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, 2000

                           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) 662-8069
                 (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  x    No
                                    ---      ---

  Check if there is no disclosure of delinquent filers in response to Item 405
       of Regulation S-B contained in this form, and no disclosure will be
    contained, to the best of registrant's knowledge, in definitive proxy or
                                information: [ ]

     Statements incorporated by reference in Part III of this Form 10-KSB or
                     any amendment to this Form 10-KSB: None

   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 the close of business, October 6, 2000,
 the aggregate market value of the Company's Common Stock (based on the average
       of the ($.155) bid and ($.105) asked price) held by non-affiliates
                                 was $8,490,855.

                    APPLICABLE ONLY TO CORPORATE REGISTRANTS

              Number of shares outstanding of each of the issuer's
                classes of Common stock as of October 6, 2000 was
                               68,078,791 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 ____ No ____

                    DOCUMENTS INCORPORATED BY REFERENCE: None


<PAGE>


           FORM 10-KSB ANNUAL REPORT - FISCAL YEAR ENDED JUNE 30, 2000

                           COMTEC INTERNATIONAL, INC.


                                TABLE OF CONTENTS

                                                                            Page
                                                                            ----

PART I

Item 1.   Description of Business.............................................3.
Item 2.   Description of Property............................................ 9.
Item 3.   Legal Proceedings.................................................. 9.
Item 4.   Submission of Matters to a Vote of Security Holders................10.

PART II

Item 5.   Market for Common Stock Equity and Related Stockholder Matters.....11.
Item 6.   Management's Discussion and Analysis or Plan of Operation..........13.
Item 6a.  Quantitative And Qualitative Disclosures About Market Risk.........16.
Item 7.   Financial Statements...............................................16.
Item 8.   Changes in and Disagreements with Accountants
               on Accounting and Financial Disclosure........................16.

PART III

Item 9.   Directors, Executive Officers, Promoters and Control Persons;
               Compliance with Section  16(a) of the Exchange Act ...........17.
Item 10. Executive Compensation..............................................19.
Item 11. Security Ownership of Certain Beneficial Owners and Management......22.
Item 12. Certain Relationships and Related Transactions......................23.
Item 13. Exhibits and Reports on Form 8-K....................................24.

SIGNATURE PAGE...............................................................26.

Attachment:

INDEPENDENT AUDITOR'S REPORT AND CONSOLIDATED FINANCIAL STATEMENTS,
JUNE 30, 2000 AND 1999 AND CUMULATIVE AMOUNTS FROM INCEPTION (MARCH 15, 1994)
THROUGH JUNE 30, 2000.






<PAGE>


                                     PART I

ITEM 1.  DESCRIPTION OF BUSINESS

(a)      Business Development:

1.       GENERAL CORPORATE

     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
various  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) 662-8069;  its facsimile number is
(303) 662-8485.  The Company is currently authorized to issue 200,000,000 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").

     As a result of the Asset  Acquisition  Agreement (as amended)  entered into
between AWN and CMSR Systems,  Inc.  ("CMSR") on April 15, 1999, and reported on
Form 8-K filed April 30, 1999,  the  day-to-day  SMR operations of AWN have been
undertaken by CMSR under a management contract wherein AWN supervises management
of the  systems  pursuant  to FCC  rules  but  actual  hands on  operations  are
conducted by CMSR. The Company is exploring potential  acquisition and/or merger
transactions  with  amicable  business   opportunities  in   telecommunications,
information  industries,  the  computer  industry or other  compatible  business
opportunities.

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 the 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 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.  From  December 5, 1997 to June 1, 1999,  AWN
operated SMR sites in seven MTA's in the southeastern U.S.A.  region,  operating
specialized mobile radio licenses purchased from Centennial Communications Corp.
As a result of the Asset Acquisition Agreement (as amended) entered into between
AWN and CMSR Systems,  Inc.  ("CMSR") on April 15, 1999,  which became effective
June 1, 1999, the day-to-day SMR operations of AWN have been  undertaken by CMSR
under a management  contract  wherein AWN  supervises  management of the systems
pursuant to FCC rules but actual  day-to-day  operations  are now  conducted  by
CMSR.

         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) 662-8069. 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 December 31, 2000.

         INACTIVE SUBSIDIARIES

     The  Company's  three  inactive  subsidiaries,  all Colorado  corporations,
Custom  Concepts,  Inc., AmNet Resources,  Ltd. and  International  Media Group,
Ltd., were dissolved by administrative  action during the fiscal year ended June
30, 2000.

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<PAGE>

3.       MANAGEMENT

     Since September 1998,  management of the Company has consisted of President
and  CEO,  James  J.  Krejci,  an  MBA,  formerly  a top  executive  with  Jones
Intercable, Inc./Jones International, Ltd. associated companies; Chief Financial
Officer  and  Secretary/Treasurer,  Gordon  Dihle,  an  attorney  and  CPA;  and
Controller;  Michael Bunch, a CPA and MBA. 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

         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 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. 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
secured by an agreement utilizing the assets sold as security for the promissory
note. The entire  principal of the promissory note, due December 31, 1999, is in
default,  and, as a result,  the book value of the LED screens ($1.3 million) as
recorded on the balance  sheet of the  Company,  was written down to zero in the
quarter  ended  June  30,  2000.  No  determination  has  been  made  as to  the
collectability  of the  promissory  note or the  potential  recovery  of the LED
Screens from Lanstar Computer Products, Inc.

         AGREEMENT FOR DISPOSITION OF LICENSES

     As previously reported on Form 8-K filed April 30, 1999, on April 15, 1999,
AWN executed an Asset Acquisition Agreement (as amended) with CMSR Systems, Inc.
("Buyer"),  a Nevada Corporation  unaffiliated with the Company.  The purpose of
the Asset  Acquisition  Agreement is to facilitate the sale by American Wireless
Network, Inc. to CMSR Systems, 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.  As of October 6, 2000,
the FCC has  tentatively  approved the transfer and final legal  documents  have
been presented to the FCC for  acceptance.  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. AWN will
retain a seven  and one  half  percent  operating  interest  in the  operational
segment represented by the Licenses and operations sold to CMSR Systems, Inc. by
AWN. The agreement also includes a lease of SMR related  equipment  owned by AWN
to CMSR Systems, 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 CMSR Systems,  Inc. were originally 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.  Effective June 1, 1999
all hands on operations  previously conducted by AWN with respect to the 900 MHz
Licenses  were  undertaken by CMSR Systems,  Inc.  under a management  agreement
between  AWN and CMSR  Systems,  Inc.  The  transfer  of the  Licenses  has been
tentatively  approved by the FCC, and documents requesting final approval of the
transfer of the 900 MHz Licenses and  assumption  of the debt to the FCC related
to the Licenses are pending at the FCC.

(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 SMR operations were conducted  through AWN. At present AWN acts as
the supervisor of certain SMR operations managed by CMSR Systems, Inc. under the
provisions of the management contract with CMSR Systems, Inc.

     During the fiscal year ended June 30, 2000 and  through  the  present,  the
Company has  continued as a  developmental  stage entity  focused on seeking and
evaluating  potential  merger and acquisition  candidates.  Activities have been
concentrated  on revising  the  Company's  strategic  business  plan,  financing
efforts,  negotiations  to acquire other  entities and  operations,  maintaining
management, and maintaining

                                       4
<PAGE>


reporting  compliance for various federal government  agencies,  such as the SEC
and  FCC.  The  Company  is  exploring   potential   acquisition  and/or  merger
transactions  with  amenable  business   opportunities  in   telecommunications,
information  industries,  the  computer  industry or other  compatible  business
operations.

Current Status and Operations

     On April 15, 1999, AWN executed an Asset Acquisition Agreement (as amended)
with CMSR Systems,  Inc.,  ("Buyer"),  an unaffiliated Nevada  corporation.  The
purpose of the Asset  Acquisition  Agreement is to facilitate the future sale by
American Wireless Network, Inc. to CMSR Systems, 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. AWN will retain a seven and one half percent operating interest in the
operational  segment  represented  by the Licenses and  operations  sold to CMSR
Systems,  Inc.  by AWN.  The  agreement  also  includes  a lease of SMR  related
equipment  owned  by AWN to CMSR  Systems,  Inc.  Effective  June 1,  1999,  all
operations previously conducted by AWN with respect to the 900 MHz Licenses were
undertaken by CMSR Systems,  Inc. under a management  agreement  between AWN and
CMSR Systems, Inc. The transfer of the Licenses has been tentatively approved by
the FCC, and documents  requesting final approval of the transfer of the 900 MHz
Licenses  and  assumption  of the debt to the FCC  related to the  Licenses  are
pending at the FCC.  At present  AWN acts as the  supervisor  of SMR  operations
conducted by CMSR Systems, Inc. under the provisions of the management contract.

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. In contrast, cellular, considered "common carriage"
by the FCC,  was  designed  to be a mobile  outgrowth  of the  public  telephone
system.  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,   hospitals,   general  government  agency  field  operations),   mining
operations and messenger services.

     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,  and  paging  and  telephone  interconnect.
Essentially,  an SMR is an individual or company's internal mobile communication
network.  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 the  potential to build  wide-area  networks
through roaming agreements.

(c)      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 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

                                       5
<PAGE>


complete  construction  of a station  timely and properly,  the license for that
station cancels automatically, without any further action by the FCC.

     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 affect 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.

COPYRIGHTS, PATENTS, PROPRIETARY INFORMATION, AND TRADEMARKS

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

(d)      Employees and Consultants:

     As of the date of this filing,  the Company and its wholly owned subsidiary
AWN  employ 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 Company's  Controller,  is
utilized  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.

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<PAGE>
(e)      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's  SMR systems  (as  operated  by CMSR  Systems,  Inc.)
currently  offer 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. 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 also "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 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, 2000,  the Company had an  accumulated
deficit of approximately $15,475,600. 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 plan to acquire an operating entity or effect a business
combination  and may  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, 2000 and 1999,  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

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<PAGE>


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.

     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
any future business  strategy will depend in part upon its ability to manage the
demands of a growing business.  Any failure of the Company's  management team to
effectively  manage growth could have a material adverse affect 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 affect 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 five years and
continue  to evolve as new FCC rules and  regulations  are  adopted  pursuant to
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   "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.

