term
                                                                              Compensation
                                                                                Awards
                                                   Annual Compensation         Securities
                                                -------------------------      Underlying        All  Other
Name and Principal Position          Year       Salary ($)      Bonus ($)       Options (#)    Compensation ($)
-----------------------------      --------     ---------       ---------     -------------    ----------------
<S>                                <C>          <C>             <C>           <C>              <C>

Eugene I. Davis                      2002            -               -             -             15,000 (2)
  Chairman of the Board and          2001            -               -             -            121,187 (2)
  Chief Executive Officer (1)        2000            -               -             -            181,109 (2)

Wayne Wright                         2002       48,000 (3)           -             -               -
Principal Accounting Officer         2001            -               -             -               -
                                     2000            -               -             -               -


<FN>

(1)  Mr.  Davis  served  as Chairman of the Board and Chief Executive Officer of Murdock from May 2000
to October 2001.  Mr. Davis resigned as Chief Executive officer on October 9, 2001 and resumed service
as Chief Executive Officer on August 1, 2002. Mr. Davis served as Interim Chairman on of the Board and
Interim  Chief  Executive  Officer  from  January  2000  through  May  2000.  Mr.  Davis' services are
contracted  through Pirinate Consulting Group, LLC ("Pirinate"), an entity controlled by Mr. Davis.

(2)  Represents  amounts  earned  by  Pirinate, during fiscal 2000, 2001  and  2002.

(3)  Represents  accrued  compensation  of  $4,000  per  month.
</TABLE>

                                       21
<PAGE>
OPTIONS  GRANTED  DURING 2002.  There were no stock options granted to the named
executive  officers  of  the  Company  during  the year ended December 31, 2002.

FISCAL  YEAR-END  OPTION  VALUES.  There were no unexercised options held by the
named  executive  officers  at  December  31,  2002.

CONSULTING  AGREEMENTS

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

The  Company  entered  into  an agreement dated August 1, 2002, as amended, with
Pirinate,  whereby Pirinate agreed to provide the services of Eugene I. Davis to
serve  as  Chairman of the Board and Chief Executive Officer effective August 1,
2002.  Under  the agreement, the Company issued 40,000 shares of Common Stock to
Pirinate  in  satisfaction  of  unpaid fees for Mr. Davis' past services and the
Company  agreed  to  pay Pirinate $3,000 per month during the term of Mr. Davis'
services.  The  Company  also  agreed  to  pay  contingent compensation of 4,000
shares  of  Common  Stock per month, contingent upon the closing of the proposed
merger  with  Polar.

COMPENSATION  OF  DIRECTORS

The  Company pays Mr. Kirkpatrick a monthly retainer equal to the greater of (a)
$1,000  or  (b)  $1,000 for each meeting of the Board of Directors attended.  In
addition,  in  January  2000  the  Company  issued options to Mr. Kirkpatrick to
purchase  up to 20,000 shares of Common Stock, 10,000 of which were fully vested
at  the  time of issuance and 10,000 of which vested on January 1, 2001, with an
exercise  price of $2.25 per share.  Through its letter agreement with Pirinate,
Pirinate  receives compensation for making Mr. Davis available to serve as MCC's
Chairman  of  the  Board  and  Chief  Executive  Officers  as  described  under
"Consulting  Agreements"  above.  Mr. Wright accrues compensation at the rate of
$4,000  per  month for serving as Principal Accounting Officer.  Mr. Kirkpatrick
and  Mr.  Wright  have agreed to convert all accrued compensation into shares of
Common  Stock  at  the time of the proposed merger with Polar at a rate of $3.03
per  share for compensation accrued before August 1, 2002 and at a rate of $1.00
per  share  for compensation accrued on of after August 1, 2002.  As of December
31,  2002,  $48,000  of  compensation was accrued with respect to Mr. Wright and
$22,000  of  compensation  was  accrued  with  respect  to Mr. Kirkpatrick.  Mr.
Murdock  does  not  receive  any  compensation  for  serving  on  MCC's board of
directors.

                                       22
<PAGE>
ITEM  12.  SECURITY  OWNERSHIP  OF  CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND
RELATED  STOCKHOLDER  MATTERS.

SECURITY  OWNERSHIP

The following table sets forth information as of December 31, 2002 regarding the
beneficial  ownership  of shares of Common Stock by (a) each person who is known
to  the  Company to be the beneficial owner of more that 5% of the Common Stock,
(b)  each  director,  director  nominee  and named executive officer (as defined
above)  and  (c)  all  directors  and  executive  officers  as  a  group.

Beneficial  ownership  of  Common  Stock has been determined for this purpose in
accordance  with Rules 13d-3 and 13d-5 of the Securities and Exchange Commission
("SEC")  under  the  Securities Exchange Act of 1934 (the "Exchange Act"), which
provide,  among other things, that a person is deemed to be the beneficial owner
of  Common  Stock  if  such person, directly or indirectly, has or shares voting
power  or  investment power with respect to the Common Stock or has the right to
acquire  such  ownership  within  sixty  days  after  December  31,  2002.


                                       23
<PAGE>

<TABLE>
<CAPTION>


                                                    SHARES BENEFICIALLY      PERCENT
NAME OF BENEFICIAL OWNER (1)                              OWNED  (2)         OF CLASS
----------------------------                        -------------------      --------
<S>                                                 <C>                      <C>
Eugene Davis . . . . . . . . . . . . . . . . . . .         40,000                *
David Kirkpatrick (3)  . . . . . . . . . . . . . .         20,000                *
Guy O. Murdock (4) . . . . . . . . . . . . . . . .        808,481              6.5
Wayne Wright (5) . . . . . . . . . . . . . . . . .      2,720,067             22.0
Berthel Fisher & Company (6) . . . . . . . . . . .      8,935,073             45.9
Larry A. Cahill (7). . . . . . . . . . . . . . . .      8,367,519             44.6
All directors and executive officers
 as a group (4 persons) (8). . . . . . . . . . . .      3,588,548             28.5

<FN>

*   Less  than  1%.

(1)  Unless  otherwise indicated, the address of each person listed in the table
     is  c/o  Murdock  Communications Corporation, 701 Tama Street, Marion, Iowa
     52302.

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

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

                                       24
<PAGE>

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

(5)  Includes  1,580,067 shares owned by a trust of which Mr. Wright is trustee,
     80,000  shares  subject  to exercise of warrants and 250,000 shares held by
     Mr.  Wright's  spouse.

(6)  Includes (i) 3,242,697 shares of Common Stock held by certain affiliates of
     Berthel  for  which  Berthel  shares voting and investment power, including
     401,879 shares subject to exercise of warrants and 1,172,278 shares subject
     to  conversion of convertible notes (based upon $3,551,996 of principal and
     interest  outstanding  under such notes as of December 31, 2002, divided by
     the conversion rate of $3.03 per share; (ii)5,392,887 shares subject to the
     exercise  of warrants held by MCCIC, a company owned by Bethel and Larry A.
     Cahill;  (iii)299,489  shares  directly  owned by Berthel, including 75,000
     shares  subject  to  the exercise of warrants and 110,917 shares subject to
     the  conversion  of convertible notes (based upon $336,078 of principal and
     interest  outstanding  under  such notes as of December 31,2002, divided by
     the conversion rate of $3.03 per share). Reflects information reported in a
     Schedule  13D filed with the SEC by Berthel on January 16, 1997, as amended
     on  June  6,  1997,  January 8, 1998, May 1, 1998, June 22, 1998, August 6,
     1998 and January 15, 1999, as well as certain other information provided to
     MCC.  The  address  of Berthel is 701 Tama Street, PO Box 609, Marion, Iowa
     52302-0609.

(7)  Includes  600,000  shares  subject  to exercise of warrants, 473,564 shares
     subject  to  conversion  of  convertible  notes  (based  upon $1,434,899 of
     principal  and  interest  outstanding  under  such notes as of December 31,
     2002,  divided  by  the conversion rate of $3.03 per share), 828,529 shares
     owned  by a family limited liability company and 24,734 shares owned by two
     trusts  of  which  Mr.  Cahill  is  trustee. Also includes 5,392,887 shares
     subject  to  the  exercise  of  warrants  held by MCCIC, a company owned by
     Berthel  and Mr. Cahill. Mr. Cahill's address is 3330 Southgate Court S.W.,
     Cedar  Rapids,  Iowa  52404

(8)  Includes  20,000  shares  subject to exercise of options and 275,000 shares
     subject  to  exercise  of  warrants.

</TABLE>


                                       25
<PAGE>
EQUITY  COMPENSATION  PLAN  INFORMATION

     The  following table summarizes share information, as of December 31, 2002,
for  the Company's equity compensation plans, including the Company's 1993 Stock
Option  Plan  and  the  Company's 1997 Stock Option Plan.  The 1993 Stock Option
Plan  was approved by the Company's shareholders, and the 1997 Stock Option Plan
was  not  approved  by  the  Company's  shareholders.
<TABLE>
<CAPTION>



                                                          NUMBER OF              NUMBER OF
                                                     COMMON SHARES TO BE      WEIGHTED-AVERAGE         COMMON SHARES
                                                     ISSUED UPON EXERCISE     EXERCISE PRICE OF     AVAILABLE FOR FUTURE
                                                    OF OUTSTANDING OPTIONS,  OUTSTANDING OPTIONS,   ISSUANCE UNDER EQUITY
PLAN CATEGORY                                        WARRANTS, AND RIGHTS    WARRANTS, AND RIGHTS    COMPENSATION PLANS
-------------                                       -----------------------  ---------------------  ---------------------
<S>                                                     <C>                   <C>                    <C>

Equity compensation plans approved
  by stockholders. . . . . . . . . . . . . . . . . . .                     -  $                   -             253,029

Equity compensation plans not approved
  by stockholders  . . . . . . . . . . . . . . . . . .                20,000                   2.25           1,707,471
                                                        --------------------  ---------------------  ------------------
Total. . . . . . . . . . . . . . . . . . . . . . . . .                20,000  $                2.25           1,960,500
                                                        ====================  =====================  ==================
</TABLE>



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

ITEM  13.  CERTAIN  RELATIONSHIPS  AND  RELATED  TRANSACTIONS.

From  1991 to 1998, the Company obtained lease and other financing services from
Berthel  and  its subsidiaries and their affiliated leasing partnerships.  These
financing  arrangements  have  been  converted into promissory notes that accrue
interest at the rate of 12% per year.  As of December 31, 2002, the Company owed
Berthel  a total of approximately $4.1 million of principal and accrued interest
under  these  notes.  Berthel has agreed that at the time of the proposed merger
with  Polar,  all  principal  and interest under these notes as of June 30, 2002
will  convert  to  Common Stock at the rate of $3.03 per share, and any interest
accrued  after  June 30, 2002 will be forgiven.  Berthel is the beneficial owner
of  approximately  45.9%  of  the  Common  Stock  as  of  December  31,  2002.


                                       26
<PAGE>
In  December 1999, Berthel entered into a Standstill Agreement with the Company.
Under  the  Standstill  Agreement,  Berthel  indicated  its  intention to form a
creditors  committee to represent the interest of Berthel and other creditors of
the  Company.  The Company agreed to provide the creditors committee with access
to  information  regarding  the  Company  and  its  business  and  to advise the
creditors  committee  in  advance  regarding  certain  significant  corporate
developments.  The  creditors  committee  may  also demand that the Company take
certain  actions with respect to the Company's assets and business.  The members
of  the  creditors  committee  agreed to forebear from taking actions to collect
past  due  debt  owed by the Company in the absence of the unanimous approval of
the  creditors  committee.  As of December 31, 2002, the Company and Berthel are
the  only  parties to the Standstill Agreement and Berthel is the only member of
the  creditors  committee.

