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

   
                               AMENDMENT NO. 1 TO
                            FORM 10-KSB/A (MARK ONE)
    

/X/  Annual report under section 13 or 15(d) of the Securities Exchange Act of
     1934 (Fee Required) for the fiscal year ended August 31, 1996.


/ /  Transition  report under section 13 or 15(d) of the Securities Exchange Act
     of 1934 (No Fee Required) for the transition period from  ____________ to
     ____________.

                         COMMISSION FILE NUMBER: 0-15482

                                 WAVETECH, INC.
                                 --------------
                 (Name of small business issuer in its Charter)

       New Jersey                                              22-2726569
       ----------                                              ----------
(State or other jurisdiction                                  (IRS Employer
      of incorporation)                                   Identification Number)

                       5210 E. Williams Circle, Suite 200
                           Tucson, Arizona 85711-4410
                           --------------------------
                    (Address of Principal Executive Offices)
                  Registrant's Telephone Number: (520) 750-9093

             Securities registered under Section 12(g) of the Act:

  Title of Each Class                  Name of each exchange on which registered
       None                                                None
       ----                                                ----

             Securities registered under Section 12(g) of the Act:

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

          Class A and Class B Redeemable Common Stock Purchase Warrants
          -------------------------------------------------------------
                                (Title of Class)

   
The  undersigned  Registrant  hereby amends in its entirety its Annual Report on
Form 10-KSB for the fiscal year ended August 31, 1996, as follows:
    

Check  whether the issuer (1) filed all reports  required to be filed by Section
13 or 15(d) of the  Securities  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 / /.

State issuer's revenues for its most recent fiscal year: $19,895

   
The  aggregate  market  value  of the  voting  stock of the  registrant  held by
non-affiliates as of February 25, 1997 was approximately $8,896,740 based on the
average high and low bid prices for such common stock, as reported on the Nasdaq
Stock Market.

The number of shares of common  stock  outstanding  as of February  25, 1997 was
14,964,442.  The aggregate number of Redeemable  Common Stock Purchase  Warrants
outstanding as of February 25, 1997 was 844,630.
    
Documents  Incorporated  by Reference - Various like numbered  exhibits from the
Company's  1987  Registration  Statement  File  No.  33-  8353;   Post-Effective
Amendment No. 1 to Form S-18 Registration Statement,  SEC File No. 33-8353 filed
September 2, 1988; Form 10-K for the fiscal year ending August 31, 1991.

Transitional Small Business Disclosure Format (Check One): Yes / /  No /X/
<PAGE>

                                     PART I

ITEM 1. DESCRIPTION OF BUSINESS

(A)  BUSINESS DEVELOPMENT

COMPANY PROFILE
   
Wavetech,  Inc.  (hereinafter referred to as "Wavetech") was incorporated in the
State of New Jersey on July 10,  1986.  The Company  became a public  company by
filing and registering with the Securities and Exchange  Commission on Form S-18
400,000  units,  each unit  consisting  of three  shares of common stock and one
Class  A  and  one  Class  B  redeemable  common  stock  purchase  warrant.  Its
registration statement became effective on February 11, 1987. A total of 400,000
units were sold at the offering price of $6.75 per unit for gross total proceeds
of $2,700,000.
    

INTERNATIONAL ENVIRONMENTAL SERVICES CORPORATION

On June 6, 1991, Wavetech acquired all of the outstanding stock of International
Environmental  Services  Corporation  (hereinafter  referred  to  as  "IES"),  a
privately held Delaware  corporation,  in exchange for 8,000,000 shares (400,000
shares  after the 1-20  split) of the  Company  and a $5 per cubic yard  royalty
payment on IES's future operations, if any. IES has not derived any revenue from
its operations.

IES was  incorporated  in 1987 and, at the time of the  acquisition by Wavetech,
had as its sole asset  approximately  1,000  acres of real  property  located in
Carroll  County,  Ohio.  The  property  was  acquired  by IES for the purpose of
converting  all, or a portion  thereof,  to a  non-hazardous  sanitary  landfill
facility.

In November of 1995,  Wavetech was advised that the land of approximately  1,000
acres was sold to satisfy real estate taxes in arrears by Caroll County in Ohio.
This tax sale was consummated in April 1994. The Company intends to pursue legal
recourse to recover the value of the land from responsible parties.

WAVETECH, INC.

Following the  acquisition of IES,  Wavetech was comprised of two divisions:  An
Environmental Laboratory Testing and Engineering Division through a wholly-owned
subsidiary,  Applied Environmental  Technology,  Inc. ("Applied") and a Landfill
Development  &  Management  Division  ("IES").  During the year ended August 31,
1995, Wavetech, divested its Applied stock. This divestiture occurred during the
year ended  August 31,  1995 and before  March 8, 1995,  resulting  in  Wavetech
having no further  liabilities  nor assets on its balance sheet  associated with
Applied.

INTERPRETEL, INC.

On March 8, 1995,  Wavetech  entered into an agreement  with  Interpretel,  Inc.
("Interpretel")  pursuant to which Wavetech agreed to issue 6,000,000  shares of
its common stock in exchange  for 100% of the  outstanding  1,532,140  shares of
common stock of Interpretel. The transaction resulted in the former shareholders
of Interpretel  owning  approximately 80% of the outstanding shares of Wavetech.
The  acquisition  agreement  also  provides  that  during the three year  period
following the March 8, 1995 closing,  former  shareholders  of  Interpretel  can
receive an additional  7,500,000 common shares of Wavetech through an "earn-out"
based upon before tax net profit.  During the two year period following closing,
former  shareholders of Interpretel are entitled to earn up to 3,7500,000 common
shares of Wavetech for every $0.50 net profit  before  taxes,  and an additional
3,750,000  common  shares of Wavetech  for every $1.00 of  cumulative  total net
profit before taxes.  During the third year  following  closing,  any shares not
previously  issued  pursuant to this agreement can be earned at $1.50 net profit
before taxes per share.

                                       2
<PAGE>

Interpretel's  business is the creation and development of customized telephonic
networks linking large groups or organizations with their customer or membership
base using an interactive marketing platform.  The system allows information and
services to be  delivered in a highly  selective  and timely  manner.  Since its
inception,  Interpretel has developed advanced call-processing  applications and
created the infrastructure for administrative,  sales,  marketing,  and customer
service requirements.

Interpretel was  incorporated  in Arizona became  operational in September 1993.
Corporate offices and the data processing center are located in Tucson, Arizona.
When  Interpretel  was acquired by Wavetech on March 8, 1995,  the principals of
Interpretel,  Inc.  continued to serve as  management  for the  newly-structured
corporation.  Wavetech,  the parent company,  is listed on the Nasdaq  Small-Cap
Market under the trading symbol ITEL.