     Concerns About Mobile  Communications  Health Risk.  Allegations  have been
made  and  certain  studies  appear  to show  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.

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

                                       8
<PAGE>



     OTC Bulletin Board Listing Requirements.  Under the new rules for continued
listing on the  Bulletin  Board,  OTC traded  firms are  required  to become and
remain fully reporting under Section 12 of the 1934 Securities and Exchange Act.
Although the Company intends to complete all future required filings on a timely
basis,  there can be no  assurance  that its $.001 par value Common Stock (YRLS)
will not be de-listed  from the Bulletin  Board.  If de-listed,  the market will
almost  certainly  reflect a  depressive  effect  on the price of the  Company's
Common Stock.

     Penny  Stock  Regulations  and  Requirements  for  Low  Priced  Stock.  The
Commission adopted  regulations which generally define a "penny stock" to be any
non-Nasdaq equity security that has a market price of less than $5.00 per share,
subject to certain  exceptions.  Based  upon the price of the  Company's  Common
Stock as currently  traded on the OTC Bulletin  Board,  the  Company's  stock is
subject to Rule 15g-9 under the  Exchange  Act which  imposes  additional  sales
practice  requirements on broker-dealers  which sell securities to persons other
than established customers and "accredited  investors." For transactions covered
by this Rule, a broker-dealer must make a special suitability  determination for
the purchaser and have received a purchasers  written consent to the transaction
prior to sale. Consequently,  the Rule may have a negative affect on the ability
of shareholders to sell common shares of the Company in the secondary market.

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 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
December 31, 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 employee and operational reductions, this lease
space is only twenty five percent utilized for Company purposes and is more than
adequate  for  the   Company's   current   needs.   The  Company  has  subleased
approximately 75% of its office space in order to offset overhead.

ITEM 3.  LEGAL PROCEEDINGS

     On  September  14, 1998,  the Company was served with 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,
Defendants.  The Complaint by seven named Plaintiffs  alleged  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.  With
respect to the Company,  this suit was terminated by a Court approved settlement
in

                                       9
<PAGE>


July 2000 with the issuance of a total of 300,000 shares of restricted $.001 par
value Common Stock in the Company to the seven plaintiffs.

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 the Company 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, and failure to
mitigate;  that Mack's alleged claims are more than 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,  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.  Sections  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. In October  of 1999,  the
Plaintiff,  Mack,  filed for  bankruptcy  protection.  Various  motions  are now
pending  with  respect  to the  Mack  bankruptcy  matter  as it  relates  to the
Company's  claims  against  Mack as well as issues  related  to the  status  and
jurisdiction of Mack's allegations  against the Company.  In September 2000, the
state court action was remanded  back to state court with the  Company's  claims
against  Mack  intact.  ComTec  believes  it has  meritorious  claims  and  will
resolutely pursue its claims against Mack.

     On February  14,  2000,  the  Company was served with a Complaint  filed in
Superior Court of California,  County of Los Angeles, Central Division, Case No.
BC 224058 entitled A-1 Business Products,  Inc. vs. ComTec  International,  Inc.
The complaint alleges damages of approximately  $200,000 with respect to alleged
financing arrangements.  In September, 2000, the Plaintiff amended its complaint
to  include  as  defendants  two  employees  of the  Company  as  well as to add
allegations  of  fraud  to its  compliant.  The  Company  believes  that  it has
meritorious  defenses and will vigorously  defend against the allegations of the
Complaint.  The  Company has not yet filed its answer to the  complaint  but has
filed an initial motion to dismiss for lack of personal  jurisdiction  which has
yet to be ruled upon. Due to the preliminary nature of the proceedings,  further
information is not available.

     Except for the foregoing, no non-course of business or 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 June 21, 2000, the annual meeting of the Company was held at the offices
of the Company.  Pursuant to a vote of the shareholders at the Annual Meeting of
Shareholders,  the  shareholders  of the Company  voted to amend the Articles of
Incorporation  to increase  the number of  authorized  shares of $.001 par value
Common Stock from  100,000,000 to 200,000,000.  The number of shares eligible to
vote  was  44,876,191,  the  number  of  shares  voted  for  the  amendment  was
37,916,945, the number of shares voted

                                       10
<PAGE>


against the amendment was 394,517 and the number of shares abstaining was 2,906.
With respect to election of the members of the board of directors  the following
results were tabulated:

         Elect James J. Krejci to the Board of Directors

                Votes for: 38,312,468        Votes against:  0     Abstain: 2100

         Elect Gordon D. Dihle  to the Board of Directors

                Votes for: 38,312,468        Votes against:  0     Abstain: 2100

         Elect Marc Maassen  to the Board of Directors

                Votes for: 38,312,468        Votes against:  0     Abstain: 2100

     As a result of the Annual Meeting of Shareholders held June 21, 2000, James
J. Krejci,  Marc  Maassen and Gordon D. Dihle were elected to the  Corporation's
Board of Directors  until the next annual  meeting of the  Shareholders  and the
Articles of  Incorporation  of the  Corporation  were  amended to  increase  the
authorized  $.001 par value Common Stock to 200,000,000  shares by the necessary
majority of all classes of shares of the Corporation eligible to vote.

     The results of the annual shareholder  meeting were previously  reported in
the Form 8-K filed August 30, 2000.

     No matters have been submitted to the shareholders  since the June 21, 2000
meeting.

                                     PART II

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

(a)      Market Information.

     The  principal  market of the Company's  $.001 par value 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, 1999 and June 30,
2000,  as  reported  by the  Nasdaq-Amex  Market  Group,  an NASD  company.  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 2000:
    First Quarter: July 1, 1999 through September 30, 1999       $0.08    $0.04
    Second Quarter: October 1, 1999 through December 31, 1999    $0.14    $0.06
    Third Quarter: January 1, 2000 through March 31, 2000        $0.66    $0.08
    Fourth Quarter: April 1, 2000 through June 30, 2000          $0.18    $0.07


                                       11
<PAGE>

                                                                  BID      BID
                                                                 HIGH($)  LOW($)
                                                                 -------  ------
Fiscal 1999:
    First Quarter: July 1, 1998 through September 30, 1998       $0.10     $0.05
    Second Quarter: October 1, 1998 through Dec. 31, 1998        $0.06     $0.02
    Third Quarter: January 1, 1999 through March 31, 1999        $0.05     $0.02
    Fourth Quarter: April 1, 1999 through June 30, 1999          $0.07     $0.03

(b)      Holders:

     As of March 10, 2000, 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 fiscal years ended June 30, 2000,
June 30, 1999 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,  2000,  which  the  Company  believed  to be exempt  from  registration
requirement as a nonpublic offering.

    Date          Number of Shares         Issued to        Consideration
    ----          ----------------         ---------        -------------

   3/21/00             36,000            Marc Maassen       Services

Unregistered  Shares  Issued  Pursuant  to  Regulation  S During  the Year Ended
6/30/00:

 Date    Number of Shares        Issued to               Consideration
 ----    ----------------        ---------               -------------

6/21/00     3,000,000     Cayman Offshore
                               International, Inc. debt conversion -  $300,000
6/21/00     1,022,500     Cayman Offshore
                               International, Inc. accrued interest - $102,250
6/21/00     2,500,000     Overseas Foreign
                               Holdings, Inc.      debt conversion -  $250,000
6/21/00       935,000     Overseas Foreign
                               Holdings, Inc.      accrued interest - $ 93,500
6/21/00     6,000,000     Queens Cross Group, Inc. debt conversion -  $600,000
6/21/00     1,230,000     Queens Cross Group, Inc. accrued interest - $123,000
6/21/00     4,000,000     Merrivale, Ltd.          debt conversion -  $400,000
6/21/00       940,000     Merrivale, Ltd.          accrued interest - $ 94,000
6/21/00     1,500,000     P.I. Pfeiger &Co. Ltd.   debt conversion -  $150,000
6/21/00       318,000     P.I. Pfeiger &Co. Ltd.   accrued interest - $ 31,800

                                       12
<PAGE>


     As reported on Form 8-K filed August 30, 2000,  the above listed  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
21,445,500  shares of $.001 par  value  Common  Stock  were  issued to  entities
organized  outside of the United  States of America  and  entities  that 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
potential   acquisitions   of  or  mergers   with   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.

     The following is a discussion of the consolidated  financial  condition and
results of  operations  of the Company for the fiscal years ended June 30, 2000,
and June 30, 1999, 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 "Business--Risk Factors" in this report.

(a)      Plan of Operation:

     From May 10, 1995 until April of 1999,  the  Company's  strategic  business
plan was, aside from terminated  venture in the LED screens and the divested TTI
prepaid phone card investment, been concentrated on wireless telecommunications.
As a result of the Asset Acquisition Agreement (as amended) entered into between
AWN and CMRS Systems,  Inc. (an  unaffiliated  Nevada  Corporation) on April 15,
1999,  and  reported  on Form 8-K  filed  April 30,  1999,  the  day-to-day  SMR
operations of AWN have been undertaken by CMSR Systems,  Inc. under a management
contract wherein AWN supervises  management of the systems pursuant to FCC rules
but actual  day-to-day  operations  are now conducted by CMSR Systems,  Inc. The
Company is now exploring  potential  acquisition and or merger transactions with
existing business opportunities in telecommunications,  information  industries,
the computer industry or other compatible business enterprises.

     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.