In  December  1999, the Company entered into a financial advisory agreement with
Berthel  Fisher  &  Company  Financial  Services,  Inc.  ("Berthel  Financial
Services"),  an  investment banking affiliate of Berthel.  Under this agreement,
Berthel  Financial  Services  agreed  to provide investment banking services and
advice  regarding the identification and investigation of strategic alternatives
available  to  the  Company.  This  agreement, which was in effect until July 1,
2001,  required  MCC  to  pay Berthel Financial Services a nonrefundable $30,000
retainer  and a retainer fee of $15,000 per month.  On July 1, 2001, the Company
entered into a new financial advisory agreement with Berthel Financial Services,
which  requires  the Company to pay Berthel Financial Services a retainer fee of
$20,000  per  month.  Retainer  fees  under the July 1, 2001 agreement have been
accruing  on  a  monthly  basis.  As  of  December  31,  2002,  MCC owed Berthel
Financial  Services  a  total  of  approximately  $442,111  for accrued fees and
expenses  under  these  agreements.

The  Company  has  also  subleased  office  space  from Berthel Fisher & Company
Management  Corp. ("Berthel Management"), an affiliate of Berthel, since October
2001  on  a  month-to-month  basis.  The  Company  owes  Berthel  Management
approximately  $7,500  in  rental  payments  as  of  December  31,  2002.

Berthel  Financial  Services  and  Berthel  Management  have  agreed  that  upon
completion  of the proposed merger with Polar, they will convert all amounts due
to  them  by  the  Company  into  a  total  of  840,000  shares of Common Stock.

As  of  December 31, 2002, the Company owed a total of approximately $730,303 to
MCCIC, a company owned by Berthel and Larry A.  Cahill.  These borrowings accrue
interest  at the rate of 12% per year.  MCCIC has agreed that at the time of the
proposed  merger  with  Polar,  it will convert $526,669 of the outstanding debt
into  shares  of Common Stock at a rate of $2.00 per share.  MCCIC has agreed to
convert  all other debt, including accrued interest, into shares of Common Stock
at  the  rate of $1.00 per share at the time of the proposed merger.  Mr. Cahill
beneficially  owns  approximately  44.6%  of  the Common Stock outstanding as of
December 31, 2002.  During 2002, the Company issued warrants to purchase a total
of  14,166  shares of Common Stock to MCCIC in connection with advances obtained
from  MCCIC.  The warrants were issued at exercise prices ranging from $0.08 per
share  to  $0.17  per  share  with  five  year  terms.


                                       27
<PAGE>
The  Company  has issued certain promissory notes to Larry A.  Cahill and Guy O.
Murdock,  a member of MCC's board of directors.  Mr. Cahill and Mr. Murdock have
agreed  that  upon  completion  of  the  proposed  merger, they will convert all
principal  and  accrued interest as of June 30, 2002 into shares of Common Stock
at  the rate of $3.03 per share and will forgive all interest accrued after June
30,  2002.  As of December 31, 2002, the Company owed approximately $1.6 million
to  Mr.  Cahill  and  approximately  $217,019  to Mr. Murdock.  These borrowings
accrue  interest  at  the  rate  of  12%  and  18%,  respectively,  per  year.

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

The  Company  entered  into  an agreement dated August 1, 2002, as amended, with
Pirinate,  whereby Pirinate agreed to provide the services of Eugene I. Davis to
serve  as  Chairman of the Board and Chief Executive Officer effective August 1,
2002.  Under  the original agreement, the Company issued 40,000 shares of Common
Stock  to  Pirinate  in satisfaction of unpaid fees for Mr. Davis' past services
and  the  Company agreed to pay Pirinate $3,000 per month during the term of Mr.
Davis'  services.  The  Company  also  agreed  to pay contingent compensation of
4,000  shares  of  Common  Stock  per  month, contingent upon the closing of the
proposed  merger  with  Polar.

Wayne  Wright,  MCC's  Principal  Accounting Officer and member of the Company's
board  of  directors,  accrues  compensation at the rate of $4,000 per month and
David  Kirkpatrick,  a  member  of  the  Company's  board  of directors, accrues
compensation monthly at the rate equal to the greater of (a) $1,000 per month or
(b)  $1,000  for  each  meeting  of  the board of directors attended during such
month.  Mr.  Kirkpatrick  and  Mr.  Wright  have  agreed  to convert all accrued
compensation into shares of Common Stock at the time of the proposed merger at a
rate  of $3.03 per share for compensation accrued before August 1, 2002 and at a
rate of $1.00 per share for compensation accrued on of after August 1, 2002.  As
of  December  31,  2002, $48,000 of compensation was accrued with respect to Mr.
Wright  and $22,000 of compensation was accrued with respect to Mr. Kirkpatrick.


                                       28
<PAGE>
ITEM  14.     CONTROLS  AND  PROCEDURES

(a)  Evaluation  of  Disclosure  Controls  and  Procedures.  The Company's Chief
     Executive  Officer  and  Principal  Accounting  Officer  have evaluated the
     effectiveness  of the Company's disclosure controls and procedures (as such
     term  is  defined  in  Rules  13a-14(c) and 15d -14(c) under the Securities
     Exchange  Act of 1934, as amended (the "Exchange Act"), as of a date within
     90  days  prior  to  the filing date of this annual report (the "Evaluation
     Date").  Based on such evaluation, such officers have concluded that, as of
     the  Evaluation  Date, the Company's disclosure controls and procedures are
     effective  in  alerting  them  on  a  timely  basis to material information
     relating  to  the Company required to be included in the Company's periodic
     filings  under  the  Exchange  Act.

(b)  Changes  in  Internal  Controls.  Since the Evaluation Date, there have not
     been any significant changes in the Company's internal controls or in other
     factors  that  could  significantly  affect  such  controls.  There were no
     significant  deficiencies  or  material weaknesses noted in our most recent
     evaluation  and,  therefore,  there  were  no corrective actions taken with
     respect  thereto.

                                     PART IV

ITEM  15.  EXHIBITS,  FINANCIAL  STATEMENT  SCHEDULES  AND  REPORTS  ON FORM 8-K

(a)     Documents  filed  as  part  of  this  report:

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

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

     3.   Exhibits:

     2.1  Agreement  and  Plan  of  Merger, dated as of December 19, 2001, among
          Murdock  Communications  Corporation,  MCC  Merger Sub Corporation and
          Polar  Molecular  Corporation.  (11)

     2.2  Agreement  regarding  Effectiveness,  dated  as  of December 19, 2001,
          among  Murdock  Communications Corporation, MCC Merger Sub Corporation
          and  Polar  Molecular  Corporation.  (11)


                                       29
<PAGE>
     2.3  First Amendment to Agreement and Plan of Merger, dated as of August 1,
          2002,  among  Murdock  Communications  Corporation,  MCC  Merger  Sub
          Corporation  and  Polar  Molecular  Corporation.  (11)

     2.4  Second Amendment to Agreement and Plan of Merger, dated as of November
          26,  2002,  among  Murdock  Communications Corporation, MCC Merger Sub
          Corporation  and  Polar  Molecular  Corporation.  (11)

     2.5  Third  Amendment  to  Agreement and Plan of Merger dated as of January
          30,  2003,  among  Murdock  Communications Corporation, MCC Merger Sub
          Corporation  and  Polar  Molecular  Corporation.  (11)

     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  Third  Amendment  to  Restated  Articles  of  Incorporation of Murdock
          Communications  Corporation.  (11)

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

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

     4.2  Form  of  Redeemable  Warrant.  (1)

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

     4.4  Second  Amendment to Common Stock Purchase Warrant Agreement, dated as
          of  April  14,  2000,  between the Company and Firstar Bank, N.A. (11)

     4.5  Third  Amendment  to Common Stock Purchase Warrant Agreement, dated as
          of  October  9,  2000, between the Company and Firstar Bank, N.A. (11)

     4.6  Fourth  Amendment to Common Stock Purchase Warrant Agreement, dated as
          of  October  __,  2001, between Murdock Communications Corporation and
          Firstar  Bank,  N.A.  (11)


                                       30
<PAGE>
     4.7  Fifth Amendment to Common Stock Purchase Warrant Agreement and Joinder
          Agreement,  dated  as  of  October  18,  2002,  between  Murdock
          Communications  Corporation and Computershare Trust Company, Inc. (11)

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

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

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

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

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

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

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

     10.8 Letter  Agreement  dated  December  22,  1999,  between  Murdock
          Communications  Corporation  and  Berthel  Fisher  & Company Financial
          Services,  Inc.  (11)

     10.9 Letter  Agreement  dated  July 1, 2001, between Murdock Communications
          Corporation and Berthel Fisher & Company Financial Services, Inc. (11)

     10.10  Letter  Agreement  dated  November  4,  2002  between  Murdock
          Communications  Corporation  and  Berthel  Fisher  & Company Financial
          Services,  Inc.  (11)

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

     10.12  Stockholders  Agreement,  dated  as  of  April __, 2000, among Actel
          Integrated  Communications,  Inc.,  the  Company  and  the  other
          stockholders  of  Actel  Integrated  Communications,  Inc.  (9)


                                       31
<PAGE>
     10.13  First  Amendment  to Stockholders Agreement and Consent to Permitted
          Transferees,  dated  as  of  June  13,  2000,  among  Actel Integrated
          Communications,  Inc., the Company and the other stockholders of Actel
          Integrated  Communications,  Inc.  (9)

     10.14  Form  of  Convertible  Note of the Company due December 31, 2002 (9)

     10.15 Purchase Agreement, dated as of June 23, 2000, among the Company, MCC
          Acquisition  Corp.,  John  Rance, Michael Upshaw, Fernando Ficachi and
          the  other  former  shareholders  of  Incomex,  Inc.  (10)

     10.16  Addendum  to  Employment  Agreement  for  Paul  C.  Tunink  (12)(5)

     10.17  Stock  Purchase  Agreement, dated as of July 31, 2001, among Murdock
          Communications  Corporation,  MCC  Acquisition  Corporation,  Priority
          International  Communications,  Inc.  and  Dartwood,  LLC.  (13)

     10.18 Compromise, Settlement and Mutual Release Agreement, dated as of June
          20,  2002, among Republic Credit Corporation I, Murdock Communications
          Corporation  and  Silent  Woman,  L.L.C.  (14)

     10.19  Compromise,  Settlement  and  Mutual  Release Agreement, dated as of
          August 1, 2002, between Murdock Communications Corporation and Buckeye
          Retirement  Co.,  L.L.C.  (15)

     10.20  Compensation  Agreement,  dated  August  1,  2002,  between  Murdock
          Communications  Corporation and Pirinate Consulting Group, L.L.C. (15)

     10.21  First  Amendment  to  Compensation  Agreement  between  Murdock  and
          Pirinate  Consulting  Group,  L.L.C.,  dated  January  3,  2003.  (11)

     10.22 Amendment, Modification and Extension Agreement, dated as of November
          16,  2002, among Republic Credit Corporation I, Murdock Communications
          Corporation  and  Silent  Woman,  L.L.C.  (11)

     10.23 Second Amendment, Modification and Extension Agreement, dated January
          28,  2003, among Republic Credit Corporation I, Murdock Communications
          Corporation  and  Silent  Woman,  L.L.C.  (11)

     10.24  Letter Agreement between Murdock and Dave Kirkpatrick for conversion
          of  service  fees  to  equity,  dated  January  27,  2003.  (11)

     10.25  Letter  Agreement between Murdock and Wayne Wright for conversion of
          service  fees  to  equity,  dated  January  27,  2003.  (11)


                                       32
<PAGE>
     10.26  Letter  Agreement  between Murdock and Berthel Fischer & Company for
          settlement  of  outstanding  fees,  dated  January  9,  2003.  (11)

     10.27  Letter  Agreement  between  Murdock  and  MCC  Investment Company re
          outstanding  debt,  dated  January  3,  2003.  (11)

     10.28  Mutual  Settlement  and  Release  Agreement, dated November 7, 2002,
          among  John  S.  Rance,  Steven  E.  Rance, Robert M. Upshaw, Fernando
          Ficachi  and  Berthel  Fisher  & Company, Thomas J. Berthel, Ronald O.
          Brendergen, Eugene I. Davis, Thomas E. Chaplin, Guy O. Murdock, Steven
          J.  Ehlert  and  Murdock Communications Corporation and any and all of
          its current and former directors, officers, agents and employees. (11)

     21   Subsidiaries.  (11)

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

     99.1 Certification by Chief Executive Officer pursuant to 18 U.S.C. Section
          1350,  or adopted pursuant to Section 906 of the Sarbanes-Oxley Act of
          2002.

