UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549
                                   FORM 10-KSB

       [X]Annual  Report  Pursuant  to  Section  13 or 15(d)  of the  Securities
          Exchange Act of 1934 For the Fiscal Year Ended June 30, 1998
                           Commission File No. 0-12116

                           ComTec International, Inc.
                           --------------------------
                 (Name of Small Business Issuer in its charter)
         New Mexico                                              75-2456757
         ----------                                              ----------
State or other jurisdiction of                                (I.R.S. Employer
Incorporation or organization                                Identification No.)

          9350      East Arapahoe  Road,  Suite 340,  Englewood,  Colorado 80112
                    (Address of principal executive offices)

                                 (303) 662-1198
                 (Issuer's Telephone Number Including Area Code)

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

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

                          Common Stock $.001 par value
                                (Title of Class)

     Check  whether  the issuer (1) filed all  reports  required  to be filed by
 Section 13 or 15(d) of the  Exchange Act during the past 12 months (or for such
 shorter period that the registrant was required to file such reports), and (2)
        has been subject to such filing requirements for the past 90 days
                                  Yes      No  x
                                      ---     ---
     Checkif there is no disclosure of delinquent filers in response to Item 405
      of Regulation S-B contained in this form, and no disclosure will
       be contained, to the best of registrant's knowledge, in definitive
                            proxy or information: [ ]

      Statements incorporated by reference in Part III of this Form 10-KSB
                   or any amendment to this Form 10-KSB: [ ]

State the  aggregate  market  value of the voting stock  (common  stock) held by
non-affiliates computed by reference to the price at which the stock was sold or
the average  bid and asked  price of such stock , as of a specified  date within
the past sixty days.  As of June 15,  1999,  the  aggregate  market value of the
Company's Common Stock held by non-affiliates  was $2,381,000 as of the close of
business on June 15, 1999.

                    APPLICABLE ONLY TO CORPORATE REGISTRANTS

                   Number of shares outstanding of each of the
                     issuer's classes of Common stock as of
                      June 15, 1999 was 46,070,019 shares.

           State issuer's revenues for its most recent fiscal year. $0

                   ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS
                           DURING THE PAST FIVE YEARS

          Check whether the issuer has filed all documents and reports  required
             to be filed by Sections 12, 13 or 15(d) of the
         Exchange Act after the distribution of securities under a plan
                              confirmed by a court
                                Yes  X   No
                                   ----     ----

                    DOCUMENTS INCORPORATED BY REFERENCE: None


<PAGE>



                            FORM 10-KSB ANNUAL REPORT
                         FISCAL YEAR ENDED JUNE 30, 1998

                           COMTEC INTERNATIONAL, INC.


                                TABLE OF CONTENTS

                                                                            Page

PART I

ITEM 1.      DESCRIPTION OF BUSINESS...........................................3
Item 2.      DESCRIPTION OF PROPERTY..........................................19
Item 3.      LEGAL PROCEEDINGS................................................19
Item 4.      SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS..............21

PART II

Item 5.      MARKET FOR COMMON STOCK EQUITY AND RELATED
                  STOCKHOLDER MATTERS.........................................22
Item 6.      MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION........24
Item 6a      QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.......31
Item 7.      FINANCIAL STATEMENTS.............................................31
Item 8.      CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
                  AND FINANCIAL DISCLOSURE....................................31
PART III

Item 9.      DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS;
                  COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT...........32
Item 10.     EXECUTIVE COMPENSATION...........................................35
Item 11.     SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
                  AND MANAGEMENT..............................................38
Item 12.     CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS...................40
Item 13.     EXHIBITS AND REPORTS ON FORM 8-K.................................42

SIGNATURE PAGE................................................................45

INDEPENDENT AUDITOR'S REPORT AND CONSOLIDATED
FINANCIAL STATEMENTS, JUNE 30, 1998 AND 1997.................................F-1






                                       2



<PAGE>



                                     PART I

ITEM 1. DESCRIPTION OF BUSINESS

(a)  BUSINESS DEVELOPMENT:

1.   General Corporate
     -----------------

     ComTec  International,  Inc., together with its subsidiaries  (collectively
"the  Company"),  is a holder of 900  megahertz  ("MHz" ) band  frequencies  for
commercial  specialized mobile radio ("SMR") service in seven metropolitan trade
areas ("MTA's") in southeastern USA.

     ComTec  International Inc. was incorporated on July 6, 1983 in the State of
New  Mexico,  originally  under  the name of  Nisus  Video,  Inc.  It is a fully
reporting 12(g), 34 Act publicly traded company.  The Company has undergone many
changes to date as a result of certain  reorganizations.  Historical changes are
more fully disclosed in prior 34 Act filings.  The Company's principal office is
located at 9350 East Arapahoe Road,  Suite 340,  Englewood,  Colorado 80112; its
telephone number is (303) 662-1198;  its facsimile number is (303) 662-8485. The
Company is currently  authorized to issue 100,000,000 common shares,  $0.001 par
value and 10,000,000  preferred  shares,  $0.001 par value.  The Company has one
wholly owned operating  subsidiary,  American  Wireless  Network,  Inc. ("AWN"),
three  inactive  wholly owned  subsidiaries,  and a seventy  percent  investment
interest in an additional inactive subsidiary.

     On May  10,  1995,  pursuant  to the  terms  and  conditions  of a  written
agreement,  the  control of the  Company was  acquired  by the  shareholders  of
Keystone Holding  Corporation  ("KHC"),  a privately owned Colorado  corporation
under the control of Donald G. Mack, solely in exchange for voting securities of
the  Company.  In  connection  with this  acquisition,  2,245,794  shares of the
Company's  common stock were issued to KHC in exchange for the  following  major
assets of KHC: (1) a commercial  revenue producing  property valued at $392,214,
and (2) a satellite uplink system valued at $290,000 (net of  depreciation).  In
connection with the revenue producing  property there was a $347,645  liability.
Mr. Mack has  subsequently  filed  litigation  against  the  Company  related to
alleged  compensation  entitlements  and the  Company  has  filed  counterclaims
against  Mr.  Mack.  (SEE ITEM 3, LEGAL  PROCEEDINGS  -  LITIGATION  WITH FORMER
OFFICER  AND  DIRECTOR   and  ITEM  12,   CERTAIN   RELATIONSHIPS   AND  RELATED
TRANSACTIONS.)

     As a result of this transaction,  the Company experienced a complete change
of management  control. On October 27, 1995, Nattem, USA, Inc. (then the name of
the  Company)  changed its name to ComTec  International,  Inc.,  and planned to
develop  various  telecommunications  services and products,  principally in the
areas of Specialized  Mobile Radio (SMR).  During the past two fiscal years, the
Company  departed  from the  strictly  SMR  business  strategy  to  include  now
terminated ventures in prepaid phone cards and giant LED screens.

     On March 28, 1997, the  Shareholders of the Company  approved a proposal to
give the  Company's  Board of Directors  authority to institute a reverse  stock
split of from 3 for 1 to 100 for 1 at the  discretion  of the Board of Directors
until  December  31, 1997.  On December 26, 1997,  the Board of Directors of the
Company acted pursuant to shareholder authority granted at the Annual Meeting of
Shareholders  held March 28, 1997, to declare a one for five reverse stock split
of the Company's $.001 par value common stock  effective 12:01 A.M.  January 31,
1998.  All share data and per share data is stated to reflect the reverse  stock
split.


                                       3
<PAGE>




2.   Current Operations
     ------------------

     OPERATING SUBSIDIARY

     On December 3, 1996, the Company formed  American  Wireless  Network,  Inc.
('AWN"),  a wholly owned subsidiary of the Company,  to pursue  opportunities in
the  Specialized   Mobile  Radio  (SMR)   industry.   In  connection  with  this
transaction,  the Company transferred all SMR radio licenses under ownership and
control of the Company to AWN (in exchange for 500,000 shares of common stock in
AWN).  On December 22, 1996 AWN issued an  additional  143,000  shares of common
stock to three additional  Company  affiliated  entities.  In March of 1997, the
Company exchanged for stock in the Company all shares of AWN held outside of the
Company.  As of March  31,  1997,  and  currently  the  Company  owns all of the
outstanding  common stock of AWN.  Since  December 5, 1997, AWN has operated SMR
sites in seven MTA's in the southeastern  U.S.A.,  operating  specialized mobile
radio licenses purchased from Centennial  Communications  Corp. in a transaction
which final closing occurred on July 6, 1998.

     PURCHASE OF SPECIALIZED MOBILE RADIO COMMUNICATIONS SYSTEMS

     On December  5, 1997,  the  Company  through  AWN,  began  operations  as a
provider of SMR two-way  communication  services.  By an  agreement  executed on
December 4, 1997, AWN, a wholly owned subsidiary of ComTec  International,  Inc.
(the "Company"), acquired management control of Specialized Mobile Radio ("SMR")
related assets and licenses owned by Centennial  Communications Corp. of Denver,
Colorado in seven MTA's located in southeastern USA. The transaction was an arms
length purchase and sale transaction,  negotiated by the representatives of each
party to the agreement.

     The Company and Centennial  Communications  Corp., a Colorado  Corporation,
initially  entered into a letter of intent  dated as of October 16, 1997,  and a
formal  agreement was entered into on December 4, 1997,  between AWN, a Colorado
Corporation and Centennial  Communications  Corp. (the "Agreement")  whereby AWN
acquired  management  control on  December  5,  1997,  of the SMR assets and SMR
licenses owned by Centennial  Communications Corp. together with the SMR related
business  limited to and located in the seven  following USA MTA's:  Birmingham,
Alabama; Knoxville, Memphis, and Nashville,  Tennessee; Oklahoma City and Tulsa,
Oklahoma;  and New  Orleans,  Louisiana.  The assets  acquired by the  Agreement
include SMR licenses issued by the Federal  Communications  Commission  ("FCC"),
radio  equipment  and  antennas,  tower  site  leases and the  customer  base of
Centennial  Communications  Corp.  in the  seven  acquired  markets.  Since  the
acquisition, AWN has continued to utilize the assets acquired in the transaction
for the same purposes,  that of commercial sale of air time to business users as
was utilized by Centennial  Communications Corp. Transfer of title to the assets
and licenses  occurred at a second  closing on July 6, 1998.  Until  transfer of
legal  title of the  assets  to AWN on July 6,  1998,  the  seven  markets  were
operated by AWN pursuant to a management agreement.  The total purchase price of
the assets was  $3,035,700,  consisting  of cash  deposit of $200,000 in October
1997,  payment of $1,000,800 in cash on December 4, 1997, a promissory note from
AWN to Centennial Communications Corp. in the amount of $444,200 (which was paid
on July 6, 1998) and assumption of FCC notes totaling $1,390,700 by AWN.

     Prior to this acquisition, neither the Company nor its subsidiary, AWN, had
any affiliation  with Centennial  Communications  Corp. nor any of its officers,
directors, affiliated companies or shareholders.


                                       4

<PAGE>



     PRINCIPAL OFFICE OF REGISTRANT

     On December 15, 1997, the Company  relocated its principal offices to Suite
340, 9350 East Arapahoe Road,  Englewood,  Colorado,  80112. The Company's phone
number is (303)-662-1198. The Company's operating subsidiary, AWN, which is also
located at such address,  entered into a three-year lease for the premises, said
lease ending November 30, 2000.

     INACTIVE SUBSIDIARIES

     Custom  Concepts,  Inc.  was  incorporated  as a  Colorado  Corporation  in
November 1997 as an additional subsidiary of the Company.  Custom Concepts, Inc.
is currently inactive with no defined business plan and has no material assets.

     On January 14, 1998, the name of CTI Real Estate,  Inc. a subsidiary of the
Company  which held real estate  formerly  owned by the Company,  was changed to
AmNet  Resources,  Ltd.  ("AmNet").  AmNet has no active  operations or material
assets.  AmNet is currently  inactive  with no defined  business plan and has no
material assets.

     International   Media  Group,   Ltd.  ("IMG")  was  formed  as  a  Colorado
Corporation  in March of 1997 with a business  plan to  operate  and market as a
public  advertising media the use of giant LED screens.  The Company has entered
into an agreement to dispose of the LED screens. IMG has no active operations or
material assets. IMG is currently inactive with no defined business plan and has
no material assets.

3.   Change in Management
     --------------------

     The Company has undergone a complete change in management over the past two
years.  The Company has undergone  management  restructure to the extent that no
Director, Officer, Management Executive, or employee associated with the Company
at July 1, 1997 is now associated with the Company.

     Current  management of the Company consists of the President and CEO, James
J. Krejci, an MBA,  formerly a top executive with Jones  Intercable,  Inc./Jones
International,  Ltd.  associated  companies;  the Chief  Financial  Officer  and
Secretary/Treasurer,  Gordon  Dihle,  an attorney and CPA;  and the  Controller,
Michael Bunch, a CPA and MBA.

     Daniel  Melnick was  appointed as a Director of the Company by the Board of
Directors at the annual meeting of the Board of Directors of the Company held on
March 28, 1997. Mr.  Melnick had no previous  affiliation  with the Company.  On
August 26, 1998, Mr.  Melnick was removed as a director by a special  meeting of
shareholders.  Mr. Melnick had not actively  participated  in the affairs of the
Company.

     On October 8, 1997, Clifford S. Perlman resigned as a Director and Chairman
of the Board of the Company and in all  capacities  as a Director and Officer of
the Company's subsidiaries.

     Michael  Bunch,  a CPA and MBA,  became the  organization's  controller  in
tandem with the appointment of Gordon Dihle, as CFO and as a Company Director in
the  initial  management  restructure  which  took  place on  October  8,  1997,
following the resignation of Clifford S. Perlman.

     Clarence  Leist,  a former  OneComm  Manager,  was appointed  Chief Network
Operations Engineer in November, 1997.


                                       5
<PAGE>



     James J. Krejci began employment with the Company on February 17, 1998, and
in conjunction  therewith,  was named CEO of AWN and Chief Operations Officer of
the Company.

     On May 8, 1998, J. Kent Millington,  an individual previously  unaffiliated
with the Company, and Clarence Leist were appointed to the Board of Directors.

     On May 8, 1998,  Gordon Dihle,  in conjunction  with the  appointment of J.
Kent  Millington  and Clarence  Leist as new members of the Board of  Directors,
resigned  as Chief  Financial  Officer and in all  capacities  as an officer and
member of the Board of Directors of the Company and all subsidiaries thereof.

     On May 11,  1998,  Clarence  Leist  resigned  as a member  of the  Board of
Directors  of the Company.  On July 1, 1998,  Clarence  Leist  resigned as Chief
Network Operations Engineer and all other capacities with the Company.

     With respect to the  resignations by each of the  individuals  named above,
there  was no  disagreement  with any  person  so  named on any  administrative,
operational or technology issues or public disclosure which disagreement, if not
resolved  to the  satisfaction  of this  officer,  would have caused him to make
reference to the subject matter in connection with this report.

     On June 23,  1998,  Donald G. Mack  resigned  as  President  and CEO of the
Company and in all officer and  director  capacities  with  subsidiaries  of the
Company.  Mr. Mack remained as a Director of the Company. Mr. Mack's resignation
letter stated that his  resignation  was not a waiver of any rights or claims to
any compensation,  stock, options,  bonuses or accrued amounts of cash, loans or
guarantees  made on behalf of the Company under the terms and  conditions of his
employment  contract.  Mr.  Mack's  resignation  letter did not request that any
disagreement be reported or disclosed in the Company's  regulatory filings.  Mr.
Mack has subsequently  filed  litigation  against the Company related to alleged
compensation  entitlements and the Company has filed  counterclaims  against Mr.
Mack.  (See "ITEM 3, LEGAL  PROCEEDINGS  -  LITIGATION  WITH FORMER  OFFICER AND
DIRECTOR.")

     On  August  26,  1998,  pursuant  to  a  call  for  a  special  meeting  by
shareholders  owning  in  excess  of 10%  of the  Company's  common  stock,  and
presented  to the  shareholders  by a notice and proxy  mailed by the  Company's
independent transfer agent on August 11, 1998, a special meeting and election of
all shareholders of the Company was held with the following  proposed  purposes:
remove  Donald G. Mack from the Board of  Directors  for  cause;  remove  Daniel
Melnick  from the  Board of  Directors;  elect  James J.  Krejci to the Board of
Directors and elect Gordon D. Dihle to the Board of Directors.

     As a result of the Special  Meeting of  Shareholders  held August 26, 1998,
Donald G. Mack and Daniel  Melnick were removed as Directors of the Company.  In
the same special shareholders meeting,  James J. Krejci and Gordon D. Dihle were
elected to the Company's Board of Directors until the next annual meeting of the
Shareholders.  As of August 26, 1998, the Company's Board of Directors consisted
of J. Kent  Millington  (appointed  May 8, 1998),  James J. Krejci and Gordon D.
Dihle.

     Prior to the Special  Meeting of  Shareholders  held August 26, 1998,  by a
letter dated August 21, Donald G. Mack tendered his resignation as a Director of
the  Company  and as an  officer  and  director  of  any  of  its  subsidiaries.
Previously,  on June 23,  1998,  Mr. Mack had  tendered  his  resignation  as an
officer  of  the  Company  and  as  an  officer  and  director  of  any  of  its
subsidiaries.  Mr. Mack's resignation letter stated that his resignation was not
a waiver of any rights or claims to any compensation, stock, options, bonuses or
accrued amounts of cash, loans or guarantees made on behalf of the Company under
the terms and  conditions of his  employment  contract.  Mr. Mack's  resignation
letter did not request  that any  disagreement  be reported or  disclosed in the
Company's regulatory filings. Mr. Mack was officially


                                       6
<PAGE>



removed as a Director of the Company by the Special Meeting of Shareholders held
August 26, 1998. Mr. Mack has subsequently  filed litigation against the Company
related  to  alleged  compensation   entitlements  and  the  Company  has  filed
counterclaims  against Mr. Mack.  (See "ITEM 3, LEGAL  PROCEEDINGS  - LITIGATION
WITH FORMER OFFICER AND DIRECTOR.")

     J. Kent  Millington who was appointed May 8, 1998,  resigned from the board
of directors  effective  September 2, 1998. With respect to the  resignations by
Mr.   Millington,   there  was  no  disagreement  with  Mr.  Millington  on  any
administrative,  operational  or technology  issues or public  disclosure  which
disagreement,  if not resolved to the  satisfaction of this officer,  would have
caused him to make  reference  to the  subject  matter in  connection  with this
report.

     At a Special  Board of  Directors  meeting  held  September  2,  1998,  the
following officers were appointed by the Board of Directors:  James J. Krejci as
President,  CEO and  Chairman of the Board of  Directors  and Gordon D. Dihle as
Secretary  and  Treasurer.   Michael  Bunch   remained  as  the   organization's
controller.

     On September 30, 1998, Marc Maassen, an individual previously  unaffiliated
with the Company or current  management  was appointed to the Board of Directors
as an outside director.

4.   Asset Forfeitures, Dispositions and Terminations of Contract Rights
     -------------------------------------------------------------------

     On July 27, 1995,  the Company  entered into an agreement to acquire all of
the outstanding voting stock of John Sandy  Productions,  Inc. (JSP) a privately
held corporation  under the sole control of John Santucci.  The business purpose
of this video  production  company was to obtain  in-house  marketing  and media
production   expertise  to  support  the  Company's   marketing  of  its  future
telecommunication  services. Based on a settlement agreement executed in October
1997, the Company has agreed to terminate the original purchase agreement of JSP
with John Santucci and the Company and JSP mutually  released any claims against
the  other.  For  accounting  purposes,  the  Company's  total  cash  investment
($40,000) in JSP had been  recorded in other  assets  since June 30, 1996.  This
amount was charged to operations in the year ended June 30, 1998.

     As of June 30, 1996,  the Company  reported that it  controlled  management
option   agreements  on  185  SMR  licenses   obtained  through  the  Omni-Range
acquisition,  some of which were partially constructed.  These channels were not
revenue  producing.  The Company  defaulted  on its payment  obligation  for the
channels since the original  compensation  involved a subordinated mortgage on a
building  previously  held by the Company,  which  building  transferred  to the
original lien-holder in foreclosure proceedings cumulating in December 1997. The
Company has forfeited any rights to the Omni-Range channels.

     In July 1997, an Adverse  Summary  Judgment and Decree in  Foreclosure  was
issued against the Company's  wholly owned  subsidiary,  CCI Real Estate,  Inc.,
which as of the  current  date has  eliminated  any equity or  ownership  by the
Company of real estate located at 10855 East Bethany Drive, Aurora, Colorado. In
the case of Sunset Life Insurance Company of America vs. CTI Real Estate,  Inc.,
Arapahoe County  District  Court,  Case No. 96 CV 741, the Court issued an order
dated July 18, 1997, entering Summary Judgment and Decree in Foreclosure against
CTI Real Estate, Inc., a subsidiary of ComTec  International,  Inc. This suit, a
foreclosure  action on the  Company's  building  at 10855  East  Bethany  Drive,
Aurora,  Colorado was filed in September 1996 in the District Court for Arapahoe
County,  Colorado.  A notice of  Sheriff's  sale dated  August 11,  1997,  set a
Sheriff's sale for September 23, 1997, in Littleton, Colorado. The sale was held
and CTI Real Estate, Inc.'s redemption period has expired. The Company


                                       7
<PAGE>



was unable to sell or redeem  the  property  and all equity was lost.  Ancillary
litigation  was  either  settled  separately  or merged and  concluded  with the
foreclosure. (See "ITEM 3, LEGAL PROCEEDINGS.")

     On January 14, 1998, the name of CTI Real Estate, Inc., a subsidiary of the
Company  which held real estate  formerly  owned by the Company,  was changed to
AmNet  Resources,  Ltd.  ("AmNet").  AmNet has no active  operations or material
assets.

     DCL ASSOCIATES SMR LICENSE OPTIONS CANCELLATION

     On August 6, 1996, the Company  acquired option  agreements to manage 1,380
800 MHz SMR channels in 20 states from a group of 34 associated  licenses  ("the
DCL  options").  The August 6, 1996  agreement  was  recorded  as a purchase  of
license rights by the Company at a purchase price of $1,597,000 in the Company's
September  30,  1996 10QSB and  subsequently  increased  with  subsequent  stock
issuances. As a result of disputes which began in February 1997, DLC Associates,
Inc.  notified the Company that DCL  Associates,  Inc.  and  additional  parties
("DCL")  considered  the Company to be in default of its  obligations  under the
option  agreements.  On  August 7,  1997,  the  Company  filed a  Complaint  for
declaratory  relief and damages in United States District Court for the District
of Colorado,  Denver,  Colorado, Case 97-1685 seeking a court ruling that option
agreements  entered  into  by  and  between  the  Company  and  the  Defendants,
consisting of DCL Associates,  Inc. and thirty three additional Defendants, were
legal,  valid and  enforceable  agreements.  The Defendants  filed an answer and
counterclaim  March 30, 1998,  denying that the option  agreements,  subcontract
agreement  and  management  agreement  entered  into by the  Defendants  and the
Company remained valid and further  alleging failure of performance,  failure of
consideration and inequitable conduct on the part of the Company. The entire DCL
option transaction and associated  litigation was terminated by legal settlement
on June 22, 1998. The opportunity to purchase two DCL licenses for $925,000 cash
as provided by the  settlement  agreement  expired on July 1, 1998.  In the same
settlement,  all of the stock previously  issued to DCL Associates,  Inc. by the
Company  in payment of such  options,  consisting  of  1,361,786  common  shares
(including  662,786 common shares issued in exchange for 39,767 shares of Series
C Preferred  Stock) has been returned to the Company and cancelled.  The Company
had issued  39,767  shares of Series C  Preferred  Stock with a stated  value of
$10.00 in  connection  with the DCL options  acquired per the closing  agreement
dated  August 6, 1996,  and these  shares were  converted  to 662,786  shares of
common stock pursuant to the DCL option agreement.  The net result of the entire
transaction  in retrospect is the loss of the actual cash paid to DCL Associates
of approximately  $150,000.  The Company has no further interest or claim to the
DCL options or assets associated therewith. (See "ITEM 3, LEGAL PROCEEDINGS.")

     DISPOSITION OF LED SCREEN ASSETS

     On December 31, 1998, the Company disposed of six (6) giant  light-emitting
diode  (LED)  screens  by sale  to  Lanstar  Computer  Products,  Inc.,  a Texas
Corporation, located in Dallas, Texas. The giant LED screens are used to provide
computer active light presentation programs, adaptable for indoor or outdoor use
for sporting events,  advertising  displays and other  theatrical  applications.
Pursuant to the Purchase  Agreement entered into between the Company and Lanstar
Computer Products, Inc., the LED screens were sold to Lanstar Computer Products,
Inc.  (which may be  considered  an  affiliate of the Company) in exchange for a
Promissory Note payable to the Company in the amount of two million four hundred
thousand  dollars  ($2,400,000).  The  promissory  note is to be  secured  by an
agreement  utilizing the assets sold as security for the  promissory  note.  The
entire principal of the promissory note is due December 31, 1999. The promissory
note, a general  obligation of Lanstar  Computer  Products,  Inc.,  bears simple
interest at the rate of eight  percent  (8%) per annum  payable  quarterly.  The
Buyer, Lanstar Computer Products,  Inc., is a Texas Corporation located at 13707
Gamma Road, Dallas, Texas 75244. Prior to this disposition, neither the Company,
nor any of its subsidiaries, directors, officers or persons associated with the


                                       8
<PAGE>



Company's  officers and directors  had any  relationship  with Lanstar  Computer
Products, Inc. or any of its officers or directors. Lewis D. Rowe, who is not an
officer or director of the  Company,  but who is listed as an  affiliate  of the
Company in the Company's  June 30, 1997 and 1998 Form 10-KSB reports as a person
known by the Company to own beneficially more than 5% of the Company's $.001 par
value  common  stock,  may also be  considered  to be an  affiliate  of  Lanstar
Computer  Products,  Inc.,  a  non-public  company.  The LED Screens had been on
consignment   for  sale  since  August  1998.   No   determination   as  to  the
collectability of the promissory note has been made.

     AGREEMENT FOR DISPOSITION OF LICENSES

     On April 15, 1999,  AWN executed an Asset  Acquisition  Agreement with S.E.
900, Inc.,  ("Buyer") a Delaware  corporation to be formed as a subsidiary of an
unaffiliated  company.  The  purpose of the Asset  Acquisition  Agreement  is to
facilitate the future sale by American Wireless Network,  Inc. to S.E. 900, Inc.
of  specifically  identified  900 MHz licenses and  American  Wireless  Network,
Inc.'s  customer base and customer lists  associated  with the specified 900 MHz
licenses. The sale is subject to certain conditions and events,  including final
and unappealable  regulatory  approvals relating to the transfer of the licenses
to  the  Buyer.  In  consideration   for  the  sale,  the  Buyer  is  to  assume
approximately  $1,400,000  of  American  Wireless  Network,  Inc.'s  debt to the
Federal  Communications  Commission  related to the  licenses  and issue  common
shares of Buyer  representing a seven and one half percent interest in S.E. 900,
Inc. to American Wireless  Network,  Inc. The agreement also includes a lease of
SMR related  equipment  owned by AWN to S.E.  900, Inc. The 900 MHz licenses and
American  Wireless  Network,  Inc.'s customer base and customer lists associated
with the specified 900 MHz licenses to be sold to S.E. 900, Inc. were  purchased
by American Wireless Network, Inc. on July 6, 1998, as a part of the acquisition
of divisional  segment assets from  Centennial  Communications  Corp.  which was
reported in Item 2 of Form 8-K's dated December 26, 1997, and September 3, 1998,
and Items 2 and 7 of the Form 8-K/A and Exhibits thereto dated February 9, 1999.

5.   Discontinued Subsidiary Operations
     ----------------------------------

     TTI COMMUNICATIONS CORPORATION

     The Company in conjunction with three additional 10% shareholders  invested
in   a   subsidiary,    TTI   Communications    Corporation,   a   long-distance
telecommunication   business,   on  February  12,  1997.  This  partially  owned
subsidiary  began operations  approximately  February 19, 1997, and by March 31,
1997,  was  functionally  operational  but operating at a substantial  loss. TTI
Communications Corporation continued to incur substantial operating losses until
the  time the  Company's  interest  in TTI  Communications  Corporation  and all
operations  was  terminated  on  approximately  December 2, 1997.  This business
resold long distance  telephone service through prepaid phone cards. The Company
had a 70% interest in TTI Communications Corporation, the remaining 30% interest
in the  subsidiary  is owned 10% each by two  unaffiliated  individuals  and one
unrelated limited liability  company.  On December 2, 1997, the Company disposed
of its entire interest in TTI Communications Corporation.

     INTERNATIONAL MEDIA GROUP, LTD.

     The Company organized a new subsidiary,  International Media Group, Ltd. on
March 20,  1997.  International  Media  Group,  Ltd.  ("IMG")  was formed with a
preliminary  business plan to operate and market as a public  advertising  media
the use of giant LED  screens.  On  approximately  March 31,  1997,  the Company
obtained possession (through agreements to acquire for future issuance of common
stock in a  nonpublic  exchange)  of six (6) giant  light-emitting  diode  (LED)
screens.  The giant LED screens  provide  active  light  presentation  programs,
adaptable for indoor or outdoor use for sporting events,


                                       9
<PAGE>



advertising displays and other theatrical applications. The acquisition required
the issuance of 5,000,000  shares of the common stock of the Company.  The stock
exchange  portion of the  transaction,  facilitated  through Geneva  Reinsurance
Company,  Ltd., a corporation organized outside of the United States of America,
resulted  in  issuance  of  5,000,000  shares of common  stock to ten  different
entities,  none of which are  residents of the U.S.A.,  on March 23,  1998.  The
Company  intended,  through its wholly  owned  subsidiary,  International  Media
Group,  Ltd., to lease out the screens for short-term  (one to six week) events.
Efforts at  leasing  and  utilizing  the LED  screens  resulted  in  substantial
operating  losses to the Company's  subsidiary,  IMG,  through which leasing and
operation of the LED screens was to take place. IMG is currently inactive.

6.   Terminated Financing Proposals
     ------------------------------

     PROPOSED UNDERWRITING WITHDRAWN

     On October 23,  1996,  the Company  made a $25,000  deposit and  obtained a
letter of intent  outlining a future  firm  commitment  by National  Securities,
Inc., an NASD member broker  dealer,  to underwrite a $25 million debt and a $15
million common stock secondary offering. National Securities, Inc. requested and
suggested  certain  changes in the  finance,  operations  and  structure  of the
Company but did not move  forward  with any type of  underwriting  process.  The
Company has been refunded its $25,000 deposit.  There are no currently  existing
agreements  for  underwriting  a public or  private  offering  of the  Company's
securities with any NASD member broker dealer.

     PRIVATE PLACEMENT WITHDRAWN

     During the quarter  ended  September 30, 1996,  the Company  entered into a
letter of intent with  American  Investments  Services,  Inc.  ("AIS"),  an NASD
member broker dealer,  wherein the Company and AIS proposed a private  placement
to be  undertaken  by AIS. AIS  subsequently  cancelled the letter of intent and
ended its preliminary  efforts with respect to the proposed  private  placement.
There are no currently  existing  agreements for underwriting a private offering
of the Company's securities with any NASD member broker dealer.

(b)  BUSINESS OF ISSUER:

     American Wireless Network,  Inc. ("AWN"),  a wholly owned subsidiary of the
Company, was incorporated under the laws of the State of Colorado on December 3,
1996, to act as the wireless  communications  operating  entity for the Company.
The Company's operations are conducted through AWN.

     During the fiscal  year ended June 30,  1998,  and  through the present the
Company  continued as a  developmental  stage entity  focused on developing  its
wireless  SMR  business  plan.  Prior  to  December  1997,  activities  had been
concentrated  on creating and executing the Company's  strategic  business plan,
raising  private  financing,  efforts to acquire other entities and  operations,
developing a management  and support  staff to execute its  business  plan,  and
maintaining  reporting compliance for various federal government agencies,  such
as the SEC and FCC. The Company's most significant accomplishment to date is the
action of its current  management  in  completing  the final  closing on July 6,
1998,  of the purchase of FCC licenses and  operation of thirteen  operating SMR
systems located in seven southeastern U.S.A. MTA's.



                                       10
<PAGE>



Current Status and Operations
-----------------------------

     On  December  5,  1997,  AWN  completed  the  initial  phase of a  purchase
agreement whereby AWN purchased seven operating SMR systems for $3,035,700.  The
wireless  communications assets and associated business acquired from Centennial
Communications Corp. lay within the following seven MTA's: Birmingham,  Alabama;
Knoxville,  Tennessee;  Memphis, Tennessee;  Nashville,  Tennessee; New Orleans,
Louisiana;  Oklahoma City, Oklahoma;  and Tulsa, Oklahoma. The recently acquired
systems are relatively new. The 105 operating  channels had  approximately  1400
subscribers,  generating recurring monthly revenues of approximately  $20,000 on
the  purchase  date.  These  operating  systems  have a total of 14  sites,  105
constructed  channels  and cover seven of the U.S.A's 51 MTA's,  including  nine
cities  located  in  four  southeastern   United  States  encompassing  a  total
population of 17.4 million,  of which the seven systems are presently capable of
covering  approximately 5.9 million population.  On April 15, 1999, AWN executed
an Asset  Acquisition  Agreement  with S.E.  900,  Inc.  ("Buyer"),  a  Delaware
corporation,  to be formed  as a  subsidiary  of an  unaffiliated  company.  The
purpose of the Asset  Acquisition  Agreement is to facilitate the future sale by
American Wireless Network, Inc. to S.E. 900, Inc. of specifically identified 900
MHz licenses and American  Wireless  Network,  Inc.'s customer base and customer
lists associated with the specified 900 MHz licenses. The sale and an associated
lease of SMR related equipment owned by AWN is subject to certain conditions and
events,  including final and unappealable  regulatory  approvals relating to the
transfer of the licenses to the Buyer. In consideration  for the sale, the Buyer
is to assume approximately  $1,400,000 of American Wireless Network, Inc.'s debt
to the  Federal  Communications  Commission  related to the  licenses  and issue
common  shares of Buyer  representing  a seven and one half percent  interest in
S.E. 900, Inc. to AWN.

     At present  AWN  operates  the seven SMR  communications  systems  from its
office in  Englewood,  Colorado.  AWN's SMR  communication  services are sold to
individual  customers  through an  independent  dealer  network of local two-way
radio  communications  equipment vendors  ("Dealers").  The Dealers maintain the
local relationships with the customers.  AWN acts as the direct billing provider
of SMR  communications  to the customer  base  provided by the  Dealers.  AWN is
responsible  for  local  telephone  lines,  equipment  maintenance,  tower  site
rentals,  customer  loading,  coding and  billing and all  customer  service and
financial relationships. AWN also has all responsibility for maintaining its SMR
licenses,  making  payments to the FCC on its licenses and funding all equipment
additions  and system  improvements.  Under the current  operation  and level of
usage,  expenses of operating the system  significantly exceed revenues from the
systems.

The Specialized Mobile Radio Industry
-------------------------------------

     SMR,  considered  "private  carriage,"  was  designed to serve the business
community.  With  the  birth  of  SMR,  the  government  saw an  opportunity  to
deregulate  the  business  communications  industry  by  creating  a viable  new
marketplace and, at the same time, decrease the cost of providing fleet dispatch
service to small  businesses.  Cellular was designed to be a mobile outgrowth of
the public telephone system. Like the public telephone system,  cellular systems
are regulated by the FCC and public  service  commissions  of  respective  state
governments.  Cellular, considered "common carriage" by the FCC, was designed to
serve the mobile public

     The  establishment  of  "private  carrier"  systems  allows  a  third-party
entrepreneur to make a profit from a mobile communications system.  Services are
provided by SMR systems to a number of different  commercial  entities,  or "end
users," which use the system for their  communications  needs.  Because users do
not have to invest in the base station,  SMR service is available to individuals
and small businesses.  Services include but are not limited to dispatch, private
voice and data networks, paging and telephone interconnect.  Essentially, an SMR
is an individual or company's internal mobile communication network.


                                       11
<PAGE>



Unlike  cellular,  SMR does not adhere to one  equipment  standard or  protocol.
Currently,  two  major  equipment  manufacturers,  Motorola  and  E.F.  Johnson,
dominate  the  industry,  each with its own  protocol.  Sophisticated  switching
necessary to  facilitate  wide-area  SMR systems  allows  dissimilar  systems to
communicate  with each other  through  the use of digital  technology,  allowing
individual SMR operators to build wide-area networks through roaming agreements.

     Typical SMR users are  businesses  in need of  communication  with large or
small  groups of  employees  on the road,  especially  those in fleet  sales and
service  operations.  Categories of users include  transportation,  real estate,
construction,  security services, plumbing and electrical contractors,  delivery
services,  taxi and  limousine  services,  government  agencies  (such as public
safety,  hospital,  and general  government  agency  field  operations),  mining
operations and messenger services.

     In  Management's  evaluation,  key factors  relevant to  competition in the
wireless  communication industry are pricing, size of the coverage area, quality
of  communication,  reliability  and  availability  of  service.  The  Company's
potential  success  depends  in large  measure on its  ability  to compete  with
numerous wireless service providers in each of its markets,  including  cellular
operators,  PCS  service  providers,   Digital  SMR  service  providers,  paging
services, and other analog SMR operators.  The wireless  communications industry
is highly  competitive  and  comprised  of many  companies,  most of which  have
substantially  greater  financial,  marketing,  and  other  resources  than  the
Company. There can be no assurances that it will be able to compete successfully
in the wireless communication industry.