                                       13
<PAGE>


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 MTA's: Birmingham,  Alabama;
Knoxville,  Tennessee;  Memphis, Tennessee;  Nashville,  Tennessee; New Orleans,
Louisiana;  Oklahoma City,  Oklahoma;  Tulsa,  Oklahoma.  On April 15, 1999, AWN
executed an Asset  Acquisition  Agreement (as amended)  with CMSR Systems,  Inc.
("Buyer"),  a Nevada  corporation,  wherein  those assets are to be sold to CMRS
Systems,  Inc. The initial phase of the Asset Acquisition Agreement (as amended)
became effective June 1, 1999. The purpose of the Asset Acquisition Agreement is
to  facilitate  the future  sale by  American  Wireless  Network,  Inc.  to CMSR
Systems, 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 CMSR Systems, 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  Commission  related to the  Licenses.  AWN will
retain a seven  and one  half  percent  operating  interest  in the  operational
segment represented by the Licenses and operations sold to CMSR Systems, Inc. by
AWN. 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
CMSR Systems,  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 (as amended),
the Company will assign its tower site licenses and lease to CMSR Systems, 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 of June 1, 1999.  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 based upon 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.  Effective June 1,
1999,  all  operations  previously  conducted by AWN with respect to the 900 MHz
Licenses  were  undertaken by CMSR Systems,  Inc.  under a management  agreement
between  AWN and CMSR  Systems,  Inc.  The  transfer  of the  Licenses  has been
tentatively  approved by the FCC, and documents requesting final approval of the
transfer of the 900 MHz Licenses and  assumption  of the debt to the FCC related
to the licenses are pending at the FCC.

(b)      Management's Discussion and Analysis of Financial Condition and Results
of Operations.

     The Company  reported a net loss of $2,223,500  for the year ended June 30,
2000,  and a net loss of  $1,526,800  for the year ended June 30, 1999,  and has
reported net losses of $15,455,200  from inception  (March 15, 1994) to June 30,
2000.  As reported on the  consolidated  statements  of cash flows,  the Company
incurred  deficient  cash  flows  from  operating   activities  of  $54,700  and
$1,046,000  for the years  ended June 30, 2000 and 1999,  respectively,  and has
reported  deficient  cash flows from  operating  activities of  $4,535,300  from
inception (March 15, 1994) to June 30, 2000. To date, these losses and cash flow
deficiencies have been financed principally through the sale of Common Stock and
warrants and issuance of short and long-term debt 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  effects on the  Company.  The Company has a  significant
investment in license rights,  the recoverability of which is dependent upon the
success of future events.

     On June  21,  2000,  the  Company  entered  into an  agreement  to  convert
$1,700,000 of outstanding  loans and $444,550 of accrued  interest to 21,445,500
shares of $.001 par value Common Stock of the Company. This agreement eliminated
the majority of the Company's debt obligations.

                                       14
<PAGE>


     Management  is  endeavoring  to develop a strategic  plan to raise  private
financing,  develop a management team, maintain reporting compliance and explore
potential   acquisition  and/or  merger   transactions  with  existing  business
opportunities  in  telecommunications,   information  industries,  the  computer
industry or other cash positive business operations. The Company entered into an
agreement  to sell its FCC  licenses to  eliminate  negative  cash flow from SMR
operations,  to satisfy debt requirements and, in a plan anticipated to generate
cash flows, has entered into an agreement to lease its SMR equipment.

     The Company has various  proposals for private debt funding pending.  There
is no obligation by any entity to provide financing to the Company.

     Should the Company be successful in obtaining  substantial  additional debt
financing,  management plans to seek acquisitions of more  telecommunication  or
computer  related  businesses,  information  and data  services  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  October 1, 2000 to the end of fiscal  year ended June 30,  2001,  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 do not 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  2000 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 Company is currently in  discussions  with one or more  entities for private
debt and equity financing package(s).

(c)      Results of Operations:

         Fiscal Year Ended June 30, 2000:

     For the fiscal year ended June 30,  2000,  the Company  recorded a net loss
before other income and expense of $173,400 and a net loss of $2,223,500  with a
net loss per common share of $0.05.  Management  has not included SMR  operating
revenues in its  financials  since past revenues have not been  sufficient to be
separately  stated in accordance  with GAAP. The fiscal year ended June 30, 2000
was a year of  reorganization,  evaluation  and  elimination  of  non-performing
assets  and non  productive  activities  remaining  from the  prior  management.
Interest  expense of $287,100,  interest of $256,000,  write-offs from telephone
services  discontinued  in  December,  1997 of  $479,800,  and a  write-down  of
$1,314,300 of LED equipments were recorded during the fiscal year ended June 30,
2000, make up the bulk of the total net loss of $2,223,500.

         Fiscal Year Ended June 30, 1999:

     For the fiscal year ended June 30,  1999,  the Company  recorded a net loss
before other income and expense of $54,700 and a net loss of  $1,526,800  with a
net loss per common share of $0.04. The Company had ancillary income of $124,200
from  dividends,  interest and other  sources.  Management  has not included SMR
operating  revenues  in  its  financials  since  past  revenues  have  not  been
sufficient to be separately stated in accordance with GAAP.  Interest expense of
$287,100,  loan origination fees of $582,700 and losses from telephone  services
discontinued in December, 1997 of $776,500 were recorded,  making up the bulk of
the total net loss of $1,526,800.

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

                                       15
<PAGE>


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  was
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 was effective in the first quarter of
1999, did not have a material impact on the consolidated financial statements.

     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.

ITEM 6A.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

     As of the date  hereof,  all the  Company's  long and short 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,  1999 and June 30,  l999,  which have been
audited and reported upon by Grabau & Company, PC, Certified Public Accountants,
are annexed as a separate  section to this Report,  designated pages F-1 through
F-40.

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

     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  September 3, 1999,  the Company  retained  Grabau and Company,  P.C. 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 Grabau and Company,  P.C.
with respect to the application of accounting principles to a

                                       16
<PAGE>


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 September 29, 1999.

                                    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, 58              August, 1998        Next Annual
     Director, President & CEO                            Meeting

     Gordon D. Dihle, 45              October, 1997       May 8, 1998
     Director, Secretary & Treasurer  August, 1998        Next Annual
                                                          Meeting

    Marc Maassen, 50                  October, 1998       Next Annual
    Outside Director                                      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.

(b)      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 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 videoconference 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.

                                       17
<PAGE>


               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.  These  firms were  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 was employed as follows:

               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 was employed as follows:

               September 2000 through present: Self employed  communications and
          computer industry consultant.

               December 1999 through  August 2000:  Employed by Netbeam,  Inc. a
          wireless phone and high-speed  Internet provider as Vice President and
          operations manager.

               February 1998 through November 1999: 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.

(c)      Identification of Certain Significant Employees and Consultants:

     None

(d)      Family Relationships:

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

(e)      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.

                                       18
<PAGE>


(f)      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 and directors, Form 4 filings have
not been required, and no supplemental Form 5 had been filed with the Securities
Exchange  Commission  (SEC) by any of its current  officers or directors at June
30, 2000.  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  (former
officers) who may have had Section 16 filing requirements during the fiscal year
ended June 30, 2000 complied with Section 16:  Clifford S. Perlman and Donald G.
Mack.

ITEM 10.  EXECUTIVE COMPENSATION.

(a)      General

     (1) through (7) All Compensation Covered. During the fiscal year ended June
30, 2000, the Company  employed the following  senior  management  personnel who
served pursuant to employment agreements further described in Section (g) below.

(b)      Summary Compensation Table.

     No employee of the Company other than James J. Krejci,  its CEO,  earned in
excess of  $100,000  during the fiscal  years  ended June 30,  1999 and June 30,
2000.

                           SUMMARY COMPENSATION TABLE

                      ANNUAL COMPENSATION          LONG TERM COMPENSATION
                  ----------------------------   ---------------------------

Name and Position Year   Salary   Bonus  Other    SAR  Options   LTIP   Other
----------------------   ------   -----  -----    ---  -------   ----   -----

James J. Krejci   1999  $117,000  None   None    None    None    None   None
CEO and President 2000  $120,000  None   None    None    None    None   None

(c)      Option/SAR Grant Table.

     During the fiscal years ended June 30, 2000 and 1999,  no effective  grants
of stock options or freestanding SAR's were made by the Company.

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
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.

                                       19
<PAGE>


     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 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 formally  issued from the 1997 Stock Option Plan during the
fiscal year ended June 30,  2000.  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,  and an option  for an  additional  14,000  shares on each
anniversary  of his term as a director,  September  30, 1999 and  September  30,
2000.

(d)      Aggregate  Option/SAR  Exercises  and  Fiscal Year-End Option/SAR Value
Table.

     No  stock  options  or  freestanding   SAR's  are  issued  or  outstanding.
Accordingly, and during the fiscal year ended June 30, 2000, no stock options or
freestanding SAR's were exercised.  Notwithstanding the foregoing,  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)      Compensation of Directors.

     (1) and (2).  During the fiscal  year ended  June 30,  2000,  Marc  Maassen
received  36,000 shares of the Company's  $.001 par value Common Stock valued at
approximately  $3,456 for services as an outside director.  No other director of
the Company received any compensation in his capacity as director.

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

     A former  officer,  Donald G. 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

                                       20
<PAGE>


the terms and  conditions  of his  employment  contract and an alleged  addendum
thereto.  Mr. Mack's resignation letter did not request that any disagreement be
reported or disclosed in the Company's  regulatory  filings.  Prior to a special
meeting of  shareholders  held  August 26,  1998,  one of the  purposes of which
meeting was to remove Mr. Mack as a director, by a letter dated August 21, 1998,
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  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  extensive   counterclaims  against  Mr.  Mack.  SEE  ITEM  3.  LEGAL
PROCEEDINGS - LITIGATION WITH FORMER OFFICER AND DIRECTOR

     On February 16, 1998,  the Company  entered  into a letter  agreement  with
James  Krejci,  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 three equal annual  increments to equal a total of 10% of the
Company's  outstanding  common shares over a three year period. The strike price
of all of the  potential  options,  as modified  (repriced) by Board of Director
action on October 7, 1998, is $.056 per share, representing 80% of the bid price
of the Company's  Common Stock on September  2nd, 1998 (closing bid price $.07),
Mr. Krejci's actual appointment date as President and CEO of the Company. On May
6, 1999, as additional  employee  incentive,  the non-interested  members of the
Board of Directors  passed a resolution  granting Mr. Krejci a four year option,
to become  effective  after July 1, 1999,  to purchase  1,300,000  shares of the
Company's  $.001 par value  Common  Stock at a strike  price of $.05 per  share,
based upon a  calculation  of 111% of the $.045 bid price of the stock on May 6,
1999. On March 20, 2000, as additional  employee  incentive,  the non-interested
members of the Board of Directors passed a resolution granting Mr. Krejci a four
year  option,  to become  effective  after July 1, 2000,  to purchase  1,300,000
shares of the Company's  $.001 par value Common Stock at a strike price of $.111
per share, based upon a calculation of 111% of the $.10 closing bid price of the
stock on March 21,  2000.  No options  have  actually  been  issued  pursuant to
agreements with Mr. Krejci.