     99.2 Certification  by  Principal  Financial  Officer pursuant to 18 U.S.C.
          Section 1350, or adopted pursuant to Section 906 of the Sarbanes-Oxley
          Act  of  2002.


                                       33
<PAGE>

(1)  Filed  as  an  exhibit to the Company's Registration Statement on Form SB-2
     (File  No.  333--5422C)  and  incorporated  herein  by  reference.

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

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

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

(5)  Management  contract  or  compensatory  plan  or  arrangement.

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

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

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

(9)  Filed  as an exhibit to the Company's Quarterly Report on Form 10-Q for the
     quarter ended June 30, 2000 (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 August 30,
     2000  and  incorporated  herein  by  reference.

(11) Filed  as  an  exhibit  to the Company's Registration Statement on Form S-4
     (File  No. 333-103167) filed with the Securities and Exchange Commission on
     February  13,  2003  and  incorporated  herein  by  reference.

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


                                       34
<PAGE>
(13) Filed  as  an exhibit to the Company's Current Report on Form 8-K (File No.
     000-21463)  filed  with  the Securities and Exchange Commission on July 31,
     2001  and  incorporated  herein  by  reference.

(14) Filed  as an exhibit to the Company's Quarterly Report on Form 10-Q for the
     quarter ended June 30, 2002 (File No. 000-21463) and incorporated herein by
     reference.

(15) Filed  as an exhibit to the Company's Quarterly Report on Form 10-Q for the
     quarter  ended  September  30,  2002  (File No. 000-21463) and incorporated
     herein  by  reference.


     (b)     Reports  on  Form  8-K.

     No  reports  on  Form  8-K  were  filed  in  the  fourth  quarter  of 2002.


                                       35
<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
                                               Chief  Executive  Officer


Date:  April  15,  2003


                                POWER OF ATTORNEY

     Each person whose signature appears below hereby appoints Wayne Wright, 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-K 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.

/s/ Eugene Davis
-------------------   Director  and  Chief  Executive           April  15,  2003
Eugene  Davis         Officer (Principal Executive Officer)


/s/ Guy O. Murdock
-------------------   Director                                  April  15,  2003
Guy  O.  Murdock


/s/ Wayne Wright
-------------------   Director and Principal Accounting         April  15,  2003
Wayne  Wright         Officer (Principal Financial and
                      Accounting  Officer)

                                       36
<PAGE>
                                 CERTIFICATIONS


I,  Eugene  I.  Davis,  Chief  Executive  Officer  of  Murdock  Communications
Corporation,  certify  that:

     1.     I  have  reviewed  this  annual  report  on  Form  10-K  of  Murdock
Communications  Corporation;

     2.     Based  on  my  knowledge,  this  annual  report does not contain any
untrue  statement  of a material fact or omit to state a material fact necessary
to  make  the  statements  made,  in light of the circumstances under which such
statements  were made, not misleading with respect to the period covered by this
annual  report;

     3.     Based on my knowledge, the financial statements, and other financial
information  included  in  this  annual  report,  fairly present in all material
respects  the  financial  condition, results of operations and cash flows of the
registrant  as  of,  and  for,  the  periods  presented  in  this annual report;

     4.     The  registrant's other certifying officer and I are responsible for
establishing  and  maintaining disclosure controls and procedures (as defined in
Exchange  Act  Rules  13a-14  and  15d-14)  for  the  registrant  and  have:

          (a)     designed  such  disclosure  controls  and procedures to ensure
that material information relating to the registrant, including its consolidated
subsidiaries,  is made known to us by others within those entities, particularly
during  the  period  in  which  this  annual  report  is  being  prepared;

          (b)     evaluated  the  effectiveness  of  the registrant's disclosure
controls  and procedures as of a date within 90 days prior to the filing date of
this  annual  report  (the  "Evaluation  Date");  and

          (c)     presented  in  this  annual  report  our conclusions about the
effectiveness  of the disclosure controls and procedures based on our evaluation
as  of  the  Evaluation  Date;

     5.     The  registrant's  other  certifying  officer  and I have disclosed,
based  on our most recent evaluation, to the registrant's auditors and the audit
committee  of  registrant's  board  of  directors  (or  persons  performing  the
equivalent  functions):

          (a)     all  significant  deficiencies  in  the design or operation of
internal  controls  which  could  adversely  affect  the registrant's ability to
record, process, summarize and report financial data and have identified for the
registrant's  auditors  any  material  weaknesses  in  internal  controls;  and


                                       37
<PAGE>
          (b)     any  fraud,  whether or not material, that involves management
or  other  employees  who  have  a significant role in the registrant's internal
controls;  and

     6.     The  registrant's  other certifying officers and I have indicated in
this  annual  report  whether  or not there were significant changes in internal
controls  or  in other factors that could significantly affect internal controls
subsequent  to  the date of our most recent evaluation, including any corrective
actions  with  regard  to  significant  deficiencies  and  material  weaknesses.



     Date:  April  15,  2003
                                                   /s/ Eugene I. Davis
                                                 -------------------------------
                                                 Eugene  I.  Davis
                                                 Chief  Executive  Officer
                                                 (Principal  Executive  Officer)


                                       38
<PAGE>

I,  Wayne  Wright,  Principal  Accounting  Officer  of  Murdock  Communications
Corporation,  certify  that:

     1.     I  have  reviewed  this  annual  report  on  Form  10-K  of  Murdock
Communications  Corporation;

     2.     Based  on  my  knowledge,  this  annual  report does not contain any
untrue  statement  of a material fact or omit to state a material fact necessary
to  make  the  statements  made,  in light of the circumstances under which such
statements  were made, not misleading with respect to the period covered by this
annual  report;

     3.     Based on my knowledge, the financial statements, and other financial
information  included  in  this  annual  report,  fairly present in all material
respects  the  financial  condition, results of operations and cash flows of the
registrant  as  of,  and  for,  the  periods  presented  in  this annual report;

     4.     The  registrant's other certifying officer and I are responsible for
establishing  and  maintaining disclosure controls and procedures (as defined in
Exchange  Act  Rules  13a-14  and  15d-14)  for  the  registrant  and  have:

          (a)     designed  such  disclosure  controls  and procedures to ensure
that material information relating to the registrant, including its consolidated
subsidiaries,  is made known to us by others within those entities, particularly
during  the  period  in  which  this  annual  report  is  being  prepared;

          (b)     evaluated  the  effectiveness  of  the registrant's disclosure
controls  and procedures as of a date within 90 days prior to the filing date of
this  annual  report  (the  "Evaluation  Date");  and

          (c)     presented  in  this  annual  report  our conclusions about the
effectiveness  of the disclosure controls and procedures based on our evaluation
as  of  the  Evaluation  Date;

     5.     The  registrant's  other  certifying  officer  and I have disclosed,
based  on our most recent evaluation, to the registrant's auditors and the audit
committee  of  registrant's  board  of  directors  (or  persons  performing  the
equivalent  functions):

          (a)     all  significant  deficiencies  in  the design or operation of
internal  controls  which  could  adversely  affect  the registrant's ability to
record, process, summarize and report financial data and have identified for the
registrant's  auditors  any  material  weaknesses  in  internal  controls;  and

          (b)     any  fraud,  whether or not material, that involves management
or  other  employees  who  have  a significant role in the registrant's internal
controls;  and


                                       39
<PAGE>
     6.     The  registrant's  other certifying officers and I have indicated in
this  annual  report  whether  or not there were significant changes in internal
controls  or  in other factors that could significantly affect internal controls
subsequent  to  the date of our most recent evaluation, including any corrective
actions  with  regard  to  significant  deficiencies  and  material  weaknesses.



     Date:  April  15,  2003
                                                    /s/ Wayne Wright
                                                 -------------------------------
                                                 Wayne  Wright
                                                 Principal  Accounting  Officer
                                                 (Principal  Financial  Officer)



                                       40
<PAGE>

MURDOCK  COMMUNICATIONS  CORPORATION
INDEX  TO  CONSOLIDATED  FINANCIAL  STATEMENTS  AND  SCHEDULE
-------------------------------------------------------------

                                                                            PAGE
                                                                            ----
INDEPENDENT  AUDITORS'  REPORT  . . . . . . . . . . . . . . . . . . . .      F-2

CONSOLIDATED  FINANCIAL  STATEMENTS:

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

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

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

  Consolidated  Statements  of  Cash  Flows . . . . . . . . . . . . . .      F-8

  Notes  to  Consolidated  Financial  Statements  . . . . . . . . . . .     F-11

SCHEDULE  -  Valuation  and  Qualifying  Accounts . . . . . . . . . . .     F-31


                                      F-1
<PAGE>
INDEPENDENT  AUDITORS'  REPORT

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

We  have  audited  the  accompanying  consolidated  balance  sheets  of  Murdock
Communications  Corporation  and subsidiaries (the "Company") as of December 31,
2002  and  2001,  and  the  related  consolidated  statements  of  operations,
shareholders'  equity (deficiency) and cash flows for each of the three years in
the  period  ended  December  31,  2002.  Our audits also included the financial
statement  schedule  listed  in  the  Index.  These  financial  statements  and
financial statement schedule are the responsibility of the Company's management.
Our  responsibility  is  to  express  an opinion on the financial statements and
financial  statement  schedule  based  on  our  audits.

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

In  our  opinion,  such consolidated financial statements present fairly, in all
material  respects, the financial position of Murdock Communications Corporation
and  subsidiaries  as  of  December  31, 2002 and 2001, and the results of their
operations  and their cash flows for each of the three years in the period ended
December 31, 2002 in conformity with accounting principles generally accepted in
the  United  States  of  America.  Also, in our opinion, the financial statement
schedule,  when  considered  in  relation  to  the  basic consolidated financial
statements  taken  as  a  whole,  presents  fairly  in all material respects the
information  set  forth  therein.