     Since the late 1980's, Nextel Communications Inc. ("Nextel") has acquired a
large number of SMR systems and is in the process of  implementing  a conversion
from analog SMR technology to Motorola's  digital  integrated  Dispatch Enhanced
Network  ("iDEN")  system.  Other  cellular  operators  and  PCS  providers  are
implementing digital transmission  protocols on their systems as well, primarily
to address  capacity  issues.  Another  potential  wireless  competitor  for the
Company is Southern  Company,  which is implementing a digital  architecture and
pursuing Nextel-like  strategies on a regional or primary market basis. Southern
Company is a large  utility  focusing on  wide-area  communications  for its own
vehicle fleet in the Southeastern  United States,  while selling excess capacity
to other businesses  spanning the same geographic region.  Most other analog SMR
providers within the Company's  operating  territory consist of locally oriented
small businesses, often passed from generation to generation.

Government Regulation
---------------------

     The Company's operations are subject to government  regulation primarily by
the FCC. The licensing,  operation,  assignment,  and acquisition of 900 MHz SMR
licenses are regulated under the  Communications Act of 1934, as amended in 1996
(the  "Communications  Act").  Since that time,  the FCC has  adopted  new rules
converting  interconnected  SMR  service  from  a  private  radio  service  to a
commercial  mobile  radio  service  and has  proposed  other new rules  allowing
operational  flexibility and mandating future licensing by competitive  bidding.
The FCC periodically has various dockets under consideration, which could result
in  changes  to the  FCC's  rules,  regulations,  and  policies.  Certain  rule,
regulation or policy changes by the FCC could potentially  affect the operations
and financial standing of the Company.

     All  SMR and  commercial  mobile  radio  service  licenses  are  issued  as
conditional licenses. The conditional licenses become licenses without condition
only upon  timely and proper  completion  of station  construction  and  minimal
loading.  If a licensee fails to complete  construction  of a station timely and
properly,  the  license  for that  station  cancels  automatically,  without any
further action by the FCC.



                                       12
<PAGE>



     Prior to  imposition  of its  commercial  mobile radio  service  regulation
system,  the FCC issued SMR licenses for five-year terms. Since January 2, 1995,
commercial  mobile radio service  licenses have been issued for ten-year  terms.
Each license may be renewed at the end of the license term upon  application  to
the FCC.  While the FCC  generally  grants  renewal of SMR  licenses  in routine
fashion  and the  Company  is aware of no reason why its  licensees  will not be
entitled to a similar renewal expectancy, there can be no certainty that the FCC
will continue its current renewal practices or extend them to the Company.

     Regulation of radio towers. The transmitters for SMR stations typically are
located on free-standing or building  roof-top towers.  The towers are regulated
by both the FCC and the Federal Aviation Administration ("FAA"). The regulations
concern geographic location,  height,  construction and lighting standards,  and
maintenance.  Failure to comply with tower  regulations can result in assessment
of fines against the tower owner or operator and has, historically,  resulted in
fines assessed against  individual  licensees located on an offensive tower. The
owners of towers are responsible  for compliance  with FCC and FAA  regulations.
The Company does not own or manage any towers.

     Other  Federal  regulations.  The  Company  is  generally  subject  to  the
jurisdiction of various federal  agencies and  instrumentalities  in addition to
the FCC and the FAA including but not limited to the United States Environmental
Protection  Agency,  the United States  Department  of Labor,  the United States
Occupational  Safety  and  Health   Administration,   the  United  States  Equal
Employment  Opportunity  Commission,  the United States  Securities and Exchange
Commission  and  others.  While the Company  believes  that it is  operating  in
conformity with all material  applicable rules and regulations,  policies,  rule
changes,  and other actions of these  agencies,  future action by these agencies
could adversely effect the operations and financial standing of the Company.

     State regulations.  At present, state and local governments cannot regulate
the rates charged by SMR operators.  Such  governments  may,  however,  exercise
regulatory powers over health, safety, consumer protection, taxation, and zoning
regulations with respect to SMR stations.  Currently,  the Company's systems are
not subject to any state or local  regulatory  restraint  (other than  generally
applicable laws and regulations).  However, there can be no assurances that such
systems  will  not  become  subject  to  various  states  and  local  regulatory
authorities in the future.

     Regulatory  developments.  In March 1996, the  Communications Act went into
effect. This Act effected  significant change in regulation and market entry for
communications service providers.  Despite this effect on the telecommunications
industry as a whole, the Company does not anticipate any material adverse affect
on its business arising from the Communications  Act.  Legislation or materially
different  rules may be proposed and enacted at any time and may have a material
adverse  affect on the  operations of the Company.  At this time, the Company is
unaware of any pending legislation or rule-making  proceedings that would have a
material adverse affect on the current operations of the Company.

Research and Development
------------------------

     The Company  has not  incurred,  and does not expect to incur,  significant
research and  development  expenses in  connection  with the  equipment  for its
existing analog SMR systems.

Copyrights, Patents, Proprietary Information, and Trademarks
------------------------------------------------------------

     The Company has no registered service marks, copyrights, or patents.



                                       13
<PAGE>



Employees and Consultants
-------------------------

     As of the date of this filing,  the Company and its wholly owned subsidiary
AWN  employs a total of two (2)  persons  on a full time  basis:  James  Krejci,
President and Chief  Executive  Officer of the Company,  and Gordon  Dihle,  the
Secretary/Treasurer  of the Company.  Mike Bunch,  the Controller is employed by
the Company on a part time as needed basis.

     The Company  periodically  retains outside  consultants  such as attorneys,
accountants,  engineers, technicians and industry consultants to perform certain
corporate administrative tasks and SMR related maintenance.

Wireless Industry
-----------------

     The wireless  communications  industry,  which  includes  services  such as
cellular,  SMR, paging,  and others, is one of the fastest growing industries in
the  world.  The  Company  currently  offers  mobile   communications   services
consisting of basic two-way dispatch.  Analog SMR network systems are capable of
providing voice and data services on a single system. Pricing for SMR service is
normally based on a flat monthly fee for unlimited unit-to-unit communications.

     The Company's success depends on its ability to compete with other wireless
communications  providers,  including  cellular mobile  telephone  operators and
established  SMR  operators,  in  each of its  existing  and  proposed  markets.
Existing cellular and SMR operators in the Company's operating  territories have
been in operation for a number of years, and have significant customer bases. In
addition to their  entrenched  market  position,  these operators have available
significantly  greater financial and other resources than those available to the
Company.  Larger SMR companies are currently  converting to all digital formats,
which require  current  subscribers to purchase  digital radio equipment or find
another analog system provider.  The competition for new SMR subscribers  within
the  Company's  operating  territories  may also include  Nextel  Communications
and/or other  independent SMR regional  operators.  Nextel  Communication is the
largest  wireless  SMR operator in the nation.  The Company also faces  possible
competition  for digital mobile service from other radio  operators for channels
that may be  allocated  by the FCC in the future and  operators  of new wireless
communications technologies such as personal communications systems ("PCS").

Risk Factors
------------

     The securities of the Company are  speculative and involve a high degree of
risk, including, but not necessarily limited to, the factors affecting operating
results described below. The statements which are not historical facts contained
in this  report,  including  statements  containing  words  such as  "believes,"
"expects," "intends,"  "estimates,"  "anticipates," or similar expressions,  are
"forward looking  statements" (as defined in the Private  Securities  Litigation
Reform Act of 1995) that  involve  risks and  uncertainties  including,  but not
limited to, the factors  set forth below (see "ITEM 1,  DESCRIPTION  OF BUSINESS
Forward Looking Statements" and "ITEM 6, MANAGEMENT'S DISCUSSION AND ANALYSIS OR
PLAN OF OPERATION - Forward-Looking Statements").

     Limited  Revenues;  Limited  Relevant  Operating  History;  Significant and
Continuing Operating Losses;  Negative Cash Flow; Accumulated Deficit. Since its
inception,  the Company has been  engaged  primarily in the  acquisition  of FCC
Licenses and the  construction  of facilities to begin  commercial  operation of
such licenses and,  therefore,  has had very limited  revenues from sales of its
services.  Management  has not included  revenues in its  financials  since past
revenues have not been sufficient to


                                       14
<PAGE>



be separately  stated in accordance  with GAAP.  Accordingly,  the Company has a
limited relevant operating history upon which an evaluation of its prospects can
be made.  Such prospects must be considered in light of the risks,  expenses and
difficulties  frequently  encountered in the  establishment of a new business in
the wireless communications  industry,  which is a continually evolving industry
characterized   by  an  increasing   number  of  market   entrants  and  intense
competition,  as well as the risks, expenses and difficulties encountered in the
commercialization of services in new markets. The Company has incurred operating
losses in each quarter since  inception and on June 30, 1998, the Company had an
accumulated deficit of approximately  $11,725,300.  Since such date, losses have
increased and are continuing through the date of this report. Accordingly, it is
anticipated that the Company will continue to incur  significant  losses.  There
can be no assurance  that the Company will be successful in generating  revenues
at a  sufficient  quantity  or margin  or that the  Company  will  ever  achieve
profitable operations.

     Significant Capital Requirements;  Need for Additional Capital; Explanatory
Paragraph in Accountant's  Report. The Company's capital  requirements have been
and will continue to be significant. The Company has been dependent primarily on
the private  placement of equity  securities  and debt  financings.  The Company
anticipates, based on its current proposed growth plans and assumptions relating
to its  growth and  operations,  that the  proceeds  from the  existing  private
placements and borrowings and planned revenues will not be sufficient to satisfy
the Company's contemplated cash requirements for the next 12 months and that the
Company will be required to raise additional funds within the next 12 months. In
addition,  in the event that the Company's plans change or its assumptions prove
to  be  inaccurate  (due  to  unanticipated  expenses,   delays,   problems,  or
otherwise), the Company would be required to seek additional funding sooner than
anticipated.  Any such  additional  funding  could be in the form of  additional
equity   capital.   The  Company  is  currently   pursuing   potential   funding
opportunities. However, there can be no assurance that any of such opportunities
will result in actual funding or that additional  financing will be available to
the Company when needed,  on  commercially  reasonable  terms, or at all. If the
Company is unable to obtain  additional  financing if needed,  it will likely be
required to curtail its  marketing and  expansion  plans and possibly  cease its
operations. Any additional equity financings may involve substantial dilution to
the  Company's  then-existing  shareholders.  The Company's  independent  public
accountants  have  included an  explanatory  paragraph  in their  reports on the
Company's financial  statements for the years ended June 30, 1998 and 1997 which
express  substantial  doubt about the  Company's  ability to continue as a going
concern.  The Company's  consolidated  financial  statements  have been prepared
assuming  that the Company  will  continue as a going  concern.  As discussed in
Footnote 2 to the consolidated  financial  statements,  the Company has suffered
recurring losses from operations and accumulated deficit that raises substantial
doubt about its ability to continue as a going concern.

     Risk of  Implementation of Analog Network;  Risk of Developing  Technology.
The Company's  success is dependent on the  commercial  acceptance of its analog
SMR services.  Consumer acceptance of the Company's services will be affected by
technology-based  differences  and  also  by  the  operational  performance  and
reliability  of system  transmissions  on the Company's  analog SMR network.  In
addition,  the  development  of new  technology  in the wireless  communications
market  could  significantly  affect  the  Company's  ability to  implement  its
marketing  strategy.  In such an event,  the  Company  may be  required to spend
additional  capital to enhance its system to compete  with such new  technology.
This  would  subject  the  Company  to the risks  normally  associated  with the
acquisition of additional capital. See "Significant Capital  Requirements;  Need
for Additional Capital; Explanatory Paragraph in Accountant's Report" above. The
use of analog  wireless  communications  equipment for  commercial  and consumer
applications  represents a relatively  new business  activity  characterized  by
emerging markets and an increasing number of market entrants who have introduced
or are developing an array of new wireless communications products and services,
some of which will compete against the Company's services and any other services
which may be developed by the Company. Achieving market acceptance for the


                                       15
<PAGE>



Company's services will require substantial marketing efforts and expenditure of
funds to create  awareness and demand by potential  customers.  The inability to
successfully complete development of a product or application or a determination
by the  Company,  for  financial,  technical or other  reasons,  not to complete
commercial  building of licenses held by the Company,  particularly in instances
in which the Company has made  significant  capital  expenditures,  could have a
material adverse affect on the Company.

     Dependence on Ability to Compete;  System Build-Out.  The Company's success
depends on its analog mobile  network's  ability to compete with other  wireless
communications  systems in each  relevant  market and the  Company's  ability to
successfully market its wireless communications  services. The Company's ability
to compete  effectively with other wireless  communications  service  providers,
however, will depend on a number of factors, including the successful deployment
of its identified  market areas, the continued  satisfactory  performance of the
Company's technology,  and the development of cost-effective direct and indirect
channels of  distribution  for its products and  services.  No assurance  can be
given  that  such   objectives   will  be   achieved.   See  "Risk   Factors  --
Forward-Looking Statements."

     While the Company believes that the mobile dispatch service currently being
provided  on its analog SMR  network is  similar  in  function  to and  achieves
performance  levels  competitive  with  those  being  offered  by other  current
wireless  communications  service providers in the Company's market areas, there
are and will  continue to be  differences  between the services  provided by the
Company and by cellular and/or PCS system operators and the performance of their
respective  systems.  In addition,  if either PCS or cellular  operators provide
two-way dispatch services in the future, the Company's ability to compete may be
impaired.  In addition,  Nextel does provide  two-way  dispatch  service and has
bundled  several  services under its digital  network that the Company's  system
does not provide.  As a result of these  differences,  there can be no assurance
that services provided on the Company's  networks will be competitive with those
available  from other  providers of mobile  telephone  services.  The  Company's
system is not currently compatible with PCS or other telecommunications  systems
and,  therefore,  the Company will not be able to offer roaming abilities in any
market  other  than its  current  markets  or  markets  in which it enters  into
agreements  with other analog SMR systems,  of which there can be no  certainty.
Moreover,  the  cellular  systems  in each of the  Company's  markets  have been
operational for a number of years,  currently  service a significant  subscriber
base and typically have significantly greater financial and other resources than
those available to the Company.

     Subscriber  units on the  Company's  network  will not be  compatible  with
cellular or PCS  systems,  and vice  versa.  This lack of  interoperability  may
impede the Company's ability to attract cellular subscribers or those new mobile
telephone  subscribers  that  desire  the  ability to access  different  service
providers  in  the  same  market.  Moreover,   because  many  of  the  Company's
competitors have  substantially  greater  financial  resources than the Company,
such operators may be able to offer prospective customers equipment subsidies or
discounts  that are  substantially  greater  than those,  if any,  that could be
offered by the Company.  Thus,  the  Company's  ability to compete  based on the
price of  subscriber  units may be  limited.  The  Company  cannot  predict  the
competitive effect that any of these factors, or any combination  thereof,  will
have.  Cellular  operators and certain PCS operators and entities that have been
awarded PCS  licenses  each  control more  spectrum  than is  allocated  for SMR
service  in each of the  relevant  market  areas.  See "ITEM 1,  DESCRIPTION  OF
BUSINESS - Forward Looking Statements" and "ITEM 6, MANAGEMENT'S  DISCUSSION AND
ANALYSIS OR PLAN OF OPERATION - Forward-Looking Statements."

     Management  of  Growth  and  Attraction  and  Retention  of Key  Personnel.
Management  of the  Company's  growth  may  place a  considerable  strain on the
Company's  management,  operations and systems. The Company's ability to execute
its business strategy will depend in part upon its ability to


                                       16
<PAGE>



manage  the  demands  of a  growing  business.  Any  failure  of  the  Company's
management  team to  effectively  manage  growth  could have a material  adverse
effect on the Company's business,  financial condition or results of operations.
The Company's  future success depends in large part on the continued  service of
its key management personnel.  The Company believes that its future success also
depends on its ability to attract and retain skilled  technical,  managerial and
marketing personnel. Competition for qualified personnel is intense. The Company
has  from  time  to  time  experienced   difficulties  in  recruiting  qualified
personnel.  Failure  by the  Company to attract  and  retain  the  personnel  it
requires  could have a material  adverse  effect on the financial  condition and
results of operations of the Company.

     Technological  Advances  and  Evolving  Industry  Standards.  The  wireless
communications industry, and in particular the SMR industry, is characterized by
rapid technological  developments,  changes in customer  requirements,  evolving
industry  standards and frequent new product  introductions.  In the future, the
Company  may be  required  to enhance  its  existing  systems and to develop and
introduce new products that take advantage of technological advances and respond
promptly to new customer requirements and evolving industry standards. There can
be no  assurance  that the  Company  will be able to keep  pace  with the  rapid
evolution of the wireless communications industry.

     Dependence  on   Governmental   Regulation.   The   licensing,   operation,
acquisition and sale of the Company's SMR licenses are regulated by the FCC. FCC
regulations  have undergone  significant  changes during the last four years and
continue to evolve as new FCC rules and regulations are adopted  pursuant to the
Omnibus  Budget  Reconciliation  Act of 1993  and  Telecommunications  Act.  The
Company's  ability  to  conduct  its  business  is  dependent,  in part,  on its
compliance with FCC rules and regulations.  See "ITEM 1, DESCRIPTION OF BUSINESS
- Government  Regulation." Future changes in regulation or legislation affecting
the Company's  system,  including  Congress' and the FCC's recent  allocation of
additional commercial mobile radio services spectrum, could materially adversely
affect The Company's business. In addition,  should the FCC fail to renew any of
the  Company's  licenses or pass rules or  regulations  that limit the Company's
ability to conduct its business,  this could have a material  adverse  affect on
the Company.

     Assets Primarily  Consist of Intangible FCC Licenses.  The Company's assets
consist primarily of intangible assets,  principally FCC licenses,  the value of
which will depend  significantly  upon the success of the Company's business and
the growth of the SMR and wireless communications  industries in general. In the
event of default on indebtedness or liquidation of the Company,  there can be no
assurance  that the value of these  assets  will be  sufficient  to satisfy  its
obligations.

     Lack of  Dividend  History;  No  Dividends.  The  Company  has  never  paid
dividends  on its Common Stock and intends to utilize any earnings for growth of
its business.  Therefore,  the Company does not intend to pay cash dividends for
the  foreseeable  future.  This lack of  dividends  and a dividend  history  may
adversely affect the liquidity and value of the Company's Common Stock.

     Possible  Volatility of Market Price.  The Company's  Common Stock has been
traded on the OTC Bulletin Board since 1984.  The Company  believes that factors
such as (but not  limited  to)  announcements  of  developments  related  to the
Company's business,  fluctuations in the Company's quarterly or annual operating
results,  failure to meet securities analysts' expectations,  general conditions
in the  international  marketplace and the worldwide  economy,  announcements of
technological  innovations or new systems or  enhancements by the Company or its
competitors,  developments in patents or other intellectual property rights, and
developments  in the Company's  relationships  with clients and suppliers  could
cause  the  price  of  the  Company's   Common  Stock  to   fluctuate,   perhaps
substantially.  In recent years the stock market has  experienced  extreme price
fluctuations, which have often been unrelated to the operating performance of


                                       17
<PAGE>



affected companies. Such fluctuations could adversely affect the market price of
the Company's Common Stock.

     Risks   Associated  with  Year  2000  Issues.   In  light  of  its  current
information,  the  Company  does not  anticipate  delays  and  postponements  in
finalizing and  implementing  Year 2000  resolutions by the middle of the fourth
quarter  of 1999.  Until the  Company's  renovation  and  validation  phases are
substantially  complete,  however,  the  Company  cannot  fully  and  accurately
estimate any uncertainty in timely  resolving its potential Year 2000 challenges
or in finalizing and implementing  related Year 2000 resolutions.  Additionally,
any failure by third parties which have a material relationship with the Company
to achieve  full Year 2000  compliance  may be a potential  risk if such failure
were to  adversely  affect  the  ability of such  third  parties to provide  any
products or services  that are critical to the  Company's  operations.  If these
third parties fail to appropriately address Year 2000 challenges, there could be
a material  adverse affect on the Company's  financial  condition and results of
operations.  Such  risks  include,  but are not  limited  to: (i)  inability  of
subscribers to make or receive dispatch calls; (ii) inability of sites, switches
and other  interfaces  to  accurately  record call records of  subscriber  phone
calls;  and (iii)  inability of billing  systems to  accurately  report and bill
subscribers  for phone usage.  Other risks  associated with the inability of the
Company or material third parties to develop and deploy Year 2000 solutions in a
timely and  successful  manner may  involve or result in  conditions  that could
preclude the Company from: (a) obtaining equity or debt financing; (b) deploying
an  alternative  technology  that  is  Year  2000  compliant;  (c)  implementing
commercial  buildouts  in new markets or  introducing  new  services in existing
markets; and (d) pursuing additional business opportunities.  The Company cannot
independently   assess  the  impact  of  Year  2000  challenges  and  compliance
activities  and programs  involving  operators of  utilities  and other  service
providers (such as electric utilities and voice and data utilities). The Company
therefore  must  rely on  utility  providers'  estimates  of their own Year 2000
challenges and the status of their related compliance activities and programs in
the Company's own Year 2000 assessment  process.  Because the Company's  systems
will be dependent upon the systems of other service providers, any disruption of
operations in the computer  programs of such service providers would likely have
an impact on the Company's  systems.  Moreover,  there can be no assurance  that
such impact will not have a material adverse effect on the Company's operations.

     Concerns About Mobile  Communications  Health Risk.  Allegations  have been
made, but not proven, that the use of portable mobile communications devices may
pose health risks due to radio frequency emissions from such devices. The actual
or perceived risk of mobile  communications  devices could adversely  affect the
Company through a reduced subscriber growth rate, a loss of current subscribers,
reduced network usage per subscriber or through reduced  financing  available to
the mobile communications industry.

Forward-Looking Statements
--------------------------

     A number of the matters and subject areas  discussed in the foregoing "Risk
Factors"  section and elsewhere in this 10-KSB Report that are not historical or
current facts deal with potential future  circumstances  and  developments.  The
discussion of such matters and subject areas is qualified by the inherent  risks
and  uncertainties  surrounding  future  expectations  generally,  and  also may
materially differ from the Company's actual future experience  involving any one
or more of such  matters  and  subject  areas.  The  Company  has  attempted  to
identify,  in context,  certain of the factors  that it  currently  believes may
cause actual future  experience and results to differ from the Company's current
expectations  regarding the relevant  matter or subject area.  The operation and
results of the Company's wireless communications business also may be subject to
the  effect  of other  risks  and  uncertainties  in  addition  to the  relevant
qualifying factors identified elsewhere in the foregoing "Risk Factors" section,
including, but not limited


                                       18
<PAGE>



to, general economic  conditions in the geographic areas and occupational market
segments  (such  as,  for  example,  construction,  delivery,  and  real  estate
management  services)  that the Company is targeting  for its SMR  systems;  the
availability  of adequate  quantities of system  infrastructure  and  subscriber
equipment and components to meet the Company's systems  deployment and marketing
plans and customer demand;  the success of efforts to improve and satisfactorily
address any issues relating to the system's performance;  the ability to achieve
market  penetration and average  subscriber revenue levels sufficient to provide
financial  viability  to the SMR  system;  access to  sufficient  debt or equity
capital to meet the Company's  operating and  financing  needs;  the quality and
price of similar or comparable wireless Communications services offered or to be
offered by the Company's  competitors,  including  providers of cellular and PCS
service;  future  legislative  or regulatory  actions  relating to SMR services,
other wireless  communications  services or  telecommunications  generally;  and
other  risks and  uncertainties  described  from  time to time in The  Company's
reports filed with the Commission.

ITEM 2.  DESCRIPTION OF PROPERTY

CORPORATE OFFICE:

     AWN leases approximately 2000 square feet of executive office space at 9350
East Arapahoe Road, Suite 340, Englewood,  Colorado. The office lease extends to
November 30, 2000. All  corporate,  administrative,  accounting and  operational
functions are carried out from the corporate  headquarters.  The Company  shares
offices with AWN. As a result of recent employee reductions, this lease space is
only thirty  percent  utilized and more than adequate for the Company's  current
needs.  The  Company  has  subleased  a portion to its office  space in order to
offset office overhead.

     SMR Tower  Sites,  the  Company  has leased  tower  sites in the  following
locations:

            Birmingham,  Alabama - three  sites.
            New  Orleans,  Louisiana - three  sites.
            Oklahoma  City,  Oklahoma  - one  site.
            Tulsa, Oklahoma  -  one  site.
            Memphis, Tennessee  -  two  sites.
            Knoxville,  Tennessee - one site.
            Nashville,  Tennessee - two sites.

ITEM 3.  LEGAL PROCEEDINGS

     During  the  fiscal  year  ended  June  30,  1997,  legal  counsel  for DLC
Associates,  Inc.  notified  the Company  that DCL  Associates,  Inc.  and other
parties to the DCL options agreement  considered the Company to be in default if
its  obligations  under the option  agreements.  On August 7, 1997,  the Company
filed a Complaint for  declaratory  relief and damages in United States District
Court for the District of Colorado,  Denver,  Colorado,  Case 97-1685  seeking a
court ruling that option agreements  entered into by and between the Company and
the Defendants,  consisting of DCL Associates,  Inc. and thirty three additional
Defendants,  are legal,  valid and enforceable  agreements.  The suit involved a
dispute  concerning  the  continuing  validity  of an  agreement  by the Company
executed August 6, 1996,  wherein the Company  obtained options to purchase 1389
EIW channels and 1046 non-EIW channels from DCL Associates,  Inc. and the thirty
three additional  Defendants  ('the DCL options").  The August 6, 1996 agreement
was  recorded as a purchase of license  rights by the  Company.  The  Defendants
filed an answer and  counterclaim  on March 30,  1998,  denying  that the option
agreements,  subcontract  agreement and management agreement entered into by the
Defendants  and the  Company  remained  valid and  further  alleging  failure of
performance, failure of consideration and inequitable conduct on the part of the


                                       19
<PAGE>



Company. The Defendants counterclaim alleged that the Company refused and failed
to register  securities  issued to the  Defendants,  breached  post  transaction
payment  obligations,  manipulated  and  inflated the bid price of its stock and
failed and refused to pay the final  installment of the option price. The entire
DCL option  transaction  and  associated  litigation  was terminated by a mutual
release and legal  settlement on June 22, 1998. The  opportunity to purchase two
DCL licenses for $925,000 cash as provided by the settlement  agreement  expired
on July 1, 1998. In the settlement,  all of the stock  previously  issued to DCL
Associates,  Inc.  by the  Company  in payment of such  options,  consisting  of
1,361,786 common shares (including  662,786 common shares issued in exchange for
39,767 shares of Series C Preferred  Stock) has been returned to the Company and
cancelled. The Company had issued 39,767 shares of Series C Preferred Stock with
a stated  value of $10.00 in  connection  with the DCL options  acquired per the
closing  agreement dated August 6, 1996.  These shares were converted to 662,786
shares  of  common   stock   pursuant  to  the  DCL  option   agreement.   DCL's
representative  had previously  refused tender of the 662,786 common shares. The
net result of the entire  transaction  in  retrospect  is the loss of the actual
cash paid to DCL  Associates  of  approximately  $150,000.  The  Company  has no
further interest or claim to the DCL options or assets associated therewith.

     In July 1997, an Adverse  Summary  Judgment and Decree in  Foreclosure  was
issued against the Company's  wholly owned  subsidiary,  CCI Real Estate,  Inc.,
which as of the current date  eliminated  any equity or ownership by the Company
of real estate located at 10855 East Bethany  Drive,  Aurora,  Colorado.  In the
case of Sunset  Life  Insurance  Company of America vs. CTI Real  Estate,  Inc.,
Arapahoe County  District  Court,  Case No. 96 CV 741, the Court issued an order
dated July 18, 1997, entering Summary Judgment and Decree in Foreclosure against
CTI Real Estate, Inc., a subsidiary of ComTec  International,  Inc. This suit, a
foreclosure  action on the  Company's  building  at 10855  East  Bethany  Drive,
Aurora, Colorado, was filed in September 1996 in the District Court for Arapahoe
County,  Colorado.  Sunset  Life  Insurance  Company had  previously  sought and
obtained the  appointment of a receiver to manage the Company's  building.  This
suit was consolidated with Shamrock Electric Co. vs. Nattem U.S.A. Incorporated;
Keystone   Holding  Corp.;   ComTec   International;   Tim  Degarmo  T.B.A.  DBI
Construction  a/k/a DBI Design  Builders a/k/a Carlton  Builders Inc.;  David L.
Terry;  Celia  M.  Terry;  Local  Service  Corporation;   Spelman  Mortgage  and
Investment  Company;  Kansas City Life Insurance Company;  Sunset Life Insurance
Company of America; Key Communications  Group; Golesh Door & Trim, Inc.; Roberta
F. Gillis,  Public  Trustee of Arapahoe  County,  and any and all  occupants.  A
notice of  Sheriff's  sale  dated  August 11,  1997,  set a  Sheriff's  sale for
September  23,  1997,  in  Littleton,  Colorado.  The sale was held and CTI Real
Estate,  Inc.'s redemption period has expired. The Company was unable to sell or
redeem the property and all real estate equity was lost.

     On September 14, 1998,  the Company  received by certified mail a Complaint
filed in Superior  Court of  California,  County of San Diego,  Case No. 723581,
entitled  John  Brent,  et al  vs.  ComTec  International,  Inc.,  a New  Mexico
corporation,  et al. The Complaint by seven named Plaintiffs  alleges securities
fraud, improper sale of unregistered securities,  and stock manipulation against
the Company and five  individual  defendants  who were  former  officers  and/or
directors  of the  Company,  none of whom  are  currently  associated  with  the
Company.  The  Company  believes  that  it has  meritorious  defenses  and  will
vigorously  defend  against  the  allegations  of  the  Complaint.  Due  to  the
preliminary  stage of the matter,  further  information  is not  available.  The
Company has not yet filed an answer to the  Plaintiffs'  complaint.  A motion to
dismiss  Plaintiffs'   complaint  for  failure  to  join  indispensable  parties
initiated by the Company is pending.



                                       20
<PAGE>



Litigation with Former Officer and Director
-------------------------------------------

     On February 1, 1999, Donald Mack, the former CEO, President and director of
ComTec  International,  Inc., filed a complaint in the District Court,  City and
County of Denver, State of Colorado,  Civil Action Number 99CV634,  Courtroom 6,
against  ComTec  International,  Inc.  ("ComTec")  as  well  as  two  individual
defendants,  a current  officer and a shareholder of ComTec.  On March 24, 1999,
ComTec  filed  its  Answer  and  extensive  Counterclaims  against  Donald  Mack
("Mack").  Mack  alleges  that he is  entitled  to  continued  compensation  and
benefits  based  upon a  March  31,  1997  addendum  to his  December  26,  1995
employment  contract  (which expired in May of 1998).  Mack further alleges that
although he resigned as an officer in June 1998,  he was  wrongfully  induced to
resign. Mack alleges that he is due salary, car allowance, health plan payments,
life  insurance  payments,  stock  bonuses  and other  items from June 30,  1998
through June 30, 2002.  ComTec's  answer states that the March 31, 1997 addendum
is null and void as a matter of law,  denies any  wrongdoing or  inducement  and
denies  any and all  liability  to  Mack.  ComTec's  answer  further  states  as
affirmative  defenses  that Mack's claims are barred by the doctrine of estoppel
and unclean  hands;  that the March 31,  1997  addendum  was entered  into under
circumstances of fraud and illegality;  that Mack's claims are barred by failure
of consideration, fraud and illegality, waiver, failure to mitigate; that Mack's
alleged claims are setoff by the  counterclaims of ComTec against Mack; and that
Mack's  alleged  damages,  if any, are the result of Mack's own actions.  ComTec
believes it has meritorious and virtuous  defenses and anticipates  that it will
vigorously  and  effectively  defend  against  any and all  claims by Mack.  The
Company filed a number of  Counterclaims  against Mack.  Among the  Counterclaim
allegations of ComTec  against Mack are  allegations  that an agreement  entered
into in May of 1995,  whereby Mack gained control of ComTec through an agreement
for ComTec to purchase the assets of a corporation  controlled by Mack, KeyStone
Holding  Corporation,  was entered  into with  intent to defraud  ComTec and its
shareholders.  Among other allegations,  ComTec alleges that  misrepresentations
and  omissions  of  material  fact  were  made by  Mack  prior  to the  Keystone
transaction,  that Mack used ComTec as an  instrumentality  for his own personal
benefit and affairs,  and that Mack acted to conceal  material  facts  regarding
Mack's ultra vires and unauthorized  acts in the name of ComTec.  ComTec further
alleges that Mack took  unauthorized and unearned bonuses in stock of ComTec and
cash,  that the  execution  of the  employment  addendum  through  which Mack is
alleging amounts are now due him from ComTec was accompanied by circumstances of
fraud and collusion,  and that Mack made  unauthorized use of ComTec's funds and
property.     ComTec's     claims    against    Mack    include:     intentional
misrepresentation/fraudulent  inducement  regarding  the  Keystone  Transaction;
fraudulent   concealment/constructive  fraud;  breach  of  warranty;  breach  of
fiduciary  duty;  conversion;  fraudulent  conveyance;  civil theft  pursuant to
C.R.S.  Section  18-4-401 and 18-4-405;  and securities fraud pursuant to C.R.S.
Section 11-51-501.  ComTec seeks monetary damages and constructive trust as well
as  Declaratory  Judgment  pursuant  to  C.R.C.P.  57.  ComTec  believes  it has
meritorious  claims and will resolutely  pursue its claims against Mack. A trial
date of April 3, 2000, has been set for the matter.

     Except for the foregoing, no other material legal proceedings, to which the
Company  is a party or to which the  property  of the  Company  is  subject,  is
pending or is known by the Company to be contemplated.

ITEM 4.  SUBMISSION OF MATTERS TO VOTE OF SECURITY HOLDERS

     On August 26, 1998, pursuant to a call for a special  shareholders  meeting
by shareholders owning more than 10% of the Company's common stock and presented
to the  shareholders  by a notice and proxy mailed by the Company's  independent
transfer agent on August 11, 1998, a special election of the shareholders of the
Company was held with the  following  proposed  purposes:  remove Donald G. Mack
from the Board of Directors for cause;  remove Daniel  Melnick from the Board of
Directors;  elect James J. Krejci to the Board of Directors; and elect Gordon D.
Dihle to the Board of Directors. The necessary


                                       21
<PAGE>



quorum of shares were voted at the special meeting.  On the date of the election
there were 39,626,718 shares of $.001 par value common stock  outstanding.  As a
result of the Special  Meeting of Shareholders  held August 26, 1998,  Donald G.
Mack and Daniel  Melnick were  removed as  Directors  of the  Company.  James J.
Krejci  and Gordon D. Dihle were  elected to the  Company's  Board of  Directors
until the next annual  meeting of the  Shareholders.  The results of the special
shareholder  meeting were previously reported in the Form 8-K filed September 3,
1998.

     No matters  have been  submitted to the  shareholders  since the August 26,
1998 meeting.


                                     PART II

ITEM 5.  MARKET FOR COMMON STOCK EQUITY AND RELATED STOCKHOLDER
MATTERS.

(a)  MARKET INFORMATION.

     The principal  market of the Company's common stock, its only trading class
of equity  securities,  is the NASD Electronic  Bulletin Board  over-the-counter
market.  The Company's  common stock currently trades under the symbol YRLS. The
Company has  approximately  600 shareholders of record.  The Company's  transfer
agent is  General  Securities  Transfer  Agency,  Inc.,  3614 Calle Del Sole NE,
Albuquerque, New Mexico 87110.

     On December  26,  1997,  the Board of  Directors,  pursuant to  shareholder
approval  granted at the annual meeting of shareholders  held on March 28, 1997,
voted to approve a one for five (1:5) reverse stock split of the Company's $.001
par value  common  stock  effective  January  31,  1998.  Financial  information
contained in this report has been restated to reflect this split.  All share and
per share data is stated to reflect the reverse split.

     The following  table  indicates the quarterly high and low bid market price
ranges  of the  Company's  common  stock in the  over-the-counter  market on the
Electronic  Bulletin Board for the fiscal years ended June 30, 1997 and June 30,
1998,  as  reported  by the  NASDAQ  section  of  the  National  Association  of
Securities  Dealers,  Inc.,  registered  broker-dealers  who have regularly been
making a market in the Company's  common stock and/or  information  derived from
confirmations of sales and/or purchases by individuals. The information supplied
represents  quotations  between  dealers that does not include  retail  markups,
markdowns or  commissions,  actual  transactions  and any  adjustments for stock
dividends.

     The  following  chart is made  considering  the  effect of the one for five
reverse  stock split  effective  January 31,  1998,  and rounded to nearest full
penny for presentation purposes only.

                                                                BID       BID
                                                             HIGH ($)   LOW ($)
                                                             --------   -------
Fiscal 1998:
  First Quarter: July 1, 1997 through September 30, 1997       $0.52     $0.24
  Second Quarter: October 1, 1997 through December 31, 1997    $1.80     $0.22
  Third Quarter: January 1, 1998 through March 31, 1998        $0.85     $0.19
  Fourth Quarter: April 1, 1998 through June 30, 1998          $0.20     $0.09




                                       22
<PAGE>




Fiscal 1997:
  First Quarter: July 1, 1996 through September 30, 1996       $5.00     $0.94
  Second Quarter: October 1, 1996 through December 31, 1996    $5.00     $1.25
  Third Quarter: January 1, 1997 through March 31, 1997        $1.72     $0.45
  Fourth Quarter: April 1, 1997 through June 30, 1997          $1.05     $0.33




     On March 28, 1997, the  Shareholders of the Company  approved a proposal to
give the  Company's  Board of Directors  authority to institute a reverse  stock
split of from 3 for 1 to 100 for 1 at the  discretion  of the Board of Directors
until  December  31, 1997.  On December 26, 1997,  the Board of Directors of the
Company acted pursuant to shareholder authority granted at the Annual Meeting of
Shareholders  held March 28, 1997, to declare a one for five reverse stock split
of the Company's $.001 par value common stock effective 12:01 A.M. January 31st,
1998.