     Effective January 1, 1999, the Company entered into a letter agreement with
Gordon  Dihle,  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  annual  increments  of 2.5%  to  equal  a  total  of  7.5% 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. On May 6,
1999, as additional employee incentive,  the non-interested members of the Board
of  Directors  passed a resolution  granting  Mr.  Dihle a four year option,  to
become  effective  after  July 1,  1999,  to  purchase  1,000,000  shares of the
Company's  $.001 par value  Common  Stock at a strike  price of $.05 per  share,
based upon a  calculation  of 111% of the $.045 bid price of the stock on May 6,
1999. On March 20, 2000, as additional  employee  incentive,  the non-interested
members of the Board of Directors passed a resolution  granting Mr. Dihle a four
year  option,  to become  effective  after July 1, 2000,  to purchase  1,000,000
shares of the Company's  $.001 par value Common Stock at a strike price of $.111
per share, based upon a calculation of 111% of the $.10 closing bid price of the
stock on March 21,  2000.  No options  have  actually  been  issued  pursuant to
agreements with Mr. Dihle.

Report on Repricing of Options/SAR's.

     No  stock  options  or  freestanding  SAR's  were  issued  or  outstanding.
Accordingly,  during the fiscal year ended June 30,  2000,  no stock  options or
freestanding SAR's were repriced.

     With respect to the  informal  letter  agreement  between Mr.  Krejci,  the
Company's CEO, and the Company, in reference to the spirit of the agreement, the
strike price of the potential options available to be earned by Mr. Krejci,  was
modified (repriced) by Board of Director action on October 7, 1998, to $.056 per
share, representing 80% of the bid price of the Company's Common Stock

                                       21
<PAGE>


on September 2, 1998 (closing bid price $.07),  Mr. Krejci's actual  appointment
date as President  and CEO of the Company.  No options have actually been issued
pursuant to agreements with Mr. Krejci.

ITEM  11.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

(a)      Security Ownership of Certain Beneficial Owners:

     The  information  is  furnished  as of  October 6, 2000 as to the number of
shares of the Company's Common Stock, $.001 par value per share owned by persons
or entities  beneficially,  or persons or  entities  known by the Company to own
beneficially  more  than 5% of any class of such  security,  who are not also an
Officer or Director of the Company:

     At June 30, 2000, the Company had  outstanding  68,078,791  $.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. Name and Address Amount and
Nature  Percentage  of Beneficial  Owner of Beneficial  Ownership of Total Class
------------------- ----------------------- --------------

    Lewis D. Rowe                              3,807,558  (1)          5.6%
    PO Box 1561GT
    Zephyr House, Mary Street
    Grand Cayman, British West Indies

    Cayman Offshore International, Inc.        4,022,500              5.9%
    PO Box 1561GT
    Zephyr House, Mary Street
    Grand Cayman, British West Indies

    Overseas Foreign Holdings, Inc.            3,435,000              5.0%
    PO Box 1561GT
    Zephyr House, Mary Street
    Grand Cayman, British West Indies

    Queens Cross Group, Inc.                   7,230,000             10.6%
    PO Box 1561GT
    Zephyr House, Mary Street
    Grand Cayman, British West Indies

    Merrivale, Ltd.                            4,940,000              7.3%
    PO Box 1561GT
    Zephyr House, Mary Street
    Grand Cayman, British West Indies
------------------
(1) Includes  1,600,000  warrants to purchase  $.001 par value Common Stock at a
price of $2.90 per share  expiring in 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  information  is  furnished  as of June 20,  2000,  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:

                                       22
<PAGE>


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

      Gordon D. Dihle                       218,676  (1)             .3%
      10333 Behrens Mile Road
      Byers, Colorado  80103

      James Krejci                          274,286  (2)             .4%
      1133 Race Street
      Denver, Colorado  80206

      Marc Maassen                          114,000  (3)             .2%
      240 Hopi Place
      Boulder, Colorado  80303

      Total officers and directors,         606,962                  .9%
      as a group (3 persons)
----------------------
(1) Includes  14,070  shares owned by a  professional  corporation  owned by Mr.
Dihle.  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 pursuant to an
employment  agreement over a three year period ending January 1, 2002.  Does not
include  non-formalized  options to purchase  2,000,000  shares of the Company's
common shares effective after July 1, 2000.

(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 pursuant to
an employee  agreement over a three year period ending  February 16, 2001.  Does
not include non-formalized options to purchase 2,600,000 shares of the Company's
common shares effective after July 1, 2000.

(3) Includes  automatic  stock options to purchase 42,000 shares of Common Stock
which accrued to Mr.  Maassen as an outside  director  under the Company's  1997
incentive stock option plan.

(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

Certain Transactions

     In April 1997, a former  officer of the Company,  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. The Company has filed extensive claims against Mr. Mack. SEE ITEM 3. LEGAL
PROCEEDINGS - LITIGATION WITH FORMER OFFICER AND DIRECTOR.

     On February  16, 1998,  the Company  entered  into a letter  agreement  (as
modified)  with James  Krejci,  which remains to be  formalized,  by which James
Krejci initially 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

                                       23
<PAGE>


period.  SEE ITEM 10 - EXECUTIVE  COMPENSATION  - (f)  Employment  Contracts and
Termination of Employment, and Change-in Control Arrangements.

     Effective January 1, 1999, the Company entered into a letter agreement with
Gordon  Dihle,  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.
SEE ITEM 10 - EXECUTIVE  COMPENSATION - (f) Employment Contracts and Termination
of Employment, and Change-in Control Arrangements.

     Except for the foregoing and during the fiscal year ended June 30, 2000, 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.

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      Conversion  of  $1,500,000  debt  to  common stock issued to non U.S.A.
         residents.  Incorporated by reference to Form  8-K  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  (former
         name of the Company).  Incorporated  by  reference to   Form 10-KSB for
         June 30, 1999.  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.

3.3      Increase in Authorized Shares: Shareholder  Authorization  for Increase
         in  Authorized  Shares, Incorporated  by  reference to  Form  8-K dated
         August 30, 2000.

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    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 June 30, 1997.

10.03    Minutes of Board of Directors  Meeting dated January 15, 1999  relating
         to  modification  of Krejci Letter Agreement. (2)

10.04    Letter Agreement between the Company and Gordon Dihle dated  January 4,
         1999. (2)

                                       24
<PAGE>


10.05    Acquisition of operating  assets from Centennial  Communications  Corp.
         Incorporated  by  reference  to  Form 8-Ks dated  December 29, 1997 and
         September  3, 1998 and exhibits filed with Form 8-K/A dated February 6,
         1999.

10.06    Purchase Agreement - LED Screen Disposition.  Incorporated by reference
         to exhibits filed with Form 8-K dated January 14, 1999.

10.07    Asset  Acquisition  Agreement - License  Disposition.  Incorporated  by
         reference  to exhibits  filed with Form 8-K dated April 29, 1999.

10.08    Amendment Number 1 to Asset Acquisition Agreement

10.09    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, September 3, 1998 and August 30, 2000.

16.1     Letters on change in certifying accountant.  Incorporated  by reference
         to Form 8-K dated  September  29, 1999 and Form 8-K/A dated October 18,
         1999.

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.

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 June 30, 1995.

         (2) Incorporated by reference to exhibits filed with the Company's Form
         10-KSB for June 30, 1998.

(b) The Company  filed one report on Form 8-K during the quarter  ended June 30,
2000, and one report on Form 8-K from June 30, 2000 to the date of this report.


                                       25
<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:    October 16, 2000            By  s/s James J. Krejci
                                       ------------------------------------
                                       James J. Krejci, Chief Executive Officer,
                                       President and CEO

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

     Pursuant to the  requirements of the Securities  Exchange Act of 1934, this
report has been signed by each director.


Date:    October 16, 2000            By: s/s James J. Krejci
                                        -----------------------------------
                                        James J. Krejci, Chairman

                                     By: s/s Gordon D. Dihle
                                        -----------------------------------
                                        Gordon D. Dihle, Director

                                     By: s/s  Marc Maassen
                                        -----------------------------------
                                        Marc Maassen, Director


                                       26
<PAGE>







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

                          INDEPENDENT AUDITORS' REPORT

                                       AND

                        CONSOLIDATED FINANCIAL STATEMENTS

            YEARS ENDED JUNE 30, 2000 AND 1999 AND CUMULATIVE AMOUNTS
              FROM INCEPTION (MARCH 15, 1994) THROUGH JUNE 30, 2000


                                       F-1

<PAGE>


             GRABAU & COMPANY
       Certified Public Accountants
        A Professional Corporation
303 East 17th Ave., Suite 700, Denver, CO 80203
              (303) 861-0434
            FAX (303) 863-1296



                          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, 2000 and 1999 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, 2000 included in the cumulative  period
from inception (March 15, 1994) to June 30, 2000. 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 for the year then ended and the  amounts  for the year
ended June 30, 2000 and 1999 included in the  cumulative  period from  inception
(March 15, 1994)

                                      F-2
<PAGE>


to June 30, 2000 in conformity with generally accepted accounting principles.

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
year ended June 30,  2000 of  $2,223,500  and has  experienced  net losses  from
inception.  Sources  of cash  flows  have been  through  the sales of its common
shares ($1,138,900) and from borrowings under financing activities ($6,609,600).
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 defendent 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/Grabau & Company P.C.