The  accompanying  consolidated financial statements have been prepared assuming
that  the  Company  will continue as a going concern.  As discussed in Note 1 to
the  consolidated financial statements, the Company's recurring losses, 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  7,  2003

                                      F-2
<PAGE>

<TABLE>
<CAPTION>

MURDOCK  COMMUNICATIONS  CORPORATION

CONSOLIDATED  BALANCE  SHEETS
DECEMBER  31,  2002  AND  2001  (DOLLARS  IN  THOUSANDS)
--------------------------------------------------------

ASSETS                                                                              2002       2001
<S>                                                                               <C>        <C>
CURRENT ASSETS:
  Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  $      1   $      3
  Accounts receivable, less allowances for doubtful
    accounts:  2002 - $179; 2001 - $179. . . . . . . . . . . . . . . . . . . . .         2          -
  Prepaid expenses and other current assets. . . . . . . . . . . . . . . . . . .         5         11
                                                                                  --------   --------
           Total current assets. . . . . . . . . . . . . . . . . . . . . . . . .         8         14
                                                                                  --------   --------

OTHER ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .         1          1

                                                                                  --------   --------
TOTAL. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  $      9   $     15
                                                                                  ========   ========

LIABILITIES  AND SHAREHOLDERS' EQUITY (DEFICIENCY)

  CURRENT LIABILITIES:
    Notes payable with related parties (Note 5). . . . . . . . . . . . . . . . .  $  7,186   $  2,721
    Notes payable, others (Note 5) . . . . . . . . . . . . . . . . . . . . . . .     6,614      6,045
    Accounts payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .       960        614
    Accrued interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .     7,272      5,036
    Other accrued expenses . . . . . . . . . . . . . . . . . . . . . . . . . . .       436        489
                                                                                  --------   --------
           Total current liabilities . . . . . . . . . . . . . . . . . . . . . .    22,468     14,905

  LONG-TERM LIABILITIES:
    Long-term debt with related parties (Note 5) . . . . . . . . . . . . . . . .         -      4,063
    Long-term debt, others (Note 5). . . . . . . . . . . . . . . . . . . . . . .         -        569
                                                                                  --------   --------
           Total liabilities . . . . . . . . . . . . . . . . . . . . . . . . . .    22,468     19,537
                                                                                  --------   --------

COMMITMENTS AND CONTINGENCIES (Note 10)

SHAREHOLDERS' EQUITY (DEFICIENCY):
  Common stock, no par or stated value (Note 8):
    Authorized - 40,000,000 shares
    Issued and outstanding:  2002 - 12,554,967 shares; 2001 - 12,514,967 shares.    22,291     22,287
  Common stock warrants (Note 7):
    Issued and outstanding:  2002 - 10,889,478; 2001 - 10,875,312. . . . . . . .     1,052      1,052
  Treasury stock at cost: 2002 and 2001 - 250,000 shares . . . . . . . . . . . .       (94)       (94)
  Additional paid-in capital . . . . . . . . . . . . . . . . . . . . . . . . . .       134        134
  Accumulated deficit. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .   (45,842)   (42,901)
                                                                                  ---------  ---------
           Total  shareholders' deficiency . . . . . . . . . . . . . . . . . . .   (22,459)   (19,522)
                                                                                  ---------  ---------

TOTAL. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  $      9   $     15
                                                                                  =========  =========

See notes to consolidated financial statements.
</TABLE>


                                      F-3
<PAGE>

<TABLE>
<CAPTION>

MURDOCK  COMMUNICATIONS  CORPORATION

CONSOLIDATED  STATEMENTS  OF  OPERATIONS
YEARS  ENDED  DECEMBER 31, 2002, 2001 AND 2000 (DOLLARS IN THOUSANDS EXCEPT SHARE DATA)
---------------------------------------------------------------------------------------

                                                       2002      2001      2000
<S>                                                  <C>       <C>       <C>
CONTINUING OPERATIONS:

REVENUES:
  Call processing . . . . . . . . . . . . . . . . .  $     -   $    19   $   135
  Other revenue . . . . . . . . . . . . . . . . . .        -         3        56
                                                     --------  --------  --------
           Total revenues . . . . . . . . . . . . .        -        22       191
                                                     --------  --------  --------

COST OF SALES:
  Call processing . . . . . . . . . . . . . . . . .        -         -       330
  Other cost of sales . . . . . . . . . . . . . . .        -         -         5
                                                     --------  --------  --------
           Total cost of sales. . . . . . . . . . .        -         -       335
                                                     --------  --------  --------

GROSS PROFIT (LOSS) . . . . . . . . . . . . . . . .        -        22      (144)
                                                     --------  --------  --------

OPERATING EXPENSES:
  Selling, general and administrative expense . . .      709       742       575
  Depreciation and amortization expense . . . . . .        -         6        36
  Impairment of assets (Note 4) . . . . . . . . . .        -         -     1,682
  AcNet bad debt and acquisition expenses (Note 4).        -         -       990
                                                     --------  --------  --------
           Total operating expenses . . . . . . . .      709       748     3,283
                                                     --------  --------  --------

LOSS FROM OPERATIONS. . . . . . . . . . . . . . . .     (709)     (726)   (3,427)
                                                     --------  --------  --------

NONOPERATING  INCOME (EXPENSE):
  Interest expense. . . . . . . . . . . . . . . . .   (2,235)   (2,304)   (3,431)
  Other income (expense) (Note 6) . . . . . . . . .        3        (3)    7,001
                                                     --------  --------  --------
           Total nonoperating income (expense). . .   (2,232)   (2,307)    3,570
                                                     --------  --------  --------

INCOME (LOSS) BEFORE INCOME TAXES . . . . . . . . .   (2,941)   (3,033)      143

INCOME TAX BENEFIT (Note 9) . . . . . . . . . . . .        -         -         9
                                                     --------  --------  --------

INCOME (LOSS) FROM CONTINUING OPERATIONS. . . . . .   (2,941)   (3,033)      152
                                                     --------  --------  --------

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

LOSS BEFORE EXTRAORDINARY ITEM. . . . . . . . . . .   (2,941)   (1,814)   (5,024)

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

NET LOSS. . . . . . . . . . . . . . . . . . . . . .   (2,941)   (1,814)   (4,302)

DIVIDENDS AND ACCRETION ON 8% SERIES A CONVERTIBLE
  PREFERRED STOCK . . . . . . . . . . . . . . . . .        -         -      (125)
                                                     --------  --------  --------

NET LOSS ATTRIBUTABLE TO COMMON SHAREHOLDERS. . . .  $(2,941)  $(1,814)  $(4,427)
                                                     ========  ========  ========

                                                                      (Continued)
</TABLE>

                                      F-4
<PAGE>

<TABLE>
<CAPTION>

MURDOCK  COMMUNICATIONS  CORPORATION

CONSOLIDATED  STATEMENTS  OF  OPERATIONS
YEARS  ENDED  DECEMBER  31,  2002,  2001  AND  2000
(DOLLARS  IN  THOUSANDS  EXCEPT  SHARE  DATA)  (CONCLUDED)
----------------------------------------------------------


                                                          2002          2001          2000
<S>                                                   <C>           <C>           <C>
BASIC AND DILUTED NET LOSS PER COMMON SHARE
 Income (loss) from continuing operations. . . . . .  $     (0.24)  $     (0.25)  $         -
 Income (loss) from discontinued operations. . . . .            -          0.10         (0.48)
                                                      ------------  ------------  ------------
 Loss before extraordinary item. . . . . . . . . . .        (0.24)        (0.15)        (0.48)
 Extraordinary item - gain on extinguishment of debt            -             -          0.07
                                                      ------------  ------------  ------------
 Net loss. . . . . . . . . . . . . . . . . . . . . .  $     (0.24)  $     (0.15)  $     (0.41)
                                                      ============  ============  ============

BASIC AND DILUTED WEIGHTED AVERAGE COMMON
  SHARES OUTSTANDING . . . . . . . . . . . . . . . .   12,281,732    12,264,967    10,869,511
                                                      ============  ============  ============

See notes to consolidated financial statements.
</TABLE>


                                      F-5
<PAGE>

<TABLE>
<CAPTION>

MURDOCK  COMMUNICATIONS  CORPORATION

CONSOLIDATED  STATEMENTS  OF  SHAREHOLDERS'  EQUITY  (DEFICIENCY)
YEARS  ENDED  DECEMBER  31,  2002,  2001  AND  2000  (DOLLAR  AND  SHARE  DATA  IN  THOUSANDS)
----------------------------------------------------------------------------------------------

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

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

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

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

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

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

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

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

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

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

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

                            (Continued)

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

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

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

  Cancellation of warrants . . . . . . . . . . . .           -           -            (99)

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

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

  Conversion of preferred stock into common stock.           -           -              -

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

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

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

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

                            (Continued)
</TABLE>


                                      F-6
<PAGE>

<TABLE>
<CAPTION>

MURDOCK  COMMUNICATIONS  CORPORATION

CONSOLIDATED  STATEMENTS  OF  SHAREHOLDERS'  EQUITY  (DEFICIENCY)
YEARS  ENDED  DECEMBER  31,  2002,  2001  AND  2000  (CONCLUDED)  (DOLLAR  AND  SHARE  DATA  IN  THOUSANDS)
-----------------------------------------------------------------------------------------------------------


                                                       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, 2001 . . . . . . . . . .             -  $       -          12,515  $    22,287       10,696  $ 1,007

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

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

BALANCES AT DECEMBER 31, 2001 . . . . . . . . .             -          -          12,515       22,287       10,875    1,052

Issuance of warrants in connection with
  debt financing. . . . . . . . . . . . . . . .             -          -               -            -           14        -

Issuance of common stock for the
  extinguishment of an accrued
  expense . . . . . . . . . . . . . . . . . . .             -          -              40            4            -        -

  Net loss for 2002 . . . . . . . . . . . . . .             -          -               -            -            -        -
                                                 ------------  ---------  --------------  -----------  -----------  -------

BALANCES AT DECEMBER 31, 2002 . . . . . . . . .             -  $       -          12,555  $    22,291       10,889  $ 1,052
                                                 ============  =========  ==============  ===========  ===========  =======


See notes to consolidated financial statements.