(b)  HOLDERS:

     As of June 15, 1999, the approximate  number of holders of record of shares
of the Company's  common stock,  $.001 par value per share,  the Company's  only
class of trading securities, was believed by management to be as follows:

              Title of Class                        Number of Record Holders
              --------------                        ------------------------
          Common Stock, $.001 par                              600



(c)  DIVIDENDS:

     The Company has paid no  dividends  during the fiscal  years ended June 30,
1997 and June 30, 1997, or to the present date.  Other than the  requirements of
the New Mexico  Business  Corporation  Act that dividends be paid out of capital
surplus only and that the  declaration  and payment of a dividend not render the
Company insolvent,  there are no restrictions on the Company's present or future
ability to pay dividends.

     The payment by the Company of dividends, if any, in the future rests within
the  discretion of its Board of Directors  and will depend,  among other things,
upon  the  Company's  earnings,  its  capital  requirements  and  its  financial
condition,  as well as other relevant  factors.  There is no current plan to pay
dividends.

Unregistered Shares Issued
--------------------------

     The  following  shares of the  Company's  $.001 par value common stock were
issued without  registration  to the named entities during the fiscal year ended
June 30,  1998,  which  the  Company  believed  to be exempt  from  registration
requirement as a nonpublic offering.




                                       23
<PAGE>



  Date      Number of Shares      Issued To             Consideration
  ----      ----------------      ---------             -------------
03/23/98         88,369        Gordon Dihle         Compensation for Services
03/23/98         77,126        Dihle & Co., P.C.    Compensation for Services
03/23/98         60,000        James J. Krejci      Compensation for Services
03/23/98         55,147        D&D Corporation      Settlement of Claims



Unregistered Shares Issued Pursuant to Regulation S During the Year Ended
-------------------------------------------------------------------------
6/30/98
-------
     As last reported on Form 8-K's filed April 7, 1998,  and September 3, 1998,
26,221,793  shares of the Company's  $.001 par value common stock were issued to
entities not residents of the United States of America pursuant to Regulation S.
All of the total  26,221,793  shares of $.001 par value common stock were issued
to entities  organized  outside of the United States of America and entities and
persons who are not residents of the United States of America.


Unregistered Warrants Issued Pursuant to Regulation S During the Year Ended
----------------------------------------------------------------------------
6/30/98.
--------

     As last reported on Form 8-K's filed April 7, 1998,  and September 3, 1998,
24,683,332  warrants to purchase the Company's $.001 par value common stock were
issued to entities  not  residents of the United  States of America  pursuant to
Regulation  S. All of said warrants are  exercisable  at any time during a three
year period following issuance of the warrants at an exercise price of $2.90 per
share.  All of the total 24,683,332  warrants were issued to entities  organized
outside of the United  States of America  and  entities  and persons who are not
residents of the United States of America.

ITEM 6.  MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION

Forward-Looking Statements
--------------------------

     The foregoing and subsequent  discussion  contains certain  forward-looking
statements  within the meaning of Section 27A of the  Securities Act of 1933 and
Section 21E of the  Securities  Exchange  Act of 1934,  which are intended to be
covered by the safe harbors created thereby.  These  forward-looking  statements
include the plans and objectives of management for future operations,  including
plans  and  objectives  relating  to the  possible  further  capitalization  and
additional   acquisitions  of  wireless  communications  license  and  operating
companies.  The forward-looking  statements included herein are based on current
expectations that involve numerous risks and uncertainties. Assumptions relating
to the foregoing involve  judgments with respect to, among other things,  future
economic,  competitive and market conditions and future business decisions,  all
of which are difficult or impossible to predict accurately and many of which are
beyond the  control of the  Company.  Although  the  Company  believes  that the
assumptions underlying the forward-looking statements are reasonable, any of the
assumptions could be inaccurate and,  therefore,  there can be no assurance that
the  forward-looking  statements  included  in this Form 10-KSB will prove to be
accurate.  In light of the  significant  uncertainties  inherent in the forward-
looking statements included herein, the inclusion of such information should not
be regarded  as a  representation  by the  Company or any other  person that the
objectives and plans of the Company will be achieved.



                                       24
<PAGE>



     The following is a discussion of the consolidated  financial  condition and
results of  operations  of the Company for the fiscal years ended June 30, 1998,
and June 30, 1997, which should be read in conjunction with, and is qualified in
its  entirety  by,  the  consolidated  financial  statements  and notes  thereto
included elsewhere in this report.

     Statements   contained   herein   that  are  not   historical   facts   are
forward-looking  statements  as that term is defined by the  Private  Securities
Litigation  Reform  Act  of  1995.   Although  the  Company  believes  that  the
expectations  reflected in such forward-looking  statements are reasonable,  the
forward-looking  statements  are subject to risks and  uncertainties  that could
cause  actual  results to differ  from those  projected.  The  Company  cautions
investors  that  any  forward-looking  statements  made by the  Company  are not
guarantees of future  performance and that actual results may differ  materially
from  those in the  forward-looking  statements.  Such  risks and  uncertainties
include,  without limitation,  fluctuations in demand, loss of subscribers,  the
quality and price of similar or comparable wireless communications services, the
existence  of  well-established   competitors  who  have  substantially  greater
financial  resources  and  longer  operating  histories,  regulatory  delays  or
denials,  ability to complete intended market roll-out,  termination of proposed
transactions,  access to  sources  of  capital,  adverse  results  in pending or
threatened litigation, consequences of actions by the FCC, general economics and
the risks  discussed  under "ITEM 1,  DESCRIPTION OF BUSINESS - Risk Factors" in
this report.

(a)  PLAN OF OPERATION:

     Since May 10, 1995, the Company's  strategic  business plan has, aside from
the  terminated  venture in the LED screens and the divested  TTI prepaid  phone
card investment,  been concentrated on wireless  telecommunications.  Currently,
the  Company's  emphasis  is  on  basic  two-way  communications   services  and
activities.  The Company has been and continues to be in the development  stage.
The  Company has yet to  commence  its  principal  planned  operations  and from
inception of the SMR business plan (March 15, 1994) has only generated auxiliary
revenues to defray the cost of its planned operations, with only limited success
in  implementing  actual  operations.  The Company has financed  its  operations
during the development stage from the sale of its common stock and from issuance
of short and long-term debt.

     During the fiscal  year ended June 30,  1998,  and  through the present the
Company  continued as a  developmental  stage entity  focused on developing  its
wireless  SMR  business  plan.  Prior  to  December  1997,  activities  had been
concentrated on creating and developing the Company's  strategic  business plan,
raising  private  financing,  efforts to acquire other entities and  operations,
developing a management  and support  staff to execute its  business  plan,  and
maintaining  reporting compliance for various federal government agencies,  such
as the SEC and FCC. The Company's most significant accomplishment to date is the
action of its current  management in completing  the closing on July 6, 1998, of
the purchase of thirteen  operating  SMR systems  located in seven  southeastern
U.S.A. MTA's.

     AWN, a wholly owned subsidiary of the Company,  was incorporated  under the
laws of the State of  Colorado  on  December  3,  1996,  to act as the  wireless
communications   operating  entity  for  the  Company.   Authorized  capital  is
25,000,000  shares of no par value common stock and  5,000,000  shares of no par
value   preferred   stock.   AWN  is   focused   on  the  SMR   portion  of  the
telecommunications industry.

Current Status and Operations
-----------------------------

     On December 5, 1997, AWN entered the initial phase of a purchase  agreement
whereby AWN purchased seven  operating SMR systems for $3,035,700.  The wireless
communications   assets  and  associated   business   acquired  from  Centennial
Communications Corp. lay within the following seven


                                       25
<PAGE>



MTA's: Birmingham, Alabama; Knoxville, Tennessee; Memphis, Tennessee; Nashville,
Tennessee; New Orleans, Louisiana; Oklahoma City, Oklahoma; and Tulsa, Oklahoma.

     The acquired  systems are  relatively  new. The 105 operating  channels had
approximately  1400  subscribers,   generating  recurring  monthly  revenues  of
approximately $20,000 on the purchase date. These operating systems have a total
of 13 sites, 105 constructed channels and cover seven of the 51 MTA's, including
nine cities located in four  southeastern  United  States,  encompassing a total
population of 17.4 million,  of which the seven systems are presently capable of
covering approximately 5.9 million population.  Since December 1997, AWN has had
possession and management of the wireless  communications  assets and associated
business previously owned by Centennial  Communications  Corp. serving the above
locations.

     At present  AWN  operates  its seven SMR  communications  systems  from its
office in Englewood,  Colorado. The Company has very limited staff and currently
relies upon contracted technical support for repairs and maintenance.  AWN's SMR
communication  services are sold to individual  customers through an independent
dealer  network  of  local  two-way  radio   communications   equipment  vendors
("Dealers"). These Dealers are paid a commission for each customer who contracts
to use AWN spectrum and the Dealers  maintain the local  relationships  with the
customers.  AWN acts as the direct billing provider of SMR communications to the
customer  base  provided by the  Dealers.  Under the present  operation,  AWN is
responsible  for  local  telephone  lines,  equipment  maintenance,  tower  site
rentals,  customer  loading,  coding and  billing and all  customer  service and
financial relationships. AWN also has all responsibility for maintaining its SMR
licenses,  making  payments to the FCC on its licenses and funding all equipment
additions   and  system   improvements.   The  capacity  of  the  Company's  SMR
communications   systems  to  carry  users   (customers)  is  only  utilized  to
approximately  ten percent of capacity.  Under  present  operation  and level of
usage,  expenses of operating the system  significantly exceed revenues from the
systems.

     Pricing  for SMR  service  is based  on a flat  monthly  fee for  unlimited
unit-to-unit  communications.  SMR operators  must convince small business users
that service  benefits and cost savings merit  conversion  from cellular to SMR.
SMR systems  offer many  features and services  that  cellular  carriers do not.
Essentially,  an SMR is an individual or firm's  internal  mobile  communication
system.  Existing cellular and SMR operators in the Company's proposed operating
territories  have been in operation for a number of years,  and have significant
customer bases. In addition to their entrenched market position, these operators
have available  significantly  greater  financial and other resources than those
available to the Company.  Larger SMR companies are currently  converting to all
digital  formats,  which require current  subscribers to purchase more expensive
digital radio equipment or find another analog system provider.  The competition
for new SMR  subscribers  within the Company's  operating  territories  may also
include Nextel  Communications  and/or other independent SMR regional operators.
The Company also faces possible  competition  for channels that may be allocated
by  the  FCC  in  the  future  as  well  as  from   operators  of  new  wireless
communications technologies such as personal communications ("PCS").

     On April 15, 1999,  AWN executed an Asset  Acquisition  Agreement with S.E.
900, Inc. ("Buyer"),  a Delaware  corporation to be formed as a subsidiary of an
unaffiliated   company.  The  terms  of  the  Asset  Acquisition   Agreement  is
anticipated to be enacted  beginning in the fiscal year ended June 30, 2000. The
purpose of the Asset  Acquisition  Agreement is to facilitate the future sale by
American Wireless Network, Inc. to S.E. 900, Inc. of specifically identified 900
MHz licenses and American  Wireless  Network,  Inc.'s customer base and customer
lists  associated  with the  specified  900 MHz  licenses.  The  agreement  also
includes the lease of SMR related  equipment  owned by AWN to S.E. 900, Inc. The
sale  is  subject  to  certain  conditions  and  events,   including  final  and
unappealable  regulatory  approvals  relating to the transfer of the licenses to
the Buyer. In consideration  for the sale, the Buyer is to assume  approximately
$1,400,000   of  American   Wireless   Network,   Inc.'s  debt  to  the  Federal
Communications


                                       26
<PAGE>



Commission related to the licenses and issue common shares of Buyer representing
a seven and one half percent interest in S.E. 900, Inc. The 900 MHz licenses and
American  Wireless  Network,  Inc.'s customer base and customer lists associated
with the specified 900 MHz licenses to be sold to S.E. 900, Inc. were  purchased
by American Wireless Network, Inc. on July 6, 1998. as a part of the acquisition
of divisional segment assets from Centennial  Communications  Corp. As a part of
the Asset Acquisition Agreement, the Company will assign its tower site licenses
and lease to S.E. 900, Inc.,  certain SMR related  transmission  Equipment for a
five (5) year term at the initial base rate of $33,750 per quarter for the first
year of payments,  $42,000 per quarter for the second year of payments,  $52,000
per  quarter  for the third year of  payments,  and  $57,250 per quarter for the
fourth year of payments;  provided,  however, that such Equipment Lease payments
shall begin one year from the Effective  Date.  The Lessee shall have the option
to extend the Lease for 1 year terms (up to a total of a 3 year extension  after
the  termination  of the  original 5 year  term);  provided,  however,  that the
monthly rate will be the fair market  value  ("FMV") of Equipment on the date of
any  extension  as agreed  upon by the parties  provided  that in the event that
Lessee and the Company  cannot agree on a FMV, the FMV shall be  determined by a
third party appraiser selected by the Company and Lessee.  Lessee shall have the
option,  within 30 days of the end of any term, to purchase the Equipment at the
then FMV as determined by the parties provided that in the event that Lessee and
the Company  cannot agree on a FMV, the FMV shall be determined by a third party
appraiser  selected by the Company and Lessee. In the event of the bankruptcy of
the Company,  Lessee shall have the right to purchase the  Equipment at its then
FMV.  Management  believes  this  agreement  will relieve the Company of the now
existing  negative  cash flow burdens of debt  service,  operating  deficits and
extensive maintenance costs related to the SMR systems.

Year 2000 Compliance:
---------------------

     The year 2000  issue is the  result  of an  antecedent  method  of  writing
computer  programs  which used only two digits rather than four digits to define
the year.  Any of the  Company's  computer  programs  that  have date  sensitive
software  may  recognize a date using "00" as the year 1900 rather than the year
2000.  This  problem  could  cause  computers  to either  shut  down or  provide
incorrect data or information.  The Company utilizes  generic software  programs
developed,  maintained and upgraded by independent  computer software providers.
In  response  to the year 2000  issue,  management  is of the  opinion  that the
providers of these software  programs will resolve the date  sensitive  issue so
that all critical  systems  will be in  compliance  prior to the year 2000.  The
Company  does not  anticipate  any  material  adverse  impact  on its  business.
However,  the Company  cannot fully and accurately  estimate any  uncertainty in
timely  resolving its Year 2000  challenges or in  finalizing  and  implementing
related Year 2000 resolutions.  Additionally, any failure by third parties which
have a  material  relationship  with the  Company  to  achieve  full  Year  2000
compliance may be a potential risk if such failure were to adversely  affect the
ability of such third  parties to provide  any  products  or  services  that are
critical  to  the  Company's   operations.   If  these  third  parties  fail  to
appropriately  address Year 2000  challenges,  there could be a material adverse
affect on the  Company's  financial  condition and results of  operations.  Such
risks  include,  but are not limited to: (i) inability of subscribers to make or
receive dispatch calls;  (ii) inability of sites,  switches and other interfaces
to accurately record call records of subscriber phone calls; and (iii) inability
of billing  systems to accurately  report and bill  subscribers for phone usage.
Other risks  associated  with the  inability  of the  Company or material  third
parties to develop and deploy  Year 2000  solutions  in a timely and  successful
manner may involve or result in conditions that could preclude the Company from:
(a) obtaining equity or debt financing;  (b) deploying an alternative technology
that is Year  2000  compliant;  (c)  implementing  commercial  buildouts  in new
markets or  introducing  new  services in  existing  markets;  and (d)  pursuing
additional business opportunities.



                                       27
<PAGE>



Pending Acquisitions
--------------------

     Currently there are no letters of intent or other formalized  agreements to
acquire  any  entity  or  assets.  The only  acquisition  that the  Company  has
accomplished  to date  is the  purchase  completed  July 6,  1998,  whereby  AWN
purchased   seven   operating  SMR  systems  for  $3,035,700   from   Centennial
Communications Corp.

     As of June 30, 1996,  the Company  reported that it  controlled  management
option   agreements  on  185  SMR  licenses   obtained  through  the  Omni-Range
acquisition,  some of which were partially constructed. The Company defaulted on
its payment obligation for the channels since the original compensation involved
a  subordinated  mortgage on a building  previously  held by the Company,  which
building  transferred to the original  lien-holder  in  foreclosure  proceedings
cumulating  in  December  1997.  The  Company  has  forfeited  any rights to the
Omni-Range channels.

     On August 6, 1996,  the Company  acquired  option  agreements to manage and
build  1,380 800 MHz SMR  channels  in 20 states  from a group of 34  associated
licensees  ("the DCL  options").  The August 6, 1996 agreement was recorded as a
purchase of license  rights by the Company at a purchase  price of $1,597,000 in
the  Company's  September  30,  1996  10QSB  and  subsequently   increased  with
subsequent  stock  issuances.  During the year ended June 30, 1998,  the Company
entered into litigation with the option grantor over the continuing  validity of
the  option  agreements.  The  entire  DCL  option  transaction  and  associated
litigation was terminated by legal  settlement on June 22, 1998. The opportunity
to purchase two DCL licenses  for  $925,000  cash as provided by the  settlement
agreement  expired on July 1,  1998.  In the same  settlement,  all of the stock
previously  issued to DCL  Associates,  Inc.  by the  Company in payment of such
options,  consisting of 1,361,786 common shares (including 662,786 common shares
issued in  exchange  for  39,767  shares of Series C  Preferred  Stock) has been
returned to the Company and cancelled.  The net result of the entire transaction
in  retrospect  is the  loss  of the  actual  cash  paid  to DCL  Associates  of
approximately  $150,000. The Company has no further interest or claim to the DCL
options or assets associated therewith. (SEE "ITEM 3, LEGAL PROCEEDINGS.")

(b)  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS:

     The Company  reported a net loss of $3,029,900  for the year ended June 30,
1998,  and a net loss of  $5,115,300  for the year ended June 30, 1997,  and has
reported net losses of $11,704,900  from inception  (March 15, 1994) to June 30,
1998.  As reported on the  consolidated  statements  of cash flows,  the Company
incurred  deficient  cash flows from  operating  activities  of  $1,205,300  and
$1,593,200  for the  years  ended  June 30,  1998  and  1997,  and has  reported
deficient  cash flows from  operating  activities of $3,434,600  from  inception
(March  15,  1994) to June  30,  1998.  To  date,  these  losses  and cash  flow
deficiencies have been financed principally through the sale of common stock and
warrants  ($1,168,900)  and issuance of short and  long-term  debt  ($5,579,600)
which includes related party debt.  Additional capital and/or borrowings will be
necessary  in order for the  Company to continue in  existence  until  attaining
profitable  operations.  Although a portion of  convertible  debt was liquidated
through  the  issuance  of common  stock,  no  assurances  can be given that the
sources of  borrowings  would  continue.  The Company is highly  leveraged and a
number of  developments  over the past year had material  adverse affects on the
Company.  The  Company  has a  significant  investment  in license  rights,  the
recoverability of which is dependent upon the success of future events.

     In December  1997,  the  Company  acquired  licenses  to operate  seven SMR
systems  located within five states for  approximately  $ 3,035,700.  Management
anticipates  that an additional  investment of several  million  dollars will be
needed to develop an effective sales and marketing program and fund equipment


                                       28
<PAGE>



purchases before the seven operating systems will generate  sufficient cash flow
to meet current  operating  expenses and  overhead.  In order to acquire the SMR
licenses,  the Company borrowed  $1,600,000 for the initial payments and working
capital. During the year ended June 30, 1998, the Company borrowed an additional
$700,000 for working  capital and payments  required at the final closing on the
SMR systems.  As part of its plan to resolve the lack of liquidity,  the Company
issued  16,000,000  common shares at $.10 per share to liquidate the  $1,600,000
convertible  debentures.  Subsequent  borrowings of $650,000 have occurred since
the year end June 30, 1998, in order meet overhead and operating costs.

     Management  has  continued  to develop a strategic  business  plan to raise
private financing,  develop a management team, maintain reporting compliance and
seek new expansive areas in telecommunications. In order to reduce negative cash
flow the Company  entered  into an agreement to sell its FCC licenses to satisfy
debt  requirements  and,  in a plan  anticipated  to  generate  cash  flows,  is
expecting to lease its SMR equipment.

     In  May  1998,  the  Company  paid  a  $25,000  deposit  to  Sigma  Finance
Corporation in connection with a nonbinding  financing proposal for up to a $200
million ten-year bond issue to be collateralized by all of the Company's assets.
In September 1998, the Board of Directors approved the preliminary  requirements
of the proposed tentative financing arrangement and management was authorized to
take all  necessary  action  to  pursue  and  finalize  the  transaction  if the
opportunity  arises. The significant terms approved by the Board in anticipation
of potential  financing  include an allowance for the lender of a minimum of two
seats on the Company's Board of Directors, the power of veto over future capital
expenditures and other significant  matters, and issuance of unrestricted shares
of  common  stock  equal to 20% of the  Company's  equity,  with a  non-dilution
agreement  which would have the effect of maintaining the lenders 20% holding at
no cost to the lender whatever  additional issues of equity capital was proposed
or made  during the life of the bond.  In  addition  to legal fees to effect the
financing,  the Company will be required to pay an origination fee of 10% of the
loan  proceeds   should  the  financing   materialize.   Neither  Sigma  Finance
Corporation  nor any other  entity is  obligated  to make an loan to the Company
under any terms.

     Should the Company be successful in obtaining  substantial  additional debt
financing,    management   plans   to   seek   acquisitions   of   more   mature
telecommunication  or  computer  related  businesses  or other  cash  generating
enterprises  that would generate  sufficient cash flow to maintain debt service.
There  can  be no  assurances  that  the  Company  will  be  successful  in  the
implementation of its plan for expansion and its overall business plan.

     From July 1,  1999,  to the end of fiscal  year ended  June 30,  2000,  the
Company  estimates  its cash  needs to  maintain  operations  under its  current
negative  cash flow  situation is $600,000.  This amount is composed of $600,000
for working  capital  assuming that current  operations  continue in its present
status.  These amounts include offsets for anticipated amounts of cash generated
from the current operations. There can be no assurances that the Company will be
able to successfully obtain the additional  financings or will be otherwise able
to obtain sufficient financing to consummate the Company's business plan.

     The Company has limited  capitalization and is dependent on the proceeds of
private or exempt  offerings to continue as a going concern and  implementing  a
business  plan.  All  during  fiscal  1998 and to the date of this  filing,  the
Company has had and continues to have a substantial need for working capital for
normal  operating  expenses  associated  with the Company  continuing as a going
concern.  This lack of cash has  slowed  its  ability  to  acquire  SMR or other
productive assets and initiate revenue producing operations. Any activity in the
wireless industry requires adequate financing and on-going funding sources.  The
Company has entered this  industry with limited  financing and funding  sources.
The


                                       29
<PAGE>



Company is currently in  discussions  with one or more entities for private debt
and equity financing package(s).

Results of Operations
---------------------

Fiscal Year Ended June 30, 1998
-------------------------------

     For the year ended June 30,  1998,  the Company  recorded a net loss before
other income and expense of $1,031,000  and a net loss of $3,029,900  with a net
loss per common share of $0.15. As of June 30, 1998, the Company incurred direct
expenses of $1,031,000 associated with the administration and limited operations
of the Company compared to $2,574,100  reported in the year ended June 30, 1997.
From the  period  of July 1,  1997 to June 30,  1998  the  Company's  management
incurred general and administrative  expenses of $818,000 a decrease of $720,200
from similar  expenses  incurred  during the year ended June 30, 1997. The major
reason  for  the  decrease  in  expense  was a  decrease  in  recorded  officers
compensation  from  $980,300  reported  in the June  1997  year end to  $128,900
reported in the year ended June 30, 1998.  The Company had  ancillary  income of
$73,400 from dividends, interest and other sources. No significant revenues were
generated in the  Company's  SMR  communications  business.  Write- downs of LED
equipment of $1,374,300,  interest expense of $457,000,  loss from  foreclosures
and disposal of assets that totaled $179,600, and losses from telephone services
discontinued in December 1997 of $61,000,  constituted 68% of the total net loss
of $3,029,900.

Fiscal Year Ended June 30, 1997
-------------------------------

     For the year  ended  June 30,  1997,  the  Company  recorded  a net loss of
$5,115,300  and a net loss per common share of $0.58.  As of June, 30 1997,  the
Company   incurred   direct   expenses  of   $2,574,100   associated   with  the
administration and limited operations of the Company. From the period of July 1,
1996  to  June  30,  1997,  the  Company's   management   incurred  general  and
administrative expenses of $2,574,100. The major expenses incurred were officers
compensation of $980,300,  consulting  fees of $167,000 and interest  expense of
$96,600.  The Company had ancillary  income of $51,800 from rents,  interest and
other sources.  No revenues were  generated in the Company's SMR  communications
business.  Losses associated with discontinued  operations in prepaid phone card
sales (TTI Communications,  Inc.) totaled $514,800.  Write-offs of investment in
International Media Group, Ltd., of $124,500, Network Teleport, Inc. of $293,400
and the DCL Associates SMR license  options of $150,000  constituted the bulk of
the loss from foreclosures and disposal of assets which totaled $621,600.  Write
down of  "prepaid  media  credits"  to zero  totaled  $1,300,000  of  additional
recorded loss for the year ended June 30, 1997. As of June 30, 1997, the Company
reported $514,800 of losses in TTI Communications,  Inc. The Company disposed of
its interest in TTI Communications, Inc. in December 1997.

Impact of Recently Issued Accounting Standards
----------------------------------------------

     The Company has adopted the  Statement  of Financial  Accounting  Standards
Board (SFAS) No. 130,  "Reporting  Comprehensive  Income,"  issued in June 1997.
Comprehensive  income  includes  net income and all  changes in an  enterprise's
other  comprehensive  income  including,  among other things,  foreign  currency
translation  adjustments and unrealized gains and losses on certain  investments
in  debt  and  equity  securities.  The  Company  also  adopted  SFAS  No.  131,
"Disclosures  about  Segments of an Enterprise  and Related  Information."  This
Statement  establishes  standards  for  reporting  information  about  operating
segments in annual financial statements,  and requires that an enterprise report
selected  information  about  operating  segments in interim  reports  issued to
shareholders.  The Company does not expect the adoption of these  statements  to
have a material impact on its financial condition or results of operations.


                                       30
<PAGE>




     The Company  adopted  SFAS No. 128,  "Earnings  Per Share"  ("EPS"),  which
specifies the method of  computation,  presentation  and disclosure for Earnings
Per Share. SFAS No. 128 requires the presentation of two EPS amounts,  basic and
diluted.  Basic EPS is  calculated by dividing net income (loss) by the weighted
average number of common shares outstanding for the period. Diluted EPS includes
the dilution that would occur if  outstanding  stock options and other  dilutive
securities  were  exercised  and  is  comparable  to the  EPS  the  Company  has
historically  reported. The diluted EPS calculation excludes the effect of stock
options  when their  exercise  prices  exceed the average  market price over the
period.   There  is  no  change  in  loss  per  share  because  diluted  EPS  is
anti-dilutive.

     In 1998,  the Company  adopted the American  Institute of Certified  Public
Accountants' ("AICPA") Statement of Position 98-1 ("SOP 98-1"),  "Accounting for
the Costs of Computer Software Developed or Obtained for Internal Use." SOP 98-1
defines the types of computer  software  project costs that may be  capitalized.
All other costs must be expensed in the period  incurred.  In order for costs to
be capitalized,  the computer  software project must be intended to create a new
system or add identifiable functionality to an existing system. Adoption of this
statement  did not  have  an  impact  on the  Company's  consolidated  financial
statements.

     In April 1998,  the AICPA  finalized  SOP 98-5,  "Reporting on the Costs of
Start-Up   Activities,"   which   requires  that  costs  incurred  for  start-up
activities,  be expensed as incurred.  This SOP, which is effective in the first
quarter of 1999,  is not  expected  to have a material  impact on the  Company's
consolidated financial statements.

     In June 1998, the Financial Accounting Standards Board issued SFAS No. 133,
"Accounting for Derivative  Instruments and Hedging  Activities,"  which defines
derivatives,  requires that  derivatives be carried at fair value,  and provides
for  hedge  accounting  when  certain  conditions  are met.  This  statement  is
effective  beginning in the year 2000.  The adoption of this  statement will not
have an impact on the Company's consolidated financial statements.

ITEM 6A.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

     As of  December  31,  1998,  all the  Company's  long term debt bears fixed
interest  rates;  however,  the fair market  value of this debt is  sensitive to
changes in  prevailing  interest  rates.  The Company  runs the risk that market
rates will  decline and the  required  payments  will exceed  those based on the
current  market  rate.  The  Company  does  not  use  interest  rate  derivative
instruments to manage its exposure to interest rate changes.

ITEM 7.  FINANCIAL STATEMENTS

     Financial  statements  meeting the  requirements  of Item 310 of Regulation
S-B, for the years ending June 30, 1997 and June 30, 1998,  have been audited by
Hixson, Marin, Powell & DeSanctis, P.A. and are annexed as a separate section to
this Report, designated pages F-1 through F-37.

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

     On August 29,  1996,  the Company  retained  Ehrhardt,  Keefe,  Steiner and
Hottman,  PC,  of  Denver,   Colorado,   as  its  independent  Certified  Public
Accountants.  During the Company's two most recent fiscal years, and the interim
periods since  completion of its last fiscal year, the Company had not consulted
Ehrhardt,  Keefe,  Steiner and Hottman,  PC with respect to the  application  of
accounting principles to a specified transaction, the type of audit opinion that
might be rendered on the Company's financial


                                       31
<PAGE>



statements  or any matter that was the subject of a  disagreement  or reportable
event.  The Company duly reported this change in  accountants  to the Securities
and Exchange Commission in its Form 8-K current report dated September 12, 1996.

     On July 14, 1997, the Company accepted the resignation of Ehrhardt,  Keefe,
Steiner  and  Hottman,  PC,  as  the  Company's   independent  Certified  Public
Accountants  for the fiscal year ended June 30, 1997.  The Company duly reported
this change in accountants to the Securities and Exchange Commission in its Form
8-K current report dated July 18, 1997. During the year ended June 30, 1996, and
the subsequent interim periods, there was no disagreement with Ehrhardt,  Keefe,
Steiner and  Hottman,  PC, on any matter of  accounting  principle  or practice,
financial   statement   disclosure  or  auditing   scope  or  procedure,   which
disagreement,  if not resolved to the satisfaction of those  accountants,  would
have caused it to make  reference to the subject  matter in connection  with its
report.

     On July 14, 1997, the Company retained Hixson,  Marin,  Powell & DeSanctis,
P.A. of Miami, Florida, as its independent Certified Public Accountants.  During
the  Company's  two most recent  fiscal  years,  and the interim  periods  since
completion of its last fiscal year, the Company had not consulted Hixson, Marin,
Powell  &  DeSanctis,  P.A.  with  respect  to  the  application  of  accounting
principles to a specified  transaction,  the type of audit opinion that might be
rendered  on the  Company's  financial  statements  or any  matter  that was the
subject of a disagreement  or reportable  event.  The Company duly reported this
change in accountants to the Securities and Exchange  Commission in its Form 8-K
current report dated July 18, 1997.

     On January 27,  1998,  the Company  retained  Grabau and  Company,  P.C. of
Denver,   Colorado  to  audit  segmented  financial   statements  of  Centennial
Communications Corp. and SMR Direct, Inc. Said audit was in conjunction with the
purchase  of  certain  assets of SMR  Direct,  Inc.  reported  on Form 8-K filed
December 30, 1997, and Form 8-K/A filed February 16, 1999.  During the Company's
two most recent fiscal years,  and the interim  periods since  completion of its
last fiscal year,  the Company had not consulted  Grabau and Company,  P.C. with
respect to the application of accounting principles to a specified  transaction,
the type of audit  opinion  that might be  rendered on the  Company's  financial
statements  or any matter that was the subject of a  disagreement  or reportable
event.

                                    PART III

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

(a)  IDENTIFY DIRECTORS AND EXECUTIVE OFFICERS:

     The  following  table sets  forth:  (1) names and ages of all  persons  who
presently are  directors of the Company;  (2) all positions and offices with the
Company held by each such person; (3) the term or office of each person named as
a director; and (4) any period during which he or she has served as such:

     Director Name/Title              From                       To
     -------------------              ----                       --
James J. Krejci, 57
Director, President & CEO          August 1998           Next Annual Meeting
Gordon D. Dihle, 44                October 1997          May 8, 1998
Director, Secretary & Treasurer    August 1998           Next Annual Meeting



                                       32
<PAGE>

     Director Name/Title              From                       To
     -------------------              ----                       --
Marc Maassen, 48
Outside Director                   October 1998          Next Annual Meeting


     There is no  understanding  or  arrangement  between any  directors  or any
person or persons  pursuant to which such individual was or is to be selected as
a director or nominee of the Company.

     Each  director is serving a term of office which shall  continue  until the
next  annual  meeting  of  Shareholders  and until his  successor  has been duly
elected and  qualified.  Officers of the  Company  serve at the  pleasure of the
Board of Directors.

     During the year ended June 30, 1998,  Mr.  Krejci was a member of the board
of directors of Jones Intercable,  Inc., a 1934 SEC Act Reporting Company, which
has no relationship or affiliation with the Company.

Business Experience
-------------------

     The  following is a brief account of the  experience,  during the past five
years, of each director and executive officers of the Company:

     James J. Krejci:  Chief Operations Officer of the Company and President and
CEO of AWN  (February,  1998);  Chairman  of the  Board  of  Directors,  CEO and
President of the Company (September, 1998).

     For the five years preceding Mr. Krejci's  appointment as a Director of the
Company, Mr. Krejci was employed as follows:

          September 1998 through present: CEO and President of ComTec
     International, Inc. and AWN.  February 1998 through August 1998:  COO of
     ComTec  International, Inc. and Chairman of the Board of Directors, CEO and
      President of AWN.
          July 1996 through February 1998: CEO and President of Imagelink
     Technologies, Inc., a firm involved in the development and distribution of
     video conference equipment.
          May 1994 through February 1996: President - International  Division of
     International Gaming Technology,  Inc., a firm involved in the development
     and distribution of gaming  equipment.
          May 1985  through  May 1994 :  President  and/or  officer of various
     subsidiaries of Jones  International,  Inc., including Jones Intercable,
     Inc..  a 1934 Act  Reporting  Company,  of which Mr.  Krejci has remained
     and is currently a director.  These firms are involved in development and
     distribution of cable television  systems as well as activities  ancillary
     and related to the cable television business.

     Mr. Krejci  earned a B.S. in chemical  engineering  from the  University of
Wisconsin in 1964 and a MBA from the University of Wisconsin in 1970.

     Gordon D. Dihle:  Secretary/Treasurer and Director of ComTec International,
Inc. and AWN (October 1997 to May 1998) and Chief Financial Officer,  Treasurer,
Secretary and Director of ComTec International, Inc. (September 1998).

     For the five years  preceding Mr. Dihle's  appointment as a Director of the
Company, Mr. Dihle was employed as follows:


                                       33
<PAGE>


          January  1992 through  September  1997:  Dihle & Co.,  P.C., a
      professional  corporation  wholly  owned by Mr.  Dihle which  provides
      legal, accounting and tax services.
           April 1993 through present:  Lostwood Farms, Ltd., a farm corporation
      wholly owned by Mr. Dihle.
           May 1998 through August 1998: Self employed as an attorney and
      consultant, including work for ComTec International, Inc.

     Mr. Dihle achieved a B.A. in Accounting and Business Administration in 1976
at Dickinson State University,  Dickinson,  North Dakota,  and a J.D. in 1980 at
the University of North Dakota School of Law.

     Marc Maassen:  Outside  Director of ComTec  International,  Inc.  (October,
1998).

     For the five years preceding Mr. Maassen's appointment as a Director of the
Company, Mr. Maassen was employed as follows:

           January 1999 through present: Self employed communications and
     computer industry consultant.
            1991 through January 1998:  Executive Vice President ICG
     Communications, Inc. and executive positions with subsidiaries of ICG
     Communications, Inc. (including Zycom Corporation and Fiber Optic
     Technologies, Inc.) operating as a local exchange carrier providing local,
     long distance, internet and data services.

     Mr. Maassen achieved a B.A. in Business  Administration in 1974 at Colorado
State University, Fort Collins, Colorado.

(b)  IDENTIFICATION OF CERTAIN SIGNIFICANT EMPLOYEES AND CONSULTANTS:

     None

(c)  FAMILY RELATIONSHIPS:

     No family relationships exist between any director or executive officers of
the Company.

(d)  INVOLVEMENT IN CERTAIN LEGAL PROCEEDINGS:

     No event listed in  subparagraphs  (1) through (4) of  subparagraph  (d) of
Item 401 of Regulation  S-B has occurred  with respect to any present  executive
officer or director of the Company  during the past five years which is material
to an evaluation of the ability or integrity of such director or officer.

COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT:

     To the date of this  filing and to the best of  knowledge  of the  Company,
Form 3 has been filed by its current officers but no supplemental  Form 4 and/or
Form 5 has been filed with the Securities  Exchange  Commission  (SEC) by any of
its officers or directors.  As of the date of this report, the SEC has not taken
any additional action with regard to any failure to file reports

     To the knowledge of the Company none of the  following  persons who have or
had Section 16 filing  requirements  during the fiscal year ended June 30, 1998,
complied with Section 16: Clifford S. Perlman and Donald G. Mack.


                                       34
<PAGE>



ITEM 10.  EXECUTIVE COMPENSATION.