On March 10, 1995, Interpretel (Canada) Inc., was incorporated under the laws of
the Province of Ontario as a wholly owned subsidiary of Interpretel.

(B)  BUSINESS OF ISSUER AND SUBSIDIARIES

As  a  wholly-owned   subsidiary  of  Wavetech,   Interpretel  has  developed  a
call-processing and data management network to provide unique  telecommunication
services,  such as language  interpretation and translation,  combined with long
distance and  messaging  services to create  feature  rich,  and  cost-effective
products.

The  Company's  products  may be  tailored to a  wide-range  of  industries  and
applications,  to provide a  high-tech  vehicle for  targeting  the needs of the
intended audience. Systems are created to provide information distribution,  and
customer  interaction for marketing and promotion  purposes,  combined with what
Interpretel believes to be cost-competitive telecommunication services.

The network supports expansion through satellite  operations and the development
of customized systems for selected foreign markets.

Since its inception,  Interpretel  has focused  primarily on the  development of
product    specifications,    proprietary    application   software   (including
call-processing,  billing,  membership and customer service database  software),
execution  of  vendor   contracts,   development  of  corporate   infrastructure
(including  customer  service,  sales and marketing  divisions,  regional  sales
staff),  design and printing of product and marketing  brochures,  and strategic
planning for international business development. The Company's software packages
are tightly integrated into a state-of-the-art  communications system creating a
platform  network  that can be  duplicated  throughout  the world as the Company
proceeds with its expansion plans.

The  Company  has  issued a  tariff,  bearing  F.C.C.  Tariff  No.  2,  filed in
compliance with the requirements of the  Communication  Act of 1934, as amended,
with the Federal Communications Commission.

Interpretel has grown to a staff of 16 employees: 14 of whom are full-time.

The Company  currently has operations  underway in the United States and Canada,
and Australia through a licensing agreement with Switch  Telecommunications  Pty
Limited.

FEATURES AND CAPABILITIES OF THE COMPANY'S INTERACTIVE SYSTEM

The Company's interactive system is provided through a call-processing  platform
system,  which combines  Interactive  Voice Response (IVR) software and computer
hardware networked with digital telephone lines.

The   call-processing    platform   system   is   a   UNIX-based   multi-tasking
call-processing  system integrated with a Tandem database server, which provides
the ability to offer and manage a wide range of information,  service  features,
and  data  bases.  The  system  is built  with  computer  telephony  integration
technology in a single system and offers direct T-1 connectivity and integration
with the  public  network.  The  system is  modularly  designed  for  growth and

                                       3
<PAGE>

supports   fully   customized    applications.    The   Company's    proprietary
call-processing  system is managed and administrated  from the corporate offices
in  Tucson,  Arizona,  with  the  hardware  located  in  Lincoln,   Nebraska.  A
development  platform is also  located in Tucson.  A platform  for the  Canadian
operations  will be  located  in  Calgary,  Alberta  in the near  future,  and a
platform  for the  Australian  and New  Zealand  business  is located in Sydney,
Australia.

During 1994 and 1995,  the Company  remained  focused on the  development of the
infrastructure for its call-processing and data management systems.

The Company  commenced its principal  operations in mid-1996,  having  completed
development of the necessary technical infrastructure and business organization.
Revenues  are  expected  to increase as  interactive  communication  systems are
developed  and  launched,  resulting in expected  additional  customers who will
utilize the  services  offered by these  systems.  The Company has entered  into
contracts  with third  parties to provide its services to such third parties and
expects to begin generating revenue from these contracts in 1997.

The Company currently offers three programs from which customers may choose:

1.   THE  INTERPRETEL  TRAVELER  CARD. An advanced  communication  traveler card
     created for worldwide  business and travel.  Using a calling card platform,
     this program  integrates voice and fax mail,  language  interpretation  and
     translation,  call  conferencing,  and  additional  services with worldwide
     access.

2.   THE AFFINITY CARD PROGRAM.  Building on the Interpretel  Card, this program
     allows a  company  to add its own  identity,  and  integrate  communication
     features  and  services  unique to its own  database  of  customers  and/or
     members.

3.   THE  INTERACTIVE  MARKETING  PROGRAM.  Taking the Affinity Card Program one
     step further,  the  Company's  advanced  call-processing  system is used to
     create a two-way  communication  and  distribution  link to the cardholder.
     Using voice and fax broadcast,  audiotext  messages and fax, the cardholder
     defines  his/her  interest  and method of message  delivery,  allowing  the
     affinity  company  to  deliver  highly  targeted  messages  timely and cost
     effectively.

Interpretel now offers additional  features including:  Voice Activation,  Stock
Quotes; Low-cost Legal Services; Dun & Bradstreet Business Services; Full Travel
Services;  Message  Notification  via pager; and Integration of Services via the
Internet.

STRATEGIES FOR THE FUTURE

Interpretel  has expanded its customer base and is penetrating  new markets with
the development of call-processing offshore. In addition, the Company intends to
develop a network of telecommunication platforms that will service the demand in
other  countries.  This  strategy  is intended  to promote  the  development  of
worldwide  services,  and at the same time  contribute on a monthly basis to the
cash flow of the Company. The Company's proprietary interactive  call-processing
software and related  hardware  allow for the creation of systems to address the
needs of people  from  many  cultures.  The  Company  intends  to  develop  more
licensing  agreements  similar to the agreement for Southeast Asia,  signed with
Switch Telecommunications Pty Limited.

As mass marketing of products  continues to shift to one-on-one  marketing,  the
Company  believes it is uniquely and  strategically  positioned to capitalize on
this trend by enabling  businesses to customize and personalize  their marketing
using the Company's interactive telecommunication broadcast system.

From time to time, the Company seeks  acquisition  and/or merger candidates that
would be  complimentary  to the Company's  existing  operations  and augment the
products now offered to the Company's customer base.

                                       4
<PAGE>

ITEM 2. DESCRIPTION OF PROPERTY

The  Company  leases  its office and  administrative  space at 5210 E.  Williams
Circle,   Suite  200,   Tucson,   Arizona  85711.  The  lease  payments  average
approximately $8,400 per month over the term of the lease.

ITEM 3. LEGAL PROCEEDINGS

   
Applied Environmental Technology, Inc. ("Applied") was named as a defendant in a
lawsuit filed by Long Beach Memorial Hospital (the "Hospital") on July 30, 1992.
Wavetech  was added as a party  defendant  in December  1994 by the filing of an
Amended Complaint. The Hospital alleges to have sustained damages as a result of
certain  errors and  omissions  by  Applied in  performing  the  engineering  of
asbestos removal for the Hospital.  Litigation counsel for Applied believes that
there are adequate defenses to the action.