                                                   TREASURY STOCK                                 SHARE-
                                                 NUMBER             ADDITIONAL                   HOLDERS'
                                                   OF                PAID-IN     ACCUMULATED      EQUITY
                                                 SHARES  ISSUED      CAPITAL       DEFICIT     (DEFICIENCY)
<S>                                              <C>     <C>        <C>         <C>            <C>
BALANCES AT JANUARY 1, 2001 . . . . . . . . . .     250  $    (94)  $      134  $    (41,087)  $  (17,753)

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

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

BALANCES AT DECEMBER 31, 2001 . . . . . . . . .     250       (94)         134       (42,901)     (19,522)

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

Issuance of common stock for the
  extinguishment of an accrued
  expense . . . . . . . . . . . . . . . . . . .       -         -            -             -            4

  Net loss for 2002 . . . . . . . . . . . . . .       -         -            -        (2,941)      (2,941)
                                                 ------  ---------  ----------  -------------  -----------

BALANCES AT DECEMBER 31, 2002 . . . . . . . . .     250  $    (94)  $      134  $    (45,842)  $  (22,459)
                                                 ======  =========  ==========  =============  ===========


See notes to consolidated financial statements.
</TABLE>


                                      F-7
<PAGE>

<TABLE>
<CAPTION>

MURDOCK  COMMUNICATIONS  CORPORATION

CONSOLIDATED  STATEMENTS  OF  CASH  FLOWS
YEARS  ENDED  DECEMBER  31,  2002,  2001  AND  2000  (DOLLARS  IN  THOUSANDS)
-----------------------------------------------------------------------------


                                                              2002      2001      2000
<S>                                                         <C>       <C>       <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
  Net loss . . . . . . . . . . . . . . . . . . . . . . . .  $(2,941)  $(1,814)  $(4,302)
  Adjustments to reconcile net loss to net cash flows
    from operating activities of continuing operations:
    Impairment of assets . . . . . . . . . . . . . . . . .        -         -     1,682
    AcNet bad debt and acquisition expenses. . . . . . . .        -         -       990
    Depreciation and amortization. . . . . . . . . . . . .        -        64       719
    Gain on sale of property and equipment . . . . . . . .        -         -      (102)
    Noncash interest expense . . . . . . . . . . . . . . .        -        45       464
    Gain on debt restructuring plan. . . . . . . . . . . .        -         -    (6,946)
    Loss on discontinued operations. . . . . . . . . . . .        -        95     4,844
    (Gain) loss on disposition of discontinued operations.        -    (1,314)      332
    Extraordinary gain on extinguishment of debt . . . . .        -         -      (722)
    Changes in operating assets and liabilities:
      Receivables. . . . . . . . . . . . . . . . . . . . .       (2)        -       490
      Other current assets . . . . . . . . . . . . . . . .        6        34       139
      Other noncurrent assets. . . . . . . . . . . . . . .        -         -        11
      Outstanding checks in excess of available balances .        -         -       (10)
      Accounts payable and accrued expenses. . . . . . . .    2,533     2,421     1,016
      Other liabilities. . . . . . . . . . . . . . . . . .        -         -       (22)
                                                            --------  --------  --------
           Net cash flows from operating activities of
              continuing operations. . . . . . . . . . . .     (404)     (469)   (1,417)
           Net cash flows from discontinued operations . .        -       148      (357)
                                                            --------  --------  --------
           Net cash flows from operating activities. . . .     (404)     (321)   (1,774)
                                                            --------  --------  --------

CASH FLOWS FROM INVESTING ACTIVITIES:
  Proceeds from sale of investments. . . . . . . . . . . .        -         -     4,948
  Proceeds from sale of subsidiary . . . . . . . . . . . .        -       100         -
  Proceeds from sale of property and equipment . . . . . .        -         -       489
  Payments received on note receivable . . . . . . . . . .        -         -       500
                                                            --------  --------  --------
           Net cash flows from investing activities. . . .        -       100     5,937
                                                            --------  --------  --------

        (Continued)
</TABLE>

                                      F-8
<PAGE>

<TABLE>
<CAPTION>


CONSOLIDATED  STATEMENTS  OF  CASH  FLOWS
YEARS  ENDED  DECEMBER  31,  2002,  2001  AND  2000  (CONTINUED)(DOLLARS  IN  THOUSANDS)
----------------------------------------------------------------------------------------


                                                                           2002    2001     2000
<S>                                                                       <C>     <C>     <C>
CASH FLOWS FROM FINANCING ACTIVITIES:
  Payments on capital lease obligation with a related party. . . . . . .      -      (1)     (472)
  Borrowings on notes payable. . . . . . . . . . . . . . . . . . . . . .    402     158       656
  Payments on notes payable. . . . . . . . . . . . . . . . . . . . . . .      -    (100)   (2,772)
  Payments on long-term debt with related parties. . . . . . . . . . . .      -       -      (429)
  Payments on long-term debt, others . . . . . . . . . . . . . . . . . .      -       -    (1,042)
                                                                          ------  ------  --------
           Net cash flows from financing activities. . . . . . . . . . .    402      57    (4,059)
                                                                          ------  ------  --------

NET INCREASE (DECREASE) IN CASH. . . . . . . . . . . . . . . . . . . . .     (2)   (164)      104

CASH AT BEGINNING OF YEAR. . . . . . . . . . . . . . . . . . . . . . . .      3     167        63
                                                                          ------  ------  --------

CASH AT END OF YEAR. . . . . . . . . . . . . . . . . . . . . . . . . . .  $   1   $   3   $   167
                                                                          ======  ======  ========

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

See notes to consolidated financial statements.
</TABLE>


                                      F-9
<PAGE>
MURDOCK  COMMUNICATIONS  CORPORATION

CONSOLIDATED  STATEMENTS  OF  CASH  FLOWS
YEARS  ENDED  DECEMBER  31,  2002,  2001  AND  2000  (CONCLUDED)
----------------------------------------------------------------

SUPPLEMENTAL  DISCLOSURES  OF  2002  NONCASH INVESTING AND FINANCING ACTIVITIES:

The  Company  issued  40,000  shares  of  common  stock  in  exchange  for  the
extinguishment  of  an  accrued  expense.

SUPPLEMENTAL  DISCLOSURES  OF  2001  NONCASH INVESTING AND FINANCING ACTIVITIES:

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

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

SUPPLEMENTAL  DISCLOSURES  OF  2000  NONCASH INVESTING AND FINANCING ACTIVITIES:

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

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

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

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

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

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

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

See  notes  to  consolidated  financial  statements.

                                      F-10
<PAGE>
MURDOCK  COMMUNICATIONS  CORPORATION

NOTES  TO  CONSOLIDATED  FINANCIAL  STATEMENTS
YEARS  ENDED  DECEMBER  31,  2002,  2001  AND  2000
---------------------------------------------------

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")  had been engaged in recent years in the business of
providing  operator  services  and  call processing to North American payphones,
hotels  and  institutions,  database  profit  management  services  and
telecommunications  billing and collection services for the hospitality industry
and  outsourced  operator  services  for  the  telecommunications industry.  The
Company  operated  its  business  under  three business units prior to the sales
discussed  below.  At  December  31,  2002 and 2001 the Company had no operating
activities  and  no  reportable  segments.  The  Company continues to exist as a
public  shell  for  use  as  a  reverse  merger  vehicle.

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

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

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

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

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

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

                                      F-11
<PAGE>
BASIS  OF PRESENTATION - The accompanying consolidated financial statements have
been  prepared  on  a going concern basis, which contemplates the realization of
assets and the satisfaction of liabilities in the normal course of business. The
Company  has  an  accumulated  deficit  of $45.8 million and current liabilities
exceed  current  assets by $22.5 million at December 31, 2002.  The Company also
is  past  due  in  the  payment  of approximately $14.6 million in principal and
accrued  interest  payable.  If the creditors who hold the past due debt seek to
enforce  their  payment rights, the Company would not be able to repay the debt.
These factors, among others, indicate that the Company may be unable to continue
as  a  going  concern  for  a reasonable period of time.  Management's plans are
discussed  below.

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

-    The  Company  intends  to  continue  to  negotiate  with  its  creditors to
     restructure  indebtedness  and  obtain  financing  to  fund operations. The
     Company  believes  that possible sources of funds will primarily consist of
     advances  from  Polar  Molecular  Corporation  ("Polar"). If the Company is
     unsuccessful  in  this  strategy,  the  Company may not be able to continue
     operating  as  a  going  concern.

-    The  Company  has an agreement with Polar to use the Company's public shell
     as  a  reverse  merger  vehicle. On December 19, 2001 the Company and Polar
     entered  into  an  Agreement and Plan of Merger (see Note 2). The merger is
     subject  to  a  number  of significant closing conditions, including, among
     others,  approval  by  the  shareholders  of the parties, that shareholders
     owning  no  more than 1,000 shares of the Company's or Polar's common stock
     shall  have  exercised  dissenters' or appraisal rights with respect to the
     merger,  the  conversion of substantially all of the Company's indebtedness
     into equity, and completion of the merger by May 15, 2003. If the merger is
     not  completed for any reason, the Company will continue to be subject to a
     significant  amount  of  past due debt and other liabilities, including the
     costs  related to the proposed merger, without any source of operating cash
     flow  to  satisfy  its  liabilities.  The Company also would not be able to
     continue  to  borrow  from  Polar,  which  has been the Company's principal
     source  of  cash  since  the  beginning  of  2002.  The Company can make no
     assurance  that  it would be able to identify another merger transaction if
     the  merger  is  not completed, and in such event, the Company would not be
     able  to  continue  as  a  going  concern.

-    The  Company  retains  an  investment  banker,  Berthel  Fisher  &  Company
     Financial  Services,  Inc. ("Berthel"), to assist the Company regarding the
     identification and investigation of strategic alternatives available to the
     Company.  Berthel,  including entities related to Berthel, is a significant
     shareholder  of  the  Company.

DISCONTINUED  OPERATIONS  -  The accompanying statements of operations have been
reclassified for the dispositions of the Incomex subsidiary (see Note 3) and the
PIC subsidiary (see Note 3) so that the results for each subsidiary's operations
are  classified  as  discontinued  operations  for  all  periods presented.  The
statements  of  cash  flows  and  related  notes  to  the consolidated financial
statements have also been reclassified to conform to the discontinued operations
presentation.

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

                                      F-12
<PAGE>
USE  OF  ESTIMATES  - The preparation of financial statements in conformity with
accounting  principles  generally  accepted  in  the  United  States  of America
requires  management  to make estimates and assumptions that affect the reported
amounts  of  assets  and  liabilities  and  disclosure  of contingent assets and
liabilities  at the date of the financial statements and the reported amounts of
revenues  and expenses during the reporting period.  Actual results could differ
significantly  from  those  estimates.

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

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

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

IMPAIRMENT  OF  LONG-LIVED  ASSETS  - The Company reviewed long-lived assets for
impairment  whenever  events  or changes in circumstances indicated the carrying
amount  of  these  assets  may  not  be recoverable.  See Note 3 for impairments
recorded  in  2000.

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

INCOME  TAXES  -  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 September 30, 2000, the date of conversion,
the Company accreted the carrying value of the 8% Series A Convertible Preferred
Stock  (net of offering costs incurred) to the conversion price by the effective
interest  method.

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

STOCK-BASED  COMPENSATION - At December 31, 2002 the Company has two stock-based
employee  compensation  plans  which  are  more  fully  described in Note 8.  As
permitted  by  Statement  of  Accounting  Standard  No.  123,  "Accounting  for
Stock-Based  Compensation" ("SFAS 123"), the Company measures compensation using
the  intrinsic  value  based method as prescribed by Accounting Principles Board
Opinion  No.  25, "Accounting for Stock Issued to Employees," but is required to
make  pro  forma  disclosures in the footnotes to the financial statements as if
the  measurement  provisions  of  SFAS  123  and  SFAS  No.  148 "Accounting for
Stock-Based  Compensation-Transition  and Disclosure - an Amendment of SFAS 123"
had been adopted.  Under the intrinsic value method, compensation is measured as
the difference between the market value of the stock on the grant date, less the
amount required to be paid for the stock.  The difference, if any, is charged to
expense  over  the  vesting  period of the options.  No compensation expense was

                                      F-13
<PAGE>
recorded  in  connection  with the grant of options for the years ended December
31,  2002,  2001  and 2000, respectively, as all options granted under the plans
had  an  exercise  price  greater  than  or  equal  to  the  market value of the
underlying  common  stock  on the date of grant. The following table illustrates
the  effect  on net income and earnings per share if the Company had applied the
fair  value  recognition  provisions  of  SFAS  123  to  stock-based  employee
compensation.