(a)  GENERAL:

     (1) through (7) All Compensation Covered. During the fiscal year ended June
30, 1998, the Company  employed the following  senior  management  personnel who
served pursuant to employment agreements further described in Section (g) below.

(b)  SUMMARY COMPENSATION TABLE:
<TABLE>

                                            SUMMARY COMPENSATION TABLE
--------------------------------------------------------------------------------------------

<CAPTION>
                                 ANNUAL COMPENSATION               LONG TERM COMPENSATION
                                 -------------------               ----------------------
Name and Position         Year   Salary     Bonus    Other    SAR   Options     LTIP   Other
-----------------         ----   ------     -----    -----    ---   -------     ----   -----

<S>                       <C>    <C>      <C>        <C>     <C>     <C>      <C>      <C>
Clifford S. Perlman       1998  $ 15,000    None     None    None    None     281,949  None
Chairman of the Board     1997  $ 80,000  $130,200   None    None    None       None   None
of Directors

Donald G. Mack *          1998  $110,000    None     None    None    None       None   None
President and Chief       1997  $171,500  $ 83,294   None    None    None       None   None
Executive Officer
============================================================================================

* Mr. Mack has  subsequently  filed  litigation  against the Company  related to
alleged  compensation  entitlements  and the  Company  has  filed  counterclaims
against Mr.  Mack.  (See "ITEM 3, LEGAL  PROCEEDINGS  -  LITIGATION  WITH FORMER
OFFICER AND DIRECTOR.")
</TABLE>

(c)  OPTION/SAR GRANT TABLE:

     During the fiscal  years ended June 30,  1997 and 1998,  no grants of stock
options or freestanding SAR's were made by the Company.

1995 Stock Incentive Plan
-------------------------

     The special meeting of  Shareholders of August 8, 1995,  increased the 1995
Incentive  Stock  Option  Plan  available  options  from  100,000 to 600,000 (as
adjusted for the January 31, 1998 reverse  stock split)  common  shares and also
approved the extension of the  termination  date of the  Incentive  Stock Option
Plan from September 16, 1996, to September 16, 1998. The Incentive  Stock Option
Plan  (the  "Plan")  was  originally  approved  by the  Board of  Directors  and
Shareholders  on  December  21,  1993.  The Plan  provides  for the grant to the
Company's employees,  officers and/or directors of stock options that qualify as
incentive stock options under Section 422A of the Internal Revenue Code of 1986,
as amended.  The Plan  provides for the grant of stock options to purchase up to
an  aggregate of 3,000,000  shares of common  stock.  Options may be granted for
terms of up to three  years.  Options  are to be granted at  exercise  prices at
least equal to the fair market value of the  Company's  common stock at the date
of grant  (110% of the fair  market  value  in the case of  options  granted  to
greater than 10%  shareholders).  Options are subject to early  forfeiture  upon
termination of employment or other relationship with the Company.  There were no
options  granted during the fiscal year ended June 30, 1998. The plan terminated
by its terms on September 16, 1998, with no options issued or outstanding.



                                       35
<PAGE>



The 1997 Stock Option Plan
--------------------------

     On March 28, 1997, the  shareholders  of the Company adopted the 1997 Stock
Option  Plan (the  "Plan")  reserving  an  aggregate  of  900,000  shares of the
Company's  Common Stock (the  "Available  Shares") for issuance  pursuant to the
exercise  of stock  options  ("Options")  which  may be  granted  to  employees,
officers,  and directors of the Company and consultants to the Company. The Plan
also  provides  for  annual  adjustment  in  the  number  of  Available  Shares,
commencing  June 30,  1997,  to a number  equal to 10% of the  number  of shares
outstanding  on June 30 of the preceding  year or 980,000  shares,  whichever is
greater.  The Plan was adopted by the Board of  Directors  on February 12, 1997.
The Plan is  designed  to (i)  induce  qualified  persons  to become  employees,
officers,  or  directors  of the  Company;  (ii)  reward  such  persons for past
services to the Company; (iii) encourage such persons to remain in the employ of
the  Company  or  associated  with  the  Company;  and (iv)  provide  additional
incentive for such persons to put forth  maximum  efforts for the success of the
business of the Company.

     The Plan will be administered by the Compensation Committee of the Board of
Directors (the "Committee").  Transactions under the Plan are intended to comply
with all applicable conditions of Rule16b-3 under the Securities Exchange Act of
1934,  as amended  (the "1934  Act").  In  addition to  determining  who will be
granted  Options,  the Committee  has the authority and  discretion to determine
when  Options  will be granted  and the number of  Options  to be  granted.  The
Committee  may determine  which  Options may be intended to qualify  ("Incentive
Stock Option") for special treatment under the Internal Revenue Code of 1986, as
amended from time to time (the "Code") or Non-Qualified Options  ("Non-Qualified
Stock Options") which are not intended to so qualify.

     The Plan  provides  that  disinterested  directors  will receive  automatic
option grants to purchase 14,000 shares of the Company's Common Stock upon their
initial appointment or election as directors, and on the date of each subsequent
annual shareholders'  meeting in which such director is reelected as a director.
Grants to employee directors and  officer/directors  can be either Non-Qualified
Stock Options or Incentive Stock Options,  to the extent that they do not exceed
the Incentive Stock Option exercise limitations, and the portion of an option to
an employee director or officer/director  that exceeds the dollar limitations of
Code Section 422 will be treated as a  Non-Qualified  Stock Option.  All options
granted to disinterested directors will be Non-Qualified Options.

     This Plan will remain in effect until it is terminated by the  Compensation
Committee,  except that no Incentive  Stock Option will be granted after January
31, 2007.

     The Plan contains provisions for proportionate  adjustment of the number of
shares for  outstanding  options and the option  price per share in the event of
stock dividends,  recapitalizations  resulting in stock, reverse stock splits or
combinations or exchanges of shares.

     Each option  granted  under the Plan will be evidenced by a written  option
agreement  between  the  Company  and the  optionee.  The  option  price  of any
Incentive  Stock  Option may be not less than 100% of the Fair Market  Value per
share on the date of grant of the option; provided,  however, that any Incentive
Stock Option  granted under the Plan to a person owning more than ten percent of
the total combined voting power of the Common Stock will have an option price of
not less  than 110% of the Fair  Market  Value per share on the date of grant of
the Incentive Stock Option.  Each  Non-Qualified  Stock Option granted under the
Plan will be at a price no less than 85% of the Fair  Market  Value per share on
the date of grant.  "Fair  Market  Value" per share as of a  particular  date is
defined  in the Plan as the last sale  price of the  Company's  Common  Stock as
reported on a national  securities exchange or on the NASDAQ System or, if none,
the average of the closing bid and asked prices of the Company's Common


                                       36
<PAGE>



Stock as reported by NASDAQ or, if such  quotations are  unavailable,  the value
determined by the Committee in its discretion in good faith.

     The exercise  period of options  granted  under the Plan may not exceed ten
years  from the date of grant  thereof.  Incentive  Stock  Options  granted to a
person  owning more than ten percent of the total  combined  voting power of the
Common Stock of the Company will be for no more than five years.

     No options  were  issued  from the 1997 Stock  Option  Plan during the year
ended June 30, 1998. As a disinterested  director,  Marc Maassen became entitled
to receive  automatic  option grants to purchase  14,000 shares of the Company's
Common Stock upon his initial appointment as a director on September 30, 1998.

(d)  AGGREGATED OPTION/SAR EXERCISES AND FISCAL YEAR-END OPTION/SAR VALUES
TABLE:

     No  stock  options  or  freestanding   SAR's  are  issued  or  outstanding.
Accordingly, and during the fiscal year ended June 30, 1998, no stock options or
freestanding  SAR's  were  exercised.  Notwithstanding  the  foregoing,  (1)  an
aggregate of 600,000 shares of the Company's  common stock,  $.001 par value per
share,  were  reserved for issuance  pursuant to the Company's  incentive  stock
option plan, as adopted by the Company's  Board of Directors in June,  1995, and
ratified and approved by the Company's  stockholders on August 10, 1995, and (2)
an aggregate of 980,000  shares of the Company's  common stock,  $.001 par value
per share, are reserved for issuance pursuant to the Company's 1997 stock option
plan as adopted by the  Company's  Board of Directors on February 12, 1997,  and
approved by the shareholders on March 28, 1997.

(e)  LONG-TERM INCENTIVE PLAN ("LTIP") AWARDS TABLE:

     Mr.  Perlman has an  outstanding  claim for 515,386  shares of common stock
representing five percent (5%) of the Company's issued and outstanding shares as
of June 20, 1997. These shares have not been issued as of the current date.

(f)  COMPENSATION OF DIRECTORS:

     (1) and (2). During the fiscal year ended June 30, 1998, no director of the
Company  received  any  compensation  in his  capacity as  director,  other than
reimbursement of travel expenses.

Employment Contracts and Termination of Employment, and Change-in Control
Arrangements.

     On February 16, 1998, the Company  entered into a letter  agreement,  which
remains  to be  formalized,  by which  James  Krejci  became  employed  as Chief
Operations  Officer of the  Company  and  President  and CEO of AWN.  The letter
agreement calls for a three year  employment  agreement with the opportunity for
Mr. Krejci to obtain, through common stock option agreements,  up to ten percent
(10%) of the  outstanding  common stock of the Company over a three year period.
The preliminary  agreement calls for Mr. Krejci to receive stock options vesting
in monthly  increments  to equal to a total of 5% of the  Company's  outstanding
common  shares over a three year period.  Options to obtain an  additional 5% of
the  Company's  outstanding  common  shares  are  conditioned  upon the  Company
reaching  certain  financial  and   administrative   goals  within   established
timelines.  The  strike  price  of all of the  potential  options,  as  modified
(reprised) by Board of Director action on October 7, 1998, is $.056 per share,


                                       37
<PAGE>



representing  80% of the bid price of the Company's common stock on September 2,
1998, (closing bid price $.07) Mr. Krejci's actual appointment date as President
and CEO of the Company.

     Effective  January 1, 1999,  the Company  entered into a letter  agreement,
which remains to be formalized,  by which Gordon Dihle became  employed as Chief
Financial  Officer of the Company.  The letter  agreement calls for a three year
employment  agreement  with the  opportunity  for Mr.  Dihle to obtain,  through
common stock option  agreements,  up to seven and one half percent (7.5%) of the
outstanding  common  stock  of  the  Company  over  a  three  year  period.  The
preliminary  agreement  calls for Mr. Dihle to receive stock options  vesting in
increments  to  equal  to a total of 2.5% of the  Company's  outstanding  common
shares over a three year period. The strike price of all of the options is $.056
per share,  representing  80% of the bid price of the Company's  common stock on
September 2, 1998,  (closing bid price $.07) Mr.  Dihle's date of appointment as
Chief Financial Officer of the Company.

     Mr.  Perlman had a two year contract with the Company  ending July 1, 1997.
Mr.  Perlman  terminated  association  with the  Company  on  October  8,  1997.
Compensation  issues with Mr.  Perlman were settled on October 8, 1997,  with an
agreement which called for the issuance to Mr. Perlman of approximately  520,700
common  shares  valued at $0.25 per share  ($130,200).  The shares have not been
issued to Mr.  Perlman  and the amount has been  accrued and charged to year end
June 30, 1997 operations.

     Mr. Mack was acting as President  and CEO of the Company under a three year
contract  ending in May,  1998.  Mr. Mack  resigned as President  and CEO of the
Company and as an officer and director of each of the Company's  subsidiaries on
June 23, 1998. Mr. Mack's resignation letter stated that his resignation was not
a waiver of any rights or claims to any compensation, stock, options, bonuses or
accrued amounts of cash, loans or guarantees made on behalf of the Company under
the terms and conditions of his employment contract and an addendum thereto. Mr.
Mack's  resignation  letter did not request that any disagreement be reported or
disclosed in the Company's  regulatory filings.  Mr. Mack has subsequently filed
litigation against the Company related to alleged compensation  entitlements and
the  Company  has filed  counterclaims  against  Mr.  Mack.  (See "ITEM 3, LEGAL
PROCEEDINGS - LITIGATION WITH FORMER OFFICER AND DIRECTOR.")

Report on Repricing of Options/SAR's.
-------------------------------------

     No  stock  options  or  freestanding  SAR's  were  issued  or  outstanding.
Accordingly, and during the fiscal year ended June 30, 1998, no stock options or
freestanding SAR's were repriced.

ITEM  11.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT

(a)  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS:

     At June 30,  1998,  the  Company  had  outstanding  Class A $.001 par value
Common Stock, the only class of voting securities outstanding. Each common share
entitles  the holder to one vote in any matter  submitted  to  shareholders  for
approval. The common shares vote as a single class.

     The  following  information  is furnished  as of June 15,  1999,  as to the
number of shares of the Company's common stock, $.001 par value per share, owned
beneficially,  or is known by the Company to be owned beneficially, of more than
5% of any class of such  security  by any  person  who is not also an Officer or
Director of the Company:




                                       38
<PAGE>



Name and Address                         Amount and Nature          Percentage
of Beneficial Owner                   of Beneficial Ownership     of Total Class
-------------------                   -----------------------     --------------

Lewis D. Rowe                               4,317,924(1)               9.3%
P.O. Box 1561GT
Zephyr House, Mary Street
Grand Cayman, British West Indies

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

(1)       Includes  2,158,962  warrants to purchase $.001 par value common stock
          at prices from $4.50 per share to $2.90 per share  expiring  not later
          than March  2001.  The shares and  warrants  were issued in payment of
          fees to Mr. Rowe  between  June 30,  1997,  and March 23,  1998,  with
          respect  to certain  funding  received  by the  Company  from  various
          entities  not  residents of the U.S.A.,  as reported on the  Company's
          Form 8-K filed April 7, 1998.

(b)  SECURITY OWNERSHIP OF MANAGEMENT:

     The following  information is furnished as of September 10, 1998, as to the
number of shares of the Company's common stock, $.001 par value per share, owned
by each  executive  officer and  director  of the  Company and by all  executive
officers and directors as a group:

Name and Address                    Amount and Nature          Percentage
of Security Owner                 of Security Ownership      of Total Class
-----------------                 ---------------------      --------------

Gordon D. Dihle                         303,676(1)                 7%
4881 South Amaro Drive
Evergreen, Colorado 80439

James Krejci                            274,286(2)                 6%
1133 Race Street
Denver, Colorado  80206

Marc Maassen                             36,000                     *
240 Hopi Place
Boulder, Colorado  80303

Total officers and directors,            613,962             1.3% as a group
(2 persons)

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

(1)       Includes  14,070 shares owned by a professional  corporation  owned by
          Mr. Dihle, 75,000 shares in Mr. Dihle's IRA accounts and 10,000 shares
          in an IRA account owned by Mr. Dihle's spouse.  Does not include stock
          options potentially equal to up to 7.5% of the Company's common shares
          which Mr.  Dihle has the  potential  to earn over a three year  period
          ending January 1, 2002.

(2)       Does not include stock options  potentially  equal to up to 10% of the
          Company's  common  shares which Mr.  Krejci has the  potential to earn
          over a three year period ending February 15, 2001.



                                       39
<PAGE>



(c)  CHANGES IN CONTROL:

     As of the  date of this  report,  the  Company  has not  entered  into  any
agreements,  the operation of which may at a subsequent  date result in a change
of control of the Company.

     The Company knows of no arrangement,  including the pledge by any person of
securities of the Company,  which may at a subsequent date result in a change of
control of the Company.

ITEM 12.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

     Effective  May 10, 1995,  the Company  entered  into a two year  Employment
Contract with  Clifford  Perlman to manage and direct the affairs of the Company
and act in the  capacity  of  Chairman  of the Board at an annual base salary of
$60,000.  In addition,  the Company agreed to compensate  Perlman by: (1) paying
him 50% cash and 50% stock on the balance of his $80,000  accrued  salary from a
prior  agreement  once the Company has closed on adequate  financing;  and (2) a
stock bonus paid annually  equal to 5% of the issued and  outstanding  shares on
June 20 of each year throughout the term of his agreement. On February 12, 1996,
Perlman settled the Company's $130,000 cash obligation to him for the ten months
ended February 28, 1996, for 260,000 shares of the Company's common stock.

     By terms of a written three year employment  agreement  between the Company
and Donald G. Mack dated as of May 10, 1995,  Mr. Mack agreed to accrue  monthly
compensation  of $10,0000,  with the option to convert the same to shares of the
Company's  common  stock at a 20% discount  from the bid price of the  Company's
common  stock in the over  the  counter  market  on the date of  conversion.  As
additional  compensation,  the Company agreed to pay Mr. Mack: (i) a bonus equal
to 5% of  the  quarterly  net  increase  in the  Company's  net  assets  payable
annually;  (ii) 10% of the Company's net before tax profit payable annually; and
(iii)  performance  stock  options,  effective  for four  years,  based upon the
Company reaching certain financial criteria.  In the latter regard, and when the
Company reached  $1,000,000,  $5,000,000 and $15,000,000 in gross revenues,  the
Company  becomes  obligated  to issue Mr. Mack 200,000  shares at $.50,  400,000
shares at $1.0 and 600,000  shares at $1.50,  respectively.  The agreement  also
obligated  the  Company to  purchase a  $1,500,000  term life policy on Mr. Mack
payable to his named  beneficiaries.  Mr. Mack has subsequently filed litigation
against the Company related to alleged compensation entitlements and the Company
has filed  counterclaims  against  Mr.  Mack.  (See "ITEM 3,  LEGAL  PROCEEDINGS
LITIGATION WITH FORMER OFFICER AND DIRECTOR.")

Certain Transactions

     In April,  1997, Donald G. Mack, while an  officer/director/shareholder  of
the Company, collateralized the purchase of an automobile in a limited liability
company which is affiliated with Donald G. Mack. A certificate of deposit of the
Company  in the  amount  of  $78,600  was  held by a  financial  institution  as
collateral to the automobile  purchased by the related party. The collateral was
reduced by approximately  $10,000 during the subsequent  period. The certificate
of deposit is restricted  and is included in cash and  equivalents.  The Company
subsequently obtained release of the collateralized  certificate of deposit from
the financial institution in December 1998.

     On February 12, 1996,  Mr.  Perlman  converted  all of the  Company's  cash
obligations to him through February 28, 1996, into shares of common stock valued
at $.50  per  share  or 80% of the $.63 bid  price  on that  date.  Mr.  Perlman
received  260,000 shares in settlement of the Company's  $130,000  obligation to
him,  computed as  follows:  ten months  salary at $5,000 per month,  $40,000 in
prior unpaid  obligation  and $40,000  worth of stock  previously  unpaid.  This
transaction  was approved by the  Company's  then Board of Directors on February
12, 1996.


                                       40
<PAGE>




     On June 20, 1996, Mr. Perlman earned 333,334 of the Company's  Common Stock
pursuant to the terms and conditions of his Employment  Agreement  dated May 10,
1995.  This  transaction  was  valued  at $.81 per share or 80% of the $1.05 bid
price on that date.

     On June 17,  1994,  the Company  purchased  from Mr.  Mack,  the  Company's
President  and CEO, a car lot located in Parker,  Colorado.  The purchase  price
paid was $392,214.  In connection with this  transaction,  the Company assumed a
first  mortgage of $352,000,  issued  172,720  preferred  shares of stated $1.00
value  per  share  of Key Car  Finance  (a  subsidiary  of the  Company)  to the
President  of the  Company  and issued a note  payable to the  President  of the
Company in the amount of $148,000.  Mr. Mack has  subsequently  filed litigation
against the Company related to alleged compensation entitlements and the Company
has filed  counterclaims  against  Mr.  Mack.  (See "ITEM 3,  LEGAL  PROCEEDINGS
LITIGATION WITH FORMER OFFICER AND DIRECTOR.")

     Donald G. Mack, the Company's President and Chief Executive Officer,  was a
principal  stockholder of Keystone Holding Corp., whose assets were purchased by
the Company on May 10, 1995. As a result of this transaction,  Mr. Mack received
 .08% of the Company's common stock as of June 30, 1995, and executed two related
party notes payable to him in the amount of: (1) $81,202 in connection  with the
purchase  of the  commercial  property in Parker,  Colorado,  and (2) $10,000 in
connection with amounts owed him from Key Communications,  Inc., a now dissolved
subsidiary of the Company.  Mr. Mack has subsequently  filed litigation  against
the Company  related to alleged  compensation  entitlements  and the Company has
filed counterclaims against Mr. Mack. (See "ITEM 3, LEGAL PROCEEDINGS LITIGATION
WITH FORMER OFFICER AND DIRECTOR.")

     On  February  12,  1996,  Mr. Mack  converted  part of the  Company's  cash
obligations to him through February 28, 1996, into shares of common stock valued
at $.50 per share or 80% of the $.63 bid price on that date.  Mr. Mack  received
440,000  shares in  settlement  of the  Company's  $220,000  obligation  to him,
computed as  follows:  $120,600 in salary  earned  from the  Company,  a $30,000
management fee from the Company and a partial reduction of the notes payable due
him in the amount of $69,300.  This  transaction  was approved by the  Company's
then Board of Directors on February 12, 1996.  Mr. Mack has  subsequently  filed
litigation against the Company related to alleged compensation  entitlements and
the  Company  has filed  counterclaims  against  Mr.  Mack.  (See "ITEM 3, LEGAL
PROCEEDINGS - LITIGATION WITH FORMER OFFICER AND DIRECTOR.")

     On July 16, 1996, Mr. Mack converted all of the Company's cash  obligations
to him as of June 30, 1996, into shares of common stock valued at $.50 per share
or 80% of the $.63 bid price on that date. Mr. Mack received  277,406 shares in
settlement of the  Company's  $138,703  obligation to him,  computed as follows:
$104,000 in salary earned from the Company and final  reduction on any remaining
notes payable due him in the amount of $34,703. This transaction was approved by
the  Company's  then  Board  of  Directors  on  July  16,  1996.  Mr.  Mack  has
subsequently   filed   litigation   against  the  Company   related  to  alleged
compensation  entitlements and the Company has filed  counterclaims  against Mr.
Mack.  (See "ITEM 3, LEGAL  PROCEEDINGS  -  LITIGATION  WITH FORMER  OFFICER AND
DIRECTOR.")

     Except for the foregoing and during the fiscal year ended June 30, 1998, no
officer, director or relative or spouse of the foregoing persons or any relative
of such person who has the same home as such  person,  or is a director or other
officer of any parent or subsidiary of the Company,  or any shareholder known by
the Company to own of record or beneficially  more than five (5%) percent of the
Company's  Common  Stock,  had a direct or  indirect  material  interest  in any
transaction or presently proposed transaction to which the Company or any of its
parents or subsidiaries was or is a party.



                                       41
<PAGE>



ITEM 13.  EXHIBITS AND REPORTS ON FORM 8-K

(a)  EXHIBITS:

     The  following  documents  are filed  herewith  or  incorporated  herein by
reference as Exhibits:

     2.0 Acquisition of assets of Keystone Holding Corp. dated May 10,1995(1)

     2.1  Definitive  Acquisition  Agreement  By and Between Key  Communications
          Group, Inc. and Omni-Range Communications dated August 5, 1995.(1)

     2.2 Agreement  between the Company and Video  Licensing  Group,  Inc. dated
         January 24, 1996.(1)

     2.3  Acquisition  Agreement  between the Company and DCL  Associates  dated
          April 29, 1996.(1)

     2.4  Letter  of Intent  between  the  Company  and  Telecosm  dated May 31,
          1996.(1)

     2.5  Conversion  of  $1,500,000  debt to common  stock issued to non U.S.A.
          residents  (incorporated  by reference  to Form 8-K's dated July 14,
          1997,  and April 7, 1998).

     3.1 Articles of Incorporation of the Company  (incorporated by reference to
         Exhibit 3.1 to the Company's Form S-1 Registration  Statement No.
         82-88530 dated December 20, 1983; Amendment incorporated by Reference
         to Form 8-K dated May 12, 1997).

     3.2 By-laws.  White Acquisition Group Incorporated  ByLaws (original bylaws
         incorporated by reference to Exhibit 3.2 to the Company's Form S-1
         Registration Statement No. 82- 88530 dated December 20, 1983).

     3.3  Increase  in  Authorized   Shares;   Shareholders   Authorization  for
          Recapitalization and Convertible Debt Funding (incorporated by
          Reference to Form 8-K dated May 12, 1997 and Form 8-K dated December
          29, 1997).

     4.0 Certificate of Designation of Series A Preferred Shares.(1)

     4.1 Certificate of Designation of Series B Preferred Shares.(1)

     4.2 Certificate of Designation of Series C Preferred Shares.(1)

     10.01 Form of  Employment  Agreement  between the Company and its officers.
         (1)

     10.02  Commercial  contract  to buy and sell real estate  between  Keystone
          Holding Corp. and Local Service  Corporation  dated May 5, 1995
          (Exhibit  header eads "International Network")(1)

     10.03 Warranty Deed dated May 30, 1995,  from Local Service  Corporation to
          Nattem USA, Inc.(1)



                                       42
<PAGE>



     10.04 Deed of Trust, security agreement and financing statement executed by
           David L. Terry and Celia M. Terry dated September 9, 1986.(1)

     10.05 Promissory Note and Deed of Trust dated May 30, 1995, executed by Key
           Car Finance Company in favor of Local Service Corporation.(1)

     10.06  Agreement  of Sale By and Between  Nattem USA,  Inc.  and John Sandy
           Productions, Inc. dated July 26, 1995, together with Exhibits.(1)

     10.07 Option Agreement By and Between Key  Communications  Group,  Inc. and
           Mobile-One Communications, Inc. dated July 31, 1995.(1)

     10.08  Agreement  among the Company,  Proxhill  Marketing  Limited and Adex
           Corp. dated December 15, 1995.(1)

     10.09 Letter Agreement  between the Company and James Krejci dated February
           12, 1998  (incorporated  by reference to exhibit filed with the
           Company's  Form 10-KSB for the fiscal year ended June 30, 1997).

     10.10 Minutes of Board of Directors Meeting dated January 15, 1999.

     10.11 Letter  Agreement  between the Company and Gordon Dihle dated January
           4, 1999.

     10.12 Acquisition of operating assets from Centennial  Communications Corp.
           (incorporated  by reference to Form 8-K's dated December 29, 1997,
           and September 3, 1998, and exhibits filed with Form 8-K/A dated
           February 6, 1999).

     10.13  Purchase  Agreement  -  LED  Screen  Disposition   (incorporated  by
           reference to exhibits filed with Form 8-K dated January 14, 1999).

     10.14 Asset Acquisition  Agreement - License  Disposition  (incorporated by
           reference to exhibits filed with Form 8-K dated April 29, 1999).

     10.15  Issuance  of shares to persons and  entities  not  residents  of the
           U.S.A.  pursuant to Regulation S  (incorporated  by reference to
           Forms 8-K dated April 7, 1998, and September 3, 1998).

     16.01 Letters on change in certifying accountant (incorporated by reference
           to the Company's  Form 8-K's dated August 22, 1996,  September 12,
           1996 and July 18, 1997).

     16.2 Change in Certifying  Accountants  (incorporated  by reference to Form
           8-K dated July 18, 1997).

     21 Subsidiaries of the registrant.

     21.1 American Wireless Network, Inc., a Colorado Corporation.

     21.2 AmNet Resources, Inc., a Colorado Corporation.

     21.3 International Media Group, Ltd., a Colorado Corporation.


                                       43
<PAGE>




     21.4 Custom Concepts, Inc., a Colorado Corporation.

     21.5  Reference  to  Former  Subsidiaries  (incorporated  by  Reference  to
          Exhibits  Filed with the  Company's  Form  10-KSB for Fiscal Year
          Ended June 30, 1995).

     27 Financial Data Schedule
--------------------------

(1)  Incorporated  by reference to exhibits filed with the Company's Form 10-KSB
for fiscal year ended June 30, 1995.

(b) The Company  filed one report on Form 8-K during the quarter  ended June 30,
1998,  and seven  reports  on Form 8-K from June 30,  1998,  to the date of this
report.




                                       44
<PAGE>


                                   SIGNATURES

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

                                           COMTEC INTERNATIONAL, INC.

Date:   6/29/99                            By   s/James J. Krejci
                   Chief Executive Officer,   __________________________________
                                             James J. Krejci,  President and CEO

                                          By:  s/Gordon D. Dihle
                  Chief Financial Officer,   ___________________________________
                                        Gordon D. Dihle, Secretary and Treasurer


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


Signature                                   Title                   Date

s/Gordon D. Dihle
-----------------------------------
Gordon D. Dihle                             Director                6/29/99

s/James J. Krejci
-----------------------------------
James J. Krejci                             Director                6/29/99

s/Marc Maassen
-----------------------------------
Marc Maassen                                Director                6/29/99






                                       45
<PAGE>


                   COMTEC INTERNATIONAL, INC. AND SUBSIDIARIES
                      (A COMPANY IN THE DEVELOPMENT STAGE)

                          INDEPENDENT AUDITORS' REPORT

                                       AND

                        CONSOLIDATED FINANCIAL STATEMENTS

            YEARS ENDED JUNE 30, 1998 AND 1997 AND CUMULATIVE AMOUNTS
             FROM INCEPTION (MARCH 15, 1994) THROUGH JUNE 30, 1998

                                      F-1
<PAGE>


                   COMTEC INTERNATIONAL, INC. AND SUBSIDIARIES
                      (A COMPANY IN THE DEVELOPMENT STAGE)
            YEARS ENDED JUNE 30, 1998 AND 1997 AND CUMULATIVE AMOUNTS
              FROM INCEPTION (MARCH 15, 1994) THROUGH JUNE 30, 1998





                                    CONTENTS


                                                                           PAGE


Independent auditors' report                                              1 - 2

Consolidated financial statements:

    Balance sheets                                                            3

    Statements of operations                                                  4

    Statements of shareholders' equity (deficiency)                           5

    Statements of cash flows                                              6 - 7

    Summary of significant accounting policies                           8 - 11

    Notes to consolidated financial statements                           12 -33



                                      F-2
<PAGE>


     HIXSON, MARIN, POWELL & De SANCTIS, P.A. CERTIFIED PUBLIC ACCOUNTANTS
  David L. Hixon, C.P.A. - Raymond F. Marin, C.P.A. - Donald F. Powell, C.P.A.
                          Peter V. De Sanctis, C.P.A.

16100 N.E. 16th Avenue, Suite B                               3300 PGA Boulevard
North Miami Beach, FL 33162                             Gardens Plaza, Suite 810
DADE:  (305) 944-7001                               Palm Beach Gardens, FL 33410
BROWARD:  (954) 920-1311                                     TEL: (561) 624-5700
FAX:  (305) 944-6637                                         FAX: (561) 624-5702





                          INDEPENDENT AUDITORS' REPORT




Board of Directors and Shareholders
Comtec International, Inc. and Subsidiaries
Englewood, CO

We  have  audited  the  accompanying   consolidated  balance  sheets  of  Comtec
International,  Inc. and Subsidiaries (a company in the development stage) as of
June 30, 1998 and 1997 and the related  consolidated  statements of  operations,
shareholders'  equity  (deficiency)  and cash flows for the years then ended and
the  amounts  for the  years  ended  June  30,  1998 and  1997  included  in the
cumulative  period  from  inception  (March 15,  1994) to June 30,  1998.  These
consolidated  financial  statements  are  the  responsibility  of the  Company's
management.  Our  responsibility is to express an opinion on these  consolidated
financial statements based on our audits.

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

In our opinion, the consolidated  financial statements referred to above present
fairly, in all material respects,  the consolidated financial position of Comtec
International,  Inc. and  Subsidiaries at June 30, 1998 and 1997 and the results
of their  operations  and their  cash  flows for the  years  then  ended and the
amounts for the years ended June 30,  1998 and 1997  included in the  cumulative
period  from  inception  (March 15,  1994) to June 30, 1998 in  conformity  with
generally accepted accounting principles.






                                      F-3
<PAGE>




Board of Directors and Shareholders
Comtec International, Inc. and Subsidiaries
Page Two



The accompanying  consolidated  financial statements have been prepared assuming
the Company will continue as a going concern. As discussed in Note 2 of notes to
consolidated  financial  statements,  the Company experienced net losses for the
years  ended  June 30,  1998 and 1997 of $  3,029,900  and $  5,115,300  and has
experienced  net losses form  inception  (March 15,  1994) to June 30, 1998 of $
11,704,900. In addition, the Company's principal sources of cash flows have been
through the sales of its common shares ($ 1,138,900) and from  borrowings  under
financing  activities ($ 5,579,600).  The borrowings under financing  activities
may  cause  severe  liquidity  problems.  No  assurances  can  be  given  to the
continuation of the sales of securities or continued  ability to obtain short or
long term borrowings to maintain the Company's  present cash flow  requirements.
The Company's  recurring  losses from operations and limited  capital  resources
raise  substantial  doubt  about the  Company's  ability to  continue as a going
concern.  Management's  plans with regard to these matters are also described in
Note 2 of notes to consolidated  financial  statements.  To date the Company has
been  dependent on its major  shareholder  group for debt and equity  financing.
There is no assurance that this  shareholder  group will continue as a source of
new funds.  The Company's  ability to achieve the elements of its business plan,
which may be necessary to permit the  realization of assets and  satisfaction of
liabilities in the ordinary  course of business,  is uncertain.  As discussed in
Notes 13 and 14 of notes to consolidated financial statements,  the Company is a
defendant in various matters  relating to stock  transactions  and an employment
agreement.  Because of the present stage of litigation,  the ultimate outcome of
these matters  cannot  presently be determined.  Accordingly,  no provisions for
losses  and  liabilities  that  may  result  therefrom  have  been  made  in the
accompanying  consolidated  financial  statements.  All these  conditions  raise
substantial  doubt about the Company's  ability to continue as a going  concern.
The consolidated  financial statements do not include any adjustments that might
result from the outcome of these uncertainties.


        s/Hisxon, Marin, Powell & De Sanctis, P.A.