On March 14, 1996,  Steven A. Ezell  ("Ezell") a former  officer of the Company,
sued the Company and two of its current  officers and  directors in the Superior
Court of the State of  Arizona in an action  titled  Ezell vs.  Wavetech,  Inc.,
Gerald I. Quinn and Terence E. Belsham.  The Complaint  alleges that the Company
breached its employment  contract with Ezell and that Messrs.  Quinn and Belsham
tortiously  interfered with Ezell's  employment  contract with the Company.  The
complaint seeks unspecified compensatory damages, including costs and attorney's
fees.  The  Company  believes  Ezell's  claims  have no  merit  and  intends  to
vigorously defend this action.
    

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

        None.

                                     PART II

ITEM 5. MARKET FOR THE COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
   
The Company is quoted on the  Nasdaq-Small  Cap Market.  Trading  activity  with
respect to the Company's  Common Stock has been limited.  A public market having
the characteristics of depth, liquidity and orderliness depends on the existence
of market makers as well as the presence of willing  buyers and sellers,  all of
which are circumstances  over which the Company does not have control.  The high
and low bid prices of the  Company's  Common  Stock,  as reported on Nasdaq from
September 1, 1994 through August 31, 1996 by fiscal quarters (i.e. 1st Quarter =
September  1 through  November  30) were as  follows  (the  quotations  provided
reflect inter-dealer prices,  without retail market-up,  mark-down or commission
and may not represent actual transactions.)
<TABLE>
<CAPTION>
               1st Qtr              2nd Qtr                3rd Qtr                   4th Qtr
Common         -------                ------                 -------                   -------                          --- ---
Stock     High        Low       High        Low         High       Low           High         Low   
------    ----        ---       ----        ---         ----       ---           ----         ---
<S>     <C>         <C>      <C>         <C>         <C>        <C>         <C>           <C>
1994      1/8         3/32     9/32        1/8         6 1/2(1)   1 1/4(1)    1 7/16 (1)    1/4    (1)
1995    1 1/8 (1)   1  (1)   2 3/32(1)   1 1/32(1)   3 1/8  (1) 1 25/32(1)    2 21/32(1)    1 11/16(1)
1996    2 1/16(1)   3/4(1)   1 3/8 (1)   11/16 (1)   2 1/8  (1)    3/4 (1)    2      (1)    3/4    (1)
</TABLE>
----------
(1) - Reflects 1-for-20 reverse stock split that occurred on March 21, 1994.

The bid and the asked prices of the Company's  common stock on November 14, 1996
were 3/4 and 7/8, respectively.

                                       5
<PAGE>

As of February  25,  1997,  the Company  had 360  shareholders  of record of its
Common  Stock.  The Company  believes that it has over 2,022  shareholders  that
beneficially own the stock in the name of various brokers.
    

The  Company  has  never  declared  a  dividend  and does not plan to  declare a
dividend of cash or common stock in the near future.

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

The Company's business is creating interactive communication systems through the
application of "intelligent call processing" technology and proprietary software
to reflect or target the needs of an  identified  audience.  These  systems  are
often used as privatized  networks for organizations and special purpose groups.
During 1995 and 1994,  the Company  remained  focused on the  development of the
infrastructure for its call processing and data management  systems.  Operations
in the USA and Canada  commenced on a limited  basis in 1996.  In May 1996,  the
Company signed a licensing agreement with Switch  Telecommunications Pty Limited
of Australia.

OPERATIONS OVERVIEW

The  Company   commenced   limited   operations  in  mid-1996  having  completed
development of the necessary technical infrastructure and business organization.
Revenues  for 1995 and 1994 are from a limited  number of focus group  customers
utilizing  the Company's  communication  system and from  interest  income.  The
Company  believes  that  revenues  will  increase in future  periods as expected
interactive communication systems are developed and placed in service.

COSTS AND EXPENSES

Expenses  increased  to $  1,912,876  in 1996  from  $1,079,567  in 1995  due to
increased  personnel,   equipment  purchases,  software  development  costs  and
marketing  initiative  costs  such as  printing,  plastic  cards,  instructional
manuals, mailing lists and creative design.

LIQUIDITY AND CAPITAL RESOURCES

At August 31, 1996, the Company had working capital of $665,483  compared with a
working capital deficit of $362,479 at August 31, 1995. The Company has utilized
proceeds from equity  financings to generate  positive working capital balances.
The Company expects that working capital will increase as the Company  generates
cash from operations and external funding. Cash balances increased from $285,793
to  $857,488  at August  31,  1996.  The  increase  is  primarily  the result of
$1,492,500 of proceeds from the sale of common stock.  Capital  expenditures for
the year ended August 31, 1996 were $89,352 and $446,599 for the prior year.  As
the Company expands the infrastructure for supplying  interactive  communication
systems capital expenditures will increase.

INFLATION

Although the Company's operations are influenced by general economic trends and,
specifically,  technology  advances  in  the  telecommunications  industry,  the
Company does not believe that inflation has had a material impact on its limited
operations.

                                       6
<PAGE>

ITEM 7. FINANCIAL STATEMENTS


                          INDEPENDENT AUDITOR'S REPORT
            TO THE STOCKHOLDERS AND BOARD OF DIRECTORS WAVETECH, INC.

We have audited the accompanying  consolidated balance sheets of Wavetech,  Inc.
And  subsidiaries  as of August 31, 1996 and 1995 and the  related  consolidated
statements of operations, changes in stockholders' equity and cash flows for the
years ended August 31, 1996, 1995 and 1994.  These financial  statements are the
responsibility of the company's management.  Our responsibility is to express an
opinion on these financial statements based on our audits.

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

In our opinion, the consolidated  financial statements referred to above present
fairly,  in all  material  respects,  the  consolidated  financial  position  of
wavetech,  inc. And  subsidiaries as of August 31, 1996 and 1995 and the results
of its operations  and its cash flows for the years ended August 31, 1996,  1995
and 1994, in conformity with generally accepted accounting principles.

                                                  Addison Roberts & Ludwig, P.C.