Denver, Colorado
September 30, 2000

                                      F-3
<PAGE>

<TABLE>

                   COMTEC INTERNATIONAL, INC. AND SUBSIDIARIES
                      (A COMPANY IN THE DEVELOPMENT STAGE)
                      CONSOLIDATED STATEMENTS OF OPERATIONS
            YEARS ENDED JUNE 30, 2000 AND 1999 AND CUMULATIVE AMOUNTS
              FROM INCEPTION (MARCH 15, 1994) THROUGH JUNE 30, 2000

<CAPTION>
                                                          Years Ended
                                                            June 30,                Cumulative
                                                ------------------------------     Amounts from
                                                     2000             1999       Inception to date
                                                -------------     ------------   -----------------
<S>                                             <C>               <C>            <C>
Operating Expenses:
     Selling, general and administrative        $     139,900     $     54,700   $       3,418,400
     Compensation in form of common stock              33,500                -           3,688,500
     Management fees, related party                         -                -              65,000
                                                -------------     ------------   -----------------
                                                      173,400           54,700           7,171,900
                                                -------------     ------------   -----------------
Loss before other income (expenses)                   173,400           54,700           7,171,900
                                                -------------     ------------   -----------------
Other income (expenses):
     Interest and dividends                                 -          122,300             156,300
     Other                                                  -            1,900             180,200
     Interest Expense (including interest paid
         in the form of common stock, 1999
         253,500; 1998 $353,800)                     (256,000)        (287,100)         (1,415,100)
     Telephone services, less revenues               (479,800)        (776,500)         (1,832,100)
     Loss on investments, foreclosures and
         disposal of assets                                 -                -            (851,300)
     Write-down of loan origination fees                    -         (532,700)           (532,700)
     Write-down of LED equipment and
         intangibles                               (1,314,300)               -          (3,988,600)
                                                -------------     ------------   -----------------
                                                   (2,050,100)      (1,472,100)         (8,283,300)
                                                -------------     ------------   -----------------
Net Loss                                        $  (2,223,500)    $ (1,526,800)  $     (15,455,200)
                                                =============     =============  =================
Basic Weighted average common shares
     outstanding                                   47,094,211       39,697,196          20,985,248
                                                =============     =============  =================
Basic Loss per common share                     $        (.05)    $      (0.04)  $            (.74)
                                                =============     =============  =================










        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-4
<PAGE>

<TABLE>

                   COMTEC INTERNATIONAL, INC. AND SUBSIDIARIES
                      (A COMPANY IN THE DEVELOPMENT STAGE)
              CONSOLIDATED BALANCE SHEETS - JUNE 30, 2000 AND 1999


                                     ASSETS

<CAPTION>
                                                       2000         1999
                                                   -----------   -----------
<S>                                                <C>           <C>
Current Assets

   Cash and equivalents                            $     5,100   $    70,500
Accounts recievable, less allowance for doubtful
   accounts                                                  -        63,100
Investment in marketable securities                          -             -
LED equipment, held for resale                               -     1,314,300
Other current assets                                         -             -
                                                   -----------   -----------
        Total current assets                             5,100     1,447,900

Property and equipment                               1,034,100     1,249,100

License rights                                       1,390,700     1,390,700
Other assets                                             4,500        60,500
                                                   --=-------    -----------
                                                   $ 2,434,400   $ 4,148,200
                                                   ===========   ===========

               LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIENCY)

Current liabilities
    Current portion of long-term debt              $    13,900   $    12,000
    Accounts payable                                    43,600        54,000
    Accrued liabilities                                327,300       846,000
    Notes Payable                                            -     1,700,000
    Convertible debenture                                    -             -
                                                   -----------   -----------
        Total current liabilities                      384,800     2,612,000
                                                   -----------   -----------
Long-term debt, less current portion                 1,409,400     1,422,000
                                                   -----------   -----------
Shareholders' Equity (deficiency):
    Series A convertible perferred 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 200,000,000 shares;
      issued and outstanding 68,078,791
      and 39,697,196 shares in 2000 and
      1999                                              68,100        39,700
Capital in excess of par                            16,047,700    13,326,600
Accumulated other comprehensive loss                         -             -
Deficit accumulated during the
    development stage                              (15,475,600)  (13,252,100)
                                                   -----------   -----------
                                                       640,200       114,200
                                                   -----------   -----------
                                                   $ 2,434,400   $ 4,148,200
                                                   ===========   ===========

        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-5
<PAGE>
<TABLE>


                  COMTEC INTERNATIONAL, INC., AND SUBSIDIARIES
                      (A COMPANY IN THE DEVELOPMENT STAGE)
          CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY (DEFICIENCY)
YEARS ENDED JUNE 30, 2000 AND 1999, AND FROM INCEPTION (MARCH 15, 1994) THROUGH JUNE 30, 2000

<CAPTION>
                                                                                    Accumulated   Deficit
                                                                                       other    Accumulated
                                   Preferred Stock                        Capital     compre-    During the
                                      -Series A         Common Stock    in excess     hensive   Development  Prepaid     Escrowed
                         Total     Shares   Amount     Shares   Amount    of par        loss       Stage       Media      Shares
                      ----------- -------- --------- ---------- ------- ----------- ----------- ----------- ----------- -----------
<S>                   <C>         <C>      <C>       <C>        <C>     <C>         <C>         <C>         <C>         <C>
Balance, beginning              -        -         -          -       -           -           -           -           -           -

Add (deduct):
 Proceeds from sale
  of common stock     $   629,700                       535,737 $   500 $   629,200

 Issuance of stock for:
  Liquidation of debt $   130,000                       246,019 $   300 $   129,700
  Consulting services $ 1,124,400                       923,164 $   900 $ 1,123,500
  Acquisitions        $   922,200  420,000 $ 420,000  3,315,969 $ 3,300 $ 1,744,300             $   (20,400)            $(1,225,000)
  Officer's
   compensation       $ 1,218,200                     1,600,300 $ 1,600 $ 1,216,600
  Exercised warrants  $    30,000                         6,000       - $    30,000
  Intangibles                   -                     1,040,000 $ 1,100 $ 1,298,900                         $(1,300,000)
Reverse acquistion    $  (230,900)                      592,662 $   600 $  (231,500)
Contribution of
  accrued officers'
  compensation        $   241,100                                       $   241,100
Net Loss:
 From inception
  (March 15,1994) to
  June 30, 1995       $(1,148,300)                                                              $(1,148,300)
 Year ended
  June 30, 1996       $(2,411,400)                                                              $(2,411,400)

Balance,
  June 30, 1996       $   505,000  420,000 $ 420,000  8,259,851 $ 8,300 $ 6,181,800 $         0 $(3,580,100)$(1,300,000)$(1,225,000)

Year ended
  June 30, 1997:
Add(deduct):
 Proceeds from sale
  of common stock     $   509,200                       743,962 $   700 $   508,500
 Issuance of stock for:
  Liquidation of debt $ 1,500,000                     3,125,000 $ 3,100 $ 1,496,900
  Licence rights      $ 1,444,500                     1,361,786 $ 1,400 $ 1,443,100
  Consulting Services $   951,200                     1,590,305 $ 1,600 $   949,600
  Conversion of
   preferred shares   $   172,700                        69,088 $   100 $   172,600
  Acquistions         $    85,000                        63,333 $   100 $    84,900
  Officers'
   compensation       $    59,700                       324,123 $   300 $    59,400
  Interest            $    46,600                        97,089 $   100 $    46,500
 Cancellation of
  shares due to:
  Foreclosure         $  (786,200)(420,000)$(420,000)   (98,000)$  (100)$  (366,100)
 License rights       $(1,444,500)                   (1,361,786)$(1,400)$(1,443,100)
 Cancelled acquisition                                 (980,000)$(1,000)$(1,224,000)                                    $ 1,225,000
 Write-down of
  intangible          $ 1,300,000                                                                           $ 1,300,000
 Unrealized losses
  on marketable
  securities          $    (3,600)                                                  $    (3,600)

 Net Loss year ended
  June 30, 1997       $(5,115,300)                                                              $(5,115,300)

        READ THE ACCOMPANYING SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
 AND NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, BOTH OF WHICH ARE AN INTEGRAL
                  PART OF THE CONSOLIDATED FINANCIAL STATEMENTS

                                      F-6

<PAGE>

                  COMTEC INTERNATIONAL, INC., AND SUBSIDIARIES
                      (A COMPANY IN THE DEVELOPMENT STAGE)
     CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY (DEFICIENCY), continued
 YEARS ENDED JUNE 30, 2000 AND 1999, AND FROM INCEPTION (MARCH 15, 1994) THROUGH JUNE 30, 2000

<CAPTION>
                                                                                    Accumulated   Deficit
                                                                                       other    Accumulated
                                   Preferred Stock                        Capital     compre-    During the
                                      -Series A         Common Stock    in excess     hensive   Development  Prepaid     Escrowed
                          Total     Shares   Amount     Shares   Amount    of par        loss       Stage       Media      Shares
                      ----------- -------- --------- ---------- ------- ----------- ----------- ----------- ----------- -----------
<S>                   <C>         <C>      <C>       <C>        <C>     <C>         <C>         <C>         <C>         <C>
Balance June 30, 1997 $  (775,700)       0 $       0 13,194,751 $13,200 $ 7,910,100 $    (3,600)$(8,695,400)$         0 $         0

Year ended
 June 30, 1998:
Add(deduct):
 Issuance of stock for:
  Liquidation of debt $ 2,600,000                    18,083,332 $18,100 $ 2,581,900
  LED equipment       $ 2,400,000                     5,000,000 $ 5,000 $ 2,395,000
  Consulting services $   193,000                     1,732,283 $ 1,700 $   191,300
  Officers'
   compensation       $    50,000                       148,369 $   200 $    49,800
  Loan origination
   and finders' fees  $   200,000                     1,538,461 $ 1,500 $   198,500

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

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


Balance,
 June 30, 1998        $ 1,641,000        0 $       0 39,697,196 $39,700 $13,326,600 $         0 (11,725,300)$         0 $         0


 Net loss year ended
  June 30, 1999       $(1,526,800)                                                              $(1,526,800)

Balance,
 June 30, 1999        $   114,200        0 $       0 39,697,196 $39,700 $13,326,600 $         0 (13,252,100)$         0 $         0


Issuance of stock for:
 Loan origination and
  finders' fees       $     6,200                     6,153,844 $ 6,200 $         0
 Consulting services  $    10,000                       227,272 $   200 $     9,800
 Compensation         $     3,500                       554,979 $   600 $     2,900
 Liquidation of debt  $ 2,729,800                    21,445,500 $21,400 $ 2,708,400