North Miami Beach,  Florida
December 30, 1998 (except as to Note 14
the date to which is March 24, 1999)


                                      F-4
<PAGE>

<TABLE>

                  COMTEC INTERNATIONAL, INC. AND SUBSIDIARIES
                      (A COMPANY IN THE DEVELOPMENT STAGE)
              CONSOLIDATED BALANCE SHEET - JUNE 30, 1998 AND 1997


                                     ASSETS

<CAPTION>
                                                   1998             1997
                                              ------------    -------------
<S>                                           <C>             <C>
Current assets
   Cash and equivalents includes restricted

     funds (1998, $568,500; 1997, $78,600 )   $    667,800    $     630,000
   Accounts receivable, less allowance for
     doubtful accounts (1998, $28,900;
     1997 $250,000)                                 13,500          127,100
   Investment in marketable securties                    -          248,400
   LED equipment, held for  resale               1,324,300                -
   Other current assets                             45,000                -
                                               -----------    -------------

     Total current assets                        2,050,600        1,005,500

Property and equipment                           1,478,600          275,500

License rights                                   1,390,700                -

Other assets                                         5,700           40,000
                                              ------------    -------------

                                              $  4,925,600    $   1,321,000
                                              ============    =============

        Read the  accompanying  summary of significant  accounting  policies and
  notes to consoldiated financial statements, both of which are an integral
                 part of this consolidated financial statement.
</TABLE>

                                      F-5
<PAGE>
<TABLE>


                 COMTEC INTERNATIONAL, INC. AND SUBSIDIARIES
                      (A COMPANY IN THE DEVELOPMENT STAGE)
              CONSOLIDATED BALANCE SHEET - JUNE 30, 1998 AND 1997
                                  (continued)

                LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIENCY)


<CAPTION>
                                                               1998             1997
                                                          -------------     ------------
<S>                                                       <C>               <C>
Current liabilities
     Current portion of long-term debt                    $      13,400     $          -
     Accounts payable                                           254,400          504,000
     Accrued liabilities                                        399,700          482,700
     Notes payable                                            1,184,200          110,000
     Convertible debenture                                            -        1,000,000
                                                          -------------     ------------

         Total current liabilities                            1,851,700        2,096,700
                                                          -------------     ------------

 Long-term debt, less current portion                         1,432,900                -
                                                          -------------     ------------



 Shareholders' equity (defieciency):
     Series A convertible preferred stock, $1 stated
       par and liquidation value; 1,000,000 shares
       authorized; no shares issued and outstanding                   -                -
     Series B convertible preferred stock, $5 stated
       par and liquidation value; 1,500,000 shares
       authorized; no shares issued and outstanding                   -                -
     Series C convertible preferred stock, $10 stated
     par and liquidation value; 1,000,000 shares
     authorized; no shares issued and outstanding                     -                -
     Common stock, $.001 par value; authorized
       100,000,000 shares; issued and outstanding
       39,697,196 shares in 1998 and 13,194,751 in 1997          39,700           13,200
     Capital in excess of par                                13,326,600        7,910,100
     Accumulated other comprehensive loss                             -           (3,600)
     Deficit accumulated during the development stage       (11,725,300)      (8,695,400)
                                                         --------------     ------------

                                                              1,641,000         (775,700)
                                                         --------------     ------------

                                                         --------------     ------------
                                                         $    4,925,600     $  1,321,000
                                                         ==============     =============


       Read the  accompanying  summary of  significant  accounting  policies and
  notes to consoldiated financial statements, both of which are an integral
                 part of this consolidated financial statement.
</TABLE>

                                      F-6
<PAGE>

<TABLE>

                   COMTEC INTERNATIONAL, INC. AND SUBSIDIARIES
                      (A COMPANY IN THE DEVELOPMENT STAGE)
                      CONSOLIDATED STATEMENTS OF OPERATIONS
            YEARS ENDED JUNE 30, 1998 AND 1997 AND CUMULATIVE AMOUNTS
              FROM INCEPTION (MARCH 15, 1994) THROUGH JUNE 30, 1998



<CAPTION>
                                                                            Years Ended                  Cumulative
                                                                             June 30,                   Amounts from
                                                                     1998                1997         Inception to date
                                                               ----------------    ---------------    -----------------
<S>                                                            <C>                 <C>                <C>
Operating Expenses:
    Selling, general and administrative                        $        818,000    $     1,538,200    $      3,223,800
    Compensation in form of common stock                                213,000          1,035,900           3,655,000
    Management fees, related party                                            -                  -              65,000
                                                               ----------------    ---------------    ----------------

                                                                      1,031,000          2,574,100           6,943,800
                                                               ----------------    ---------------    ----------------


Loss before other income (expenses)                                   1,031,000          2,574,100           6,943,800
                                                               ----------------    ---------------    ----------------

Other income (expenses):
    Interest and dividends                                               27,700              6,300              34,000
    Other                                                                45,700             45,500             178,300
    Interest expense (including interest paid in the form
     common stock, 1998, $353,800; 1997, $106,600)                     (457,400)          (156,600)           (872,000)
    Telephone services, less revenues                                   (61,000)          (514,800)           (575,800)
    Loss on investments, foreclosures and disposal of assets           (179,600)          (621,600)           (851,300)
    Write-down of LED equipment and intangibles                      (1,374,300)        (1,300,000)         (2,674,300)
                                                               ----------------    ---------------    ----------------

                                                                     (1,998,900)        (2,541,200)         (4,761,100)
                                                               ----------------    ---------------    ----------------

Net loss                                                       $     (3,029,900)   $    (5,115,300)   $    (11,704,900)
                                                               ================    ===============    =================

Basic Weighted average common shares outstanding                     20,251,100          8,857,079           8,866,064
                                                               ================    ===============    ================

Basic Loss per common share                                    $          (0.15)   $         (0.58)   $          (1.32)
                                                               ================    ===============    ================


    Read the accompanying  summary of significant  accounting policies and notes
  to consoldiated financial statements, both of which are an integral
                 part of this consolidated financial statement.
</TABLE>

                                      F-7
<PAGE>

<TABLE>

                  COMTEC INTERNATIONAL, INC. AND SUBSIDIARIES
                      (A COMPANY IN THE DEVELOPMENT STAGE)
          CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY (DEFICIENCY)
                      YEARS ENDED JUNE 30, 1998 AND 1997,
           AND FROM INCEPTION (MARCH 15, 1994) THROUGH JUNE 30, 1998





<CAPTION>
                                                       Preferred Stock - Series A             Common Stock
                                            Total         Shares         Amount           Shares       Amount
                                         -----------    -----------    -----------      ----------    --------
<S>                                      <C>            <C>            <C>              <C>           <C>
Balance, beginning:                      $        --             --    $        --              --    $     --
  Add (deduct):
    Proceeds from sale of common stock       629,700                                       535,737         500

    Issuance of stock for:
    Liquidation of debt                      130,000                                       246,019         300

    Consulting services                    1,124,400                                       923,164         900

    Acquistions                              922,200        420,000        420,000       3,315,969       3,300

    Officers' compensation                 1,218,200                                     1,600,300       1,600

    Exercised warrants                        30,000                                         6,000          --

    Intangibles                                   --                                     1,040,000       1,100

    Reverse acquisition                     (230,900)                                      592,662         600

    Contribution of accrued
      officers' compensation                 241,100

    Net loss:
      From inception (March 15, 1994)
        to June 30, 1995                  (1,148,300)            --             --              --          --
      Year ended June 30, 1996            (2,411,400)
                                         -----------    -----------    -----------     -----------    --------

Balance, June 30, 1996                       505,000        420,000        420,000       8,259,851       8,300

Year ended June 30, 1997:
  Add (deduct):
    Proceeds from sale of common stock       509,200                                       743,962         700

    Issuance of stock for:
      Liquidation of debt                  1,500,000                                     3,125,000       3,100

      License rights                       1,444,500                                     1,361,786       1,400

      Consulting services                    951,200                                     1,590,305       1,600

      Conversion of preferred shares         172,700                                        69,088         100

      Acquisitions                            85,000                                        63,333         100

      Officers' compensation                  59,700                                       324,123         300

      Interest                                46,600                                        97,089         100

    Cancellation of shares due to:
      Foreclosure                           (786,200)      (420,000)      (420,000)        (98,000)       (100)
      License rights                      (1,444,500)                                   (1,361,786)     (1,400)

      Cancelled acquisition                       --                                      (980,000)     (1,000)

   Write-down of intangible                1,300,000

   Unrealized losses on
    marketable securities                     (3,600)

  Net loss year ended June 30, 1997       (5,115,300)
                                         -----------    -----------    -----------     -----------    --------

Balance, June 30, 1997                      (775,700)            --             --      13,194,751      13,200

Year ended June 30, 1998:
  Add (deduct):
    Issuance of stock for:
    Liquidation of debt                    2,600,000                                    18,083,332      18,100

    LED equipment                          2,400,000                                     5,000,000       5,000

    Consulting services                      193,000                                     1,732,283       1,700

    Officers' compensation                    50,000                                       148,369         200

    Loan origination and finders' fees       200,000                                     1,538,461       1,500

    Current period change in realized
      losses on marketable securities          3,600

    Net loss year ended June 30, 1998     (3,029,900)
                                         -----------    -----------    -----------     -----------    --------

Balance, ending:                         $ 1,641,000             --    $        --      39,697,196    $ 39,700
                                         ===========    ===========    ===========     ===========    ========

   Read the accompanying  summary of significant  accounting policies and notes
  to consoldiated financial statements, both of which are an integral
                 part of this consolidated financial statement.
</TABLE>

                                      F-8
<PAGE>

<TABLE>


                  COMTEC INTERNATIONAL, INC. AND SUBSIDIARIES
                      (A COMPANY IN THE DEVELOPMENT STAGE)
          CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY (DEFICIENCY)
                      YEARS ENDED JUNE 30, 1998 AND 1997,
           AND FROM INCEPTION (MARCH 15, 1994) THROUGH JUNE 30, 1998
                                  (continued)


<CAPTION>
                                                                        Deficit
                                                       Accumulated   Accumulated
                                           Capital        other       During the
                                          in excess   comprehensive  Development       Prepaid        Escrowed
                                            of par         loss         Stage           Media          Shares
                                         -----------    ---------    ------------    -----------    -----------

<S>                                      <C>            <C>          <C>             <C>            <C>
Balance, beginning:                      $         -    $       -    $          -    $         -    $         -

  Add (deduct):
    Proceeds from sale of common stock       629,200

    Issuance of stock for:
    Liquidation of debt                      129,700

    Consulting services                    1,123,500

    Acquistions                            1,744,300                      (20,400)                   (1,225,000)

    Officers' compensation                 1,216,600

    Exercised warrants                        30,000

    Intangibles                            1,298,900                                  (1,300,000)

    Reverse acquisition                     (231,500)

    Contribution of accrued
      officers' compensation                 241,100

    Net loss:
      From inception (March 15, 1994)
        to June 30, 1995                                               (1,148,300)
      Year ended June 30, 1996                                         (2,411,400)

                                         -----------    ---------    ------------    -----------    ----------
Balance, June 30, 1996                     6,181,800            -      (3,580,100)    (1,300,000)   (1,225,000)

Year ended June 30, 1997:
  Add (deduct):
    Proceeds from sale of common stock       508,500

    Issuance of stock for:
      Liquidation of debt                  1,496,900

      License rights                       1,443,100

      Consulting services                    949,600

      Conversion of preferred shares         172,600

      Acquisitions                            84,900

      Officers' compensation                  59,400

      Interest                                46,500

  Cancellation of shares due to:
    Foreclosure                             (366,100)

    License rights                        (1,443,100)

    Cancelled acquisition                 (1,224,000)                                                1,225,000

  Write-down of intangible                                                             1,300,000

  Unrealized losses on
    marketable securities                                  (3,600)

  Net loss year ended June 30, 1997                                    (5,115,300)
                                         -----------    ---------     -----------    -----------    -----------

Balance, June 30, 1997                     7,910,100       (3,600)     (8,695,400)             -              -

Year ended June 30, 1998:
  Add (deduct):
    Issuance of stock for:
    Liquidation of debt                    2,581,900

    LED equipment                          2,395,000

    Consulting services                      191,300

    Officers' compensation                    49,800

    Loan origination and finders' fees       198,500

    Current period change in realized
      losses on marketable securities                       3,600

    Net loss year ended June 30, 1998                                  (3,029,900)
                                         -----------    ---------    ------------    -----------    -----------

Balance, ending:                         $13,326,600    $       -    $(11,725,300)   $         -    $         -
                                         ===========    =========    ============    ===========    ============

  Read the accompanying  summary of significant  accounting policies and notes
  to consoldiated financial statements, both of which are an integral
                 part of this consolidated financial statement.

</TABLE>
                                      F-9
<PAGE>

<TABLE>

                   COMTEC INTERNATIONAL, INC. AND SUBSIDIARIES
                      (A COMPANY IN THE DEVELOPMENT STAGE)
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
            YEARS ENDED JUNE 30, 1998 AND 1997 AND CUMULATIVE AMOUNTS
              FROM INCEPTION (MARCH 15, 1994) THROUGH JUNE 30, 1998

<CAPTION>
                                                                       Years Ended June 30,            Cumulative
                                                                 --------------------------------     Amounts from
                                                                       1998              1997       Inception to date
                                                                 --------------   ---------------   -----------------
<S>                                                              <C>              <C>               <C>
Cash flows from operating activities:

Net loss                                                         $   (3,029,900)  $    (5,115,300)  $     (11,704,900)
                                                                 --------------   ---------------   -----------------
Adjustments to reconcile net loss to net cash used in
   operating activities:
    Depreciation and amortization                                        61,700            81,800             263,200
    Issuance of common stock for services and interest                  443,000         1,142,500           3,304,200
    Gain on the sale of marketable securities                           (10,000)                -             (10,000)
    Write-down of LED equipment and intangibles                       1,374,300         1,300,000           2,674,300
    Losses on investments, foreclosures and disposal of assets          179,600           497,600             677,200
    Changes in assets and liabilities
      Accounts receivable                                               113,700          (127,100)            (38,800)
      Deposits and other                                                      -            (2,500)             (2,500)
      Other current assets                                              (45,000)            1,600             (33,900)
      Accounts payable and accrued liabilities                         (332,700)          658,200           1,396,600
      Other assets                                                       40,000                 -              40,000
                                                                 --------------   ---------------   -----------------
                                                                      1,824,600         3,552,100           8,270,300
                                                                 --------------   ---------------   -----------------
         Cash used in operating activities                           (1,205,300)       (1,563,200)         (3,434,600)
                                                                 --------------   ---------------   -----------------

Cash flows from investing activities:
    Proceeds of sale of marketable securities                           267,500                 -             267,500
    Proceeds from acquisition                                                 -                 -              22,100
    Payments for:
      License rights                                                   (274,300)         (150,000)           (424,300)
      Marketable securities                                              (5,600)         (250,000)           (255,600)
      Non-operating assets                                                    -                 -             (25,000)
      Related party                                                           -           (39,000)            (39,000)
      Property, plant, equipment and trade name                      (1,408,500)         (218,600)         (1,699,800)
      Other assets                                                       (5,700)                -              (5,700)
      Other                                                                   -                 -             (79,500)
                                                                 --------------   ---------------   -----------------
         Cash used in investing activities                           (1,426,600)         (657,600)         (2,239,300)
                                                                 --------------   ---------------   -----------------
Cash flows from financing activities:
    Proceeds from:
      Related party                                                           -                 -             184,500
      Sales of common stock                                                   -           509,200           1,138,900
      Notes payable, principally related parties                      1,144,100                 -           1,295,100
      Warrants                                                                -                 -              30,000
      Convertible debentures                                          1,600,000         2,500,000           4,100,000
    Payments on:
      Notes payable, principally related parties                        (70,000)         (185,900)           (397,800)
      Long-term debt                                                     (4,400)                -              (9,000)
                                                                 --------------   ---------------   -----------------
      Cash provided by financing activities                           2,669,700         2,823,300           6,341,700
                                                                 --------------   ---------------   -----------------

Increase in cash and equivalents                                         37,800           602,500             667,800

Cash and equivalents, beginning                                         630,000            27,500                   -
                                                                 --------------   ---------------   -----------------

Cash and equivalents, ending                                     $      667,800   $       630,000   $         667,800
                                                                 ==============   ===============   =================

        Read the accompanying summary of significant accounting policies
 and notes to consolidated financial statements, both of which are an integral part
                    of this consolidated financial statement
</TABLE>

                                      F-10
<PAGE>

<TABLE>

                   COMTEC INTERNATIONAL, INC. AND SUBSIDIARIES
                      (A COMPANY IN THE DEVELOPMENT STAGE)
                CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
            YEARS ENDED JUNE 30, 1998 AND 1997 AND CUMULATIVE AMOUNTS
              FROM INCEPTION (MARCH 15, 1994) THROUGH JUNE 30, 1998

<CAPTION>
                                                                        Years Ended June 30,          Cumulative
                                                                  ------------------------------      Amounts from
                                                                       1998            1997        Inception to date
                                                                  -------------   --------------   -----------------
<S>                                                               <C>             <C>              <C>
Supplemental disclosure of cash flow information:

    Cash paid for interest                                        $      73,100   $       30,700   $        180,000
                                                                  =============   ==============   ================
Supplemental schedule of non-cash financing activities:
      Foreclosures:
        Net book value of real property                           $           -   $   (1,867,100)  $     (1,867,100)
        Mortgages, notes, and other debt                                      -        1,081,300          1,081,300
        Preferred and common stock                                            -          786,200            786,200
        Gain on foreclosure                                                   -             (400)              (400)
                                                                  -------------   --------------   ----------------
                                                                  $           -   $            -   $              -
                                                                  =============   ==============   ================

      Common stock issued for:
        Conversion of convertible debentures                      $   2,600,000   $    1,500,000   $      4,100,000
        Acquisition of LED equipment                                  2,400,000                -          2,400,000
                                                                  -------------   --------------   ----------------
                                                                  $   5,000,000   $    1,500,000   $      6,500,000
                                                                  =============   ==============   ================

      Common stock cancellation                                   $           -   $    1,225,000   $      1,225,000
                                                                  =============   ==============   ================

      Acquisitions:
        Book value of property acquired                           $   1,450,800   $            -   $      1,450,800
        Debt assumed                                                 (1,390,700)               -         (1,390,700)
        Capital lease obligation incurred                               (60,100)                            (60,100)
                                                                  -------------   --------------   ----------------
                                                                  $           -   $            -   $              -
                                                                  =============   ==============   ================

      Disposition:
        Debt assumed                                              $           -   $     (145,000)          (145,000)
        Book value of the property acquired                                   -          135,000            135,000
        Loss on deposit for terminated Worland acquisition                    -           10,000             10,000
                                                                  -------------   --------------   ----------------
                                                                  $           -   $            -   $              -
                                                                  =============   ==============   ================

      Stock conversion                                            $           -   $      172,700   $        172,700
                                                                  =============   ==============   ================


      Read the accompanying summary of significant accounting policies
 and notes to consolidated financial statements, both of which are an integral part
                    of this consolidated financial statement

</TABLE>

                                      F-11
<PAGE>





                   COMTEC INTERNATIONAL, INC. AND SUBSIDIARIES
                      (A COMPANY IN THE DEVELOPMENT STAGE)
                   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
                       YEARS ENDED JUNE 30, 1998 AND 1997



Basis of accounting:
   Comtec International, Inc. (the Company) prepares its financial statements in
   accordance  with  generally  accepted  accounting  principles.  This basis of
   accounting  involves the  application  of accrual  accounting;  consequently,
   revenues and gains are  recognized  when earned,  and expenses and losses are
   recognized  when  incurred.   Financial   statement  items  are  recorded  at
   historical cost and may not necessarily represent current values.

Principles of consolidation:
     The  consolidated  financial  statements  include  the  accounts  of Comtec
    International,  Inc.  and all  subsidiaries.  All  significant  intercompany
    balances and transactions have been eliminated in consolidation.

Reverse stock split:
    On December  26,  1997,  the Board of  Directors,  pursuant  to  shareholder
    approval  granted at the annual  meeting of  shareholders  held on March 28,
    1997,  voted to  approve a one for five  (1:5)  reverse  stock  split of the
    Company's  $.001 par value common  stock,  effective  January 31, 1998.  All
    share and per share data is stated to reflect the reverse split.

Management estimates:
   The preparation of financial statements in conformity with generally accepted
   accounting  principles  requires management to make estimates and assumptions
   that affect the reported  amounts of assets and  liabilities,  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.  Certain amounts  included in the financial  statements are estimated
   based on currently available  information and management's judgment as to the
   outcome  of future  conditions  and  circumstances.  Changes in the status of
   certain  facts or  circumstances  could  result in  material  changes  to the
   estimates  used in the  preparation  of the financial  statements  and actual
   results could differ from the estimates and assumptions. Every effort is made
   to ensure the integrity of such estimates.

Fair value of financial instruments:
   The carrying amounts of cash and equivalents,  accounts receivable,  accounts
   payable and accrued liabilities  approximate their fair values because of the
   short duration of these instruments.

Impairment of long-lived assets:
   Long-lived assets and certain  identifiable  intangibles held and used by the
   Company are reviewed for possible impairment whenever events or circumstances
   indicate the carrying amount of an asset may not be  recoverable.  Intangible
   assets have been written down to their net  estimated  realizable  value.  As
   judgment is involved,  the  estimates are not  necessarily  indicative of the
   amounts the Company could realize.

Cash and cash equivalents:
    The Company considers all highly liquid investments  purchased with original
    maturities of three months or less to be cash equivalents.




                                      F-12
<PAGE>



                   COMTEC INTERNATIONAL, INC. AND SUBSIDIARIES
                      (A COMPANY IN THE DEVELOPMENT STAGE)
             SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
                       YEARS ENDED JUNE 30, 1998 AND 1997



Marketable securities:
    Marketable  securities are classified as available for sale and are reported
    at fair value.  Fair value is based upon quoted market  prices.  At June 30,
    1997,  marketable  securities  consisted  of mutual  funds  and the  Company
    recorded  the  unrealized  loss  in  shareholders'  equity.  All  marketable
    securities were disposed of during the year ended June 30, 1998.

Property, equipment and depreciation:
    Property and equipment are stated at cost,  less  accumulated  depreciation.
    Depreciation  is computed  using the straight line method over the estimated
    useful lives as follows:
                                                  Estimated Useful Lives
                                                       (in years)
                                                    ------------------

         Office furniture and equipment                     10
         Communication equipment                             7
         Computer equipment                                  5

    The  cost of  fixed  assets  retired  or sold,  together  with  the  related
    accumulated  depreciation,  are  removed  from  the  appropriate  asset  and
    depreciation  accounts,  and the  resulting  gain or loss is included in net
    earnings.

    Repairs  and  maintenance  are  charged  to  operations  as  incurred,   and
    expenditures for significant  betterments and renewals are capitalized.  The
    cost of property and  equipment  retired or sold,  together with the related
    accumulated  depreciation,  are  removed  from  the  appropriate  asset  and
    depreciation  accounts,  and the  resulting  gain or  loss  is  included  in
    operations.

License rights:
    License rights are recorded at cost, less accumulated amortization. Licenses
    are  amortized  to  operations  using  the  straight-line  method  over  the
    remaining term.

Income taxes:
   The Company  accounts for income taxes using the asset and liability  method.
   Under this method, deferred tax assets and liabilities are recognized for the
   future tax  consequences  attributable  to differences  between the financial
   statement  carrying  amounts of  existing  assets and  liabilities  and their
   respective tax bases.  Deferred tax assets and liabilities are measured using
   enacted  tax rates  applied to taxable  income.  The effect on  deferred  tax
   assets and  liabilities  of a change in tax rates is  recognized in income in
   the period  that  includes  the  enactment  date.  A valuation  allowance  is
   provided  for  deferred  tax assets  when it is more likely than not that the
   asset will not be realized.

Per share amounts:
   Loss per share is  computed  by  dividing  net loss by the  weighted  average
   number of shares outstanding throughout the year.





                                      F-13
<PAGE>


                   COMTEC INTERNATIONAL, INC. AND SUBSIDIARIES
                      (A COMPANY IN THE DEVELOPMENT STAGE)
             SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
                       YEARS ENDED JUNE 30, 1998 AND 1997



Stock based compensation:
   The Company applies the intrinsic value method for accounting for stock based
   compensation  described  by  Accounting  Principles  Board  Opinion  No.  25,
   "Accounting  for Stock Issued to Employees." Had the Company applied the fair
   value method  described by the  Statement of Financial  Accounting  Standards
   Board (SFAS) No. 123,  "Accounting  for Stock-Based  Compensation,"  it would
   report the effect of  compensation  expense for stock based  compensation  as
   pro-forma effects on income and earnings per share, if material.

Accounting Pronouncements:
   The Company has adopted the Statement of Financial Accounting Standards Board
   (SFAS)  No.  130,  "Reporting  Comprehensive  Income,"  issued in June  1997.
   Comprehensive  income  includes net income and all changes in an enterprise's
   other comprehensive  income including,  among other things,  foreign currency
   translation   adjustments   and  unrealized   gains  and  losses  on  certain
   investments in debt and equity securities.  The Company also adopted SFAS No.
   131,  "Disclosures about Segments of an Enterprise and Related  Information."
   This  Statement   establishes   standards  for  reporting  information  about
   operating  segments in annual  financial  statements,  and  requires  that an
   enterprise report selected  information  about operating  segments in interim
   reports issued to  shareholders.  The Company does not expect the adoption of
   these  statements  to have a material  impact on its  financial  condition or
   results of operations.

   The Company  adopted SFAS No. 128,  Earnings Per Share,  which  specifies the
   method of  computation,  presentation  and disclosure for Earnings Per Share.
   SFAS No. 128 requires the presentation of two EPS amounts, basic and diluted.
   Basic EPS is calculated by dividing net income (loss) by the weighted average
   number of common shares outstanding for the period.  Diluted EPS includes the
   dilution that would occur if  outstanding  stock  options and other  dilutive
   securities  were  exercised  and is  comparable  to the EPS the  Company  has
   historically  reported.  The diluted EPS  calculation  excludes the effect of
   stock options when their exercise prices exceed the average market price over
   the  period.  There is no  change in loss per share  because  diluted  EPS is
   anti-dilutive.

   In June 1998, the Financial  Accounting  Standards Board issued SFAS No. 133,
   "Accounting for Derivative Instruments and Hedging Activities," which defines
   derivatives, requires that derivatives be carried at fair value, and provides
   for hedge  accounting  when certain  conditions  are met.  This  statement is
   effective beginning in the year 2000. The adoption of this statement will not
   have an impact on its consolidated financial statements.

   In April  1998,  the AICPA  finalized  SOP 98-5,  "Reporting  on the Costs of
   Start-Up  Activities,"  which  requires  that  costs  incurred  for  start-up
   activities,  be expensed as  incurred.  This SOP,  which is  effective in the
   first  quarter of 1999,  is not  expected  to have a  material  impact on the
   consolidated financial statements.

                                      F-14
<PAGE>





                   COMTEC INTERNATIONAL, INC. AND SUBSIDIARIES
                      (A COMPANY IN THE DEVELOPMENT STAGE)
             SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
                       YEARS ENDED JUNE 30, 1998 AND 1997



Accounting Pronouncements (continued):
   In 1998,  the  Company,  adopted the American  Institute of Certified  Public
   Accountants'  ("AICPA") Statement of Position 98-1 ("SOP 98-1"),  "Accounting
   for the Costs of Computer  Software  Developed or Obtained for Internal Use."
   SOP 98-1  defines the types of computer  software  project  costs that may be
   capitalized.  All other  costs must be expensed  in the period  incurred.  In
   order for costs to be  capitalized,  the  computer  software  project must be
   intended  to create a new  system  or add  identifiable  functionality  to an
   existing  system.  Adoption of this  statement  did not have an impact on the
   Company's consolidated financial statements.

Reclassifications:
   In order to facilitate comparison of financial  information,  certain amounts
   reported in the prior year have been reclassified to conform with the current
   year presentation.

                                      F-15
<PAGE>


                   COMTEC INTERNATIONAL, INC. AND SUBSIDIARIES
                      (A COMPANY IN THE DEVELOPMENT STAGE)
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                       YEARS ENDED JUNE 30, 1998 AND 1997

1.  Organization and business:
      Comtec  International,  Inc.  (Comtec),  formerly  Nisus Video,  Inc., was
      incorporated  in the State of New Mexico on July 6, 1983. On May 10, 1995,
      Comtec  shareholders  approved the exchange of 2,245,794  common shares in
      exchange  for   all   the  outstanding  common  stock  of  subsidiaries of
      Keystone  Holding  Corporation,  Inc.  (Keystone).   Comtec  and  Keystone
      were related  parties through certain common  shareholders and management.
      The acquisitions had been accounted for in a manner similar to the pooling
      of  interests  method  in  accordance  with  Accounting  Principles  Board
      Opinion No. 16, Accounting for Business  Combinations, since it represents
      an  exchange  of  entities  under  common  control.     Accordingly,   the
      consolidated  financial  statements  of  prior years have been restated to
      include  the  accounts  of  the  companies  transferred, all at historical
      costs. No intercompany transactions existed between the  companies  during
      the  prior  periods  and  no  adjustments  were  necessary  to conform the
      accounting policies of the companies.

      Information about the Company's subsidiaries is presented below:

<TABLE>
<CAPTION>
                                          Percentage     State           Date of
               Company                      Owned      Organized      Organization
               -------                      -----      ---------      ------------

      <S>                                   <C>        <C>           <C>
      American Wireless Network, Inc.       100.0%      Colorado     December 3, 1996
      (AWN)

      TTI Communications Corporation         70.0%      Colorado     February 12, 1997
      (TTI)

      International Media Group, Ltd.       100.0%      Colorado     March 20, 1997
      (IMG)

      AmNet Resources, Ltd.  (AmNet)        100.0%      Colorado     May 10, 1995
      (formerly CTI Real Estate, Inc.)

      Custom Concepts, Inc. (CCI)            100.0%     Colorado     December 2, 1997

</TABLE>
       The subsidiaries are principally in the telecommunication business except
       for AmNet,  which held real  property.  The real property was  foreclosed
       during  the year  ended  June 30,  1997.  AmNet was  inactive  during the
       current fiscal year. In December,  1997, AWN acquired  management control
       of 160 channels of 900 Mhz  Metropolitan  Trading Area licenses for seven
       operating  Specialized  Mobile Radio (SMR)  systems  located  within five
       states,  principally in the Southern and Western United States, and began
       generating  SMR  revenue.   In  June  1998  the  Federal   Communications
       Commission  (FCC)  approved the final sale of the licenses and assignment
       of the associated promissory notes from the seller to AWN. TTI was in the
       business of reselling long distance  service through prepaid phone cards.
       TTI became operational in February 1997 and ceased operations on December
       2,  1997,  due  to  excessive  losses.  These  operations  only  provided
       auxiliary  revenues and did not take Comtec out of the development stage.
       IMG was formed to operate and market advertising media through the use of
       giant LED  screens.  On March 23,  1998,  the  Company  acquired  the LED
       screens  through the issuance of 5,000,000  common shares valued at $ .48
       per share.


                                      F-16
<PAGE>

                  COMTEC INTERNATIONAL, INC. AND SUBSIDIARIES
                      (A COMPANY IN THE DEVELOPMENT STAGE)
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                       YEARS ENDED JUNE 30, 1998 AND 1997



1.  Organization and business (continued):
      On May 8, 1998, the Board of Directors authorized  management to liquidate
      the LED  screens.  Subsequently,  the  Company  sold the LED  screens  and
      related   equipment   which  are  reflected  as  current   assets  in  the
      accompanying  consolidated balance sheets. CCI was formed to assist in the
      wind-down  phase of TTI and was  inactive  during  the  later  part of the
      current fiscal year.

      Comtec has been and continues to be in the development  stage. Since 1995,
      the Company has been executing strategic business plans to develop various
      telecommunications services and products,  principally in the area of SMR.
      Prior to December 4, 1997,  the Company had yet to commence its  principal
      planned  operations and from inception (March 15, 1994) had only generated
      limited revenues to defray the cost of its planned operations. On December
      4,  1997,  AWN  acquired  management  control of 160  channels  of 900 Mhz
      Metropolitan  Trading Area licenses and began  generating SMR revenue,  as
      discussed  above.  While AWN's operations for the year ended June 30, 1998
      were not profitable and additional capital will be required to develop the
      AWN  business  plan,  it  is  the  intent  of  Comtec's   management  that
      significant  operations could be generated through AWN which will take the
      Company  out of the  development  stage.  The  Company  has  financed  its
      operations  during the development stage from the sale of its common stock
      and from issuance of short and long-term debt.  Subsequently,  the Company
      has entered into agreements  with an independent  third party for the sale
      of its FCC licenses and lease of its SMR  equipment.  No assurances can be
      given that the sale and  operating  lease  would take the  Company  out of
      development stage.

2. Going concern, liquidity and strategic planning:
      The  accompanying  consolidated  financial  statements  have been prepared
      assuming  the  Company  will  continue  as a going  concern.  The  Company
      reported net losses of $3,029,900 and $ 5,115,300 for the years ended June
      30, 1998 and 1997 and has reported  cumulative  net losses of $ 11,704,900
      from  inception  (March 15,  1994) to June 30,  1998.  As  reported on the
      consolidated  statements of cash flows, the Company incurred negative cash
      flows from  operating  activities  of $ 1,205,300  and $ 1,563,200 for the
      years ended June 30, 1998 and 1997 and has  reported  negative  cash flows
      from operating  activities of $ 3,434,600 from inception  (March 15, 1994)
      to June 30, 1998. To date,  these have been financed  principally  through
      the sale of common stock and warrants ($ 1,168,900)  and issuance of short
      and long-term debt ($ 5,579,600), including related party debt. Additional
      capital  and/or  borrowings  will be necessary in order for the Company to
      continue  in  existence   until   attaining  and   sustaining   profitable
      operations.

      The Company's  principal source of working capital funding has been Geneva
      Reinsurance Company Ltd. (Geneva), a Nevis company, whose shareholders are
      clients  of  Zephyr  International  Limited  (Zephyr),  a  Cayman  Islands
      investment  brokerage and management company.  (Read Note 7 on Convertible
      Debentures).  Additional  working  capital  funding was provided by Cayman
      Offshore International,  Ltd. (Cayman),  Queens Cross Group, Ltd. (Queens)
      and Overseas Foreign Holdings,  Ltd.  (Overseas) which are also clients of
      Zephyr.  In September 1998, the Company's Board of Directors  approved the
      terms of a proposed debt financing with Sigma Finance Corporation (Sigma),
      an affiliate of Zephyr.



                                      F-17
<PAGE>

                 COMTEC INTERNATIONAL, INC. AND SUBSIDIARIES
                      (A COMPANY IN THE DEVELOPMENT STAGE)
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                       YEARS ENDED JUNE 30, 1998 AND 1997




2.    Going concern,  liquidity and strategic planning (continued):  Hereinafter
      Geneva,  Cayman,  Queens,  Overseas  and Sigma will be  referred to in the
      aggregate  as "clients  and  affiliates  of Zephyr".  The Company has been
      dependent on clients and  affiliates  of Zephyr to maintain its cash flow,
      and no  assurances  can be given  that they will  continue  as a source of
      funding or complete the proposed financing agreements.  The amounts of the
      proposed financing arrangements have not been finalized.

      Management  has  continued to develop a strategic  business  plan to raise
      private   financing,   develop  a  management  team,   maintain  reporting
      compliance and seek new expansive areas in telecommunications.  Should the
      Company be successful in obtaining sufficient funds, management intends to
      continue  developing  the market for the  Company's  SMR  services  in the
      territories they currently  represent and would pursue SMR acquisitions on
      an opportunistic  basis.  However, in order to satisfy current obligations
      the Company is selling its FCC licenses to satisfy debt  requirements  and
      to generate cash flows is leasing its SMR equipment. Should the Company be
      successful in obtaining substantial additional debt financing,  management
      plans to seek  acquisitions  of more mature  telecommunication  businesses
      that would generate sufficient cash flow to maintain debt service.

      In December  1997,  the  Company  acquired  licenses to operate  seven SMR
      systems  located  within  five  states  for   approximately  $  3,035,700.
      Management  anticipates  that an additional  investment of several million
      dollars will be needed to develop an effective sales and marketing program
      and fund  equipment  purchases  before the seven  operating  systems  will
      generate  sufficient  cash flow to meet  current  operating  expenses  and
      overhead.  In order to acquire the SMR  licenses,  the Company  borrowed $
      1,600,000 from Geneva for the initial  payments and working  capital.  The
      Company  borrowed an  additional $ 100,000  from Cayman and $600,000  from
      Queens for working  capital and payments  required at the final closing on
      the SMR systems. As part of its plan to resolve the lack of liquidity, the
      Company issued  approximately  2,083,300  common shares at $ .48 per share
      and approximately 16,000,000 common shares at $ .10 per share to liquidate
      the $ 1,000,000  and $  1,600,000  convertible  debentures,  respectively.
      Subsequently,  Overseas  and Cayman  advanced an  additional $ 250,000 and
      $200,000, respectively, to the Company to fund working capital.

      There can be no  assurances  that the Company  will be  successful  in the
      implementation of its plan for expansion and its overall business plan.


                                      F-18
<PAGE>

                 COMTEC INTERNATIONAL, INC. AND SUBSIDIARIES
                      (A COMPANY IN THE DEVELOPMENT STAGE)
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                       YEARS ENDED JUNE 30, 1998 AND 1997





3. Other comprehensive income:.
      The Company has adopted Statement of Financial Accounting Standards (SFAS)
      No. 130, "Reporting  Comprehensive Income." SFAS 130 establishes new rules
      for the  reporting  and  display of  comprehensive  income  (loss) and its
      components;  however,  it has no impact  on the  Company's  net loss.  The
      components of comprehensive loss are as follows:

                                                    Year Ended
                                                     June 30
                                                     -------
                                               1998           1997
                                            ----------     ----------

            Net loss                        $3,029,900     $5,115,300
            Other comprehensive loss:
             Unrealized loss in marketable
              Securities                             -          3,600
                                            ----------     ----------
            Total comprehensive loss        $3,029,900     $5,118,900
                                            ==========     ==========

      Accumulated  other   comprehensive  loss  presented  on  the  accompanying
      consolidated  balance  sheet  consists of  unrealized  loss in  marketable
      securities in 1997.

4. Acquisitions and dispositions:
      On December 5, 1997, the Company  acquired from Centennial  Communications
      Corp.  (CCC)  management  control of seven  operating SMR systems  located
      within five  states,  including  SMR  licenses  obtained  from the Federal
      Communications  Commission (FCC), radio equipment and antennas, tower site
      leases  and  customer  lists,  for  approximately  $3,035,700.  The  final
      transfer of title to the acquired assets was subject to the FCC's approval
      of the sale and  assignment  of the SMR  licenses  and  assumption  of the
      related FCC  promissory  notes.  The FCC approval was obtained on June 11,
      1998,  and the final closing took place on July 6, 1998.  The  acquisition
      has been  reflected  at cost in the  accompanying  consolidated  financial
      statements. Payment of the purchase price of $3,035,700 was as follows:

                                                               Amount
                                                           ------------

            Down payment                                   $    200,000
            Payment at December 1997 closing                  1,000,800
            Note payable to seller due at final closing,
              8% interest                                       444,200
            Promissory notes payable to the Federal
              Communications Commission                       1,390,700
                                                            -----------

                                                            $ 3,035,700
                                                            ===========








                                      F-19
<PAGE>



4.  Acquisitions and dispositions (continued):
      In April 1996,  the Company  entered into a license  option  agreement (as
      subsequently  amended) to purchase  approximately 1,380 SMR radio channels
      in the 800  MHz  radio  spectrum  from a  number  of  independent  license
      holders.  The  purchase  price of the option  rights was $  1,594,500,  as
      amended, and was payable as follows:

                                                             Amount
                                                        ---------------
           Cash paid on closing                         $       150,000
           Issuance of:
             560,000 common shares of common
               stock at $1.25 per share.                        700,000
             39,767 shares of Series C Redeemable
               Convertible Preferred Stock, $1.00
               par value                                        397,000
             139,000 shares of common stock at
               $2.50 per share                                  347,500
                                                         --------------

                                                         $    1,594,500
                                                         ==============

       The Company had a  significant  investment  in the  license  rights,  the
       recoverability  of which was  dependent  upon the  success  of  funding a
       settlement with the independent license holders.  The settlement required
       the repurchase of all previously  issued common and preferred stock for $
       925,000.  At June 30, 1997, it was not the intention of management to pay
       the  settlement  and  accordingly   the  license  option   agreement  was
       terminated. The Company canceled the common stock and Series C Redeemable
       Convertible  Preferred Stock issued as if the termination had occurred on
       June 30, 1997,  which  resulted in a loss of $150,000.  The holder of the
       common  stock and Series C  Redeemable  Convertible  Preferred  Stock has
       subsequently  surrendered  the common and  preferred  stock  certificates
       which were then canceled.

       In March 1998,  the Company  acquired  large Light  Emitting  Diode (LED)
       screens from a group of Geneva  shareholders  (Read Note 8 on convertible
       debentures)  for $  2,400,000,  which was  financed  by the  sellers  and
       liquidated by the issuance of approximately  5,000,000 common shares at $
       .48 per share.  Closing bid price of the common stock was approximately $
       0.26 per share.  The Company  wrote down the  acquisition  based upon the
       fair  value  of  the  stock  issued  ($1,300,000).  Management  has  been
       authorized to sell the screens for the best possible price.