November 1, 1996
Tucson, Arizona


                                       7
<PAGE>
                         WAVETECH, INC. AND SUBSIDIARIES

                           Consolidated Balance Sheets
                            August 31, 1996 and 1995
                                                             
                                     ASSETS
                                                           1996          1995
                                                           ----          ----
Current Assets:
Cash And Cash Equivalents                              $  857,488    $  285,793
Accounts Receivable, Net Of Allowance Of $527              35,585
License Fee Receivable (Note 6)                           200,000
Notes Receivable                                           45,282
Prepaid Expenses And Other Assets                           1,521         4,348
Inventory Deposit (Note 6)                                241,037
                                                       ----------    ----------
Total Current Assets                                    1,380,913       290,141
Property And Equipment, Net (Note 7)                      539,528       476,465
Other Assets:
Investment In Switch Telecommunications
Pty Limited (Note 5)                                    2,316,165
License Fee Receivable (Note 6)                           300,000
Intangibles, Net Of Amortization Of $4,000 And $1,600       8,000        10,400
Deposits And Other Assets                                  35,633        33,125
                                                       ----------    ----------
Total Other Assets                                      2,659,798        43,525
                                                       ----------    ----------
Total Assets                                           $4,580,239    $  810,131
                                                       ==========    ==========
                      LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts Payable And Accrued Expenses                  $  130,715    $  235,054
Accrued Interest Payable                                   39,327
Unearned Revenue (Note 6)                                 499,985
Notes Payable, Current Portion (Notes 8 And 11)            53,639       378,239
Capital Leases Payable, Current Portion                    31,091
                                                        ---------    ----------
Total Current Liabilities                                 715,430       652,620
Other Liabilities:
Capital Leases Payable                                     55,099
Unearned Revenue-License Fee (Note 6)                     300,000
                                                        ---------    ----------
Total Liabilities                                       1,070,529       652,620
Commitments (Note 10)
Stockholders' Equity (Notes 4, 8, 11 And 15)
Common Stock, Par Value $ .001 Per Share;
50,000,000 Shares Authorized, 9,455,078 and
14,114,441 Shares Issued And Outstanding                   14,114         9,455
Additional Paid-In Capital                              6,747,967     1,540,223
Accumulated Deficit                                    (3,252,371)   (1,392,167)
                                                       ----------    ---------- 
Total Stockholders' Equity                              3,509,710       157,511
                                                       ----------    ----------
Total Liabilities And Stockholders' Equity             $4,580,239    $  810,131
                                                       ==========    ==========
                                                                       
                        See Independent Auditor's Report.
              The Accompanying Notes are an Integral Part of These
                       Consolidated Financial Statements.

                                       8
<PAGE>
                         WAVETECH, INC. AND SUBSIDIARIES

                      Consolidated Statements of Operations
               For the Years Ended August 31, 1996, 1995 and 1994
           
                                   -----------

                                       1996          1995           1994
                                       ----          ----           ----
Revenue                            $   19,895     $   24,468     $    1,151
                                   ----------     ----------     ----------
Expenses:
Development                           297,935        201,224
General And Administrative          1,603,356        855,756        307,762
                                  -----------    -----------     ----------
Total Expenses                      1,901,291      1,056,980        307,762
                                  -----------    -----------     ----------
Net Loss From Operations           (1,881,396)    (1,032,512)      (306,611)
Other Income And Expense:
Interest Income                        32,777
Interest Expense                      (11,585)       (22,587)       (18,637)
                                   ----------    -----------     ----------
                                                
Total Other Income And Expense         21,192        (22,587)       (18,637)
                                   ----------    -----------     ----------
                                                
Net Loss                          $(1,860,204)   $(1,055,099)    $ (325,248)
                                  ===========    ===========     ==========
                                                                
Net Loss Per Common Share         $      (.17)   $      (.22)    $     (.31)
                                  ===========    ===========     ==========
Weighted Average Number Of
Shares Outstanding                 11,200,401      4,830,803      1,051,000
                                  ===========    ===========    ===========
                                                                

                        See Independent Auditor's Report.
              The Accompanying Notes are an Integral Part of These
                       Consolidated Financial Statements.


                                       9
<PAGE>
                         WAVETECH, INC. AND SUBSIDIARIES

           Consolidated Statements of Changes in Stockholders' Equity
               For the Years Ended August 31, 1996, 1995 and 1994
                                   -----------
<TABLE>
<CAPTION>
                                                        ADDITIONAL
                                             COMMON      PAID-IN     ACCUMULATED
                               SHARES        STOCK       CAPITAL       DEFICIT        TOTAL
                             ----------    ---------   -----------   -----------   -----------
<S>                         <C>          <C>          <C>          <C>            <C>         
Balances August 31, 1993      1,051,000    $   1,051   $             $   (11,820)  $   (10,769)
Net loss                       (325,248)    (325,248)
                             ----------    ---------   -----------   -----------   -----------
Balances August 31, 1994      1,051,000        1,051                    (337,068)     (336,017)
Adjustment to effect reverse
acquisition (note 4)          6,433,958        6,434        (6,434)
Common stock issued
(note 11)                     1,970,120        1,970     1,546,657                   1,548,627
Net loss                                                              (1,055,099)   (1,055,099)
                             ----------    ---------   -----------   -----------   -----------
Balances August 31, 1995      9,455,078        9,455     1,540,223    (1,392,167)      157,511
Common stock issued
(note 11)                     4,659,363        4,659                   5,207,744     5,212,403
Net loss                                                              (1,860,204)   (1,860,204)
                             ----------    ---------   -----------   -----------   -----------
Balances August 31, 1996     14,114,441    $  14,114   $ 6,747,967   $(3,252,371)  $ 3,509,710
                             ==========    =========   ===========   ===========   ===========
</TABLE>











                        See Independent Auditor's Report.
              The Accompanying Notes are an Integral Part of These
                       Consolidated Financial Statements.


                                       10
<PAGE>


                         WAVETECH, INC. AND SUBSIDIARIES

                     Consolidated Statements of Cash Flows
               For the Years Ended August 31, 1996, 1995 and 1994
                                  ------------
<TABLE>
<CAPTION>
                                                     1996           1995          1994
                                                 -----------    -----------    -----------
Cash Flows From Operating Activities:
     <S>                                        <C>            <C>            <C>       
       Net Loss                                  $(1,860,204)   $(1,055,099)   $(325,248)
       Adjustments to Reconcile Net Loss to
       Net Cash Used in Operating Activities:
       Depreciation and Amortization                 136,902         23,434       13,226
       Common Stock Issued for Services              203,125        100,539
       Changes in Assets and Liabilities:
       (Increase) in Accounts Receivable
           And Other Current Assets                  (32,758)        (3,583)        (764)
       (Increase) in License Fee Receivable         (500,000)
       (Increase) in Inventory Deposit              (241,037)
       Increase (Decrease) in Accounts Payable
           And Accrued Expenses                     (104,339)       197,220       37,833
       Increase (Decrease) in Accrued Interest
           Payable                                   (39,327)        20,646       18,497
       Increase in Unearned Revenue                  799,985
                                                 -----------    -----------    ---------
Total Adjustments                                    222,551        338,256       68,792
                                                 -----------    -----------    ---------
Net Cash Used in Operating Activities             (1,637,653)      (716,843)    (256,456)
       Cash Flows From Investing Activities:
       Purchase Of Property and Equipment            (89,352)      (446,599)     (64,926)
       Increase in Deposits and Other Assets          (2,508)       (31,450)      (7,675)
       Advance on Notes Receivable                   (45,282)
                                                 -----------    -----------    ---------
       Net Cash Used in Investing Activities        (137,142)      (478,049)     (72,601)
       Cash Flows From Financing Activities:
       Proceeds From (Payment Of) Notes
Payable, Net                                        (324,600)        28,639      244,700
       Payments on Capital Lease Payable             (22,023)
       Proceeds From Common Stock Issued           2,693,113      1,448,088
                                                 -----------    -----------    ---------
Net Cash Provided By Financing
       Activities                                  2,346,490      1,476,727      244,700
                                                 -----------    -----------    ---------
Net Increase (Decrease) in Cash                      571,695        281,835      (84,357)
Cash and Cash Equivalents, Beginning Of Year         285,793          3,958       88,315
                                                 -----------    -----------    ---------
Cash and Cash Equivalents, End Of Year           $   857,488    $   285,793    $   3,958
                                                 ===========    ===========    =========
</TABLE>

                        See Independent Auditor's Report.
              The Accompanying Notes Are An Integral Part Of These
                       Consolidated Financial Statements.