<TABLE>
<CAPTION>


                                           2002      2001      2000
<S>                        <C>           <C>       <C>       <C>
Net loss attributable to   As reported   $(2,941)  $(1,814)  $(4,427)
  common shareholders      Pro forma      (2,941)   (1,837)   (4,731)

Net loss per common share  As reported   $ (0.24)  $ (0.15)  $ (0.41)
                           Pro forma       (0.24)    (0.15)    (0.44)

</TABLE>


The  weighted  average  fair  values at date of grant for options granted during
2000  were  estimated to be $45,000.  The Company's calculations were made using
the  Black-Scholes  option  pricing  model  with  the following weighted average
assumptions: ten year expected life; stock volatility of 221% in 2000; risk-free
interest  rate  of  5.2% in 2000; and no dividends during the expected term.  No
options  were  granted  during  2002  or  2001 and the pro forma amounts reflect
options  vesting  during  the  year.

NET  LOSS  PER  COMMON SHARE - Basic net loss per common share has been computed
using  the  weighted average number of shares of common stock outstanding during
the  year.  The  warrants  outstanding  are  anti-dilutive  and  are, therefore,
excluded  from  the  computation of loss per share.  In the future, the warrants
may  become  dilutive.  Potential  common  shares  excluded  from  the per share
computation  because  they  were  antidilutive  are  as  follows:


<TABLE>
<CAPTION>
                                 YEARS ENDED DECEMBER 31,

                                   2002    2001   2000
<S>                               <C>     <C>     <C>
    Options. . . . . . . . .           -       -     -
    Warrants . . . . . . . .      73,484  45,454     -
                                  ------  ------  ----
    Total. . . . . . . . . .      73,484  45,454     -
                                  ======  ======  ====
</TABLE>

The  exercise  prices  on all outstanding options and warrants exceed the market
price  of the Company's common stock at December 31, 2002, 2001 and 2000, except
as  noted  above.

RECLASSIFICATIONS  - Certain amounts in the 2001 and 2000 consolidated financial
statements  have  been  reclassified  to  conform  with  the  2002 presentation.

IMPACT  OF  NEW  ACCOUNTING  PRONOUNCEMENTS  -  In  April  2002,  the  Financial
Accounting  Standards Board ("FASB") issued Statement of Accounting Standard No.
145  ("SFAS 145"), Rescission of FASB Statements No. 4, 44, and 64, Amendment of
FASB  Statement  No. 13, and Technical Corrections.  This statement, among other
things,  significantly  limits the situations whereby the extinguishment of debt
is  treated  as  an  extraordinary  item  in  the statement of operations.  This
statement  requires  reclassification  of  all  prior period extraordinary items
related to debt extinguishments.  The provisions of this statement are effective
for  fiscal  years  beginning  after  May  15,  2002.


                                      F-14
<PAGE>

2.     PROPOSED  MERGER  WITH  POLAR

On December 19, 2001 the Company and Polar entered into an Agreement and Plan of
Merger  (as  amended,  the  "Agreement").  Under the terms of the Agreement, the
outstanding  shares of Polar's common stock will be converted into the number of
shares  of the Company's no par value common stock (the "Common Stock") equal to
80% of the outstanding shares of the Common Stock as of the effectiveness of the
merger  and  the  Company's  shareholders  will  retain  a  20%  ownership.  The
outstanding  warrants  and  options of the Company will remain outstanding after
the  completion  of the merger and the outstanding warrants and options of Polar
will  be  converted  into warrants and options to purchase Common Stock based on
the  exchange  ratio  in  the  merger.

Polar develops and markets fuel additives. Polar's primary product, DurAlt(R)FC,
is  a  patented  fuel  additive  that  has  been  proven  effective  at reducing
combustion  chamber  deposits  and  reducing  octane  requirement  increase  in
combustion  engines.  Polar  had  a  stockholders'  deficit  of  $4.2  million
(unaudited)  at  September 30, 2002 and revenues for its fiscal year ended March
31,  2002  were  $162,000  (unaudited).

One  of  the  conditions to completing the merger is that the Company must cause
its  creditors to forgive and/or convert into equity sufficient liabilities such
that the Company's liabilities, excluding loans from Polar and professional fees
directly  related  to  the  merger,  do not exceed its assets at the time of the
merger.  As  of December 31, 2002, the Company's liabilities exceeded its assets
by approximately $21.9 million, excluding loans from Polar and professional fees
directly related to the merger. As of December 31, 2002, the Company has reached
agreements  with  the  holders of the Company's debt or other obligations in the
aggregate  amount  of  approximately  $21.0 million for the satisfaction of such
liabilities  in  exchange  for  approximately  4,570,000 shares of the Company's
common  stock  and the payment by the Company of approximately $570,000 in cash.
However,  as  of  March 7, 2003 the Company is in default on the terms of one of
these  settlement  agreements  for  $11.2  million  requiring  a cash payment of
$485,000.  Also see Note 16. All of the agreements are contingent on the closing
of  the  merger  and/or  the  cash  payment.

To  satisfy  the  above  mentioned  closing  condition,  the  Company must reach
additional  agreements  with  its  creditors.  Any conversions of liabilities to
equity  will  dilute  the  outstanding  common  stock  held  by  the  current
shareholders.  The  Company  also must raise sufficient funds to make all of the
payments that may be required under the agreements with the Company's creditors,
and  there  can  be no assurance that such funds will be available from Polar or
otherwise.  If the Company is not able to satisfy the net worth test, Polar will
have  the  right  to  terminate  the  merger  agreement.

The Company filed an S-4 Registration Statement with the Securities and Exchange
Commission  in  February  2003  in  connection  with  the  proposed  merger.

3.     DISCONTINUED  OPERATIONS

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

                                      F-15
<PAGE>
Summary  operating  results  of  the  discontinued  operations of Incomex are as
follows  for  the year ended December 31, 2000 (amounts expressed in thousands):

<TABLE>
<CAPTION>


                                     2000
<S>                                <C>
Revenues. . . . . . . . . . . . .  $ 2,987
Expenses. . . . . . . . . . . . .   (4,162)
                                   --------
Loss from discontinued operations  $(1,175)
                                   ========
</TABLE>


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

Effective July 31, 2001, the Company sold all the shares of PIC to Dartwood, LLC
for  a  total  purchase  price  of  $196,000,  comprised  of $100,000 cash and a
noninterest  bearing  promissory  note  of  $96,000  payable  in  24  monthly
installments  of  $4,000.  A  director,  executive  officer  and  significant
shareholder  of  the  Company  is  related  to  the  owner  of  Dartwood,  LLC.

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


<TABLE>
<CAPTION>

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

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


<TABLE>
<CAPTION>

                                              2000
<S>                                          <C>
Goodwill impairment . . . . . . . . . .      $3,300
USF fees. . . . . . . . . . . . . . . .        (894)
Telecommunications equipment impairment         600
                                             -------
Total . . . . . . . . . . . . . . . . .      $3,006
                                             =======
</TABLE>


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

                                      F-16
<PAGE>
4.     INVESTMENTS

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

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

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

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

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

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

                                      F-17
<PAGE>
5.     NOTES  PAYABLE

Notes  payable  as  of  December  31, 2002 and 2001, consisted of the following:

<TABLE>
<CAPTION>

                                                                    (DOLLARS IN THOUSANDS)
                                                                    ----------------------

                                                                          2002    2001
<S>                                                                      <C>     <C>
Past due notes payable to individuals, $200,000 of which has
  been provided by related parties, bearing interest at
  the default rate of 18%, due March 5, 1999.  Warrants
  to purchase 300,000 shares of the Company's common
  stock were issued, 200,000 of which were issued to related
  parties, at an exercise price of $1.44 per share which expire,
  if unexercised, on March 31, 2004.. . . . . . . . . . . . . . . . . .  $  300  $  300

Past due notes payable to individuals, $25,000 of which has
 been provided by related parties, bearing interest at the
  default rate of 18%, due March 31, 1999.  Warrants to
  purchase 275,000 shares of the Company's common
  stock were issued, 25,000 of which were issued to related
  parties, at an exercise price of $1.75 per share which
  expire, if unexercised, on March 31, 2004.. . . . . . . . . . . . . .     275     275

Past due notes payable to individuals, $1,725,000 of which has
 been provided by related parties, bearing interest at the default
  rate of 18%, due November 30, 1999.  Warrants to purchase
  984,000 shares of the Company's common stock were
  issued, 230,000 of which were issued to related parties.
  The warrants were issued at exercise prices ranging
  from $2.50 to $3.53 and, if unexercised, expire on
  dates ranging from November 2003 to December 2003.. . . . . . . . . .   6,895   6,895

Past due note payable to consultant bearing interest at the default
  rate of 18%, 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, 2004. . . . . . . . . . . . . . . . . . . .      25      25

Past due note payable to an individual, bearing interest at the default
  rate of 18%, due May 19, 2001.. . . . . . . . . . . . . . . . . . . .     500     500
</TABLE>

                                      F-18
<PAGE>

<TABLE>
<CAPTION>

                                                                         (DOLLARS IN THOUSANDS)
                                                                         ----------------------
                                                                              2002       2001
<S>                                                                         <C>        <C>
Past due note payable to Murdock Communications Corporation
  Investment Company ("MCCIC") bearing interest at 12%,
  due June 21, 2001.  Warrants to purchase 4,289,897 shares
  of the Company's common stock were issued at a weighted
  average exercise price of $2.00 per share which, if unexercised,
  expire between December 2004 and April 2005.  The note is
  collateralized by substantially all assets of the Company (see
  additional terms below). . . . . . . . . . . . . . . . . . . . . . . . .       388       388

Past due revolving promissory note payable to MCCIC bearing
  interest at 12%, due June 21, 2001.  In 2002 warrants to purchase
  14,166 shares of the Company's common stock were issued at
  a weighted average exercise price of $.14 per share which, if
  unexercised, expire between January 2007 and March 2007.
  In 2001 warrants to purchase 179,600 shares of the Company's
  common stock were issued at a weighted average exercise price of
  $.13 per share which, if unexercised, expire between August 2006
  and December 2006.  In 2000 warrants to purchase 909,224 shares of
  the Company's common stock were issued at a weighted average
  exercise price of $1.94 per share which, if unexercised, expire
  between December 2004 and April 2005.  The note is collateralized
  by substantially all assets of the Company (see additional terms
  below).. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .       190       183

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

Uncollateralized covertible notes payable to individuals, bearing
  interest at 12% due May 29, 2003 (see Note 6 for conversion terms).
  Warrants to purchase  978,724 shares of the Company's common
  stock were issued at an exercise price of $1.75 per share which,
  if unexercised, expire March 31, 2004. . . . . . . . . . . . . . . . . .       569       569

Uncollateralized convertible notes payable to related party individuals,
  bearing interest at 12% due May 29, 2003 (see Note 6 for
  conversion terms). . . . . . . . . . . . . . . . . . . . . . . . . . . .     1,142     1,142

Uncollateralized convertible notes payable to Berthel, bearing interest
  at 12% due May 29, 2003 (see Note 6 for conversion terms). . . . . . . .     2,921     2,921

Uncollateralized one year notes payable to Polar, bearing interest at 10%.       395         -
                                                                            ---------  --------

Total notes payable. . . . . . . . . . . . . . . . . . . . . . . . . . . .    13,800    13,398
Past due or current portion of notes payable . . . . . . . . . . . . . . .   (13,800)   (8,766)
                                                                            ---------  --------
Long-term debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  $      -   $ 4,632
                                                                            =========  ========
</TABLE>


                                      F-19
<PAGE>
On June 17, 1999, the Company completed a bridge financing in the amount of $2.0
million  with  New  Valley  Corporation  ("New Valley").  Pursuant to the bridge
financing,  the  Company  issued  a note in the principal amount of $2.0 million
(the  "Note").  This  principal and all unpaid accrued interest at 12% per annum
were  due  July  21, 1999.  The Company was past due on this note effective July
21,  1999.  Warrants  to  purchase  250,000 shares of the Company's common stock
were  issued in connection with the Note at an exercise price of $3.50 per share
and  may be exercised at anytime through June 21, 2009.  Because the Company did
not  repay  the  Note  on  or  prior  to September 21, 1999, the warrants may be
exercised  to  purchase a total of 500,000 shares of the Company's common stock.
On  December  17,  1999, the Company amended the terms of the agreement with New
Valley.  The  amendment reset the interest rate to 12% since inception (14% upon
default)  and  the  note  was  due  in  5 monthly payments of $200,000 beginning
January 17, 2000 with a final payment of $1.0 million on June 17, 2000.  Waivers
of  any  prior  violations were included as part of the amendment.  The Note was
convertible  into  shares  of  common  stock of the Company at the option of New
Valley  at  any  time  up  to  the  maturity  date.  The number of shares in the
conversion  was  to  be  obtained  by  dividing the principal amount of the Note
converted  by  the  conversion  price  of  $3.00.