       During the year ended June 30, 1997,  land and buildings  with a net book
       value of $1,867,100 were foreclosed upon. The foreclosures  resulted from
       litigation for non-performance. Long and short-term debt ($1,081,300) and
       equity   ($786,200)   were  assumed  or  canceled  as  a  result  of  the
       foreclosures.  The Company  recognized a gain of $400, which was credited
       to operations.







                                      F-20
<PAGE>

                   COMTEC INTERNATIONAL, INC. AND SUBSIDIARIES
                      (A COMPANY IN THE DEVELOPMENT STAGE)
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                       YEARS ENDED JUNE 30, 1998 AND 1997



4.  Acquisitions and dispositions (continued):
       In January 1996, the Company  executed an agreement to acquire 61% of the
       outstanding common stock of Network  Teleports,  Inc. for approximately $
       1,250,000  consisting  of a $25,000  deposit and the  issuance of 980,000
       shares of common stock at $ 1.25 per share ($ 1,225,000), which were held
       in escrow until approval was obtained from the FCC. Certain  shareholders
       of the Company were also shareholders of Network Teleports, Inc. (related
       parties).  During  the  year  ended  June 30,  1997,  the  agreement  was
       terminated,  which resulted in a loss to the Company of  approximately  $
       318,400  consisting of the $25,000  deposit and equipment with a net book
       value of $ 293,400.  The loss was charged to  operations  during the year
       ended June 30, 1997. The escrowed shares were cancelled by mutual consent
       of the parties.

       In August,  1995, the Company  acquired rights to 185  unconstructed  and
       non-operational  SMR channels for $ 75,000,  including a note payable for
       $50,000, collateralized by real property. The FCC cancelled 110 licenses,
       and the remaining 75 licenses were considered  active.  The real property
       that  collateralized  the  note was lost in a  foreclosure  as  described
       earlier,  and the Company forfeited the remaining licenses.  As a result,
       the Company recognized a loss of approximately $ 9,100, which was charged
       to  operations  during  the  year  ended  June  30,  1997.  The  loss was
       determined as follows:


              Original cash deposit              $      25,000
              Note payable                              50,000
              Accrued interest                           9,100
                                                 -------------
                                                        84,100
              Original basis                            75,000
                                                 -------------
              Loss on cancellation               $       9,100
                                                 =============

       The Company had advanced $ 40,000 for the  acquisition  of an advertising
       company.  The  acquisition  agreement was  terminated and the advance was
       converted to prepaid advertising costs in October 1997. Subsequently, the
       advertising  company  started  to  produce  media  advertising  for  AWN,
       however,  AWN decided not to proceed with the  advertising  program.  The
       prepaid advertising costs were charged to operations during 1998.


                                      F-21
<PAGE>

                  COMTEC INTERNATIONAL, INC. AND SUBSIDIARIES
                      (A COMPANY IN THE DEVELOPMENT STAGE)
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                       YEARS ENDED JUNE 30, 1998 AND 1997




5. Concentrations of credit risk:
       Financial   instruments   that   potentially   subject   the  Company  to
       concentrations  of  credit  risk consist principally of cash and accounts
       receivable.   During  the  year,  the  Company's  account  balances  with
       financial institutions may exceed  federally  insured limits.  Management
       regularly monitors their balances and  attempts  to keep  this  potential
       risk  to  a  minimum  by   maintaining   their  accounts  with  financial
       institutions that they believe are of good quality.

       The  Company  may have a  concentration  of credit  risk with  respect to
       accounts receivable, as substantially all customers resulted from SMR and
       prepaid phone services.  The Company does not perform credit  evaluations
       and does not require collateral. The Company maintains, when appropriate,
       an  allowance  for  uncollectible  accounts  receivable.   Therefore,  no
       additional  credit risk beyond amounts provided for collection  losses is
       believed inherent in the Company's  accounts  receivable and to date have
       been within management's expectations.

6. Details of financial statement components:

                                                           1998          1997
                                                        ----------    ----------

       Other current assets:
        Accrued interest receivable                     $   14,000    $       --
        Other receivables and prepaid expenses              31,000            --
                                                        ----------    ----------
                                                        $   45,000            --
                                                        ==========    ==========

       Property and equipment:
        Communications equipment                        $1,436,700    $  249,700
        Furniture, fixtures and equipment                   72,700        49,200
                                                        ----------    ----------
                                                         1,509,400       298,900
        Accumulated depreciation                            30,800        23,400
                                                        ----------    ----------
                                                        $1,478,600    $  275,500
                                                        ==========    ==========

       Accrued liabilities:
        Payroll and related benefits                    $   72,400    $  371,800
        Interest                                           198,500        25,600
        Professional fees                                  102,600        85,300
        Sales taxes                                         11,400            --
        Deferred revenue                                    14,800            --
                                                        ----------    ----------
                                                        $  399,700    $  482,700
                                                        ==========    ==========

                                      F-22
<PAGE>

                 COMTEC INTERNATIONAL, INC. AND SUBSIDIARIES
                      (A COMPANY IN THE DEVELOPMENT STAGE)
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                       YEARS ENDED JUNE 30, 1998 AND 1997




6.  Details of financial statement components (continued):

                                                       1998            1997
                                                   -----------      -----------
  Charges to operations, losses (gains) on:
   Investments:
         International Media Group, Ltd.           $        --      $   124,500
         Omni-Range                                         --            9,100
         Worland Communications, Inc.                       --           10,000
         Network Teleport, Inc.                             --          293,400
                  SMR option agreement                      --          150,000
                                                   -----------      -----------
                                                                        587,000
                                                   -----------      -----------
         Foreclosures:
           Bethany property                                 --           51,100
           Parker property                                  --          (51,500)
                                                   -----------      -----------
                                                            --             (400)
                                                   -----------      -----------
         Disposal of assets                            179,600           35,000
                                                   -----------      -----------
  Loss on investments, foreclosures,
   and disposal of assets                          $   179,600      $   621,600
                                                   ===========      ===========

  Write-down of LED equipment and intangibles:

         LED equipment                             $ 1,100,000      $        --
         License rights                                 74,300               --
         Prepaid media agreement                            --        1,300,000
                                                   -----------      -----------

                                                   $ 1,374,300      $ 1,300,000
                                                   ===========      ===========

                                      F-23
<PAGE>

                COMTEC INTERNATIONAL, INC. AND SUBSIDIARIES
                      (A COMPANY IN THE DEVELOPMENT STAGE)
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                       YEARS ENDED JUNE 30, 1998 AND 1997



7. Notes payable:
                                                  1998             1997
                                                  ----             ----
   Related parties:
      Note payable,  former  officer,
        unsecured,  interest at 12% per
        annum, maturing December 15, 1997.
        Default rate of 24% per annum
        from inception to liquidation          $        -      $    70,000

      Note payable,  Cayman,  unsecured,
        interest at 12% per annum, maturing
        August 21, 1998. Note in default,
        due on demand with interest at
        default rate of 18% from maturity         100,000                -

      Note payable,  Queens,  unsecured,
        interest at 12% per annum, maturing
        September 30, 1998. Note in default,
        due on demand with interest at
        default rate of 18% from maturity         600,000                -

      Note payable,  unsecured,  interest
        at 18% per annum,  due to an entity
        related to a former  officer/director,
        personally  guaranteed by a former
        officer of the Company. Note in
        default, due on demand.                    40,000           40,000
                                               ----------      -----------
                                                  740,000          110,000
                                               ----------      -----------
   Other:
      Revolving  promissory note payable to
        bank; $ 500,000 maximum principal
        balance,  interest on advances of
        6.75% per annum,  payable on demand
        or on December 10, 1998.
        Collateralized by a $ 500,000
        certificate of deposit                          -                -

      Note payable, CCC, unsecured, interest
        at 8% per annum, maturing July 6, 1998    444,200                -
                                               ----------      ------------
                                               $1,184,200     $    110,000


      On May 20, 1998,  the Company issued  1,538,461  shares of common stock to
      Cayman as loan  origination  fees on the $100,000 note. At their September
      2, 1998 meeting,  the Board of Directors  approved the issuance of another
      1,538,461 shares of common stock to Queens as loan origination fees of the
      $600,000  note.  Based upon the bid price of the common  stock on the loan
      dates, the origination  fees aggregated  approximately $ 353,800 which was
      charged to operations during the year ended June 30, 1998.


                                      F-24
<PAGE>

                   COMTEC INTERNATIONAL, INC. AND SUBSIDIARIES
                      (A COMPANY IN THE DEVELOPMENT STAGE)
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                       YEARS ENDED JUNE 30, 1998 AND 1997


7. Notes payable (continued):
      On July  23,  1998  and  November  12,  1998,  Overseas  and  Cayman  made
      additional  loans to the Company of $ 250,000 and $200,000,  respectively.
      These loans were made on terms  similar to those made  earlier and each of
      the  companies   received   1,538,461  shares  of  common  stock  as  loan
      origination fees. Based upon the bid price of the common stock on the loan
      dates,  the  origination  fees amounted to  approximately  $ 138,500 and $
      76,900 respectively.

8. Convertible debentures:
      The Company entered into various loan agreements with certain shareholders
      of Geneva to provide financing for working capital and asset acquisitions.
      The  agreements  provided  for  financing  up to $  6,500,000,  of which $
      2,500,000 had been funded through June 30, 1997; $ 1,600,000 was funded in
      December  1997,  and the balance of $ 2,400,000  was funded in March 1998.
      Under the terms of the  agreement,  the first  $2,500,000  advance  earned
      interest at 12%,  maturing in March 1998 and was  convertible  into common
      stock at $ .48 per share.  Each share  carried a warrant  to  purchase  an
      additional common share at $4.50 per share, exercisable at any time during
      a three (3) year period commencing with the date of issuance of the shares
      and  warrants.  On June 30,  1997,  the Geneva  shareholders  converted  $
      1,500,000 of advances into 3,125,000 common shares and 3,125,000 warrants.
      The  outstanding  balance of  convertible  debentures at June 30, 1997 was
      $1,000,000,  which was converted by the Geneva  shareholders  on March 23,
      1998 into 2,083,000 common shares and 2,083,000 warrants.

      In  December  1997  certain  Geneva  shareholders  advanced  the Company $
      1,600,000 for AWN's  acquisition  of SMR systems (Read Note 2 on Strategic
      Planning).  This advance was converted by the Geneva shareholders on March
      23, 1998 into  approximately  16,000,000  common shares at $ .10 per share
      and 16,000,000 warrants to purchase common stock on a one for one basis at
      $2.90 per share.

      On March 23,  1998,  the  Company  acquired  giant LED screens and related
      equipment from a group of Geneva  shareholders for $ 2,400,000.  The group
      of shareholders owned the LED screens as a result of foreclosing on a loan
      to an unrelated third party. The Company issued 5,000,000 shares of common
      stock at $ .48 per share and 5,000,000  warrants to purchase  common stock
      on a one for one basis at $2.90 per share to acquire  the  screens.  Based
      upon the bid price of $ .26 per share,  the Company paid a premium for the
      LED screens of  approximately  $1,100,000  which was charged to operations
      during the year ended June 30,  1998.  At their May 8, 1998  meeting,  the
      Board of Directors authorized  management to liquidate the LED screens and
      equipment at the best possible  price.  In August 1998 the Company shipped
      the  LED  screens  and  equipment  to  Lanstar  Computer  Products,   Inc.
      (Lanstar), an affiliate of Zephyr, to be held for sale on consignment.  In
      December 1998 Lanstar  executed a $2,400,000  promissory  note in favor of
      the Company to purchase the LED screens and equipment.  The note,  secured
      by the assets sold, bears interest of 8% per annum payable  quarterly with
      the  entire  principal  due at its  maturity  on  December  31,  1999.  No
      determination  of the  recoverability  of the  promissory  note  has  been
      determined.

                                      F-25
<PAGE>

                   COMTEC INTERNATIONAL, INC. AND SUBSIDIARIES
                      (A COMPANY IN THE DEVELOPMENT STAGE)
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                       YEARS ENDED JUNE 30, 1998 AND 1997




8.  Convertible debentures (continued):
      A summary of the convertible debentures is as follows:

                                                  Amount            Shares
                                              ------------        ----------

          Working capital loans               $  2,500,000         5,208,334
          Purchase of LED screens                2,400,000         5,000,000
          Working capital loans
            and SMR station purchases            1,600,000        15,999,998
                                              ------------        ----------
                                              $  6,500,000        26,208,332
                                              ============        ==========

       No warrants  have been  exercised  as a result of this  transaction.  The
       4,242,922 warrants can be converted into 4,242,922 shares of common stock
       at  $4.50  per  share  and  24,683,332  warrants  can be  converted  into
       24,683,332  shares  of common  stock at $ 2.90 per  share.  The  warrants
       expire at  varying  dates  from June 2000 to March  2001 (Read Note 13 on
       warrants and options).

       As a result of the financing provided by certain Geneva shareholders, the
       Company  agreed to pay finders  fees of  $245,000  each to Geneva and the
       managing director of Zephyr.  Approximately $490,000 was paid and charged
       to  operations  on June 30, 1997  through the  issuance of  approximately
       1,020,800  common shares at $ .48 per share.  An additional  $160,000 was
       paid to the  managing  director  of Zephyr and charged to  operations  on
       March 23, 1998 through the issuance of 1,600,000  common  shares at $ .10
       per share. The Company also issued warrants to purchase common stock on a
       one for one basis.  Approximately 1,020,800 warrants issued June 30, 1997
       are exercisable at $4.50 per share and 1,600,000 warrants issued on March
       23,  1998 are  exercisable  at $2.90 per  share.  No  warrants  have been
       exercised  and they  expire  three (3) years from date of issue,  but not
       later than March 2001.


                                      F-26
<PAGE>

                   COMTEC INTERNATIONAL, INC. AND SUBSIDIARIES
                      (A COMPANY IN THE DEVELOPMENT STAGE)
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                       YEARS ENDED JUNE 30, 1998 AND 1997



9. Long-term debt
                                                                  1998
                                                              -----------
   Promissory notes, Federal
    Communications Commission
    collateralized by SMR licenses,
    7 % interest per annum only through
    August 31, 2001; quarterly principal
    and interest payments of $86,700
    thereafter through maturity on
    August 21, 2006                                           $ 1,390,700

   Capital  lease   obligations,
    collateralized by communication
    and computer equipment, interest
    ranging from 8% to 11% per annum,
    payable in monthly installments
    through April, 2003                                            55,600
                                                              -----------
                                                                1,446,300

    Less current portion of long term debt                         13,400
                                                              -----------
                                                              $ 1,432,900
                                                              ===========

      The  aggregate  maturities  of the  promissory  notes and  future  minimum
      payments  under capital  leases  subsequent to June 30, 1998 are presented
      below:

                   Year ending                      Promissory          Capital
                    June, 30         Total             Notes            Leases
                   -----------    ----------        ----------        ----------
                      1999        $   18,400        $       --        $   18,400
                      2000            18,500                --            18,400
                      2001            13,700                --            13,700
                      2002           199,900           190,300             9,600
                      2003           277,500           269,600             7,900
                   Thereafter        930,800           930,800                --
                                  ----------        ----------        ----------
                                  $1,458,700        $1,390,700        $   68,000
                   Less interest      12,400                --            12,400
                                  ----------        ----------        ----------
                                  $1,446,300        $1,390,700        $   55,600
                                  ==========        ==========        ==========

                                      F-27
<PAGE>

                   COMTEC INTERNATIONAL, INC. AND SUBSIDIARIES
                      (A COMPANY IN THE DEVELOPMENT STAGE)
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                       YEARS ENDED JUNE 30, 1998 AND 1997



9.  Long-term debt (continued):
      In May  1998,  the  Company  paid  a  $25,000  deposit  to  Sigma  Finance
      Corporation,  an affiliate of Zephyr,  in connection with a proposed $ 200
      million ten-year bond issue to be  collateralized  by all of the Company's
      assets for an amount yet to be determined. In September 1998, the Board of
      Directors  approved the terms of the proposed financing and management was
      authorized  to take all  necessary  action  to  pursue  and  finalize  the
      transaction. The significant terms approved by the Board include a minimum
      of two seats on the  Board of  Directors,  the power of veto over  capital
      expenditures and other significant  matters,  and issuance of unrestricted
      shares  of  common  stock  equal to 20% of the  Company's  equity,  with a
      non-dilution  agreement which would have the effect of maintaining the 20%
      holding  at no cost to the  lender  whatever  additional  issues of equity
      capital was  proposed or made during the life of the bond.  In addition to
      legal  fees to  effect  the  financing,  the  Company  would  pay a fee of
      $20,000,000 to the managing director of Zephyr.

10. Income taxes:
       Deferred   income  taxes   reflect  the  net  tax  effects  of  temporary
       differences  between the carrying  amounts of assets and  liabilities for
       financial reporting purposes and the amounts used for income purposes.

       The significant components of the deferred tax asset at June 30, 1998 and
       1997 are:

                                               1998                  1997
                                          -------------         ------------
         Deferred tax asset:
           Net operating loss             $   4,363,300         $  3,204,600
           Less valuation allowance           4,363,300            3,204,600
                                          -------------         ------------
         Net deferred tax asset           $           -         $          -
                                          =============         ============

       The valuation  allowance is provided when it is more likely than not that
       the tax benefit may not be realized.

       The  provision  (benefit)  for income  taxes  differs  from the amount of
       income tax (benefit)  determined by applying the applicable  federal rate
       due to the following:

                                                    1998             1997
                                               ------------     ------------
         U.S. Federal statutory income
          tax rate of 35% (benefit)            $ (1,060,500)    $ (1,790,400)
         Effective state income tax (benefit)       (98,200)        (166,200)

         Valuation allowance                      1,158,700        1,956,600
                                               ------------     ------------
                                               $          -     $          -
                                               ============     ============
       At June 30, 1998,  the Company had available  federal net operating  loss
       carryforwards of approximately $ 11,815,200, which will expire in varying
       years through 2013.

                                      F-28
<PAGE>

                   COMTEC INTERNATIONAL, INC. AND SUBSIDIARIES
                      (A COMPANY IN THE DEVELOPMENT STAGE)
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                       YEARS ENDED JUNE 30, 1998 AND 1997




11. Shareholders' equity:
       On March 28, 1997, the Company's shareholders approved an increase in the
       number of  authorized  shares of stock  from  50,000,000  to  100,000,000
       common shares and from  5,000,000 to  10,000,000  preferred  shares.  The
       Board of Directors has  authorized up to 4,000,000  shares of Convertible
       Preferred Stock,  with a par value of $ .001 per share.  These securities
       are non-voting and have an issue price and liquidation value ranging from
       $ 1.00 to $ 10.00. The Series B is subordinate to the Series A and Series
       C is  subordinate  to the  Series A and B. Each  share of each  series is
       convertible  into common stock, $ .001 par value at the closing bid price
       on the date notice of the  conversion is received.  No conversion  may be
       made  unless the closing bid price has reached $ 10.00 per Series A and $
       7.50 per Series B shares for more than 20  consecutive  trading days. The
       Company  may redeem the Series A at $ 1.00 per share,  Series B at $ 5.00
       per share and Series C at $ 10.00 per share.

       On May 1, 1997, the Company settled litigation with the holder of 420,000
       shares of Series A Redeemable  Convertible  Preferred  Stock  pursuant to
       which the 420,000 shares of stock were returned and canceled. At June 30,
       1998 and 1997,  no Series A Redeemable  Convertible  Preferred  Stock was
       issued and outstanding.

       At June 30, 1998 and 1997, no Series B Redeemable  Convertible  Preferred
       Stock was issued and outstanding.

       In  September  1996,  the  Company  issued  39,767  shares  of  Series  C
       Redeemable Convertible Preferred Stock in connection with the acquisition
       of license rights. When management decided not to pay the settlement with
       the independent  license  holders and accordingly  terminated the license
       option   agreement,   the  Company   canceled  the  Series  C  Redeemable
       Convertible  Preferred Stock as if the  termination  occurred on June 30,
       1997. The holder of the Series C Redeemable  Convertible  Preferred Stock
       has subsequently  surrendered the preferred stock  certificate  which was
       canceled.  At June 30,  1998 and 1997  there was no  Series C  Redeemable
       Convertible Preferred Stock issued or outstanding.

       A summary of the terms of the Redeemable  Convertible  Preferred Stock is
       as follows:

                                        Issue    Liquidation Conversion ratio
               Type          Par        price       price      to common stock
               ----          ---        -----       -----      ---------------

             Series A      $ .001     $    1.00$     1.00           1:1
             Series B        .001          5.00      5.00           1:1
             Series C        .001         10.00     10.00           1:1

       As described  in Note 8 of notes to  consolidated  financial  statements,
       certain Geneva shareholders converted their debt into common stock of the
       Company.  As a result of the debt conversions and common stock issued for
       finders'  and loan  origination  fees,  clients  of Zephyr  and  Zephyr's
       managing  director  controlled  approximately 77% of the Company's common
       stock at June 30, 1998. Through subsequent  transactions,  they increased
       their ownership interest to approximately 79%.

                                      F-29
<PAGE>


                   COMTEC INTERNATIONAL, INC. AND SUBSIDIARIES
                      (A COMPANY IN THE DEVELOPMENT STAGE)
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                       YEARS ENDED JUNE 30, 1998 AND 1997



12.  Incentive Compensation plans:
       The Company has a stock option plan, approved by the shareholders,  which
       provides  for  the  granting  of  options  to  officers,  key  employees,
       directors and  consultants to the Company.  The plan provides for 900,000
       shares of the Company's common stock (the available  shares) for issuance
       pursuant  to the  exercise  of stock  options  which  may be  granted  to
       officers, key employees,  directors,  and consultants.  The plan provides
       for  annual  adjustment  in the number of  available  shares to an amount
       equal to ten percent (10.0%) of the number of shares  outstanding on June
       30 of the preceding  year or 980,000  shares,  whichever is greater.  The
       Compensation  Committee  administers  the  plan.  The  committee  has the
       authority and  discretion to determine  when and how many options will be
       granted.  The committee will also determine which options may be intended
       to qualify  (Incentive  Stock  Option)  for special  treatment  under the
       Internal  Revenue  Code of 1986,  as  amended  or  non-qualified  options
       (Non-Qualified Stock Options) which are not intended to qualify.  Options
       are to be  granted  at 85% to 110% of fair  market  value  on the date of
       grant.  As of June 30, 1998 and 1997,  those eligible under the plan have
       not  purchased  any  shares of the  company  common  stock,  nor have any
       options been granted.  The plan will remain in effect until terminated by
       the Compensation  Committee,  except that no Incentive Stock options will
       be granted after January 31, 2007.

      Other stock option agreements:
         The former plan, which  terminated on September 16, 1998,  provided for
         the granting of stock options to  employees,  officers and directors to
         purchase up to 600,000  shares of common stock.  Options may be granted
         for terms up to three (3) years at the exercise  prices of 100% to 110%
         to the fair market value of the  Company's  stock at the date of grant.
         No options are outstanding under the plan at June 30, 1998 and 1997.

13.   Commitments, contingencies,  litigation, transactions with related parties
      and other: Restricted funds:
         In April 1997,  an  officer/director/shareholder  of the Company used a
         $78,600  certificate  of deposit of the  Company to  collateralize  the
         purchase of an automobile  by a limited  liability  company  affiliated
         with the  officer/director/shareholder.  The  collateral was reduced by
         approximately  $10,100  during  the  year  ended  June  30,  1998.  The
         certificate  of  deposit  is  restricted  and is  included  in cash and
         equivalents. While the officer/director resigned his positions with the
         Company  in  June  1998  without  releasing  the  restrictions  on  the
         certificate  of  deposit,  the Company has  subsequently  redeemed  the
         remaining balance of the certificate of deposit.

         In December 1997, the Company purchased a one-year $500,000 certificate
         of deposit which is being held by a bank as  collateral  for a $500,000
         revolving  line  of  credit.   This  certificate  of  deposit  is  also
         restricted and is included in cash and equivalents.

                                      F-30
<PAGE>


                   COMTEC INTERNATIONAL, INC. AND SUBSIDIARIES
                      (A COMPANY IN THE DEVELOPMENT STAGE)
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                       YEARS ENDED JUNE 30, 1998 AND 1997





13.   Commitments, contingencies,  litigation, transactions with related parties
      and other (continued):
      Employment contracts:
         On February  12,  1998,  the Company  executed a three year  employment
         agreement  with its current  Chief  Executive  Officer.  The  agreement
         provided for a starting salary of $8,000 per month, which was increased
         to $ 10,000 per month  effective  August 15, 1998,  an initial bonus of
         $42,000  to be  satisfied  by the  issuance  of common  stock and stock
         options to purchase five percent  (5.0%) of the  Company's  outstanding
         common stock to be earned ratably over the term of the agreement. Stock
         options to purchase an additional  five percent (5.0%) of the Company's
         outstanding  common  stock is  contingent  upon  attainment  of certain
         financial and management  goals. The option price was set at 80% of the
         closing bid price of the Company's common stock on September 2, 1998 or
         $.056 per share.  During the year ended June 30, 1998, the Company paid
         and/or  accrued $ 150,800 in  compensation  and issued 60,000 shares to
         satisfy  half of the initial  bonus.  No stock  options  were issued in
         connection with this agreement.

         The Company had an employment agreement with its former Chief Executive
         Officer/director/shareholder ("former CEO") with whom the Company is in
         litigation.  The  employment  agreement  ended by its  terms on May 10,
         1998,  although  there is an  addendum to such  agreement,  which is in
         dispute,  which  addendum would have extended the agreement to June 30,
         2002.  The  agreement  provided  for  minimum  salary  levels  adjusted
         annually,  term life insurance as well as incentive  bonuses payable if
         specified  management  goals are attained.  The  agreement  allowed the
         conversion of any unpaid compensation into common stock at five percent
         (5%) of the net  increase in the net assets of the Company and provided
         for an  additional  bonus of ten percent  (10%) of net earnings  before
         income taxes,  depreciation  and amortization and an annual stock bonus
         equal to five  percent  (5.0%) of the  issued  and  outstanding  common
         stock.  For the year ended June 30, 1997, the five percent (5.0%) stock
         bonus of approximately $291,200 (727,952 shares at $ .40 per share) was
         accrued and charged to operations.  There is pending litigation between
         the  Company  and the  former  CEO who is no longer  with the  Company.
         Information available from Management indicates that this litigation is
         in District Court, City and County of Denver,  State of Colorado,  Case
         No. 99CV634 and is being defended and counterclaimed  vigorously by the
         Company.  The  probability of the outcome of the  litigation  cannot be
         assessed since it is not probable that a liability has been incurred at
         the date of the  financial  statements  nor can the amount of loss,  if
         any, be reasonably estimated.

         An      employment       agreement       with      another       former
         officer/director/shareholder  was  settled on  October  8, 1997,  which
         called for the issuance of approximately 520,700 common shares at $0.25
         per share ($  130,200).  The  amount,  which was accrued and charged to
         operations during the year ended June 30, 1997, remains unpaid.

                                      F-31
<PAGE>


                   COMTEC INTERNATIONAL, INC. AND SUBSIDIARIES
                      (A COMPANY IN THE DEVELOPMENT STAGE)
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                       YEARS ENDED JUNE 30, 1998 AND 1997



13.   Commitments, contingencies,  litigation, transactions with related parties
      and other (continued):
      Consulting agreements:
         The Company had  consulting  service  agreements  with  certain  former
         officers/directors, expiring at various dates through October 1997. The
         agreements  provided  for minimum  monthly fees and common stock of the
         Company  based upon a formula of the bid price.  The  agreement  grants
         stock options for 100,000 common shares at an exercisable  price of 70%
         of the offering price of any secondary offering. Consulting services of
         $ 167,500 had been paid and/or  accrued as of June 30, 1997 and 139,870
         shares of common stock had been issued.  During the year ended June 30,
         1998, consulting services of $15,000 was paid and/or accrued and 77,126
         shares of common  stock  were  issued.  All  amounts  were  charged  to
         operations.

      Transactions with related parties:
         The following is a summary of  transactions  with related parties as of
         June 30, 1998 and 1997:

                                                          1998          1997
                                                      ------------  -----------
           Compensation to officers/
            directors/shareholders                    $    128,900  $   980,300
           Consulting                                            -      167,500
           Origination fees to related parties                   -       60,000
           Common stock issued on preferred stock
            conversion                                           -      172,700
           Restricted funds for related party               65,500       78,600
           Advertising fees to related party                 7,000       10,900
           Loss on terminated agreement with
            related party                                        -      318,400
           Reimbursement of expenses to
            officers/directors/shareholders                 27,600       66,300
           Legal settlement with prior
            officers/shareholders                            7,500      105,000
           Interest on related party loans                  11,500            -
           Related party loans                              70,000      (70,000)
                                                      ------------  -----------
                                                      $    318,000  $ 1,889,700
                                                      ============  ===========
      Advertising agreement:
         In 1995 the Company entered into a three year media purchase  agreement
         for  $1,950,000,  that was  partially  prepaid  through the issuance of
         5,200,000  common  shares  at $ .25 per  share  ($  1,300,000).  As the
         advertising  was  utilized,  the  Company  would  pay one  third of the
         invoice and two-thirds would be applied against the prepaid amount. The
         Company also granted the advertiser an option expiring in the year 2000
         to acquire  200,000 common shares at $ 1.25 per share.  During the year
         ended June 30, 1997,  management determined the media agreements had no
         continuing  value and charged  operations for the outstanding  balance.
         The common stock issued and the stock option remain outstanding at June
         30, 1998.

                                      F-32
<PAGE>

                   COMTEC INTERNATIONAL, INC. AND SUBSIDIARIES
                      (A COMPANY IN THE DEVELOPMENT STAGE)
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                       YEARS ENDED JUNE 30, 1998 AND 1997



13.   Commitments, contingencies,  litigation, transactions with related parties
      and other (continued):
      Termination of private placement:
         During 1997, the Company  prepared a private  placement  offering.  The
         discussions  regarding  the offering  were  terminated  and the cost of
         approximately  $ 25,000 was charged to operations at June 30, 1997. The
         Company's attorney's were subsequently successful in recouping $ 24,400
         from the securities  firm which has been accrued and reflected as other
         income at June 30, 1998.

      Tax examination:
         The  Internal  Revenue  Service is  conducting  an  examination  of the
         Company's  1994  Federal  income tax return.  At this time  counsel and
         management are unable to either determine  whether any adjustments will
         be proposed or estimate  the amount of any such  proposed  adjustments;
         therefore, no provision has been made in the accompanying  consolidated
         financial statements.

      Litigation:
         Pending  litigation  includes  a case  brought  by  several  California
         investors  alleging  securities fraud,  manipulation and improper sales
         and seeking  damages of  approximately  $850,000 or  recission of their
         stock  purchases  and return of at least  $250,000  of the price  paid.
         Counsel is unable to gauge the  outcome of these  matters at this time,
         consequently,   no  provision   has  been  made  in  the   accompanying
         consolidated financial statements.

         Claims  made by a  telecommunications  service  provider  and a  former
         employee for breach of their  agreements  were settled  during the year
         ended  June  30,  1998  for  $47,500,  which  was  charged  to  current
         operations.

         The  Company is a  defendant  to  various  other  lawsuits,  claims and
         proceedings.   Management   considers  these  other  actions  as  being
         incidental  to the  Company's  business  and is of the opinion that the
         financial  exposure of these other actions will not  materially  affect
         the financial position of the Company.

      Minority interest:
         Minority interest represents the cumulative effect of earnings, losses,
         capital   contributions   and   distributions   in  TTI   Communication
         Corporation.  The minority interest of TTI  Communications  Corporation
         reflects no value at June 30, 1997. At June 30, 1997,  unused losses of
         the  minority  interest of  approximately  $166,900  can be utilized to
         offset future profits.

      Rental commitments:
         In  December  1997,  the Company  relocated  its  principal  offices to
         Englewood,  CO and  executed a three year lease on the  premises  which
         expires  November  30, 2000.  Minimum  annual  lease  payments  will be
         approximately $ 20,400, $ 35,700 and $ 36,800 for the years ending June
         30, 1998, 1999 and 2000,  respectively  and $ 15,500 for the five month
         period ending November 30, 2000.

                                      F-33
<PAGE>


                   COMTEC INTERNATIONAL, INC. AND SUBSIDIARIES
                      (A COMPANY IN THE DEVELOPMENT STAGE)
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                       YEARS ENDED JUNE 30, 1998 AND 1997




13.   Commitments, contingencies,  litigation, transactions with related parties
      and other (continued):
      Warrants and options:
         The Company has granted  various  stock options and warrants to various
         employees,  consultants  and lenders under  employment,  consulting and
         financing  agreements.  The  agreements  with clients and affiliates of
         Zephyr provide for the issuance of 28,926,254 shares of common stock at
         prices ranging from $ 2.90 to $ 4.50 per share.  The warrants expire no
         later than March 23, 2001.

         Information relating to stock options and warrants are as follows:

<TABLE>
<CAPTION>
                                     Employee/consultants   Lender     Option Price
                                        Stock Options      Warrants   Per Share Range
                                        -------------      --------   ---------------
           <S>                          <C>               <C>         <C>
           Outstanding options/warrants,
            balance, beginning             200,000         4,242,922   $ 1.25-$ 4.50

            Add (deduct):
                  Granted                        -        24,683,332      $ 2.90
                  Exercised                      -                 -
                  Expired or cancelled           -                 -
                                           -------        ----------
           Balance, ending                 200,000        28,926,254
                                           =======        ==========
</TABLE>

    Year 2000 compliance:
         The year 2000 issue is the result of computer  programs  being  written
         using two (2)  digits  rather  than four (4) digits to define the year.
         Any  of  the  Company's  computer  programs  that  have  date-sensitive
         software  may  recognize a date using "00" as the year 1900 rather than
         2000. This problem could force computers to either shut down or provide
         incorrect data or information.  The Company  utilizes  generic software
         programs  developed,  maintained and upgraded by  independent  computer
         software providers.  In response to the year 2000 issue,  management is
         relying on the  providers of these  software  programs will resolve the
         date sensitive issue so that all critical systems will be in compliance
         prior to the year 2000. There can be no assurance that the providers of
         the software or the manufacturers of chips will resolve the issue.

14. Subsequent events
    Litigation with former officer and director:
         On February 1, 1999, the Company's former CEO filed a complaint against
         the Company,  its present CEO and the managing director of Zephyr.  The
         former CEO alleges  that he is entitled to continued  compensation  and
         benefits  based upon a March 31, 1997 addendum to his December 26, 1995
         employment  contract  (which  expired on May 10,  1998) and that he was
         wrongfully  induced to resign as an  officer  in June 1998.  He alleges
         that he is due salary,  car  allowance,  health plan and life insurance
         payments,  stock bonuses and other items from May 10, 1998 through June
         30, 2002.


                                      F-34
<PAGE>

                  COMTEC INTERNATIONAL, INC. AND SUBSIDIARIES
                      (A COMPANY IN THE DEVELOPMENT STAGE)
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                       YEARS ENDED JUNE 30, 1998 AND 1997




14.  Subsequent events (continued):
         On  March  24,  1999,  the  Company  filed  its  answer  and  extensive
         counterclaims  against the former CEO. The Company's answer states that
         the March 31, 1997 addendum is null and void as a matter of law, denies
         any  wrongdoing or  inducement  and denies any and all liability to the
         former CEO. The Company's answer further states as affirmative defenses
         that the former CEO's claims are barred by the doctrine of estoppel and
         unclean hands and by failure of  consideration,  fraud and  illegality,
         waiver and failure to mitigate.  The Company  states that the March 31,
         1997  addendum  was  entered  into  under  circumstances  of fraud  and
         illegality  and that the former CEO's alleged  claims are setoff by the
         counterclaims  of the Company against him. The Company believes that it
         has  meritorious  and virtuous  defenses and  anticipates  that it will
         vigorously  and  effectively  defend  against any and all claims by the
         former CEO. No provision  has been made in the  accompanying  financial
         statements for compensation,  benefits and stock bonuses claimed by the
         former CEO subsequent to the  expiration of his employment  contract on
         May 10, 1998 .

      Disposition of LED screens and related equipment:
         On  December  31,  1998,  the  Company  sold six giant LED  screens and
         related  equipment  to  Lanstar  Computer   Products,   Inc.,  a  Texas
         corporation  affiliated  with  Zephyr.  The LED  screens  were  sold to
         Lanstar in exchange  for a  $2,400,000  promissory  note secured by the
         assets sold and bearing  interest of 8% per annum,  payable  quarterly.
         The entire  principal is payable at maturity on December  31, 1999.  No
         determination  of  recoverability  of  the  promissory  note  has  been
         determined.

      Pending sale and operating lease agreements:
         On December 18, 1998, the Company  entered into  agreements  whereby an
         independent third party would acquire the Company's FCC license rights,
         customers  and  agreements,  site licenses  and/or leases  necessary to
         operate  the  Company's  seven SMR  operating  systems  through a newly
         formed  subsidiary.   The  subsidiary  would  assume  the  Company's  $
         1,390,700  promissory  notes  payable to the FCC,  issue to the Company
         shares of common stock representing a 7.5% ownership interest and issue
         a warrant to purchase  50,000  shares of the common stock of the parent
         company at the  exercise  price of $.50 per share for a period of three
         years.  The agreement  further provides that should the market price in
         the period immediately preceding the closing of the transaction be less
         than  $.50  per  share,   the  number  of  shares  will  be   increased
         proportionately,  but in no event to exceed 100,000  shares.  Effective
         June 30, 1998, the carrying value of the license rights were reduced to
         their sales value of $ 1,390,700.

         The third party will enter into a system management  agreement pursuant
         to which they will  manage the day to day  business  operations  of the
         Company's SMR system subject to the Company's ultimate  supervision and
         control until such time as the FCC shall approve the  assignment of the
         licenses. Thereafter, they will assume all responsibility for operation
         and control of the system.