                                       11
<PAGE>

                         WAVETECH, INC. AND SUBSIDIARIES

                          Notes To Financial Statements
                                 --------------

1.   Organization

     The  consolidated  financial  statements  include the accounts of wavetech,
     Inc. (the  company) and its wholly owned  subsidiaries,  Interpretel,  Inc.
     (Interpretel),  Interpretel  (Canada) Inc. And international  environmental
     services corporation (an inactive  corporation).  All material intercompany
     balances and transactions have been eliminated.  As of August 31, 1996, and
     for the previous three years,  the company had no operations other than its
     investment  in  Interpretel  which was made on March 8, 1995.  On March 10,
     1995,  Interpretel  (Canada) Inc. Was  incorporated  in Ontario Canada as a
     wholly owned subsidiary of Interpretel.  Interpretel  (Canada) Inc. Had not
     yet had any activities as of August 31, 1996.

     Interpretel was incorporated April 15, 1993, under the laws of the State of
     Arizona  to  develop,  market  and  provide  interactive  telecommunication
     systems and  services to business  and  individual  customers.  The systems
     incorporate  interactive call processing,  computer-telephony  integration,
     card production/fulfillment,  bill services,  marketing, sales support, and
     customer  service to  provide  features  and  services,  including  but not
     limited  to,  long  distance  dialing,   voice/fax   messaging,   voice/fax
     broadcast,  language  interpretation/translation,   information  retrieval,
     interface  to existing  databases,  and product  promotion  services.  Each
     Interpretel  system is  developed  to  reflect  or  target  the needs of an
     identified (target) market, with services provided to individual  customers
     via a calling card product  incorporating the use of certain trade secrets,
     trademarks,  service marks, and materials related thereto.  In prior years,
     Interpretel was deemed to be a development stage  enterprise.  For the year
     ended  August  31,  1996,  Interpretel  is  considered  to be an  operating
     company.

     As further  described in note 4, on March 8, 1995, the company entered into
     a  plan  and  agreement  of  reorganization   for  the  exchange  of  stock
     ("Acquisition")  with the  shareholders of Interpretel.  In accordance with
     accounting  principles board opinion no. 16. "business  combinations,"  the
     acquisition  has  been  accounted  for  as  a  reverse   acquisition   with
     Interpretel   deemed  to  be  the  acquiring   entity.   Accordingly,   the
     consolidated financial statements include the accounts of Interpretel, Inc.
     From the earliest period  presented to August 31, 1996. The accounts of the
     company  are  included  in the  financial  statements  from the date of the
     acquisition  transaction,  March 8,  1995 to  August  31,  1995 and for all
     periods forward.

2.   Summary of significant accounting policies

     Cash and cash equivalents

     For  purposes of the  consolidated  Statements  of cash flows,  the company
     considers  all highly  liquid  debt  instruments  with a maturity  of three
     months or less (money market  accounts and  certificates  of deposit) to be
     cash equivalents.

     Property and equipment

     All property and  equipment  is recorded at cost and  depreciated  over the
     estimated useful lives of the assets, as follows:

     Furniture and fixtures                       7 years
     Computer equipment                           5 years
     Software                                     5 years

     The costs of maintenance, repairs and minor renewals are charged to expense
     in the year incurred.  Expenditures  which increase the useful lives of the
     asset are capitalized.  When items are retired or disposed of, the cost and
     accumulated depreciation are removed from the accounts and any gain or loss
     is included in income.

                                       12
<PAGE>
                         WAVETECH, INC. AND SUBSIDIARIES

                          Notes To Financial Statements
                                 --------------

2.   Summary of Significant Accounting Policies, continued

     Intangible Assets

     Intangible  assets  consist of start-up  costs.  These costs are  primarily
     consulting fees and other costs incurred in connection with the development
     of the company. Management believes that these costs will be recovered with
     future  operations.  Start-up costs are amortized over five years using the
     straight-line method.

     Income Taxes

     The company adopted  Statement of financial  accounting  standards no. 109,
     "accounting  for income  taxes"  (Sfas 109).  Sfas 109 requires a liability
     approach to  accounting  for  deferred  income  taxes in that the  deferred
     income tax liability or benefit at the end of an  accounting  period should
     reflect  the  estimated  deferred  tax  liability  or  tax  benefit  on the
     temporary book-tax  differences at anticipated federal and State income tax
     rates.

     Credit Risk And Fair Value Of Financial Instruments

     At August 31, 1996, the company maintained a cash balance in a bank account
     in excess of the FDIC insurable amount. The cash balance was $840,417 which
     exceeds the FDIC insurable amount by $740,417.

     The  company  extends  credit to  customers  on an  unsecured  basis in the
     ordinary  course of business.  The company  bills its services  directly to
     authorized customer credit cards as usage is incurred.

     Sfas 107  requires  disclosing  fair  value to the extent  practicable  for
     financial  instruments  which are recognized or unrecognized in the balance
     sheet. The fair value of the financial  instruments disclosed herein is not
     necessarily representative of the amount that could be realized or settled,
     nor does the fair value amount consider the tax consequences of realization
     or settlement.

     The carrying amounts for cash and cash  equivalents,  accounts  receivable,
     license fee receivable, accounts payable and notes payable approximate fair
     value because of the short maturity of these instruments. The fair value of
     the common stock of switch  telecommunications  pty limited is estimated at
     carrying  value as such stock is not  traded on the open  market and market
     price  is not  readily  available.  The  company  does  not  hold or  issue
     financial instruments for trading purposes.

     Advertising Costs

     The cost of  advertising  is  expensed  when  incurred  or when  the  first
     advertising  takes place.  Wavetech and  Interpretel do not  participate in
     direct-response  advertising  which  requires  the  capitalization  and  of
     related costs.

     Investments

     Investments  in companies in which the company has less than a 20% interest
     are carried at cost.  Dividends  received from those companies are included
     in  other   income.   Dividends   received  in  excess  of  the   company's
     proportionate  share of accumulated  earnings are applied as a reduction of
     the cost of the investment.