 Net loss year ended
  June 30, 2000       $(2,223,500)                                                              $(2,223,500)

Balance,
 June 30, 2000        $   640,200        0 $       0 68,078,791 $68,100 $16,047,700 $        0  (15,475,600)$         0 $         0






        READ THE ACCOMPANYING SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
 AND NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, BOTH OF WHICH ARE AN INTEGRAL
                  PART OF THE CONSOLIDATED FINANCIAL STATEMENTS

</TABLE>

                                      F-7
<PAGE>

<TABLE>

                  COMTEC INTERNATIONAL, INC. AND SUBSIDIARIES
                      (A COMPANY IN THE DEVELOPMENT STAGE)
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
            YEARS ENDED JUNE 30, 2000 AND 1999 AND CUMULATIVE AMOUNTS
              FROM INCEPTION (MARCH 15, 1994) THROUGH JUNE 30, 2000

<CAPTION>
                                                             Years Ended
                                                               June 30,             Cumulative
                                                      --------------------------    Amounts from
                                                          2000           1999     Inception to date
                                                      -----------    -----------    ------------
<S>                                                   <C>            <C>            <C>
Cash flows from operating activities:
Net loss                                              $(2,223,500)   $(1,526,800)   $(15,455,200)
                                                      -----------    -----------    ------------
Adjustments to reconcile net loss to net cash
     used in operating activities
         Depreciation and amortization                    215,000        214,800         693,000
         Issuance of common stock for service
           and interest                                         -              -       3,304,200
         Gain on the sale of marketable securities              -              -         (10,000)
         Write-down on LED equipment and
           intangibles                                  1,314,300              -       3,988,600
         Losses on investments,foreclosures
           and disposal of assets                               -              -         677,200
         Changes in assets and liabilities:
           Accounts receivable                             63,100       (49,600)         (25,300)
           Deposits and other                                   -              -          (2,500)
           Other current assets                                 -         45,000          11,100
           Accounts payable and accrued liabilities       520,400        245,900       2,162,900
           Other assets                                    56,000         24,700         120,700
                                                      -----------    -----------    ------------
                                                        2,168,800        480,800      10,919,900
                                                      -----------    -----------    ------------
           Cash used in operating activities              (54,700)    (1,046,000)     (4,535,300)

Cash flows from investing activities:
     Proceeds of sale of marketable securities                  -              -         267,500
     Proceeds from acquisition                                  -              -          22,100
     Payments for:
         License rights                                         -              -        (424,300)
         Marketable securities                                  -              -        (255,600)
         Non-operating assets                                   -              -         (25,000)
         Related party                                          -              -         (39,000)
         Property,plant, equipment and trade name               -              -      (1,699,800)
         Other assets                                           -        (54,800)        (60,500)
         Other                                                  -              -         (79,500)
                                                      -----------    -----------    ------------
         Cash used in investing activities                      -        (54,800)     (2,294,100)
                                                      -----------    -----------    ------------
Cash flows from financing activities:
     Proceeds from:
         Related party                                          -      1,000,000       1,184,500
         Sales of common stock                                  -              -       1,138,900
         Notes payable, principally related parties             -              -       1,295,100
         Warrants                                                                         30,000
         Convertible debentures                                 -              -       4,100,000
     Payments on:
         Notes payable,principally related parties              -       (484,200)       (882,000)
         Long-term debt                                   (10,700)       (12,300)        (32,000)
                                                      -----------    -----------    ------------
         Cash provided by financing activities            (10,700)       503,500       6,834,500
                                                      -----------    -----------    ------------
Increase (decrease) in cash and equivalents               (65,400)      (597,300)          5,100

Cash and equivalents,beginning                             70,500        667,800               -
                                                      -----------    -----------    ------------
Cash and equivalents,ending                           $     5,100    $    70,500    $      5,100
                                                      ===========    ===========    ============

        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

                                      F-8
<PAGE>


                   COMTEC INTERNATIONAL, INC. AND SUBSIDIARIES
                      (A COMPANY IN THE DEVELOPMENT STAGE)
                CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
            YEARS ENDED JUNE 30, 2000 AND 1999 AND CUMULATIVE AMOUNTS
              FROM INCEPTION (MARCH 15, 1994) THROUGH JUNE 30, 2000

<CAPTION>
                                                             Years Ended
                                                               June 30,             Cumulative
                                                      --------------------------    Amounts from
                                                          2000           1999     Inception to date
                                                      -----------    -----------    ------------
<S>                                                   <C>            <C>            <C>
Supplemental disclosure of cash flow information:

         Cash paid for interest                       $     2,500    $   124,900    $    307,400
                                                      ===========    ===========    ============

Supplemental schedule of non-cash financing activities:
         Foreclosures:
           Net book value of real property            $         -              -    $ (1,867,100)
           Mortgages,notes,and other debt                       -              -       1,081,300
           Preferred and common stock                           -              -         786,200
           Gain of foreclosure                                  -              -            (400)
                                                      -----------    -----------    ------------
                                                      $         -    $         -    $          -
                                                      ===========    ===========    ============

         Common stock issued for:
           Conversion of convertible debentures       $ 2,144,550    $         -    $  6,244,550
           Acquisition of LED equipment                         -              -       2,400,000
                                                      -----------    -----------    ------------
                                                      $ 2,144,550    $         -    $  8,644,550
                                                      ===========    ===========    ============

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

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

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

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

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

</TABLE>

                                      F-9
<PAGE>


                   COMTEC INTERNATIONAL, INC. AND SUBSIDIARIES
                      (A COMPANY IN THE DEVELOPMENT STAGE)
                   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
                       YEARS ENDED JUNE 30, 2000 AND 1999


Basis of accounting:
         Comtec  International,   Inc.  (the  Company)  prepares  its  financial
         statements in accordance with generally accepted accounting principles.
         This basis of  accounting  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-10
<PAGE>



                   COMTEC INTERNATIONAL, INC. AND SUBSIDIARIES
                      (A COMPANY IN THE DEVELOPMENT STAGE)
                   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
                       YEARS ENDED JUNE 30, 2000 AND 1999


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  appropriated
         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  included 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-11
<PAGE>


                   COMTEC INTERNATIONAL, INC. AND SUBSIDIARIES
                      (A COMPANY IN THE DEVELOPMENT STAGE)
                   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
                       YEARS ENDED JUNE 30, 2000 AND 1999


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

Accounting Pronouncements:
         The Company has adopted the Statement of Financial Accounting Standards
         Board (SFAS) No. 130, OReporting  Comprehensive Income,O 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,  ODisclosures  about  Segments of an
         Enterprise  and  Related   Information.O  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,  OAccounting for Derivative  Instruments and Hedging  Activities,O
         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, OReporting on the Costs of
         Start-Up  Activities,O  which require 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-12

<PAGE>


                   COMTEC INTERNATIONAL, INC. AND SUBSIDIARIES
                      (A COMPANY IN THE DEVELOPMENT STAGE)
                   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
                       YEARS ENDED JUNE 30, 2000 AND 1999


Accounting Pronouncements (continued):
         In 1998,  the  Company,  adopted the  American  Institute  of Certified
         Public Accountants'  (OAICPAO) Statement of Position 98-1 (OSOP 98-1O),
         OAccounting  for the Costs of Computer  Software  Developed or Obtained
         for  Internal  Use.O 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-13
<PAGE>


                   COMTEC INTERNATIONAL, INC. AND SUBSIDIARIES
                      (A COMPANY IN THE DEVELOPMENT STAGE)
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                       YEARS ENDED JUNE 30, 2000 AND 1999


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 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 company.

         Information about the Company's subsidiaries is presented below:


                                         Percentage   State      Date of
                  Company                  Owned    Organized  Organization
                  -------                  -----    ---------  ------------

         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, 1997
         (formerly CTI Real Estate, Inc.)

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


         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 900Mhz Metropolitan  Trading Area
         licensed 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-14
<PAGE>



                   COMTEC INTERNATIONAL, INC. AND SUBSIDIARIES
                      (A COMPANY IN THE DEVELOPMENT STAGE)
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                       YEARS ENDED JUNE 30, 2000 AND 1999


1.   Organization and business:
         On May 8,  1998,  the  Board  of  Directors  authorized  management  to
         liquidate the LED screen. Subsequently, the Company sold the LED screen
         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 900Mhz  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 $2,223,500  and  $1,526,800  for the years ended
         June 30,  2000  and 1999 and has  reported  cumulative  net  losses  of
         $15,455,200  from  inception  (March  15,  1994) to June 30,  2000.  As
         reported on the  consolidated  statements  of cash  flows,  the Company
         incurred  negative cash flows from operating  activities of $54,700 and
         $1,046,000  for the years ended June 30, 2000 and 1999 and has reported
         negative  cash flows  from  operating  activities  of  $4,535,300  from
         inception  (March 15, 1994) to June 30, 2000. To date,  these have been
         financed  principally  through  the sale of common  stock and  warrants
         ($1,138,900)  and issuance of short and  long-term  debt  ($6,609,600),
         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-15

<PAGE>


                   COMTEC INTERNATIONAL, INC. AND SUBSIDIARIES
                      (A COMPANY IN THE DEVELOPMENT STAGE)
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                       YEARS ENDED JUNE 30, 2000 AND 1999


2.   Going concern, liquidity and strategic planning (continued):
         Hereinafter Geneva, Cayman, Queens, Overseas and Sigma will be referred
         to in the aggregate as Oclients and affiliates of ZephyrO.  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-16

<PAGE>


                   COMTEC INTERNATIONAL, INC. AND SUBSIDIARIES
                      (A COMPANY IN THE DEVELOPMENT STAGE)
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                       YEARS ENDED JUNE 30, 2000 AND 1999


3.   Other comprehensive income:
         The Company has adopted  Statement  of Financial  Accounting  Standards
         (SFAS) No. 130, OReporting  Comprehensive Income.O 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
                                                  2000          1999
                                              -----------   -----------