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

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

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

6.     DEBT  RESTRUCTURING  PLAN

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

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

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

                                      F-20
<PAGE>
During  the  second  quarter  of  2000,  the Company transferred 1,063,584 Actel
Shares  and  issued  Convertible  Notes in an aggregate principal amount of $4.6
million  in  the  Unit  Offering in exchange for the cancellation of outstanding
indebtedness in the amount of $9.2 million, resulting in a gain of approximately
$3.3  million.  The  Convertible  Notes  accrue  interest  at  the  rate  of 12%
annually,  with  principal  and  accrued  interest  due on May 29, 2003, and are
convertible  into  shares  of  the  Company's  no  par  value  common stock at a
conversion  price  of  $3.03 per share (330 shares for each $1,000 due under the
Convertible  Notes).  The  Convertible Notes are uncollateralized obligations of
the  Company.

7.     COMMON  STOCK  WARRANTS

A  summary  of common stock warrant activity during the years ended December 31,
2002,  2001  and  2000  is  as  follows:


<TABLE>
<CAPTION>

                                                                 WEIGHTED
                                                                 AVERAGE
                                                      WARRANT    WARRANT
                                         WARRANT       PRICE       PRICE     EXPIRATION
                                          SHARES     PER SHARE   PER SHARE     DATE
<S>                                     <C>          <C>         <C>         <C>

Balance at January 1, 2000.  . . . . .   5,866,591   $1.12-9.75  $     3.05  2002-2009

Warrants issued with termination of
  employment agreements. . . . . . . .     150,000         1.00        1.00       2003

Warrants issued with notes payable to
  MCCIC (Note 5) . . . . . . . . . . .   5,199,121    0.94-2.44        1.99  2004-2005

Warrants exercised . . . . . . . . . .     (25,000)        1.75        1.75

Warrants cancelled . . . . . . . . . .    (495,000)   3.50-4.13        3.88
                                        -----------

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

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

Balance at December 31, 2001 . . . . .  10,875,312    0.05-9.75        2.40  2002-2009

Warrants issued in connection with
  MCCIC advances (Note 5). . . . . . .      14,166    0.08-0.17        0.14       2007
                                        -----------

Balance at December 31, 2002 . . . . .  10,889,478    0.05-9.75        2.40  2003-2009
                                        ===========

</TABLE>


The  weighted  average remaining life of the warrants was 1.9, 2.3 and 3.1 years
at  December  31,  2002,  2001  and  2000,  respectively.

                                      F-21
<PAGE>
Warrants  outstanding  and  exercisable  at  December  31, 2002 were as follows:

<TABLE>
<CAPTION>


             EXERCISE PRICE      WARRANTS
<S>          <C>                 <C>
             $0.05-$0.38          193,766
              0.94. . . .         435,467
              1.00. . . .         150,000
              1.12. . . .         229,279
              1.25. . . .         200,000
              1.31. . . .         884,804
              1.44. . . .          21,000
              1.50. . . .         100,000
              1.75. . . .       1,918,228
              2.09. . . .         499,600
              2.19. . . .          40,000
              2.25. . . .         831,467
              2.44. . . .       2,207,783
              2.50-3.00 .          90,000
              3.01-3.25 .       1,798,084
              3.26-3.60 .       1,210,000
              9.75. . . .          80,000
                               ----------
                               10,889,478
                              ===========

</TABLE>


On  March  22,  2001,  the  Company  extended  the  expiration date of 1,939,228
warrants  from  March  31,  2001  to  March  31,  2002.  On March 21, 2002 these
warrants  were extended to March 31, 2003.  Subsequently, on March 5, 2003 these
warrants  were  extended  to  March  31,  2004.

8.     STOCK  OPTION  PLANS

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

                                      F-22
<PAGE>
A  summary  of  stock option activity under the 1993 Plan during the years ended
December  31,  2002,  2001  and  2000,  is  summarized  as  follows:

<TABLE>
<CAPTION>

                                                           WEIGHTED               WEIGHTED
                                                           AVERAGE                AVERAGE
                                                           OPTION                  OPTION
                                OPTIONS     OPTION PRICE    PRICE     OPTIONS      PRICE
                               OUTSTANDING    PER SHARE   PER SHARE  EXERCISABLE  PER SHARE
<S>                           <C>           <C>         <C>         <C>          <C>
Balance at January 1, 2000        221,101   $1.88-2.25  $     2.06      182,564  $     2.02
  Cancelled. . . . . . . . .      (20,299)        1.88
  Cancelled. . . . . . . . .      (15,523)        1.88
  Cancelled. . . . . . . . .       (5,000)        2.25
  Cancelled. . . . . . . . .       (8,836)        2.00
                              ------------
Balance at December 31, 2000      171,443    1.88-2.25        2.09      171,443        2.09
  Cancelled. . . . . . . . .      (67,899)        1.88
  Cancelled. . . . . . . . .       (8,836)        2.00
  Cancelled. . . . . . . . .      (94,708)        2.25
                              ------------
Balance at December 31, 2001
  and 2002 . . . . . . . . .            -            -           -            -           -
                              ============
</TABLE>


At  December  31,  2002,  253,029  shares  were available for future grants. The
Company  has reserved 253,029 shares of common stock in connection with the 1993
Plan.

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

                                      F-23
<PAGE>
A  summary  of  stock  option  activity under the 1997 Stock Option Plan for the
years  ended  December  31,  2002,  2001  and  2000,  is  as  follows:

<TABLE>
<CAPTION>

                                                         WEIGHTED                 WEIGHTED
                                                         AVERAGE                  AVERAGE
                                                          OPTION                   OPTION
                                OPTIONS     OPTION PRICE  PRICE       OPTIONS      PRICE
                              OUTSTANDING   PER SHARE   PER SHARE   EXERCISABLE  PER SHARE
<S>                           <C>           <C>         <C>         <C>          <C>
Balance at January 1, 2000      1,289,957   $2.00-4.16  $     2.64    1,106,259  $     2.63
  Cancelled. . . . . . . . .     (323,236)   2.25-2.75
  Cancelled. . . . . . . . .     (600,000)   2.25-3.50
  Cancelled. . . . . . . . .       (1,164)        2.00
  Cancelled. . . . . . . . .      (15,000)   3.13-4.16
  Cancelled. . . . . . . . .      (15,000)   3.13-4.16
  Cancelled. . . . . . . . .      (10,000)        3.13
  Cancelled. . . . . . . . .       (2,000)        3.88
  Cancelled. . . . . . . . .       (5,500)        2.56
  Cancelled. . . . . . . . .       (4,500)        2.75
  Granted at market. . . . .       20,000         2.25
                              ------------
Balance at December 31, 2000      333,557    2.00-2.81        2.58      323,557        2.58
  Cancelled. . . . . . . . .       (1,164)        2.00
  Cancelled. . . . . . . . .     (102,393)        2.25
  Cancelled. . . . . . . . .     (135,000)        2.75
                              ------------
Balance at December 31, 2001       95,000    2.25-2.81        2.69       95,000        2.69
  Cancelled. . . . . . . . .      (75,000)        2.81
                              ------------
Balance at December 31, 2002       20,000         2.25        2.25       20,000        2.25
                              ============
</TABLE>


At  December 31, 2002, 1,707,471 shares were available for future grants and the
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.

9.     INCOME  TAXES

The provision for (benefit from) income taxes consisted of the following for the
years  ended  December  31,  2002,  2001  and  2000  (dollars  in  thousands):


                                2002           2001         2000

Continuing  operations  -
    Current, state            $    -       $    -       $       (9)
                              ========     ========     ===========

                                      F-24
<PAGE>
The provision for (benefit from) income taxes from continuing operations for the
years  ended  December 31, 2002, 2001 and 2000 is less than the amounts computed
by  applying  the  statutory federal income tax rate of 35% to the income (loss)
before  income  taxes  from  continuing  operations  due  to the following items
(dollars  in  thousands):

<TABLE>
<CAPTION>


                                                   2002      2001      2000
<S>                                              <C>       <C>       <C>
Computed expected amount. . . . . . . . . . . .  $(1,029)  $(1,062)  $    50
Amortization and write-down of goodwill . . . .        -         -     1,313
State income taxes, net of federal tax benefit.        -         -        (9)
Change in valuation allowance . . . . . . . . .    1,029     1,062    (1,363)
                                                 --------  --------  --------
  Income tax provision (benefit). . . . . . . .  $     -   $     -   $    (9)
                                                 ========  ========  ========
</TABLE>


At  December  31,  2002  the  Company  has  net operating loss carryforwards for
federal income tax purposes of approximately $40 million to use to offset future
taxable  income.  These  net operating losses will expire between 2008 and 2022.

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

Significant  components  of the Company's deferred tax assets and liabilities as
of  December  31,  2002  and  2001  are  as  follows  (dollars  in  thousands):

<TABLE>
<CAPTION>

                                                  2002       2001
<S>                                             <C>        <C>
Deferred tax assets:
  Current:
    Allowance for doubtful accounts receivable  $     63   $     62
                                                ---------  ---------

  Noncurrent:
    Interest and other accruals. . . . . . . .     1,033      1,521
    Carryforward of net operating loss . . . .    13,862     13,224
                                                ---------  ---------
                                                  14,895     14,745
                                                ---------  ---------
Total deferred tax assets. . . . . . . . . . .    14,958     14,807
Valuation allowance for deferred tax assets. .   (14,958)   (14,807)
                                                ---------  ---------
Net deferred tax assets. . . . . . . . . . . .  $      -   $      -
                                                =========  =========
</TABLE>


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

                                      F-25
<PAGE>
10.     COMMITMENTS  AND  CONTINGENCIES

At  December  31,  2002  the  Company's only operating lease is a month to month
lease  of  office  space  with  a related party in the amount of $500 per month.
Rent  expense under operating leases for the years ended December 31, 2002, 2001
and  2000  was  $6,000,  $20,000  and  $95,000,  respectively.

The  Company  guaranteed  a facility lease between Actel and a third party.  The
lease  expires  in  June  2009 and total remaining noncancellable lease payments
were  $765,000 at December 31, 2000.  Actel was current on its lease payments as
of  December  31,  2000.  However,  on April 11, 2001 Actel filed for Chapter 11
bankruptcy  protection  which  was  subsequently  converted  to  Chapter 7.  The
Company  has  not  received  any notification from the bankruptcy trustee or the
third  party  regarding the guarantee during 2001 or 2002.  No loss, if any, has
been  recorded  in  the  consolidated  financial statements with respect to this
matter.