                                       13
<PAGE>
                         WAVETECH, INC. AND SUBSIDIARIES

                          Notes To Financial Statements
                                 --------------

3.   Use Of Estimates In Preparation Of Financial Statements

     The  preparation  of financial  statements  in  conformity  with  generally
     accepted  accounting  principles  requires management to make estimates and
     assumptions  that affect the reported  amount of assets and liabilities and
     disclosure  of  contingent  assets  and  liabilities  at  the  date  of the
     financial  statements  and the  reported  amounts of revenues  and expenses
     during  the  reporting  period.  Actual  results  could  differ  from those
     estimates.

     Management  utilized certain  estimates in connection with establishing the
     value of the  common  stock of switch  (note 5). It is at least  reasonably
     possible  that these  estimates  will change in the near term due to one or
     more  future  events.  Such a change  would  change the value of the common
     stock  of  switch.  The  effect  of the  change  could be  material  to the
     financial statements.

     Management  has not recorded a deferred tax asset of  $2,531,000 to reflect
     the potential benefit of $6,040,000 in loss carryforwards,  which expire in
     varying  amounts between 1997 and 2001.  Realization  depends on generating
     sufficient taxable income before expiration of the loss  carryforward.  The
     company has a number of  promising  strategies  under  development,  but is
     aware that  failure  of the  company's  development  efforts  could  reduce
     estimates of the company's  profitability  which could affect the company's
     ability to use its loss carryforwards (note 12).

4.   Business Combination

     On March 8, 1995, the company  entered into an agreement  with  Interpretel
     pursuant  to which  the  company  agreed to issue  6,000,000  shares of its
     common stock in exchange for 100% of the  outstanding  1,532,140  shares of
     common  stock  of  Interpretel.  The  transaction  resulted  in the  former
     shareholders  of Interpretel  owning  approximately  80% of the outstanding
     shares of the company.  In  accordance  with  accounting  principles  board
     opinion no. 16 "business  combinations," the acquisition has been accounted
     for as a reverse  acquisition with  Interpretel  deemed to be the acquiring
     entity of the company.  The common  shares  issued in  connection  with the
     acquisition  were  assigned  no value  because the company had no assets or
     liabilities at the date of the acquisition.

     The  acquisition  agreement also provides that during the three year period
     following the March 8, 1995 closing, former shareholders of Interpretel can
     receive an additional  7,500,000  common  shares of the company  through an
     "earn-out"  based upon  before tax net  profit.  During the two year period
     following  closing,  former  shareholders  of Interpretel  shall earn up to
     3,750,000  common  shares of the company for every $0.50 net profit  before
     taxes,  and an additional  3,750,000 common shares of the company for every
     $1.00 of cumulative  total net profit  before taxes.  During the third year
     following  closing,  any  shares not  previously  issued  pursuant  to this
     agreement can be earned at $1.50 net profit  before taxes per share.  These
     additional  shares will not be  considered  in  recording  the  acquisition
     transaction until such time as the earnings targets have been met.


                                       14
<PAGE>
                         WAVETECH, INC. AND SUBSIDIARIES

                          Notes To Financial Statements
                                 --------------

4.   Business Combination, continued

     The consolidated  financial statements include the accounts of Interpretel,
     considered to be the acquiring entity,  from the earliest period presented.
     The  accounts  of the company are  included in the  consolidated  financial
     statements  from the date of the  acquisition,  March  8,  1995.  Pro-forma
     results of  operations  as though the  companies  had been  combined  as of
     september 1, 1993 are approximately as follows:

                                           PERIOD ENDED         PERIOD ENDED
                                          AUGUST 31, 1995     AUGUST 31, 1994
                                          ---------------     ---------------
                                         
          Revenues                         $    24,468          $     1,151
                                           ===========          ===========
          Net Loss                         $(1,347,139)         $(1,062,866)
                                           ===========          ===========
          Net Loss Per Common Share        $      (.17)         $      (.14)
                                           ===========          ===========

5.   Investment In Switch Telecommunications Pty Limited

     On may 21, 1996, the company entered into an agreement  within a memorandum
     of  understanding  with switch  telecommunications  pty limited (switch) to
     exchange  an equity  interest  in the  company  for an equity  interest  in
     switch.  The equity  interests  consist of outstanding  common stock of the
     respective companies. The exchange agreement provided for an exchange of up
     to five percent of the value of the outstanding  common equity of switch in
     exchange  for a fixed number of shares of the company at the price at which
     the stock was trading on the date the  agreement,  may 21, 1996.  On August
     28, 1996 the  definitive  agreement  was signed and the shares were issued.
     The company  received  five shares of switch  common  stock in exchange for
     1,544,110 shares of the company's stock.

     Switch is a wholly owned  subsidiary of tech pacific holdings limited (tech
     pacific).  Tech  pacific is an  australian  corporation  whose stock is not
     publicly  traded.  Tech  pacific  is a  wholly  owned  subsidiary  of first
     pacific, a publicly traded company on the hong kong stock exchange.  Switch
     conducts  business as a  telecommunications  fixed network service provider
     and also validates mobile telephone  connections for telestra  mobilenet in
     australia. The company has entered into a contract appointing switch as the
     exclusive   provider  of  Interpretel's   telecommunications   services  in
     australia, new zealand, the subcontinent of india and asia (excluding korea
     and japan) (note 6).

     The  value  assigned  to the  switch  shares  received  was  determined  by
     management  valuing the whole of the issued  capital of switch on the basis
     of discounting the anticipated future cash flow. This method determines the
     net present value of the underlying cash flow of a business.  It recognizes
     that  money  has a time  value  by  discounting  future  cash  flows  at an
     appropriate   discount  rate.  A  valuation  using   discounted  cash  flow
     procedures  requires the  determination  of the nature and timing of future
     cash inflows and outflows and the discount factor to be applied to the cash
     flows.  Future cash flows may not be achieved and  consequently  any future
     variation  between  the actual cash flow and those  utilized by  management
     will affect the valuation.  Since switch is a privately  held company,  the
     market value of the shares is not readily  ascertainable  and is subject to
     uncertainty.

                                       15
<PAGE>
                         WAVETECH, INC. AND SUBSIDIARIES

                          Notes To Financial Statements
                                 --------------

5.   Investment In Switch Telecommunications Australia Pty Ltd., continued

     The agreement  provides that when tech pacific  completes an initial public
     offering of its equity  securities,  the  company  will have the right upon
     written  notice to tech  pacific to convert  its switch  common  stock into
     equity  securities  of an equivalent  value  proposed to be offered by tech
     pacific.  The value of switch  common  stock held by the  company  for this
     purpose  will be its then current  fair market  value as  determined  by an
     independent  third  party.  If tech  pacific has not  completed  an initial
     public offering within two years from the date of the agreement,  then tech
     pacific shall, upon thirty days written notice from the company, repurchase
     the switch  common  stock held by the company at its then  market  value as
     determined by an independent third party.