         Net Loss                             $ 2,223,500   $ 1,526,800
         Other comprehensive loss:
             Unrealized loss in marketable
                  Securities                            -             -
                                              -----------   -----------
         Total comprehensive loss             $ 2,223,500   $ 1,526,800
                                              ===========   ===========

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-17

<PAGE>



                   COMTEC INTERNATIONAL, INC. AND SUBSIDIARIES
                      (A COMPANY IN THE DEVELOPMENT STAGE)
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                       YEARS ENDED JUNE 30, 2000 AND 1999


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  form 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 holder. 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 the 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   nonperformance.   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-18

<PAGE>


                   COMTEC INTERNATIONAL, INC. AND SUBSIDIARIES
                      (A COMPANY IN THE DEVELOPMENT STAGE)
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                       YEARS ENDED JUNE 30, 2000 AND 1999


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 canceled 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  canceled  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-19

<PAGE>



                   COMTEC INTERNATIONAL, INC. AND SUBSIDIARIES
                      (A COMPANY IN THE DEVELOPMENT STAGE)
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                       YEARS ENDED JUNE 30, 2000 AND 1999


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 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.   Detail of financial statement components:
                                                            2000         1999
                                                        ----------    ----------

         Other current assets:
              Accrued interest receivable               $        -    $        -
              Other receivables and prepaid expenses             -             -
                                                        ----------    ----------
                                                        $        -    $        -
                                                        ==========    ==========

         Property and equipment:
              Communications equipment                  $1,422,100    $1,422,100
              Furniture, fixtures and equipment             72,700        72,700
                                                        ----------    ----------
                                                         1,494,800     1,494,800
              Accumulated depreciation                     460,700       245,700
                                                        ----------    ----------
                                                        $1,034,100    $1,249,100
                                                        ==========    ==========
         Accrued liabilities:
              Payroll and related benefits              $  243,500    $   67,500
              Interest                                      60,200       191,000
              Stock payable                                      -       561,600
              Sales taxes                                   22,200        22,200
              Deferred revenue                               1,400         3,700
                                                        ----------    ----------
                                                        $  327,300    $  846,000
                                                        ==========    ==========






                                      F-20

<PAGE>



                   COMTEC INTERNATIONAL, INC. AND SUBSIDIARIES
                      (A COMPANY IN THE DEVELOPMENT STAGE)
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                       YEARS ENDED JUNE 30, 2000 AND 1999


6.   Details of financial statement components (continued):

                                                         2000          1999
                                                     ----------     ------------
     Charges to operations, losses(gains) on:
         Disposal of assets                          $        -     $          -
                                                     ----------     ------------
     Loss on investments, foreclosures,
         and disposal of assets                      $        -     $          -
                                                     ==========     ============
     Write-down of LED equipment and intangibles:

           LED equipment                             $1,314,300     $          -
           License rights                                     -                -
                                                     ----------     ------------
                                                     $1,314,300     $          -
                                                     ==========     ============

                                      F-21

<PAGE>



                   COMTEC INTERNATIONAL, INC. AND SUBSIDIARIES
                      (A COMPANY IN THE DEVELOPMENT STAGE)
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                       YEARS ENDED JUNE 30, 2000 AND 1999

7.   Notes payable:
                                                       2000           1999
                                                   -----------    -----------
     Related parties:
       Note payable, Overseas Foreign, unsecured
        interest at 12% per annum, maturing
        October 23, 1998.  Note in default,
        due on demand  with interest at
        default rate of 18% from maturity          $         -    $  250,000

       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, Cayman Offshore, unsecured
        interest at 12% per annum, maturing
        January 13, 1999.  Note in default,
        due on demand  with interest at
        default rate of 18% from maturity                    -       200,000

       Note payable, Pfeiger, unsecured
        interest at 12% per annum, maturing
        June 30, 1999. Note in default,
        due on demand with interest at
        default rate of 18% from maturity                    -       400,000

       Note payable, Merrivale, unsecured
        interest at 12% per annum, maturing
        September 16,1999. Note in default,
        due on demand with interest at
        default rate of 18% from maturity                    -       150,000
                                                   -----------    -----------

                                                   $         0    $ 1,700,000
                                                   ===========    ===========


On June 21, 2000, the Company issues 21,445,000 shares of common stock to Cayman
in exchange for  extinguishment of the above debt and accrued  interest,  in the
amount of  $2,144,550.  Additionally,  common  stock  payable  in the  amount of
$563,850 was extinguished and contributed to capital in excess of par.

                                      F-22
<PAGE>


                   COMTEC INTERNATIONAL, INC. AND SUBSIDIARIES
                      (A COMPANY IN THE DEVELOPMENT STAGE)
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                       YEARS ENDED JUNE 30, 2000 AND 1999

7.   Notes payable (continued):


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 originations 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-23

<PAGE>


                   COMTEC INTERNATIONAL, INC. AND SUBSIDIARIES
                      (A COMPANY IN THE DEVELOPMENT STAGE)
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                       YEARS ENDED JUNE 30, 2000 AND 1999


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 screen 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-24
<PAGE>


                   COMTEC INTERNATIONAL, INC. AND SUBSIDIARIES
                      (A COMPANY IN THE DEVELOPMENT STAGE)
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                       YEARS ENDED JUNE 30, 2000 AND 1999


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 in
         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-25

<PAGE>



                   COMTEC INTERNATIONAL, INC. AND SUBSIDIARIES
                      (A COMPANY IN THE DEVELOPMENT STAGE)
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                       YEARS ENDED JUNE 30, 2000 AND 1999


9.   Long-term debt:
                                                       2000           1999
                                                   ----------      ----------
     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      $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
       February, 2003                                  32,600          43,300
                                                   ----------      ----------
                                                    1,423,300       1,434,000

     Less current portion of long term debt            13,900          12,000
                                                   ----------      ----------
                                                   $1,409,400      $1,422,000
                                                   ==========      ==========
         The aggregate  maturities of the  promissory  notes and future  minimum
         payments under capital leases subsequent to June 30, 2000 are presented
         below:

                 Year ending                 Promissory       Capital
                   June 30        Total         Notes          Leases
                 -----------   ----------    ----------     ----------

                    2001       $   16,700    $        -     $   16,700
                    2002          201,800       190,300         11,500
                    2003          278,000       269,600          8,400
                 Thereafter       930,800       930,800              -
                               ----------    ----------     ----------
                               $1,427,300    $1,390,700     $   36,600
                 Less Interest      4,000             -          4,000
                               ----------    ----------     ----------
                               $1,423,300    $1,390,700     $   32,600
                               ==========    ==========     ==========







                                      F-26

<PAGE>



                   COMTEC INTERNATIONAL, INC. AND SUBSIDIARIES
                      (A COMPANY IN THE DEVELOPMENT STAGE)
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                       YEARS ENDED JUNE 30, 2000 AND 1999


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, 2000
         and 1999 are:

                                                2000           1999
                                            ----------      ----------

         Deferred tax asset:
              Net operating loss            $5,174,500      $4,438,400
              Less valuation allowance       5,174,500       4,438,400
                                            ----------      ----------
              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:

                                                     2000          1999
                                                -----------     -----------

         U.S. Federal statutory income
              tax rate of 35% (benefit)         $  (778,200)    $(1,078,500)
         Effective state income tax (benefit)      (111,200)        (99,900)
                                                -----------     -----------
         Valuation allowance                    $   889,400     $ 1,178,400
                                                ===========     ===========

         At June 30, 2000, the Company had available  federal net operating loss
         carryforwards  of  approximately  $15,446,400,  which  will  expire  in
         varying years through 2015.

                                      F-27
<PAGE>


                   COMTEC INTERNATIONAL, INC. AND SUBSIDIARIES
                      (A COMPANY IN THE DEVELOPMENT STAGE)
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                       YEARS ENDED JUNE 30, 2000 AND 1999

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 or 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, 2000 and 1999, no Series A Redeemable Convertible Preferred
         Stock nor 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%.

         On June 21, 2000,  the Company's  shareholders  approved an increase in
         the  number  of  authorized   shares  of  stock  from   100,000,000  to
         200,000,000 common shares

                                      F-28
<PAGE>


                   COMTEC INTERNATIONAL, INC. AND SUBSIDIARIES
                      (A COMPANY IN THE DEVELOPMENT STAGE)
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                       YEARS ENDED JUNE 30, 2000 AND 1999


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 of  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.

         At June 30, 2000, the following contingent stock issue requirements and
         warrants were outstanding:

         -   Shares  reserved  for  the  Company's  incentive  stock option plan
            (900,000)

         -   Shares reserved for  issuance in  accordance  with the  outstanding
             warrants  issued June 30, 1997 (4,242,923) exercisable at $4.50 per
             share, expiring June 30, 2000.

         -   Shares reserved for contingent  issue with  respect to  outstanding
             warrants  exercisable  at $2.90 per share associated with converted
             debt and LED Screens (7,083,333), expiring in March 2001.

         -   Shares reserved for contingent  issue with  respect to  outstanding
             warrants  exercisable  at @2.90 per share associated with converted
             debt  related  to  the SMR Asset purchase (17,600,000), expiring in
             March 2001.

                                      F-29
<PAGE>


                   COMTEC INTERNATIONAL, INC. AND SUBSIDIARIES
                      (A COMPANY IN THE DEVELOPMENT STAGE)
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                       YEARS ENDED JUNE 30, 2000 AND 1999


12.    Incentive Compensation plans (continued):

         - On February 16,  1998,  the Company  entered into a letter  agreement
         with the Company, 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  three  monthly  increments  to  equal a total of 5% of the
         Company;s  outstanding  common shares are conditioned  upon the Company
         reaching certain financial and  administrative  goal 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,  representing  80% of the bid price of the  Company's
         common  stock on  September  2nd,1998,  (closing  bid  price  $.07) Mr.
         Krejci's actual  appointment  date as president and CEO of the Company.
         On August 12, 1999 the board of director clarified the vesting schedule
         for Mr. Krejci's options as follows:

         The vesting  schedule for Mr.  Krejci's stock option in the preliminary
         agreement is hereby modified to state as follows:

         James J Krejci  shall be  entitled to earn stock  options  equal to ten
         percent  (10%)  of  the  total  outstanding   common  stock  of  ComTec
         international,  Inc.  over the three year period  beginning on February
         16, 1998.