                                      F-35
<PAGE>


                  COMTEC INTERNATIONAL, INC. AND SUBSIDIARIES
                      (A COMPANY IN THE DEVELOPMENT STAGE)
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                       YEARS ENDED JUNE 30, 1998 AND 1997




14.  Subsequent events (continued):
         The  Company  shall lease SMR  equipment  to the third party for a four
         year term at annual base rates of $ 135,000, $ 168,000, $ 208,000 and $
         229,000,  payable  quarterly and  collateralized by the third party and
         their affiliate or parent company.  They will have the option to extend
         the lease for up to three additional one year terms,  provided that the
         lease  payment  will be the  fair  market  value  of the  equipment  as
         determined by the two parties in accordance with the lease provisions.

15. Selected quarterly data (unaudited):
       The following  summarized  certain  quarterly  results of operations  (in
       thousands, except share amounts):

<TABLE>
<CAPTION>
     Year ended June 30, 1998:                             Quarter ended
                                              ----------------------------------------
                                              September December     March      June
                                                 30,       31,        31,        30,
                                              -------    -------    -------    ------
<S>                                           <C>        <C>        <C>        <C>
     Expenses:

       Selling, general and administrative    $   285    $   219    $   443    $    84
       Interest                                     1         --         (1)       457
                                              -------    -------    -------    -------
                                                  286        219        442        541

     Deduct other income (expense)                 24        (49)       (40)    (1,477)
                                              -------    -------    -------    -------
     Net loss                                 $  (262)   $  (268)   $  (482)   $(2,018)
                                              =======    =======    =======    =======
     Net loss per share                       $  (.03)   $  (.03)   $  (.05)   $  (.04)
                                              =======    =======    =======    =======


<CAPTION>
     Year ended June 30, 1997:                             Quarter ended
                                              ----------------------------------------
                                              September  December    March      June
                                                 30,        31,       31,        30,
                                              -------    -------    -------    -------
<S>                                           <C>        <C>        <C>        <C>
     Expenses:
       Selling, general and administrative    $   342    $   706    $   360    $ 1,226
       Interest                                    --         10         32         55
                                              -------    -------    -------    -------
                                                  342        716        392      1,281

     Deduct other income (expense)                (53)        60        144     (2,535)
                                              -------    -------    -------    -------
     Net loss                                 $  (395)   $  (656)   $  (248)   $(3,816)
                                              =======    =======    =======    =======
     Net loss per share                       $  (.04)   $  (.07)   $  (.03)   $  (.44)
                                              =======    =======    =======    =======
</TABLE>


                                      F-36
<PAGE>


                  COMTEC INTERNATIONAL, INC. AND SUBSIDIARIES
                      (A COMPANY IN THE DEVELOPMENT STAGE)
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                       YEARS ENDED JUNE 30, 1998 AND 1997




15. Selected quarterly data (unaudited) (continued):
       Comtec  International,  Inc. common stock is traded on the OTC Electronic
       Bulletin Board system under the symbol of YRLSD. The following table sets
       forth the quarterly high and low sales prices for the periods  indicated.
       The prices shown  represent  actual sales prices without retail  markups,
       markdowns or commissions.

       Share price of common stock:
                                              1998                  1997
                                         ---------------     ---------------
                                          High     Low         High     Low

         First quarter, September 30,    $  .52   $  .24     $ 5.00    $ .94

         Second quarter, December 31,      1.80      .22       5.00     1.25

         Third quarter, March 31,           .85      .19       1.72      .45

         Fourth quarter, June 30,           .20      .09       1.05      .33

                                      F-37
<PAGE>



Exhibit 3.2 Bylaws of White  Acquisition Group  Incorporated,  December 27, 1992
(former name of ComTec International, Inc., a New Mexico Corporation.)

                      WHITE ACQUISITION GROUP INCORPORATED
                           (a New Mexico corporation)


                                     BYLAWS

                                    CONTENTS


ARTICLE ONE:               SHAREHOLDERS
         1.01              Place of Meetings
         1.02              Annual Meetings
         1.03              Voting List
         1.04              Special Meetings
         1.05              Notice
         1.06              Quorum
         1.07              Majority Vote; Withdrawal of Quorum
         1.08              Method of Voting
         1.09              Record Date; Closing Transfer Books
         1.10              Action Without Meeting
         1.11              Telephone and Similar Meetings
         1.12              Order of Business at Meetings
         1.13              Oral and Written Voting
         1.14              Appointment of Inspectors

ARTICLE TWO:               DIRECTORS
         2.01              Management
         2.02              Number; Qualification; Election; Term
         2.03              Change in Number
         2.04              Removal
         2.05              Vacancies
         2.06              Election of Directors
         2.07              Place of Meetings
         2.10              Quorum; Majority Vote
         2.11              Conduct of Meetings
         2.12              Compensation
         2.13              Procedure
         2.14              Action Without Meeting
         2.15              Telephone and Similar Meetings
         2.16              Interested Directors, Officers and Security
                           holders
         2.17              Committees
         2.18              Committee Procedures
         2.19              Advisory Directors
         2.20              Authority to Execute Instruments
         2.21              Execution of certain Instruments

ARTICLE THREE:             EXECUTIVE COMMITTEE
         3.01              Designation
         3.02              Number; Qualification; Term

                                        1

<PAGE>




         3.03              Authority
         3.04              Change in Number
         3.05              Removal
         3.06              Vacancies
         3.07              Meetings
         3.08              Quorum; Majority Vote
         3.09              Compensation
         3.10              Procedure
         3.11              Action Without Meeting
         3.12              Telephone and Similar Meetings
         3.13              Responsibility

ARTICLE FOUR:              NOTICE
         4.01              Method
         4.02              Waiver

ARTICLE FIVE:              OFFICERS AND AGENTS
         5.01              Number; Qualification; Election; Term
         5.02              Removal
         5.03              Vacancies
         5.04              Authority
         5.05              Compensation
         5.06              President
         5.07              Vice President
         5.08              Secretary
         5.09              Treasurer
         5.10              Registered Agent

ARTICLE SIX:               CERTIFICATES AND SHAREHOLDERS
         6.01              Certificates
         6.02              Issuance
         6.03              Payment for Shares
         6.04              Lien
         6.05              Lost, Stolen or Destroyed Certificates
         6.06              Transfer of Shares
         6.07              Registered Owner
         6.08              Preemptive Rights
         6.09              Cumulative Voting Rights
         6.10              Transfer agents and registrars
         6.11              Conditions of Transfer
         6.12              Reasonable doubts as to right to Transfer

ARTICLE SEVEN:             GENERAL PROVISIONS
         7.01              Dividends and Reserves
         7.02              Books and Records
         7.03              Execution of Instruments
         7.04              Fiscal Year
         7.05              Indemnification
         7.06              Seal
         7.07              Resignation
         7.08              Amendment of Bylaws
         7.09              Meaning of Certain Terms

                                        2

<PAGE>



         7.10              Construction
         7.11              Table of Contents; Headings
         7.12              Relation to Articles of Incorporation
         7.13              Share Register
         7.14              Books of Account














































                                        3

<PAGE>



                      WHITE ACQUISITION GROUP INCORPORATED

                                     BYLAWS

                            ARTICLE ONE: SHAREHOLDERS

1.01 Place of Meetings. Meetings of shareholders shall be held at the registered
office of the corporation, or any other place within or without the State of New
Mexico,  as may be designated for that purpose from time to time by the Board of
Directors

1.02 Annual Meetings.  An annual meeting of the shareholders  shall be held each
year on the 1st Wednesday of September.  If such a day is a legal holiday,  then
the meeting shall be on the next  business day  following.  At the meeting,  the
shareholders  shall elect  directors  and  transact  such other  business as may
properly be brought  before the meeting.  Failure to hold any annual  meeting or
meetings shall not work a forfeiture or dissolution of the Corporation.

1.03  Voting  List.  At least ten days before each  meeting of  shareholders,  a
complete list of the shareholders  entitled to vote at the meeting,  arranged in
alphabetical  order,  with the  address of each and the number of voting  shares
held by each,  shall be prepared by the  officer or agent  having  charge of the
stock transfer  books.  The list, for a period of ten days prior to the meeting,
shall be kept on file at the registered  office of the  corporation and shall be
subject to  inspection  by any  shareholder  at any time during  usual  business
hours.  The list shall also be  produced  and kept open at the time and place of
the  meeting  during  the  whole  time  thereof,  and  shall be  subject  to the
inspection of any shareholder during the whole time of the meeting.

1.04 Special Meetings. Special meetings of the shareholders,  for any purpose of
purposes,  unless  otherwise  prescribed  by  statute  or  by  the  Articles  of
Incorporation,  or by these Bylaws, may be called by the president, the Board of
Directors,  or the  holders  of not less  than ten  percent  (10%) of all of the
shares  entitled  to vote at the  meetings.  Business  transacted  at a  special
meeting shall be confined to the purposes stated in the notice of the meeting.

1.05 Notice.  Written or printed notice  stating the place,  day and hour of the
meeting and, in case of a special meeting, the purpose or purposes for which the
meeting is called, shall be delivered not less than ten nor more than fifty days
before  the date of the  meeting,  either  personally  or by mail,  by or at the
direction of the president,  the secretary, or the officer or person calling the
meeting,  to each shareholder  entitled to vote at the meeting.  If mailed, such
notice shall be deemed to be delivered  when deposited in the United States mail
addressed to the  shareholder at his address as it appears on the share transfer
records of the corporation,  with postage thereon prepaid.  See also Bylaws 5.01
and 5.02.



                                        4

<PAGE>



1.06 Quorum.  The holders of a majority of the shares issued and outstanding and
entitled to vote there at, present in person or  represented by proxy,  shall be
requisite and shall  constitute a quorum at meetings of the shareholders for the
transaction of business except as otherwise provided by statute, by the Articles
of Incorporation  or by these Bylaws.  If a quorum is not present or represented
at a meeting of the shareholders,  the shareholders entitled to vote, present in
person or  represented  by proxy,  shall have power to adjourn the meeting  from
time to time,  without notice other than  announcement  at the meeting,  until a
quorum is present or represented.  At an adjourned  meeting at which a quorum is
present or represented, any business meeting as originally notified.

1.07 Majority Vote; Withdrawal of Quorum. When a quorum is present at a meeting,
the vote of the holders of a majority of the shares having voting power, present
in person or represented by proxy,  shall decide any question brought before the
meeting,  unless  the  question  is one on which,  by express  provision  of the
statutes,  the  Articles of  Incorporation,  or these  Bylaws,  a higher vote is
required in which case the express  provision  shall  govern.  The  shareholders
present at a duly  constituted  meeting  may  continue  to  continue to transact
business until  adjournment,  despite the withdrawal of enough  shareholders  to
leave less than a quorum.

1.08 Method of Voting.  Each outstanding  share,  regardless of class,  shall be
entitled  to one  vote on  each  matter  submitted  to a vote  at a  meeting  of
shareholders,  except to the extent that the voting  rights of the shares of any
class or classes are limited or denied by the Articles of Incorporation.  At any
meeting of the shareholders, every shareholder having the right to vote may vote
either in person,  or by proxy executed in writing by the  shareholder or by his
duly  authorized  attorney-in-fact.  A telegram,  telex,  cablegram,  or similar
transmission by the shareholder, or a photographic,  photostatic,  facsimile, or
similar reproduction of a writing executed by the shareholders, shall be treated
as an execution in writing for purposes of this Section. No proxy shall be valid
after eleven months from the date of its execution, unless otherwise provided in
the  proxy.  In the event a proxy  provides  for two or more  persons  to act as
proxies,  a majority of such persons  present at the meeting,  or if only one be
present,  that one, shall have all the powers  conferred by the instrument  upon
all the persons so  designated  unless the proxy shall provide  otherwise.  Each
proxy shall be revocable unless expressly provided therein to be irrevocable and
unless  otherwise  made  irrevocable  by law. Each proxy shall be filed with the
secretary of the corporation prior to or at the time of the meeting.  Voting for
directors shall be in accordance with Section 2.06 of these Bylaws. Any vote may
be taken by voice or by show of hands unless  someone  entitled to vote objects,
in which case written ballots shall be used.

1.09 Record Date;  Closing  Transfer  Books.  The Board of Directors  may fix in
advance a record date for the purpose of  determining  shareholders  entitled to
notice of or to vote at a meeting of the

                                        5

<PAGE>



shareholders,  the record  date to be not less than ten nor more than fifty days
prior to the  meeting;  or the Board of Directors  may close the share  transfer
records  for such  purpose for a period of not less than ten nor more than fifty
days  prior to such  meeting.  In the  absence  of any  action  by the  Board of
Directors,  the date upon which the notice of the meeting is mailed shall be the
record date.

1.10 Action  Without  Meeting.  Any action  required by statute to be taken at a
meeting of the  shareholders,  or any action  which may be taken at a meeting of
the  shareholders,  may be taken  without a meeting  if a  consent  in  writing,
setting  forth the action so taken,  shall be signed by all of the  shareholders
entitled to vote with  respect to the subject  matter  thereof and such  consent
shall have the same force and effect as a  unanimous  vote of the  shareholders.
The signed Consent, or a signed copy shall be placed in the minute book.

1.11  Telephone  and Similar  Meetings.  Shareholders,  directors  and committee
members may  participate in and hold a meeting by means of conference  telephone
or similar communications  equipment by means of which all persons participating
in the  meeting  can hear each  other.  Participation  in such a  meeting  shall
constitute presence in person at the meeting, except where a person participates
in the meeting for the express  purpose of objecting to the  transaction  of any
business on the grounds that the meeting is not lawfully called or convened.

1.12 Order of Business at Meetings. The order of business at annual meetings and
so far as  practicable  at other  meetings of  shareholders  shall be as follows
unless changed by the Board of Directors:

      (1)      Call to order
      (2)      Proof of due notice of meeting
      (3)      Determination of quorum and examination of proxies
      (4)      Announcement of availability of voting list (See Bylaw
               1.03)
      (5)      Reading and disposing of minutes of last meeting of
               shareholders
      (6)      Reports of officers and committees
      (7)      Appointing of voting inspectors
      (8)      Unfinished business
      (9)      New business
      (10)     Nomination of directors
      (11)     Opening of polls for voting
      (12)     Recess
      (13)     Reconvening; closing of polls
      (14)     Report of voting inspectors
      (15)     Other business
      (16)     Adjournment

1.13           Oral and Written Voting.  Voting on any question and on all
matters of agenda and procedure shall be determined in the sole
discretion of the of the presiding officer except where otherwise

                                        6

<PAGE>



required by law or these Bylaws.

1.14 Appointment of Inspectors.  The directors,  in advance of any meeting, may,
but need  not,  appoint  one or more  inspectors  to act at the  meeting  or any
adjournment thereof. If an inspector or inspectors are not appointed, the person
presiding at the meeting may, but need not, appoint one or more  inspectors.  In
case any person who may be appointed as an inspector fails to appear or act, the
vacancy may be filled by  appointment  made by the  directors  in advance of the
meeting or at the meeting by the person presiding  thereat.  Each inspector,  if
any,  before  entering upon the discharge of his duties,  shall take and sign an
oath  faithfully  to execute the duties of inspector at such meeting with strict
impartiality and according to the best of his ability.  The inspectors,  if any,
shall  determine the number of shares  outstanding and the voting power of each,
the shares represented at the meeting, the existence of quorum, the validity and
effect of proxies,  and shall  receive  votes,  ballots,  or consents,  hear and
determine all challenges and questions  arising in connection  with the right to
vote, count and tabulate all votes,  ballots or consents,  determine the result,
and do such acts as are proper to conduct the election or vote with  fairness to
all  shareholders.  On  request of the person  presiding  at the  meeting or any
shareholder, the inspector or inspectors, if any, shall make a report in writing
of any  challenge,  question or matter  determined  by him or them and execute a
certificate of any fact found by him or them.

                             ARTICLE TWO: DIRECTORS

2.01 Management. The business and affairs of the corporation shall be managed by
the Board of Directors who may exercise all such powers of the  corporation  and
do all such lawful acts and things as are not (by statute or by the  Articles of
Incorporation  or by these Bylaws)  directed or required to be exercised or done
by the shareholders.

2.02 Number; Qualification; Election; Term. The Board of Directors shall consist
of not less than  three (3)  directors,  none of whom  need be  shareholders  or
residents of any particular  state. The directors shall be elected at the annual
meeting of the  shareholders,  except as provided in Bylaws 2.03 and 2.05.  Each
director  elected  shall hold office  until his  successor  shall be elected and
shall qualify.

2.03 Change in Number.  The number of  directors  may be  increased or decreased
from time to time by amendment  to these  Bylaws but no decrease  shall have the
effect of shortening the term of any incumbent director.  Any directorship to be
filled by reason of an  increase in the number of  directors  shall be filled by
election at an annual meeting or at a special meeting of shareholders called for
that purposes.

2.04  Removal.  Any director may be removed  either with or without cause at any
special or annual meeting of shareholders, by the affirmative vote of a majority
in number of shares of the shareholders

                                        7

<PAGE>



present,  in person or by proxy,  at such  meeting and  entitled to vote for the
election of such  director if notice of  intention to act upon such matter shall
have been given in the notice calling such meeting.

2.05  Vacancies.  Any vacancy  occurring  in the Board of  Directors  (by death,
resignation,  removal or otherwise)  may be filled by an  affirmative  vote of a
majority of the  remaining  directors  though less than a quorum of the Board of
Directors.  A  director  elected  to fill a  vacancy  shall be  elected  for the
unexpired term of his predecessor in office.

2.06  Election  of  Directors.  Directors  shall be elected by  plurality  vote.
Cumulative voting shall not be permitted.

2.07 Place of Meeting.  Meetings of the Board of Directors,  regular or special,
may be held either within or without the State of New Mexico.

2.08 Regular  Meetings.  Regular  meetings of the Board of Directors may be held
without  notice at such time and place as shall from time to time be  determined
by the board.

 2.09 Special Meetings. Special meetings of the Board of Directors may be called
by the president on three days' notice to each director, either personally or by
mail or by  telegram.  Special  meetings  shall be  called by the  president  or
secretary  in like  manner  and on like  notice on the  written  request  of two
directors.  Except as  otherwise  expressly  provided  by  statute,  Articles of
Incorporation,  or these Bylaws,  neither the business to be transacted  at, nor
the purpose of, any special  meeting  need be specified in a notice or waiver of
notice. See also Bylaws 4.01 and 4.02.

2.10 Quorum;  Majority Vote. At meetings of the Board of Directors a majority of
the number of directors fixed by these Bylaws shall  constitute a quorum for the
transaction  of business.  The act of a majority of the  directors  present at a
meeting at which a quorum is present shall be the act of the Board of Directors,
except  as  otherwise   specifically   provided  by  statute,  the  Articles  of
Incorporation,  or these Bylaws.  If a quorum is not present at a meeting of the
Board of Directors,  the directors  present may adjourn the meeting from time to
time,  without notice other than announcement at the meeting,  until a quorum is
present.

2.11  Conduct of Meetings.  Meeting of the Board of Directors  shall be presided
over by the  following  persons in the order of  seniority  and if  present  and
acting - the Chairman of the Board,  if any, the  president,  or in his absence,
any  director  selected  by  the  directors   present.   The  secretary  of  the
corporation,  or in his absence,  any person appointed by the presiding officer,
shall act as secretary of the Board of Directors.

2.12 Compensation. By resolution of the Board of Directors, the

                                        8

<PAGE>



directors may be paid their  expenses,  if any, of attendance at each meeting of
the  Board  of  Directors  and may be paid a fixed  sum for  attendance  at each
meeting  of the  Board of  Directors  or a stated  salary as  director.  No such
payment shall  preclude any director from serving the  corporation  in any other
capacity  and  receiving  compensation  therefore.  (members  of  the  executive
committee or of special or standing  committees  may, by resolution of the Board
of Directors, be allowed like compensation for attending committee meetings.)

2.13  Procedure.  The Board of  Directors  shall  keep  regular  minutes  of its
proceedings. The minutes shall be placed in the minute book of the corporation.

2.14 Action Without  Meeting.  Any action required or permitted to be taken at a
meeting of the Board of Directors may be taken without a meeting if a consent in
writing,  setting forth the action so taken, is signed by all the members of the
Board of  Directors.  Such  consent  shall  have the same  force and effect as a
unanimous  vote at a meeting.  The signed  consent,  or a signed copy,  shall be
placed in the minute book.

2.15 Telephone and Similar Meetings. See Bylaw 1.11.

2.16 Interested Directors, Officers and Security holders.

      (A) No contract or  transaction  between a corporation  and one or more of
its directors or officers,  or between a corporation and any other  corporation,
partnership,  association,  or other  organization  in which  one or more of its
directors  or officers are  directors or officers or have a financial  interest,
shall be void or voidable solely for this reason, solely because the director or
officer is present at or  participates  in the meeting of the board or committee
thereof which  authorizes the contract or transaction,  or solely because his or
their votes are counted for such purposes, if:

               (1) The material facts as to his  relationship or interest and as
to the  contract  or  transaction  are  disclosed  or are  known to the board of
directors or the committee,  and the board or committee in good faith authorizes
the  contract  or  transaction  by the  affirmative  vote of a  majority  of the
disinterested directors,  even though the disinterested directors be less than a
quorum; or

               (2) The material facts as to his  relationship or interest and as
to the contract or  transaction  are disclosed or are known to the  shareholders
entitled to vote  thereon,  and the  contract  or  transaction  is  specifically
approved in good faith by vote of the shareholders; or

               (3) The contract or transaction is fair as to the  corporation as
of the time it is authorized, approved, or ratified by the board of directors, a
committee thereof, or the shareholders.


                                        9

<PAGE>



      (B) Common or  interested  directors  may be counted  in  determining  the
presence  of a quorum at a meeting of the board of  directors  or of a committee
which authorizes the contract or transaction.

      (C)  Non-Exclusive.  This provision shall not be construed to invalidate a
contract or transaction which would be valid in the absence of this provision.

2.17  Committees.  The Board of Directors may appoint  Committees from among its
members  which,  in each case,  shall have such  duties,  authority,  rights and
powers as the Board of Directors  may  determine,  or as  otherwise  provided in
these Bylaws. If not appointed as a member of any such committee,  the President
shall be an ex officio  member of each  committee  so  appointed by the Board of
Directors.

2.18 Committee Procedures. A majority of the members of each Committee shall fix
and prescribe the rules for its procedure which shall not be  inconsistent  with
law or these Bylaws.  Each Committee shall keep full and complete minutes of all
its meetings and the presiding  member  thereof shall report all action taken to
the first Directors' meetings succeeding such action. The Board of Directors may
modify,  alter,  revise  and/or  approve  any  actions  taken by any  Committee;
provided  that no rights or acts of third  parties shall be affected by any such
modification,  alteration or revision. The term of each member of all committees
shall expire on the day of the next annual meeting of the shareholders following
such member's appointment.

2.19 Advisory Directors. The Board of Directors may appoint individuals who need
not be officers or employees of the  Corporation to serve as Advisory  Directors
and may fix fees or other  compensation  for their attendance at meetings of the
Board of Directors.  Such Advisory  Directors shall be ex officio members of the
Board of Directors, without vote. The duties of such Advisory Directors shall be
to meet with and advise the Board of Directors, but only when so requested by he
President,  Chairman of the Board, or majority of the Directors, with respect to
all or any part of the  business,  affairs,  policies  and/or  operations of the
Corporation.  Advisory Directors shall not be considered official members of the
Board of Directors for the purposes of notice,  quorum,  voting  requirements or
liability. The term of office of each Advisory Director shall be at the pleasure
of the Board of  Directors,  but shall  always  expire on the day of the  annual
meeting of shareholders following the appointment of such Advisory Director.

2.20 Authority to execute  Instruments.  These Bylaws provide certain  authority
for the execution of  instruments.  The Board of Directors,  except as otherwise
provided in these Bylaws,  may  additionally  authorize any officer or officers,
agent or  agents,  to  enter  into any  contract  or  execute  and  deliver  any
instrument in the name of an on behalf of the  Corporation,  and such  authority
may be general or confined to specific instances. Unless expressly

                                       10

<PAGE>



authorized  by these have any power or authority to bind the  Corporation  by an
contract  or  engagement  nor to  pledge  its  credit  nor to  render  it liable
pecuniarily for any purpose or in any amount.

2.21  Execution of certain  Instruments.  Formal  contracts or the  Corporation,
promissory notes, deeds, deeds of trust, mortgages, pledges, and other evidences
of indebtedness of the Corporation,  other corporate documents, and certificates
of  ownership  of  liquid  assets  held by the  Corporation  shall be  signed or
endorsed by the  President  or any Vice  President  and by the  Secretary or the
Treasurer, unless otherwise specifically determined by the Board of Directors or
otherwise required by law.

                       ARTICLE THREE: EXECUTIVE COMMITTEE

3.01  Designation.  The Board of  Directors  may,  by  resolution  adopted  by a
majority of the whole board,  designate an executive committee.  The designation
of a committee of the Board of Directors and the delegation thereto of authority
shall not operate to relieve the board of directors,  or any member thereof,  of
any responsibility imposed by law.

3.02 Number;  Qualification;  Term. The executive committee shall consist of one
or more directors,  one of whom shall be the president.  The executive committee
shall serve at the pleasure of the Board of Directors.

3.03  Authority.  The  executive  committee,  to the  extent  provided  in  such
resolution,  shall have and may  exercise  all of the  authority of the Board of
Directors in the  management  of the  business  and affairs of the  corporation,
including authority over the use of the corporate seal.  However,  the executive
committee shall not have the authority of the board in reference to:


      (A)      Reduce earned or capital surplus;

      (B)      Approve a plan of merger not requiring shareholder approval;

      (C) Approve or recommend to shareholders  actions or proposals required by
the New Mexico Corporation Code to be approved by shareholders;

      (D)      Declare dividends or distributions;

      (E) Authorize or approve the  reacquisition of shares unless pursuant to a
general formula or method specified by board of directors;

      (F)      Amend the bylaws;



                                       11

<PAGE>



      (G)      Fill vacancies on the board of directors or any committee
thereof;

      (H)      Authorize or approve the issuance or sale of, or any contract to
issue or sale, shares or designate the terms of a series of a class of shares;

3.04  Change  in  Number.  The  number of  executive  committee  members  may be
increased or decreased from time to time by resolution  adopted by a majority of
the whole Board of Directors.

3.05 Removal.  Any member of the executive committee may be removed by the Board
of Directors by the affirmative vote of a majority of the whole board,  whenever
in its judgment the best interests of the corporation will be served thereby.

3.06  Vacancies.  A vacancy  occurring  in the  executive  committee  (by death,
resignation,  removal or  otherwise)  may be filled by the Board of Directors in
the manner provided for original designation in Bylaw 3.01.

3.07 Meetings.  Time, place and notice, (if any) of executive committee meetings
shall be determined by the executive committee. See also Bylaws 4.01 and 4.02.

3.08 Quorum;  Majority Vote. At meetings of the executive committee,  a majority
of the number of members designated by the Board of Directors shall constitute a
quorum for the  transaction  of  business.  The act of a majority of the members
present  at any  meeting  at which a quorum is  present  shall be the act of the
executive committee,  except as otherwise  specifically provided by statute, the
Articles  of  Incorporation,  or these  Bylaws.  If a quorum is not present at a
meeting of the executive  committee,  the members present may adjourn the meting
from time to time,  without  notice other than an  announcement  at the meeting,
until a quorum is present.

3.09 Compensation. See Bylaw 2.12.

3.10  Procedure.  The  executive  committee  shall keep  regular  minutes of its
proceedings  and report the same to the Board of Directors  when  required.  The
minutes of the  proceedings  of the executive  committee  shall be placed in the
minute book of the corporation.

3.11 Action Without  Meeting.  Any action required or permitted to be taken at a
meeting of the  executive  committee may be taken without a meeting if a consent
in writing,  setting forth the action so taken,  is signed by all the members of
the executive committee.  Such consent shall have the same force and effect as a
unanimous  vote at a meeting.  The signed  consent,  or a signed copy,  shall be
placed in the minute book.

3.12 Telephone and Similar Meetings. See Bylaw 1.11.

                                       12

<PAGE>




3.13  Responsibility.   The  designation  of  an  executive  committee  and  the
delegation  of  authority  to it shall  not  operate  to  relieve  the  Board of
Directors,  or any members thereof, of any responsibility imposed upon it or him
by law.

                              ARTICLE FOUR: NOTICE

4.01 Method.  Whenever by statute, the Articles of Incorporation,  these Bylaws,
or otherwise, notice is required to be given to a director, committee member, or
security  holder,  and no provision is made as to how the notice shall be given,
it shall not be construed to mean  personal  notice,  but any such notice may be
given:  (a) in writing,  by mail,  postage  prepaid,  addressed to the director,
committee  member,  or security holder at the address  appearing on the books of
the  corporation;  or (b) in any  other  method  permitted  by law.  Any  notice
required or permitted to be given by mail shall be deemed given at the time when
the same is thus deposited in the United States mail.

4.02  Waiver.  Whenever,  by statute or the Articles of  Incorporation  or these
Bylaws, notice is require to be given to a security holder, committee member, or
director,  a waiver thereof in writing signed by the person or persons  entitled
to such notice, whether before or after the time stated in such notice, shall be
equivalent  to  the  giving  of  such  notice.  Attendance  at a  meeting  shall
constitute a waiver of notice of such meeting, except where a person attends for
the express  purpose of  objecting  to the  transaction  of any  business on the
grounds that the meeting is not lawfully called or convened.

                        ARTICLE FIVE: OFFICERS AND AGENTS

5.01 Number; Qualification; Election; Term.

      (A) The  corporation  shall have:  (1) a president,  a vice  president,  a
secretary and a treasurer;  and (2) such other officers (including a chairman of
the board and vice presidents) and assistant officers and agents as the Board of
Directors  may think  necessary.  In its  discretion  the board of directors may
leave unfilled any office except those of president and secretary.

      (B) No officer or agent need by a shareholder, a director or a resident of
New Mexico.

      (C)  Officers  name in Bylaw  5.01(A)  shall be  elected  by the  Board of
Directors ont he expiration  of an officer's  term or whenever a vacancy  exists
and may be elected by the board at any meeting.

      (D) Unless  otherwise  specified  by the board at the time of  election or
appointment,  or in an employment contract approved by the board, each officer's
and  agent's  term shall end at the first  meeting of  directors  after the next
annual meeting of shareholders.  He shall serve until the end of his term or, if
earlier, his death, resignation,

                                       13

<PAGE>



or removal.

      (E) Any two or more  offices  may be held by the same  person,  except  he
offices of president and secretary.

5.02  Removal.  Any  officer  or agent  elected  or  appointed  by the  Board of
Directors may be removed by the Board of Directors  whenever in its judgment the
best interests of the corporation will be served thereby.  Such removal shall be
without  prejudice  to the  contract  rights,  if any, of the person so removed.
Election  or  appointment  of an  officer  or agent  shall not of itself  create
contract rights.

5.03  Vacancies.  Any vacancy  occurring  in any office of the  corporation  (by
death,  resignation,  removal  or  otherwise)  may be  filled  by the  Board  of
Directors.

5.04  Authority.  Officers and agents shall have such authority and perform such
duties in the  management of the  corporation as are provided in these Bylaws or
as may be determined  by  resolution of the Board of Directors not  inconsistent
with these Bylaws.

5.05 Compensation.  The compensation of the president, all vice-presidents,  the
secretary  and the  treasurer  may be fixed by the Board of  Directors,  but the
compensation  of all minor  officers and all other  agents and  employees of the
Corporation  may be fixed by the  president,  unless by resolution  the Board of
Directors shall determine otherwise; provided, however, that without the express
approval  of the  Board  of  Directors  the  president  may not  enter  into any
employment  agreement on behalf of the Corporation with any person which may not
be terminated by the Corporation either at will or upon thirty (30) days written
notice.

5.06  President.  The  president  shall be the chief  executive  officer  of the
corporation;  he shall preside at all meetings of the shareholders and the Board
of  Directors,  shall have  general and active  management  of the  business and
affairs of the  corporation,  shall see that all orders and  resolutions  of the
board are carried into effect.  He shall perform such other duties and have such
other  authority  and  powers  as the Board of  Directors  may from time to time
prescribe.

5.07 Vice President. The vice presidents, if any shall have been elected, in the
order of their seniority, unless otherwise determined by the Board of Directors,
shall,  in the absence or  disability of the  president,  perform the duties and
have the authority and exercise the powers of the president.  They shall perform
such  other  duties  and have such  other  authority  and powers as the Board of
Directors  may from time to time  prescribe or as the president may from time to
time delegate.

5.08 Secretary.



                                       14

<PAGE>



      (A) The secretary  shall attend all meetings of the Board of Directors and
all meetings of the shareholders  and record all votes,  actions and the minutes
of all  proceedings in a book to be kept for that purpose and shall perform like
duties for the executive and other committees when required.

      (B) He shall  give,  or cause to be given,  notice of all  meetings of the
shareholders and special meetings of the Board of Directors.

      (C) He shall keep in safe custody the seal of the  corporation  and,  when
authorized by the Board of Directors or the executive committee, affix it to any
instrument  requiring it. When so affixed, it shall be attested by his signature
or by the signature of the treasurer or an assistant secretary.

      (D) He shall be under the  supervision of the president.  He shall perform
such  other  duties  and have such  other  authority  and powers as the Board of
Directors  may from time to time  prescribe or as the president may from time to
time delegate.

5.09 Treasurer.

      (A) The  treasurer  shall  have the  custody  of the  corporate  funds and
securities   and  shall  keep  full  and  accurate   accounts  of  receipts  and
disbursements  of the  corporation  and  shall  deposit  all  moneys  and  other
valuables  in the name and to the  credit  of the  corporation  in  depositories
designated by the Board of Directors.

      (B) He shall disburse the funds of the corporation as ordered by the Board
of Directors, and prepare financial statements as they direct.

      (C) If required by the Board of Directors, he shall give the corporation a
bond (in such form,  in such sum,  and with such  surety or sureties as shall be
satisfactory  to the board) for the  faithful  performance  of the duties of his
office  and for  the  restoration  to the  corporation,  in  case of his  death,
resignation,  retirement or removal from office, of all books, papers, vouchers,
money and other property of whatever kind in his possession or under his control
belonging to the corporation.


      (D) He shall  perform such other duties and have such other  authority and
powers  as the Board of  Directors  may from  time to time  prescribe  or as the
president may from time to time delegate.

                   ARTICLE SIX: CERTIFICATES AND SHAREHOLDERS

6.01 Certificates. Certificates in the form determined by the Board of Directors
shall be delivered  representing all shares to which  shareholders are entitled.
Certificates  shall be consecutively  numbered and shall be entered in the books
of the corporation as they

                                       15

<PAGE>



are issued.  Each  certificate  shall state on its face the holder's  name,  the
number and class of  shares,  the par value of shares or a  statement  that such
shares are without par value,  and such other matters as may be required by law.
It shall be signed by the  president or a vice  president and such other officer
or officers as the Board of Directors  shall  designate,  and may be sealed with
the  seal  of the  corporation  or a  facsimile  thereof.  If a  certificate  is
registered by a registrar  (either of which is other than the  corporation or an
employee of the corporation), the signature of any officer may be facsimile.

6.02 Issuance.  Shares (both treasury and authorized but unissued) may be issued
for such  consideration  (not less than par  value)  and to such  persons as the
Board of Directors may  determined  from time to time.  Shares may not be issued
until the full amount of the  consideration,  fixed as provided by law, has been
paid.

6.03 Payment for Shares.

      (A) Kind.  The  consideration  for the issuance of shares shall consist of
money  paid,  labor  done,   (including  services  actually  performed  for  the
corporation) or property  (tangible or intangible)  actually  received.  Neither
promissory notes nor the promise of future services shall constitute payment for
shares.

      (B) Valuation. In the absence of fraud in the transaction, the judgment of
the  Board of  Directors  as to the  value of  consideration  received  shall be
conclusive.

      (C) Effect. When  consideration,  fixed as provided by law, has been paid,
the shares  shall be deemed to have been  issued and shall be  considered  fully
paid and nonassessable.

      (D) Allocation of  Consideration.  The  consideration  received for shares
shall be allocated by the Board of Directors,  in accordance  with law,  between
stated capital and capital surplus accounts.

6.04  Lien.  For any  indebtedness  of a  shareholder  to the  corporation,  the
corporation  shall have a first and prior lien on all shares of its stock  owned
by him and on all dividends or other distributions declared thereon.

6.05 Lost, Stolen or Destroyed  Certificates.  The corporation shall issue a new
certificate  in place of any  certificate  for shares  previously  issued if the
registered owner of the certificate:

      (A) Claim. Makes proof in affidavit form that it has been lost,  destroyed
or wrongfully taken; and

      (B) Timely Request.  Requests the issuance of a new certificate before the
corporation has notice that the certificate has been acquired by a purchaser for
value in good faith and without notice of

                                       16

<PAGE>



an adverse claim; and

      (C) Bond.  Gives a bond in such form,  and with such  surety or  sureties,
with fixed or open  penalty,  as the  corporation  may direct,  to indemnify the
corporation  (and its transfer  agent and  registrar,  if any) against any claim
that may be made on account of the alleged  loss,  destruction,  or theft of the
certificate; and

      (D)  Other  Requirements.  Satisfies  any  other  reasonable  requirements
imposed  by the  corporation.  When a  certificate  has  been  lost,  apparently
destroyed  or  wrongfully  taken,  and the holder of record  fails to notify the
corporation  within  a  reasonable  time  after  he has  notice  of it,  and the
corporation  registers a transfer of the shares  represented by the  certificate
before  receiving  such  notification,  the holder of record is  precluded  from
making  any  claim  against  the  corporation  for  the  transfer  or  for a new
certificate.