     As soon as practicable  after the issuance of the company's common stock to
     switch  and for as long as  switch  holds at least  750,000  shares  of the
     company's  common stock, the company will reserve two seats on its board of
     directors for designees of switch.

     Concurrent  with the  exchange  of the  company's  common  stock for switch
     common  stock,  the company  will issue to switch a  three-year  warrant to
     purchase up to 2,000,000 shares of the company's common stock at a price of
     $1.50 per  share.  In  consideration  of and at the time of such  issuance,
     switch will pay to the company a fee of $20,000.

6.   Licensing Agreement

     The company entered into an equipment and software  turnkey  agreement with
     switch pursuant to a memorandum of understanding among the customer and the
     supplier  dated may 21, 1996.  This  agreement sets forth the terms of fees
     and services between Interpretel and switch. The agreement provides for the
     purchase of the Interpretel  system and licensing for its use in australia,
     new  zealand,  the  subcontinent  of india  and asia  (excluding  korea and
     japan). The initial term of the license is seven years.

     In the  agreement,  switch  contracted  to purchase an  Interpretel  system
     consisting of a computer platform and related software.  The purchase price
     is approximately $500,000. Switch agreed to and paid a deposit equal to 60%
     of the purchase  price which is reflected in the  financial  statements  as
     inventory  deposit and  unearned  revenue.  Switch  will pay the  remaining
     balance upon acceptance of the complete installation of the system.

     The  agreement  also provides for a licensing fee in the amount of $500,000
     to be paid to Interpretel over a three-year period.  $200,000 of the fee is
     payable on the first  anniversary  of the date of delivery of an acceptable
     working  platform in australia and $150,000 payable on each of the next two
     anniversaries  of the date of delivery as specified for the first  payment.
     Switch shall not have an obligation to pay any fees pursuant to termination
     provisions  in the  agreement.  The  licensing  fees are  reflected  in the
     financial statements as licensing fees receivable and unearned revenue.

     Switch  will  pay an  additional  fee  to  Interpretel  of 2% of the  gross
     revenues on all sales of products by switch using the  Interpretel  system,
     including  without  limitation  on  gross  revenues  derived  from  prepaid
     applications,   post-paid   applications  and  interactive  voice  response
     systems.  The fee of 2% of gross  revenues shall be reviewed by the parties
     and  increased  or  decreased  by mutual  agreement of the parties at least
     annually,  reviewed  after the first  15,000  cards are on the  Interpretel
     system in australia, and reviewed if net revenues for switch are altered by
     a change in carrier  discounts  and/or  rates.  Net revenues are defined as
     gross revenues minus carrier costs only.


                                       16
<PAGE>
                         WAVETECH, INC. AND SUBSIDIARIES

                          Notes To Financial Statements
                                 --------------

7.   Property and Equipment

     Property and  equipment  is composed of the  following at december 31, 1996
     and 1995:

                                                         1996            1995
                                                         ----            ----
     furniture and fixtures                          $ 116,634       $   8,421
     computer equipment                                485,600         477,676
     software                                          106,856          25,428
                                                     ---------       ---------
     total property and equipment, at cost             709,090         511,525
     less: accumulated depreciation                   (169,562)        (35,060)
                                                     ---------       ---------
     net property and equipment                      $ 539,528       $ 476,465
                                                     =========       =========

8.   Notes Payable

     During  the year ended  August  31,  1994,  Interpretel  borrowed  $324,600
     through  a  private  placement  of  uncollateralized  8%  notes.  The notes
     included  warrants to purchase 216,400 shares of Interpretel  common stock.
     At the  date  of  the  acquisition  (note  4),  the  warrants  to  purchase
     Interpretel  common stock were  converted  to warrants to purchase  847,437
     shares of common stock of the company.  The notes accrued  interest through
     july 31,  1995,  at which time all  principal  and accrued  interest on the
     notes was due. At August 31, 1995,  the  principal  amount of the notes and
     accrued interest of $39,327 was unpaid. The notes and accrued interest were
     repaid during the period ended August 31, 1996.

     During the year ended  August 31, 1995,  Interpretel  received a short-term
     advance of $100,000 from an unaffiliated  entity.  The terms of the advance
     required  a payment  of  $46,361  and  issuance  of  100,000  shares of the
     company's  common  stock.  At August 31,  1995,  the  company  had made the
     required  payment of  $46,361.  As the shares of common  stock had not been
     issued at August 31, 1996,  notes  payable  includes the unpaid  balance of
     $53,639. The company intends to issue the 100,000 shares of common stock in
     1996 (note 11).  The terms of the  borrowing  require  the company to issue
     50,000 shares of registered  common stock with the remaining  50,000 shares
     of common stock being issued as unregistered common stock.

     Future maturities of notes payable are as follows:

     1997                                      $ 53,639
                                               ========
9.   Capital Leases Payable

     The  company  has  entered  into  capital  lease  arrangements  for  office
     furniture and  equipment.  The leases  require  monthly  payments of $2,591
     including interest.

     Future lease commitments are as follows:

     1997                                     $ 31,091
     1998                                       31,091
     1999                                       12,659
     2000                                        6,515
     2001                                        4,834
                                              --------
                                              $ 86,190
                                              ========

                                       17
<PAGE>
                         WAVETECH, INC. AND SUBSIDIARIES

                          Notes To Financial Statements
                                 --------------

10.  Commitments

     The  company  has  entered  into  cancelable  operating  agreements  with a
     telecommunications  service  provider.  The company has agreed to a $12,040
     monthly  minimum  charge.  Although  there are a limited  number of service
     providers for the call processing  systems used by the company,  management
     believes that other suppliers could provide similar  services on comparable
     terms.

     The company has entered into a lease agreement for office space.

     Future lease commitments are as follows:

     1997                                     $ 85,446
     1998                                       99,453
     1999                                      105,056
     2000                                      110,659
     2001                                      116,262
     Thereafter                                 29,416
                                              --------
         total                                $546,292
                                              ========

11.  Stockholders' Equity

     Common stock

     During the year ended  August 31,  1996,  the company  issued  common stock
     pursuant to various Securities and Exchange  Commission  Regulation S stock
     subscription  agreements.  The company  issued  3,115,253  shares of common
     stock and received $2,658,734.

     On May 21,  1996 the  company  entered  into an  agreement  with  switch to
     exchange an equity interest in the company for an equity interest in switch
     (note 5). On August 30, 1996 the company  issued  1,544,110  shares  common
     stock in exchange for five shares of switch common stock.

     On March 8, 1995, the company  entered into an agreement  with  Interpretel
     pursuant  to which  the  company  agreed to issue  6,000,000  shares of its
     common stock in exchange for 100% of the  outstanding  1,532,140  shares of
     common stock of Interpretel.