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

         Year  One-  Option  Vesting  33.33% of total  option-  (3.33% of ComTec
         outstanding common stock)


         Year  Two-  Option  Vesting  33.33% of total  option-  (3.33% of ComTec
         outstanding common stock)


         Year Three- Option  Vesting  33.34% of total  option-  (3.34% of ComTec
         outstanding common stock)


         James Krejci  Compensation  Stock  Option:  1,300,000  shares at strike
         price  of  $.50  per  share  (111% of $.045 bid price on 5-6-99), First
         Granted: 5-6-99 - effective after 7-1-99

                                      F-30
<PAGE>


                   COMTEC INTERNATIONAL, INC. AND SUBSIDIARIES
                      (A COMPANY IN THE DEVELOPMENT STAGE)
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                       YEARS ENDED JUNE 30, 2000 AND 1999


12.    Incentive Compensation plans (continued):

         - Effective January 1,1999,  the Company enters into a letter agreement
         with the Company, which remains to be formalized, by which Gordon Dihle
         became employed as Chief Financial  Officer of the Company.  The letter
         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 option 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 2nd, 1998, (closing bid price $.07)

    Mr. Dihle date of appointment as Chief Financial Officer of the Company.


         Gordon Dihle  Compensation  Stock  Option:  1,000,000 shares at  strike
         price of $.050 per share (111% of $.045 bid  price  on  5-6-99),  First
         Granted: 5-6-9 -effective after 7-1-99.


            James J. Krejci - Contract Stock Option Agreement Summary

                  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 and 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  (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 share over a
         three year period.  Options to obtain an additional 5% of the Company's
         outstanding  common  share are  conditioned  upon the Company  reaching
         certain   financial  an  d  administrative   goals  within   referenced
         timelines. Pursuant to the Board of Directors Resolution at the meeting
         held October 7,1998,  Mr. Krejci 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).  9-2-98
         is the date Mr.  Krejci became  President and Ceo of ComTec,  therefore
         that date was used to  establish  the strike  date.  On October 7, 1998
         there were 44,495,558 shares outstanding or pending issuance.

         Contract  Stock  Option: 10%  over three years at strike price of $.056
         per share, First Contracted: 2/16/98

         Repriced: October 7, 1998. No options actually issued.

                                      F-31
<PAGE>


                   COMTEC INTERNATIONAL, INC. AND SUBSIDIARIES
                      (A COMPANY IN THE DEVELOPMENT STAGE)
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                       YEARS ENDED JUNE 30, 2000 AND 1999


12.    Incentive Compensation plans (continued):

         Compensation  Stock  Option:  1,300,000  shares at strike  price of and
         .050 per share  (111%  of  $.045 bid price on  5-6-99),  First Granted:
         5-6-99 -effective after 7-1-99

         As of 5-6-99 there were 46,034,019  shares  outstanding - Krejci option
         of 1,300,00  shares on 5-6-99 is 2.7% of the Company  (considering  the
         option  exercise).  Total Krejci potential stock purchases  pursuant to
         the contract option and the compensation option is 12.7%.

              Gordon Dihle- Contract Stock Option Agreement Summary

                  A letter  agreement  effective  1-1-99 was negotiated with Mr.
         Dihle  providing  for  Mr.  Dihle  to  receive  a set  monthly  salary,
         potential  bonuses and stock options totaling 7.5% to vest 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.
         This  agreement  was ratified by the Board of Directors on 1-15-99.  On
         1-15-99 there were 44,495,558 shares outstanding or pending issuance.

         Contract  Stock  Option:  10% over three years at strike price of $.056
         per share,  First  Contracted:  1/1/99 No options  actually issued.

         Compensation Stock Option: 1,000,000 shares  at  strike  price of $.050
         per  share  (111% of $.045 bid price on 5-6-99),  First Granted: 5-6-99
         -effective after 7-1-99.

         As of 5-6-99 there were 46,034,019 shares outstanding - Dihle option of
         1,000,000  shares  on 5-6-99 is 2.1% of the  Company  (considering  the
         option  exercise).  Total  potential  stock  purchases  pursuant to the
         contract option and the compensation option is 9.6%.


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-32

<PAGE>


                   COMTEC INTERNATIONAL, INC. AND SUBSIDIARIES
                      (A COMPANY IN THE DEVELOPMENT STAGE)
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                       YEARS ENDED JUNE 30, 2000 AND 1999


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 OCEOO) 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 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  can  not  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 an  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-33
<PAGE>


                   COMTEC INTERNATIONAL, INC. AND SUBSIDIARIES
                      (A COMPANY IN THE DEVELOPMENT STAGE)
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                       YEARS ENDED JUNE 30, 2000 AND 1999


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 OCEOO) 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 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  can  not  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 an  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-34

<PAGE>


                   COMTEC INTERNATIONAL, INC. AND SUBSIDIARIES
                      (A COMPANY IN THE DEVELOPMENT STAGE)
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                       YEARS ENDED JUNE 30, 2000 AND 1999


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  amount  were  changed  to
         operations.

        Transactions with related parties:
         The following is a summary of  transactions  with related parties as of
         June 30, 2000 and 1999:


                                                             1999       1998
                                                         ----------  ----------
               Compensation to officers/directors/
               shareholders                              $  212,700  $  246,000
               Origination fees to related parties                -     532,700
               Legal settlement with prior
               officers/shareholders                         30,000           -
               Interest on related party loans              253,500     180,000
               Related party loans                                -   1,000,000
                                                         ----------  ----------
                                                         $  496,200  $1,958,700
                                                         ==========  ==========
        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-35

<PAGE>


                   COMTEC INTERNATIONAL, INC. AND SUBSIDIARIES
                      (A COMPANY IN THE DEVELOPMENT STAGE)
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                       YEARS ENDED JUNE 30, 2000 AND 1999


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, 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 recision 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 loss 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 five month period ending November 30, 2000.



                                      F-36

<PAGE>


                   COMTEC INTERNATIONAL, INC. AND SUBSIDIARIES
                      (A COMPANY IN THE DEVELOPMENT STAGE)
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                       YEARS ENDED JUNE 30, 2000 AND 1999


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:

                                        Employee/
                                       consultants    Lender     Option Price
                                      Stock Options  Warrants   Per Share Range
                                      ------------- ----------- ---------------

         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 canceled                   -              -

         Balance, ending                 200,000     28,926,254
                                         =======     ==========

       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 O00O 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-37

<PAGE>


                   COMTEC INTERNATIONAL, INC. AND SUBSIDIARIES
                      (A COMPANY IN THE DEVELOPMENT STAGE)
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                       YEARS ENDED JUNE 30, 2000 AND 1999


14.    Subsequent events:
         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.

         On February 14, 2000, the Company was served with a Complaint  filed in
         Superior Court of California,  County of Los Angeles, Central Division,
         Case No. b C224058  entitled  A-1 Business  Products,  Inc. dba Premium
         Financial   Services,   Inc.,  a  California   Corporation  vs.  ComTec
         International,  Inc. The  Complaint  alleges  damages of $205,142  with
         respect to  allegations  that the Company  failed to pay amounts due to
         Plaintiff  under  assignments  of debts  related to  alleged  factoring
         agreements.  The Company  believes that it has meritorious  defense and
         will vigorously  defend against the  allegations of the Complaint.  The
         Company's answer to the complaint is due approximately  March 15, 2000.
         Due  to  the  very  preliminary  nature  of  the  proceedings,  further
         information is not available.


       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  provided 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-38
<PAGE>


                   COMTEC INTERNATIONAL, INC. AND SUBSIDIARIES
                      (A COMPANY IN THE DEVELOPMENT STAGE)
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                       YEARS ENDED JUNE 30, 2000 AND 1999


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):

         Year ended June 30, 2000:                    Quarter ended
                                           -----------------------------------
                                           September  December  March    June
                                              30,        31,     31,      30,
                                           ---------  --------  -----  -------

           Expenses:
           Selling, general and
             administrative                $     142  $    198  $ 219  $    94
           Interest                               51        51     76       78
                                           ---------  --------  -----  -------
                                                 193       249    295      172

           Deduct other income (expense)         (50)        4      8   (1,277)
                                           ---------  --------  -----  -------
           Net loss                        $    (243) $   (245) $(287) $(1,449)
                                           =========  ========  =====  =======

           Net loss per share $                 .(01) $   (.01) $(.01) $  (.02)
                                           =========  ========  =====  =======

         Year ended June 30, 1999:                   Quarter ended
                                           -----------------------------------
                                           September  December  March    June
                                              30,        31,      31,     30,
                                           ---------  --------  -----  -------
           Expenses:
           Selling, general and
             administrative                $     160 $     140  $ 319  $   212
           Interest                               51        75     75       86
                                           ---------  --------  -----  -------
                                                 211       215    394      298

           Deduct other income (expense)        (209)     (123)   106     (183)
                                           ---------  --------  -----  -------
           Net loss                        $    (420) $   (338) $(288) $  (481)
                                           =========  ========  =====  =======
           Net loss per share $            $    (.01) $   (.01) $(.01) $  (.01)
                                           =========  ========  =====  =======


                                      F-39

<PAGE>


                   COMTEC INTERNATIONAL, INC. AND SUBSIDIARIES
                      (A COMPANY IN THE DEVELOPMENT STAGE)
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                       YEARS ENDED JUNE 30, 2000 AND 1999


15.    Selected quarterly data (unaudited):
         Comtec International, Inc. common stock is traded on the OTC Electronic
         Bulletin  Board system under the symbol of YRLS.  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:
                                                   2000              1999
                                               -------------    --------------
                                               High     Low     High      Low
                                               ----     ---     ----      ---

             First quarter, September 30,    $  .12   $  .04   $  .12   $   .05

             Second quarter, December 31,       .16      .05      .07       .02

             Third quarter, March 31,           .66      .08      .06       .02

             Fourth quarter, June 30,           .24      .07      .07       .03




         A significant  fourth quarter adjustment was made to write-down certain
         LED Equipment to its' net realizable value in the amount of $1,314,300.


                                      F-40