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

On  November  23,  2001 three individuals, one of which was a former officer and
director of the Company, filed suit against the Company, several former officers
and  directors of the Company and several related parties. These lawsuits allege
that  the  named  individuals and entities devised a scheme to defraud the three
plaintiffs  to  personally borrow funds from a financial institution, invest the
proceeds  in the Company as a note payable with the promise of stock options and
repayment  of  the notes, and give the financial institution a security interest
in  the  notes  under the Uniform Commercial Code. Unspecified damages sought by
the  plaintiffs include actual, punitive, and treble damages and court costs and
attorney costs. The Company's Director and Officer ("D&O") insurance carrier has
notified the Company that because one of the plaintiffs was a former director of
the  Company,  that  the  D&O policy will not provide coverage for the claims by
that  plaintiff. The Company believes that its D&O policy will provide coverage,
up  to the policy limit, in this lawsuit related to the other two plaintiffs. In
November 2002, the Company entered into a settlement agreement providing for the
issuance  by  the Company of 517,000 shares of the Company's common stock to the
three  plaintiffs  and  one  other  individual  who  did  not  file  suit.  The
effectiveness  of  the  settlement  is contingent on the closing of the proposed
merger  with  Polar.  No  loss,  if  any,  has been recorded in the consolidated
financial  statements  with  respect  to  these  matters.

As  of  December  31, 2002 the Company had been notified by several state taxing
authorities  that  approximately  $46,000  of  past  due  taxes and penalties is
allegedly  owed.  Some  of  the  states have assigned the alleged amounts due to
collection  agencies  or  filed  tax  warrants.  Management believes that it has
meritorious  defenses  against these amounts. No assurance can be given that the
Company's defenses are valid or that the Company will not be liable for any part
of  these  amounts.  No  loss,  if  any,  has  been recorded in the consolidated
financial  statements  with  respect  to  these  matters.

As  of  December  31, 2002 the Company had been notified by several vendors that
approximately  $45,600  is  owed.  Management  believes  that it has meritorious
defenses  against  these  amounts.  No  loss,  if  any, has been recorded in the
consolidated  financial  statements  with  respect  to  these  matters.


                                      F-26
<PAGE>
The  Company  has divested certain of its businesses during 2001 and 2000.  As a
result  of  such  divestitures,  there  may  be  lawsuits, claims or proceedings
instituted  or  asserted  against  the  Company  related  to the period that the
businesses were owned by the Company.  No loss, if any, has been recorded in the
consolidated  financial  statements  with  respect  to  these  matters.

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

11.     RELATED  PARTY  TRANSACTIONS

The  Company  conducts  a  significant amount of business with Berthel and other
affiliated  entities.  Berthel  provided  lease  and  other  financing services,
including  investment  banking,  to  the  Company.  Other  affiliated  entities
provided  financing,  consulting and miscellaneous services to the Company.  See
Note  5  for  the  disclosure of the various related party financing agreements.

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

In  January  2000,  the Company retained Berthel to assist the Company regarding
the  identification  and  investigation  of strategic alternatives that might be
available to the Company.  Various fees were paid to Berthel under the Placement
Agreement  including  a  monthly  retainer and placement fees.  The Company paid
Berthel  total fees of $536,000 during 2000.  This agreement was revised on July
1,  2001  for  a period of 12 months with annual renewal options.  The agreement
allows  for  a monthly retainer fee of $20,000 and other success fees defined in
the agreement based on the strategic event that occurs.  The expenses related to
the previous agreement and the revised agreement for 2002 and 2001 were $248,131
and  $218,980,  respectively.  As  of December 31, 2002 the Company owes Berthel
$442,111  under  both  agreements.

The  Company has subleased office space from Berthel Fisher & Company Management
Corp.,  an  affiliate  of Berthel, since October 2001 on a month-to-month basis.
The  expense related to this sublease agreement for 2002 and 2001 was $6,000 and
$1,500, respectively. The Company owes Berthel Fisher & Company Management Corp.
approximately  $7,500  in  rental  payments  as  of  December  31,  2002.

                                      F-27
<PAGE>
On  July  1,  1994,  the  Company  entered  into  an  agreement  with a minority
shareholder to provide telecommunication services to hotels owned and managed by
Larken,  Inc., a company 50% owned by the minority shareholder.  Revenues of $0,
$0  and $109,000 were generated from such agreement for the years ended December
31,  2002,  2001  and  2000,  respectively.  The  agreement provided for a fixed
payment  of  $30,000  per  month  in  commissions  to  be  paid  to the minority
shareholder.  This  agreement  was  terminated  in  June  2000.

In  January  2000,  the  Company  entered  into a letter agreement with Pirinate
Consulting Group, LLC ("Pirinate"), an entity controlled by Eugene I. Davis, for
the  personal  services  of  Mr.  Davis as the Company's Interim Chairman of the
Board  and  Interim  Chief Executive Officer.  Pirinate received $15,000 a month
plus  out-of-pocket  expenses  for these services.  In May 2000 Mr. Davis became
the Chairman of the Board and Chief Executive Officer of the Company.  Mr. Davis
resigned on October 9, 2001 as Chief Executive Officer and remained on the Board
of  Directors.

The  Company  entered  into  an agreement dated August 1, 2002, as amended, with
Pirinate,  whereby Pirinate agreed to provide the services of Eugene I. Davis to
serve  as  Chairman of the Board and Chief Executive Officer effective August 1,
2002.  Under  the  agreement,  the Company issued 40,000 shares of the Company's
common  stock  to  Pirinate  in  satisfaction of unpaid fees for Mr. Davis' past
services and the Company agreed to pay Pirinate $3,000 per month during the term
of  Mr.  Davis' services.  The Company also agreed to contingent compensation of
4,000  shares  of  the  Company's  common  stock  per month, contingent upon the
closing  of  the  proposed  merger  with  Polar.

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

During  2002,  Mr.  Wright  served as the Company's Interim Principal Accounting
Officer  and  received  compensation  of  $4,000  per  month.

A  summary of transactions with related parties for the years ended December 31,
2002,  2001  and  2000  is  as  follows  (dollars  in  thousands):

<TABLE>
<CAPTION>


                                                          2002   2001    2000
<S>                                                       <C>    <C>    <C>
Consulting expense - Prentice (included in discontinued
  operations). . . . . . . . . . . . . . . . . . . . . .  $   -  $ 105  $   15
Consulting expense - director. . . . . . . . . . . . . .     48      -       -
Consulting expense - Pirinate. . . . . . . . . . . . . .     15    121     181
Interest expense on related party notes payable. . . . .    542    539   1,620
Interest expense on notes payable to Berthel . . . . . .    375    372     243
Interest expense on notes payable to MCCIC . . . . . . .     69     68      36
Interest expense on notes payable to Polar . . . . . . .     20      -       -
Commissions to minority shareholder. . . . . . . . . . .      -      -     180
Investment banking and placement fees to Berthel . . . .    248    219     536
Lease payments to Berthel. . . . . . . . . . . . . . . .      -      -     840
Rent expense on lease with Berthel . . . . . . . . . . .      6      2       -
</TABLE>


     Certain  parties were considered related parties in 2000 but not in 2001 or
2002  due  to  the  disposition  of  assets.

                                      F-28
<PAGE>
12.     PROFIT  SHARING  PLAN

The  Company  had  a  profit  sharing  plan under Section 401(k) of the Internal
Revenue  Code.  Employees  were  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 year ended December 31,
2000.

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

13.     FAIR  VALUE  OF  FINANCIAL  INSTRUMENTS

The  fair  value  amounts disclosed below are based on estimates prepared by the
Company  utilizing  valuation  methods  appropriate  in  the circumstances.  The
carrying  amount  for  financial  instruments  included among cash, receivables,
notes  payable,  and  other  short-term  payables  approximates their fair value
because of the short maturity of those instruments.  The estimated fair value of
other  significant  financial  instruments  are  based principally on discounted
future  cash  flows at rates commensurate with the credit and interest rate risk
involved  and  the  timing  of  when  the  instruments  were  entered  into.

The  estimated  fair  values  of  the  Company's  other  significant  financial
instruments at December 31, 2002 and 2001 are as follows (dollars in thousands):

<TABLE>
<CAPTION>

                             2002               2001
                       ----------------   ----------------

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

</TABLE>


14.     SUBSEQUENT  EVENT

During  the  period  from  January  1,  2003  through March 7, 2003, the Company
borrowed  $44,753  from  Polar.  The  notes  are payable on January 16, 2004 and
February  4,  2004  and  bear  interest  at  10%.

                                      F-29
<PAGE>
15.     QUARTERLY  RESULTS  OF  OPERATIONS  (UNAUDITED)

The  following is a summary of the quarterly results of operations for the years
ended  December  31, 2002 and 2001 (dollars in thousands except per share data).
These quarterly results have been reclassified from those previously reported in
form  10-Q's  filed  with  the Securities and Exchange Commission to reflect the
results  of  operations  for  PIC,  that  was  sold  effective July 31, 2001, as
discontinued  operations  for  all  periods  presented.


<TABLE>
<CAPTION>

                                               FIRST      SECOND     THIRD     FOURTH
                                              QUARTER    QUARTER    QUARTER    QUARTER    TOTAL
<S>                                           <C>        <C>        <C>        <C>        <C>
2002
----
Revenues . . . . . . . . . . . . . . . . .   $    -     $    -     $    -     $    -    $     -
Gross profit . . . . . . . . . . . . . . .        -          -          -          -          -
Loss from continuing operations  . . . . .     (696)      (733)      (763)      (749)    (2,941)
Net loss . . . . . . . . . . . . . . . . .     (696)      (733)      (763)      (749)    (2,941)

Basic and diluted net loss per common share  $(0.06)    $(0.06)    $(0.06)    $(0.06)   $ (0.24)
</TABLE>


<TABLE>
<CAPTION>

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

Basic and diluted net income (loss) per common share.  $  (0.07)  $  (0.07)      0.07   $  (0.07)  $ (0.15)
</TABLE>


The  third  quarter of 2001 includes a $1,314,000 gain on the sale of PIC in net
income. The fourth quarter of 2001 includes a $146,000 severance accrual in loss
from  continuing  operations  (see  Note  10).

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

16.     SUBSEQUENT EVENT (UNAUDITED)

On March 31, 2003, a settlement agreement that the Company had entered into with
a  financial  institution  in  which  the financial institution agreed to accept
payment  of $100,000 in cash and 475,000 shares of the Company's common stock in
full satisfaction of all principal and interest due of approximately $964,000 as
of  December  31,  2002,  expired.

                                    * * * * *

                                      F-30
<PAGE>


<TABLE>
<CAPTION>

MURDOCK  COMMUNICATIONS  CORPORATION

SCHEDULE  -  VALUATION  AND  QUALIFYING  ACCOUNTS
YEARS  ENDED  DECEMBER  31,  2002,  2001  AND  2000
---------------------------------------------------

                                                  NET
                                     BALANCE    CHARGES                    BALANCE
                                        AT        TO                         AT
                                    BEGINNING   COSTS AND                  END OF
                                     OF YEAR    EXPENSES   DEDUCTIONS       YEAR
<S>                                 <C>         <C>        <C>             <C>
Year ended December 31, 2002
  Allowance for doubtful accounts   $    179  $       -   $         -      $ 179

Year ended December 31, 2001
  Allowance for doubtful accounts        225        (46)            -        179

Year ended December 31, 2000
  Allowance for doubtful accounts        152         98            25        225
</TABLE>

                                      F-31