6.06  Transfer  of  Shares.  Shares of the  Corporation  may be  transferred  by
endorsement  by the  signature  of the  owner,  his  agent,  attorney,  or legal
representative,  and the  delivery of the  certificate.  The  transferee  in any
transfer  of shares  shall be deemed to have full  notice of, and to consent to,
the Bylaws of the  corporation  to the same extent as if he had signed a written
assent thereto.

6.07 Registered Owner. Prior to the due presentment for registration of transfer
of a certificate for shares,  the corporation may treat the registered  owner as
the person  exclusively  entitled to vote,  to receive  notices and otherwise to
exercise all the rights and powers of a shareholder.

6.08 Preemptive Rights.  Shareholders or other persons shall not have preemptive
rights.

6.09 Cumulative Voting.  Shareholders or other persons shall not have cumulative
voting rights.

6.10 Transfer agents and  registrars.  The Board of Directors may appoint one or
more transfer agents or transfer  clerks,  and one or more  registrars,  at such
times and places as the  requirements of the Corporation may necessitate and the
Board of Directors may designate.  Each registrar appointed, if any, shall be an
incorporated bank or trust company, either domestic or foreign.

6.11  Conditions  of Transfer.  The party in whose name shares of stock stand on
the books of the  Corporation  shall be deemed the owner  thereof as regards the
Corporation,  provided  that  whenever  any transfer of shares shall be made for
collateral security, and not absolutely,  and prior written notice thereof shall
be given to the Secretary of the Corporation,  or to its transfer agent, if any,
such fact shall be state in the entry of the transfer.


                                       17

<PAGE>



6.12  Reasonable  doubts as to right to  Transfer.  When a transfer of shares is
requested and there is reasonable  doubt as to the rights of the person  seeking
the  transfer,  the  Corporation  or its transfer  agent,  before  recording the
transfer of shares in its books or issuing any certificate therefor, may require
from the person seeking the transfer  reasonable proof of that person's right to
the transfer.  If there remains a reasonable doubt of the right to the transfer,
the Corporation may refuse a transfer unless the person gives adequate  security
or a bond of  indemnity  executed  by a  corporate  surety or by two  individual
sureties  satisfactory to the Corporation as to form, amount, and responsibility
of sureties. The bond shall be conditioned  registrars,  or any of them, against
any loss, damage, expense, or other liability to the transfer or the issuance of
a new certificate for shares.

                        ARTICLE SEVEN: GENERAL PROVISIONS

7.01 Dividends and Reserves.

      (A)  Declaration  and  Payment.  Subject to statute  and the  Articles  of
Incorporation,  dividends on the outstanding shares may be declared by the Board
of Directors at any annual,  regular or special meeting and may be paid in cash,
in property, or in shares of the corporation.  The declaration and payment shall
be at the discretion of the Board of Directors.

      (B) Record Date.  The Board of Directors  may fix in advance a record date
for the purpose of determining  shareholders  entitled to receive payment of any
dividend,  the record  date to be not more than fifty days prior to the  payment
date of such  dividend,  or the Board of Directors may close the stock  transfer
books for such  purpose  for a period of not more than  fifty  days prior to the
payment  date of such  dividend.  In the  absence  of any action by the Board of
Directors,  the date upon which the board of  directors  adopts  the  resolution
declaring the dividend shall be the record date.

      (C) Reserves. By resolution the Board of Directors may create such reserve
or reserves out of the earned  surplus of the  corporation as the directors from
time to time, in their discretion, think proper to provide for contingencies, or
to equalize dividends, or to repair or maintain any property of the corporation,
or for any other purpose they think beneficial to the corporation. The directors
may modify or abolish any such reserve in the manner in which it was created.

7.02 Books and Records.  The  corporation  shall keep correct and complete books
and  records  of  account  and shall  keep  minutes  of the  proceedings  of its
shareholders and Board of Directors,  and shall keep at its registered office or
principal  place  of  business,  or at the  office  of  its  transfer  agent  or
registrar,  a record of its shareholders,  giving the names and addressed of all
shareholders and the number and class of the shares held by each.


                                       18

<PAGE>



7.03 Execution of Instruments. All corporate instruments and documents are to be
so signed or counter-signed,  executed, verified or acknowledged by such officer
or officers or other  person or persons as the board may from time to time elect
to designate.

      All  checks,  drafts or other  orders for the  payment of money,  notes or
other evidences of indebtedness  issued in the name of the corporation  shall be
signed by such officer or officers,  agent or agents of the corporation,  and in
such manner as shall be determined from time to time by resolution of the board.

7.04 Fiscal Year. The fiscal year of the corporation  shall end on June 30th, or
as set by the Board of Directors.

7.05 Indemnification.

               (A) The corporation shall indemnify any person made a party to an
action or proceeding by or in the right of the corporation to procure a judgment
in its favor by reason of the fact that such person,  that person's  testator or
intestate, is or was a director,  officer or employee of the corporation against
the reasonable  expenses,  including  attorneys'  fees actually and  necessarily
incurred  by such  person  in  connection  with the  defense  of such  action or
proceeding,  or in  connection  with the appeal  therein,  except in relation to
matters  as to which  such  person is  adjudged  to have  breached a duty to the
corporation; and

               (B) The corporation shall indemnify any person made or threatened
to be made a party to an action or proceeding  other than one by or in the right
of the  corporation  to  procure  a  judgment  in its  favor,  whether  civil or
criminal,  including any action by or in the right of any other  corporation  of
any type or kind, domestic or foreign, which any director officer or employee of
the  corporation  served in any capacity at the request of the  corporation,  by
reason of the fact that such person, such person's testator or intestate,  was a
director  or  officer  or  employee  of the  corporation,  or served  such other
corporation in any capacity against judgments, fines, amounts paid in settlement
and reasonable  expenses,  including  attorney's  fees actually and  necessarily
incurred as a result of such action or  proceeding,  or any appeal  therein,  if
such person acted in good faith,  for a purpose which he reasonably  believed to
be in the  best  interests  of the  corporation  and,  in  criminal  actions  or
proceedings,  in  addition  had no  reasonable  cause to be  believe  that  such
person's conduct was unlawful.


7.06 Seal. The  corporation  seal (of which there may be one or more  exemplars)
shall  contain  the  name of the  corporation  and  the  name  of the  state  of
incorporation.  The seal may be used by impressing it or reproducing a facsimile
of it, or otherwise. The seal on the certificates for shares or on any corporate
obligation for the payment of money may be facsimile, engraved or printed.

                                       19

<PAGE>




7.07 Resignation. Any director, committee member, officer or agent may resign by
giving written notice to the president or the secretary.  The resignation  shall
take  effect  at the  time  specified  therein,  or  immediately  if no  time is
specified.   Unless  otherwise   specified  therein,   the  acceptance  of  such
resignation shall not be necessary to make it effective.

7.08 Amendment of Bylaws.

               (A) These Bylaws may only be altered, amended, or repealed at any
meeting  of the  Board  of  Directors  at  which a  quorum  is  present,  by the
affirmative  vote of a  majority  of the  directors  present  at  such  meeting,
provided the directors have received  notification  of the proposed  alteration,
amendment, or repeal at least three days prior to the meeting.


               (B) These Bylaws may also be altered,  amended or repealed at any
meeting of the Shareholders at which a quorum is present or represented,  by the
affirmative  vote  of the  holders  of a  majority  of  the  shares  present  or
represented at the meeting and entitled to vote there at, provided notice of the
proposed  alteration,  amendment  or repeal is  contained  in the  notice of the
meeting.


7.09 Meaning of Certain Terms.  As used herein in respect of the right to notice
of a meeting of shareholders or a waiver thereof or to participate or vote there
at or to consent or dissent in writing in lieu of a meeting, as the case may be,
the term "share" or "shares" or  "shareholder"  or  "shareholders"  refers to an
outstanding  share or shares and to a holder or holders of record of outstanding
shares when the corporation is authorized to issue only one class of shares, and
said reference is also intended to include any  outstanding  share or shares and
any holder or holders of record of outstanding shares of any class upon which or
upon whom the Articles of  Incorporation  confer such rights where there are two
or more  classes  or series of shares or upon  which or upon whom the New Mexico
Corporation  Code  confers  such  rights  notwithstanding  that the  Articles of
Incorporation  may provide  for more than one class or series of shares,  one or
more of which are limited or denied such rights thereunder.

7.10 Construction. Whenever the context so requires, the masculine shall include
the  feminine  and neuter,  and the  singular  shall  include  the  plural,  and
conversely.  If any  portion of these  Bylaws  shall be invalid or  inoperative,
then, so far as is reasonable and possible:

      (A)      The remainder of these Bylaws shall be considered valid and
operative, and



                                       20

<PAGE>



      (B)      Effect  shall be given to the intent  manifested  by the portion
held invalid or inoperative.

7.11 Table of  Contents;  Headings.  The table of contents  and headings are for
organization, convenience, and clarity. In interpreting these Bylaws, they shall
be subordinated in importance to the other written material.

7.12  Relation to Articles of  Incorporation.  These  Bylaws are subject to, and
governed by, the Articles of Incorporation.

7.13 Share Register.  The Corporation  shall keep at the registered or principal
office,  or at the office of the transfer agent, a share  register,  showing the
names of the  Shareholders,  their  addresses,  the  number  and class of shares
issued by each, the number and date of certificates  issued for such shares, and
the  number  and date of  cancellation  of  every  certificate  surrendered  for
cancellation.  The above  specified  information  may be kept on an  information
storage device such as electronic data processing  equipment,  provided that the
equipment is capable of reproducing  the information in clearly legible form for
the purposes of inspection by any shareholder,  Director,  Officer,  or agent of
the  Corporation  during  regular  business  hours.  If the  Corporation  elects
taxation under  Internal  Revenue Code Section 1244 or Subchapter S. the officer
issuing shares shall ensure that the appropriate requirements regarding issuance
of share are maintained in effect.

7.14 Books of Account.  The  Corporation  shall  maintain  correct and  adequate
accounts of its properties and business transactions,  including accounts of its
assets, liabilities,  receipts,  disbursement,  gains, losses, capital, surplus,
and shares.  The  corporate  bookkeeping  procedures  shall  conform to accepted
accounting  practices for the business or businesses in which the Corporation is
engage. Subject to the foregoing, the chart of financial accounts shall be taken
from, and designed to facilitate  preparation of, current corporate tax returns.
Any surplus, including earned surplus, paid-in surplus, and surplus arising from
a reduction of stated capital, account. If the Corporation elects taxation under
Internal  Revenue  Code Section  1244 or  Subchapter  S, the officers and agents
maintaining  the books of account  and  issuing  shares  shall  ensure  that the
appropriate requirements are maintained in effect.



                                       21

<PAGE>


                                     * * * *

                           SIGNATURES AND ATTESTATION

Adopted by the Board of Directors on this 27th day of December, 1992.

                                            s/Robert E. Barbee
                                            -------------------------------
                                            Robert E. Barbee, Director

                                            s/Tasso Getsos
                                            -------------------------------
                                            Tasso Getsos, Director

                                            s/G.W. Aubrey
                                            -------------------------------
                                            G.W. Aubrey, Director



                                       22

<PAGE>



Exhibit 10.10 Minutes of Board of Directors Meeting dated January 15, 1999.

                           ComTec International, Inc.
                                Quarterly Meeting
                           BOARD OF DIRECTORS MEETING
                                January 15, 1999

On January 15, 1999 a regular  quarterly  meeting of the BOARD OF  DIRECTORS  of
ComTec  International,  Inc. was held at the offices of the  Corporation  on the
date and time previously  specified for a regular quarterly meeting of the board
of directors,  notice of meeting is waived and the  undersigned  directors take,
ratify,  confirm and approve  the  following  actions as if at a duly called and
formally noticed meeting:

James J. Krejci, acting chairman, called the meeting to order with the following
agenda presented to the Board of Directors:

         (1)  Acceptance  of  recorded  minutes of last  meeting of the Board of
              Directors.
         (2)  Ratification of the sale of giant LED Screens to LanStar
              Computer  Products,  Inc.
         (3)  Ratification of the letter of intent with Chadmoore Wireless
              Group, Inc.
         (4)  Purchase of an insurance policy for Director and Officer Liability
              Insurance
         (5)  Recognition of liability for common stock issuance to Marc Maassen
              as outside director compensation to Mr. Maassen
         (6)  Conversion of the Corporation  from a New Mexico  Corporation to a
              Delaware  Corporation
         (7)  Employment  Contract and compensation  issues with Mr. Krejci
         (8)  Employment  Contract and  compensation  issues with Mr.  Dihle
         (9)  Filing of 8K to update recent events involving the Corporation
              sale of LED Screens.

Following opening formalities, a review of the agenda and reading of prior board
of director minutes, the business of the meeting began.

The  Chairman  provided  the Board with the copies of  recorded  minutes of last
meeting of the Board of Directors held November 11, 1998. The Board  unanimously
approved  the reported  minutes of the special  meeting of directors as recorded
for November 11, 1998.

The Chairman  raised the issue of the need to formally  ratify the sale of giant
LED Screens to LanStar Computer  Products,  Inc. The Chairman provided the Board
with the copies of the final Purchase  Agreement and Promissory Note executed by
LanStar Computer Products, Inc. on December 31, 1998.

After discussion,  presentation of the issue and vote thereon the members of the
Board unanimously determined that:

          RESOLVED:  That  the  Board of  Directors  of the  Corporation
          hereby authorizes and ratifies the sale of giant LED Screens
          to LanStar Computer Products, Inc. pursuant to the Purchase
          Agreement and Promissory Note executed by LanStar Computer
          Products, Inc. on December 31, 1998.

The  Chairman  raised  the issue of the need to  formally  ratify  the letter of
intent with Chadmoore Wireless Group, Inc., which letter of intent calls for the
potential sale of FCC license and associated business owned by American Wireless
Network,  Inc.  together with the lease of equipment owned by American  Wireless
Network,  Inc. to Chadmoore Wireless Group, Inc. The Chairman provided the Board
with the copies of the letter of intent  executed by Chadmoore  Wireless  Group,
Inc. on December, 1998.

After discussion,  presentation of the issue and vote thereon the members of the
Board unanimously determined that:

          RESOLVED:  That the Board of  Directors of the Corporation
          hereby  authorizes  and  ratifies  the letter of intent
          with Chadmoore Wireless Group, Inc.



<PAGE>



         FURTHER RESOLVED:  That the officers of the Corporation
         are authorized and directed to move forward to complete
         and execute a detailed formalized contract with Chadmoore
         Wireless Group, Inc. and finalize all arrangements for the
         sale and lease as outlined in the letter of intent.

The Chairman  raised the issue of the need to provide  director  compensation by
payment  of .001 par value  common  shares of the  Company  to Marc  Maassen  as
remuneration  to this  individual  for  director  services to the  Company.  The
qualified  stock option plan ratified by the  shareholders at the annual meeting
of the  Corporation  on March 28,  1997,  calls for  issuance of options to each
outside director for a total of 14,000 shares.  Additional discussion called for
the  authorization  of 36,000  additional  shares to Mr.  Maassen given that Mr.
Maassen is serving as a director without cash compensation.

After discussion,  presentation of the issue and vote thereon,  with Mr. Maassen
abstaining, the two voting members of the Board unanimously determined that:

         RESOLVED:  That the Board of Directors of the Corporation
         hereby authorizes and directs its Transfer Agent to issue
         stock certificates of ComTec International, Inc. for shares
         of the $.001 par value common stock of ComTec International,
         Inc. to Marc Maassen in the amounts described below:

         Director Compensation:  .001 par value common shares to be
         issued to Marc Maassen: 36,000 shares.  These shares are to
         be valued at 80% of the closing bid price as of 1/15/99 (.023)
         for total of $662.40

         FURTHER RESOLVED: That the Board of Directors of the
         Corporation hereby authorizes issuance of a option to Marc
         Maassen for 14,000 shares of .001 par value  common  shares
         in  accordance  with the  Corporation's qualified stock
         option plan.

The  Chairman  raised the issue of the  desirability  of director  and  officers
liability  insurance  and  presented  the  opportunity  to purchase an insurance
policy for Director and Officer Liability Insurance. After review and discussion
of the issues of cost versus benefits to the Corporation the issue of whether to
purchase directors and officers liability insurance was put to vote.

After discussion, presentation of the issue and vote thereon, the members of the
Board unanimously determined that:

         RESOLVED:  That the Board of Directors of the Corporation
         hereby authorizes and empowers the Corporation's officers
         to purchase the available policy of Directors and Officers
         Liability Insurance.

Mr. Dihle raised the concept of  converting  the  Corporation  from a New Mexico
Corporation  to a Delaware  Corporation  in order to achieve  certain  corporate
advantages and added corporate  flexibility  offered by Delaware  statutes which
are not  available  under  New  Mexico  law.  The  issue  of  converting  ComTec
International,  Inc. to a Delaware  corporation and related matters of costs and
necessary shareholder approvals was discussed.

After discussion, presentation of the issue and vote thereon, the members of the
Board unanimously determined that:

         RESOLVED: That the Board of Directors of the Corporation
         hereby directs and authorizes the Corporation's  secretary
         and general counsel prepare documents  and  presentations
         necessary  for inclusion of the issue of whether to convert
         the  Corporation to a Delaware Corporation in the
         Corporation's proxy and proxy solicitation to be presented
         to its shareholders at its next annual meeting.

The  Chairman  raised  the issue of the  desirability  of  resolving  employment
contract and compensation issues with Mr. Krejci and Mr. Dihle.




<PAGE>



On February 16, 1998, the Company entered into a letter agreement, which remains
to be  formalized,  by which James Krejci  became  employed as Chief  Operations
Officer of the  Company  and  President  and CEO of AWN.  On August 26, 1998 Mr.
Krejci was elected to the Corporation's Board of Directors. On September 2, 1998
Mr.  Krejci was  appointed as CEO of President  of the  Corporation.  The letter
agreement  calls  for  a  minimum  three  year  employment  agreement  with  the
opportunity for Mr. Krejci to obtain, through common stock option agreements, up
to ten percent (10%) of the outstanding common stock of the Company over a three
year period.  The  preliminary  agreement  calls for Mr. Krejci to receive stock
options vesting in monthly increments to equal to a total of 5% of the Company's
outstanding  common  shares  over a three  year  period.  Options  to  obtain an
additional 5% of the Company's  outstanding  common shares are conditioned  upon
the  Company  reaching  certain  financial  and   administrative   goals  within
established  timelines.  Pursuant to the Board of  Directors  Resolution  at the
meeting  held  October 7, 1998,  Mr.  Krejci's  existing  letter  agreement  was
modified to provide  that the stock  options  provided to him by that  agreement
shall  have  a  strike  price  equal  to  80%  the  closing  bid  price  of  the
Corporation's common stock on 9-2-98 of $.07 ($.056 per share).

Discussion  was then had  concerning the current  condition,  future  prospects,
financing and business  developments  related to the  Corporation.  The personal
financial  needs  and  continuing  sacrifice  of the  ability  to  pursue  other
opportunities  by the  individual  officers  in order to  maintain,  protect and
develop the potential of the Corporation for the benefit of the shareholders was
discussed.  The directors  agreed that although the Corporation has great future
potential,  it is currently in an uncertain and volatile position and its future
is  unpredictable.  Mr. Krejci  requested that his employment  contract  contain
specific  conditions  concerning  additional  early vesting of stock options and
continuation  of salary in the event of  termination  without  cause or due to a
change in  control  or  direction  of the  Corporation  in the  future.  Typical
compensation and termination  packages for executives of similar size public and
quasi public corporations were reviewed and discussed.

After  discussion,  presentation of the issue and vote thereon,  with Mr. Krejci
abstaining, the two voting members of the Board unanimously determined that:

         RESOLVED:  We agree and understand that the Corporation
         is currently in an uncertain and volatile position and its
         future is unpredictable. The promise of potential future
         benefit in the form of the stock options to Mr. Krejci is
         provided as reward for past  loyalty,  as an incentive to
         participate  in the growth of the  Company, and to provide
         potential rewards for foregoing other opportunities and
         assuming the risk and responsibility of long term employment
         as a member of ComTec's executive management team.  Since
         changes in control and/or direction of ComTec are a possibility,
         and the future is certainly changeable, the following paragraphs
         shall be made a part of the employment contract with respect
         to Mr. Krejci's  employment as CEO and President of ComTec
         and American Wireless Network, Inc. ("Executive").

               Termination  by Company  without  Cause.  The  Company
         may at any time, in its sole  discretion,  terminate the
         employment of Executive hereunder, without cause, by written
         notice to Executive. In the event of  termination of
         Executive's  employment by the Company under this Section
         without Cause (as defined below), Executive shall be entitled:
                a.  to  receive  immediate  vesting  of all  stock  options
                    to  which Executive  would  have  been  entitled  had his
                    employment  continued through the full term of his
                    employment contract;
                b.  reimbursement of any expenses otherwise  reimbursable
                    hereunder;
                c.  all salary earned through the date of such termination
                    and for an additional  thirty six months after notice
                    of termination, payable in one lump sum at the date
                    of termination.
                d.  such other and additional benefits provided under
                    the employment contract as may by its terms then be
                    applicable.
              Termination  "without cause" for purposes of this agreement
         shall mean (1) any reason which is not  specifically  defined
         as "Termination Due to Executive's Death or Disability" or
         "Termination With Cause" in the sections below; or (2) the
         substantial diminution of authority,


<PAGE>



         duties and/or  responsibilities of Executive due to a change
         of control, management or direction of the Company.

              Termination  by  Company  Due to  Executive's  Death or
         Disability.   In  the  event  of  Executive's  death  or  if
         Executive  is unable to  perform  his  duties  hereunder  by
         reason of illness or other physical or mental  infirmity for
         a period of one hundred eighty (180)  consecutive  days, the
         Company may terminate Executive's  employment hereunder.  In
         the event of such  termination,  Executive  (or his  Estate)
         shall be entitled: a. to receive, at times otherwise payable
         and subject to the other  provisions of this Agreement,  all
         of the stock  options  then  accrued and vested in Executive
         together with such other and  additional  benefits  provided
         under the  employment  contract  as may by its terms then be
         applicable.  b. all salary  earned  through the date of such
         termination  and  reimbursement  of any  expenses  otherwise
         reimbursable hereunder;

              Termination by Executive.  In the event  Executive
         terminates his employment hereunder other than by reason of
         a material breach of the provisions of this Agreement by the
         Company,  the Company shall pay any salary and expenses
         otherwise reimbursable accrued through the date of such
         termination, and, except as otherwise expressly provided this
         employment  contract in the event that  Executive then has
         qualified by age and service for retirement benefits under
         this employment contract, the Company shall have no other
         obligation to Executive hereunder, or otherwise with respect
         to his employment by the Company.

              Termination by Company for Cause.  The Company may at
         any time terminate the employment of Executive hereunder
         for "Cause," as defined below, in accordance with the
         following  procedure.  First, the Company shall give
         Executive written notice to the effect that the Board of the
         Company  intends to  consider  such  termination,  stating
         the time and place of the meeting of the Board for such
         purpose.  Second, Executive shall be afforded the opportunity
         to address the Board at such meeting with respect to the
         appropriateness of such termination.  Third, if the Board
         determines that Cause exists, by means of such procedures and
         based on such evidence as it may deem sufficient in the
         circumstances, it shall notify Executive of such determination,
         whereupon Executive's employment hereunder shall terminate.
         The  Board's good faith determination of the existence of
         Cause shall be final. As used in the Agreement, "Cause"
         means (i) the failure or refusal of Executive to substantially
         perform his duties hereunder (other than any such failure
         resulting from Executive's incapacity due to physical or
         mental illness), after written  notice from the Company
         stating the duties Executive is believed to be failing or
         refusing to perform and stating a reasonable period to cure
         such failure or refusal and the manner in which such cure
         may be effected;  or (ii) an act or acts of  dishonesty
         by Executive involving the Company; or (iii) conduct of
         Executive which is materially injurious to the Company,
         monetarily or otherwise, and the injurious effect of which
         conduct was known or reasonably should have been known to
         Executive;  or (iv) material  breach by Executive of this
         Agreement;  or (v)  commission by Executive of a felony.
         In the event Executive's employment hereunder is terminated
         by the Company for Cause pursuant to this Section, the
         Company shall pay to Executive any salary accrued through
         the date of such termination.  The Company shall remain
         obligated to provide or pay such other and additional benefits
         provided  under the employment contract as may by its terms
         then be vested and applicable.

              Non-Competition Covenant. Executive shall not, during
         the term of his employment by the Company and for the one-year
         period immediately following the end of his employment by the
         Company,  (a) unless Executive's employment by the Company was
         terminated by the Company without Cause, as defined above,
         act as an officer, director, employee, partner, or agent of,
         or invest in or lend money to, or own, directly or indirectly,
         any interest in, or participate in the control of, any
         corporation, partnership, joint venture or other business
         organization  which has an office or business located within
         the States of Colorado and which is engaged in the same business


<PAGE>



         as the Company or offer to any person  employed by the
         employment with any business entity with which Executive
         may become associated in any capacity other than the Company.

             Confidential  Information.  Executive shall not, except
         in the performance of his duties hereunder and for the benefit
         of the Company, disclose or reveal to any unauthorized  person
         any confidential information of the Company relating to the
         Company, to its subsidiaries or affiliates, or to any of the
         businesses operated by them, or any business invested in or
         funded by the Company, and Executive confirms that such
         information constitutes the exclusive property of the
         Company.

         FURTHER RESOLVED:  That since Mr. Krejci's one year
         anniversary is February 16, 1999, the Board will as soon
         as practical review Mr. Krejci's compensation package in
         accordance with the spirit of ordinal letter agreement
         and the additional duties and responsibilities undertaken
         by Mr. Krejci.

The Chairman than  requested  that a  preliminary  letter  agreement  negotiated
between the  Corporation's  President  and Mr. Dihle  providing for Mr. Dihle to
receive a set monthly salary, potential bonuses and stock options vesting over a
three year period with a strike  price based upon 80% of the market price of the
Corporation's  common  stock as of  9/2/98,  ($.056  per  share) the date of Mr.
Dihle's appointment by the board as acting  Secretary/Treasurer,  be ratified by
the Board of Directors.

After  discussion,  presentation  of the issue and vote thereon,  with Mr. Dihle
abstaining, the remaining Board members unanimously determined that:

         RESOLVED: That the letter agreement dated January 4,
         1999, executed by Mr. Krejci as President of ComTec and
         American Wireless Network, Inc. and by Mr. Dihle as
         Executive, a copy of which is attached hereto and
         incorporated by reference, is hereby ratified and
         accepted by the Board.

         FURTHER RESOLVED:  That the officers of the Corporation
         shall move forward as time permits to complete a
         detailed formalized contract with Mr. Dihle.

The Chairman  raised the issue of the need for Filing of an 8K to update  recent
events involving the sale of the giant LED screens to LanStar Computer Products,
Inc.

After  discussion,  presentation  of the  issue  and  vote  thereon,  the  Board
unanimously determined that:

         RESOLVED:  that Gordon Dihle is directed and authorized
         to approve, execute and file an 8K to update recent events
         involving the sale of the giant LED screens to LanStar
         Computer Products, Inc.

Mr. Dihle then presented and the Board discussed a preliminary business plan for
a Business Development Company, said plan to be potentially used as the business
plan for operations of a subsidiary of the Company.  After review and discussion
of the plan, Mr. Dihle was directed to continue  development of the plan and Mr.
Krejci indicated that he would began making inquiries as to potential clients of
the proposed business development company.

The Chairman raised the issue of the need to set date for next scheduled meeting
of Board of Directors.

It was previously  determined  that the  Corporation's  Board of Directors would
hold regular meetings on a quarterly basis.

After  discussion,  presentation  of the  issue  and  vote  thereon,  the  Board
unanimously determined that:



<PAGE>


         RESOLVED:  the next scheduled meeting of the Board of
         Directors shall be April 15th, 1999 at 2:00 P.M. Denver
         time, to be held at the offices of the Corporation at
         9350 East Arapahoe Road, Suite 340, Englewood, Colorado.

There being no further  business,  the meeting  upon motion  made,  seconded and
unanimously approved, was adjourned.

Dated and effective this 15th Day of January, 1999.

s/James J. Krejci                                        s/Gordon Dihle
______________________________________________  ATTEST:_________________________
James J. Krejci, Chairman of the Board                 Gordon Dihle, Secretary

s/Marc Maassen
----------------------------------------------
Marc Maassen, Member of the Board of Director

s/Gordon D. Dihle
----------------------------------------------
Gordon D. Dihle, Member of the Board of Directors










<PAGE>



Exhibit  10.11  Letter  Agreement  between the  Company  and Gordon  Dihle dated
January 4, 1999

                           ComTec International, Inc.
                             9350 East Arapahoe Road
                                    Suite 340
                               Englewood, CO 80112
                          303-662-8373 FAX 303-662-8485


January 4, 1999

Gordon Dihle
4881 South Amaro Drive
Evergreen, CO  80439

Dear Gordon:

         We appreciate the time and efforts you've put forth on behalf of ComTec
International,  Inc.  and  American  Wireless  Network,  Inc.  as well as  other
subsidiaries in the past four months as general counsel and acting secretary and
treasurer.  This letter  confirms in principal  the basic terms of our agreement
for your  employment  with ComTec  International,  Inc.,  and American  Wireless
Network, Inc. as well as other existing or future subsidiaries.

We are pleased to offer you a contractual  salaried  position as Chief Financial
Officer, Secretary, Treasurer and General Counsel of ComTec International,  Inc.
and  American  Wireless  Network,  Inc.  as well as  possible  current or future
subsidiaries. The official start date will be January 1, 1999.

         This  letter  will  establish  a  minimum  of a  three-year  employment
contract and incentive  stock options  which could give you the  opportunity  to
control and purchase 7.5% of ComTec  International,  Inc. within the term of the
contract.  The  initial  options  will be  granted to you on your start date and
vesting  will occur  based on time  schedules  and  performance  criteria  to be
identified in your formal employment agreement.  The option price will be 80% of
the  closing  bid price of ComTec on  September  2,  1998,  ( $.056 - 80% of the
closing bid price of $.07 per share) as was  discussed in the board of directors
resolution of October 7, 1998. The final details of the contract might take some
time to  complete  but you agree to start  immediately  based  upon this  letter
agreement.

         The following  basic salary,  option earn-in and other  pertinent items
are agreed:

                  Starting Salary:  $7500 per month plus health insurance
                  benefits.

                  Increase Salary:  Semiannual  reviews (every 6 and 12 months),
                  predicated upon meeting milestone goals, financing, cash flow,
                  Company achievements and your personal performance.

         Cash Bonus:
                  A year-end  cash bonus will be  considered  in the first month
                  following the prior year's close of business.  The amount will
                  be determined based on both Company and personal performance.

         Business Expenses:
                  All business related expenses, including travel and applicable
                  continuing  education,  will be arranged for and paid directly
                  by the Company or reimbursed by the Company on a timely basis.

         Stock Options  Vesting - upon  completion of each  successive  one year
         period:

                  Year One - Option Vesting 33.33% of total option - (2.5% of
                  ComTec outstanding common stock)



<PAGE>




                  Year Two - Option Vesting 33.33% of total option - (2.5% of
                  ComTec outstanding common stock)

                  Year Three - Option Vesting 33.33% of total option - (2.5% of
                  ComTec outstanding common stock)

         We agree and  understand  that ComTec is currently in an uncertain  and
volatile  position  and its future is  unpredictable.  The promise of  potential
future benefit in the form of the stock options  described  above is provided as
reward for past  loyalty,  as an incentive to  participate  in the growth of the
Company and to provide potential  rewards for foregoing other  opportunities and
assuming  the risk and  responsibility  of long term  employment  as a member of
ComTec's executive management team. Since changes in control and/or direction of
ComTec are a possibility,  and the future is certainly changeable, the following
paragraphs  shall be made a part of the formal  contract  to be  completed  with
respect to your employment as CFO and general counsel ("Executive").

         Termination by Company  without Cause.  The Company may at any time, in
its sole discretion,  terminate the employment of Executive  hereunder,  without
cause,  by  written  notice  to  Executive.  In  the  event  of  termination  of
Executive's  employment  by the Company  under this  Section  without  Cause (as
defined below), Executive shall be entitled:

         a.       to receive immediate vesting of all stock options to which
                  Executive would have been entitled had his employment
                  continued through the full term of his employment contract;
         b.       reimbursement of any expenses otherwise reimbursable
                  hereunder;
         c.       all salary earned through the date of such termination and for
                  an additional  thirty six months after notice of  termination,
                  payable in one lump sum at the date of termination.
         d.       such other and additional benefits provided under the
                  employment contract as may by its terms then be applicable.

         Termination  "without  cause" for purposes of this agreement shall mean
(1)  any  reason  which  is not  specifically  defined  as  "Termination  Due to
Executive's  Death or  Disability" or  "Termination  With Cause" in the sections
below;   or  (2)  the  substantial   diminution  of  authority,   duties  and/or
responsibilities  of  Executive  due  to a  change  of  control,  management  or
direction of the Company.

         Termination by Company Due to Executive's  Death or Disability.  In the
event of  Executive's  death or if  Executive  is unable to  perform  his duties
hereunder  by reason of  illness or other  physical  or mental  infirmity  for a
period of one hundred eighty (180)  consecutive  days, the Company may terminate
Executive's  employment hereunder.  In the event of such termination,  Executive
(or his Estate) shall be entitled:

         a.       to  receive,  at times  otherwise  payable  and subject to the
                  other  provisions of this Agreement,  all of the stock options
                  then accrued and vested in Executive  together with such other
                  and additional benefits provided under the employment contract
                  as may by its terms then be applicable.

         b.       all salary earned through the date of such termination and
                  reimbursement of any expenses otherwise reimbursable
                  hereunder;

         Termination  by  Executive.  In  the  event  Executive  terminates  his
employment hereunder other than by reason of a material breach of the provisions
of this Agreement by the Company,  the Company shall pay any salary and expenses
otherwise reimbursable accrued through the date of such termination, and, except
as  otherwise  expressly  provided  this  employment  contract in the event that
Executive  then has qualified by age and service for  retirement  benefits under
this  employment  contract,  the  Company  shall  have no  other  obligation  to
Executive hereunder, or otherwise with respect to his employment by the Company.

         Termination by Company for Cause. The Company may at any time terminate
the  employment  of  Executive  hereunder  for  "Cause,"  as defined  below,  in
accordance with the following procedure. First, the Company shall give Executive
written  notice to the effect that the Board of the Company  intends to consider
such termination, stating


<PAGE>


the time  and  place of the  meeting  of the  Board  for such  purpose.  Second,
Executive shall be afforded the opportunity to address the Board at such meeting
with respect to the  appropriateness  of such  termination.  Third, if the Board
determines  that Cause  exists,  by means of such  procedures  and based on such
evidence  as it may  deem  sufficient  in the  circumstances,  it  shall  notify
Executive of such  determination,  whereupon  Executive's  employment  hereunder
shall terminate.  The Board's good faith determination of the existence of Cause
shall be final.  As used in the  Agreement,  "Cause"  means (i) the  failure  or
refusal of Executive to  substantially  perform his duties hereunder (other than
any such failure resulting from Executive's incapacity due to physical or mental
illness),  after written notice from the Company stating the duties Executive is
believed to be failing or refusing to perform and stating a reasonable period to
cure such  failure or refusal and the manner in which such cure may be effected;
or (ii) an act or acts of  dishonesty  by Executive  involving  the Company;  or
(iii)  conduct  of  Executive  which is  materially  injurious  to the  Company,
monetarily or otherwise,  and the injurious effect of which conduct was known or
reasonably  should  have been known to  Executive;  or (iv)  material  breach by
Executive of this Agreement;  or (v) commission by Executive of a felony. In the
event  Executive's  employment  hereunder is terminated by the Company for Cause
pursuant to this Section,  the Company shall pay to Executive any salary accrued
through the date of such  termination.  The Company  shall  remain  obligated to
provide or pay such other and additional  benefits provided under the employment
contract as may by its terms then be vested and applicable.

         Non-Competition  Covenant.  Executive shall not, during the term of his
employment by the Company and for the one-year period immediately  following the
end of his employment by the Company,  (a) unless Executive's  employment by the
Company was terminated by the Company without Cause, as defined above, act as an
officer,  director,  employee,  partner, or agent of, or invest in or lend money
to, or own,  directly or  indirectly,  any  interest in, or  participate  in the
control  of, any  corporation,  partnership,  joint  venture  or other  business
organization  which has an office  or  business  located  within  the  States of
Colorado  and which is engaged in the same  business  as the Company or offer to
any person  employed  by the  employment  with any  business  entity  with which
Executive may become associated in any capacity other than the Company.

         Confidential   Information.   Executive   shall  not,   except  in  the
performance of his duties hereunder and for the benefit of the Company, disclose
or reveal to any unauthorized person any confidential information of the Company
relating to the Company,  to its  subsidiaries  or affiliates,  or to any of the
businesses  operated  by them,  or any  business  invested  in or  funded by the
Company, and Executive confirms that such information  constitutes the exclusive
property of the Company.

         Assuredly,  some of the final details of the formal  contract will take
time for us to work out  together.  We are pleased to make this offer to you and
expect to be able to benefit from your input,  advice and counsel in  completing
the  various  open  matters  as  well as  participating  in the  future  growth,
direction and prospects of ComTec.

Thank you,

s/James J. Krejci

James J. Krejci
Chief Executive Officer and President
ComTec International, Inc. and American Wireless Network, Inc.


s/Gordon Dihle
--------------------------------------------------
Agreed and accepted  -  Gordon Dihle (Executive)

--------------------------------------------------
     Date