     During the year ended August 31, 1995, Interpretel issued 481,140 shares of
     common stock for cash and services valued at $348,389.

     During  the  period  from  September  1,  1994  through  the  date  of  the
     acquisition,  the company  issued  625,000 shares of common stock for a net
     value of $406,774.  Included in the shares  issued by the company  prior to
     the  merger  are  315,000  shares  valued at $.50 per  share  issued to the
     company's  attorney for legal services.  During the period from the date of
     the merger through August 31, 1995, the company issued  1,488,980 shares of
     common  stock  in  accordance  with  securities  and  exchange   commission
     regulation s for net proceeds of $1,200,238.

     During the year ended  August 31, 1995,  Interpretel  received a short-term
     advance of $100,000 from an unaffiliated  entity (note 8). The terms of the
     advance required a payment of $46,361 and issuance of 100,000 shares of the
     company's common stock.  The terms of the borrowing  require the company to
     issue 50,000  shares of registered  common stock with the remaining  50,000
     shares of common stock being issued as unregistered common stock. At August
     31,  1996,  the 100,000  shares of common  stock had not been  issued.  The
     company intends to issue the 100,000 shares of common stock during the year
     ended August 31, 1997.

                                       18
<PAGE>
                         WAVETECH, INC. AND SUBSIDIARIES

                          Notes To Financial Statements
                                 --------------

11.  Stockholders' Equity, continued

     Warrants

     During 1995 and 1994,  Interpretel  issued warrants for the purchase of its
     common stock in connection  with a note  offering  (note 8). At the date of
     the acquisition, the warrants were converted to warrants to purchase common
     stock of the company.  The warrants are exercisable at a price of $1.00 per
     share at any time prior to may 31, 1998. As of August 31, 1996,  there were
     820,885 warrants outstanding.

     During 1995 and 1994,  Interpretel  issued warrants for the purchase of its
     common stock in connection  with a private  placement  offering of units of
     common stock. At the date of the  acquisition,  the warrants were converted
     to warrants to purchase  common  stock of the  company.  The  warrants  are
     exercisable  at a price of $3.50 per share.  The  warrants  expire june 30,
     1997. As of August 31, 1996, there were 25,706 warrants outstanding.

     In connection with its initial public offering,  the company issued class a
     and class b redeemable common stock purchase warrants.  At August 31, 1995,
     13,455 class a warrants and 12,098 class b warrants were  outstanding  with
     an  exercise  price of $10.00 per share.  In  accordance  with the terms of
     warrant agreements, the company canceled the warrants effective january 31,
     1996.

     Stock Options

     The company has granted  certain  options to employees and  consultants  at
     prices not less than the market price of the company's  common stock on the
     date of grant.  All options are granted for future services and vest over a
     period  ranging to three years.  No charges to operations are recorded with
     respect to authorization, grant, or exercise of these stock options.

     During the year ended  August 31,  1996,  the  company  granted  options to
     purchase   1,550,000  shares  of  common  stock  in  connection  with  four
     employment agreements.  The options were granted at the market price of the
     stock on the dates of the grants.

     During the year ended  August 31, 1995 stock  options to  purchase  450,000
     were canceled pursuant to the termination of an employment agreement.

                                                              EXERCISE PRICE
                                         NUMBER OF SHARES     RANGE PER SHARE
                                         ----------------     ---------------
     Outstanding August 31, 1994              436,250          $.10 - 6.25
     Exercised                               (300,000)                 .10
                                            ---------          -----------
     Outstanding August 31, 1995              136,250           .10 - 6.25
     Issued                                 1,550,000            1.31-1.94
     Canceled                                (450,000)                1.94
                                            ---------          -----------
     Outstanding August 31, 1996            1,236,250          $.10 - 6.25
                                            =========          ===========

                                       19
<PAGE>
                         WAVETECH, INC. AND SUBSIDIARIES

                          Notes To Financial Statements
                                 --------------

12.  Income Taxes

     At August 31,  1996,  the  company  has net  operating  loss  carryforwards
     totaling approximately  $6,040,000 that may be offset against future income
     from 1997 to 2001 with varying  expiration  dates.  No tax benefit has been
     recorded in the financial  statements  since the company is unsure as to if
     or when  the net  operating  loss  carryforwards  would  be  realized.  The
     potential benefit of the net operating loss  carryforwards and the deferred
     tax  benefit  of  future   timing   differences   under  Sfas  no.  109  is
     approximately  $2,531,000.  The March 8, 1995 acquisition (note 4) resulted
     in  a  "change  in  control"  as  defined  by  internal   revenue   service
     regulations.  Accordingly,  the  utilization of the company's net operating
     loss carryforwards may be subject to annual  limitations.  The total amount
     of  the  net  operating   loss   carryforward,   $6,040,000,   consists  of
     pre-Acquisition  losses of approximately  $3,186,000 the income tax benefit
     for the years ended August 31 is comprised of the following amounts:

                                    1996         1995        1994
                                 ---------    ---------    ---------
     Current                     $     -0-    $    -0-     $     -0-
                                 ---------    ---------    ---------
     Deferred
     Federal                     $(628,000)   $(367,000)   $(312,000)
     State                         (67,000)     (64,000)     (80,000)
                                 ---------    ---------    ---------
                                  (695,000)    (431,000)    (392,000)
     Valuation allowance           695,000      431,000      392,000
                                 ---------    ---------    ---------
     Total tax benefit           $    -0-     $    -0-     $    -0-
                                 =========    =========    =========

     The company's  tax benefit  differs from the benefit  calculated  using the
     federal statutory income tax rate for the following reasons:

                                            1996      1995     1994
                                            ----      ----     ----
     Statutory tax rate                    (35.0%)   (35.0%)  (35.0%)
     State income taxes                     (9.0%)    (9.0%)   (9.0%)
     Amortization of organization costs      7.0%      5.0%     8.5%
     Release of valuation allowance         37.0%     39.0%    35.5%
                                            ----      ----     ----
     Effective tax rate                       .0%       .0%      .0%
                                            ====      ====     ====

           The components of the net deferred tax asset are as follows:

                                              1996            1995
                                           -----------     -----------
     Deferred tax asset:
     Amortization of organization costs    $  (164,000)    $  (214,000)
     Net operating loss carryforward        (1,500,000)     (1,127,000)
                                           -----------     -----------
                                            (1,664,000)     (1,341,000)
     Valuation allowance                     1,664,000       1,341,000
                                           -----------     -----------
                                           $      -0-      $      -0-
                                           ===========     ===========

                                       20
<PAGE>
                         WAVETECH, INC. AND SUBSIDIARIES

                          Notes To Financial Statements
                                 --------------

13.  Related Party Transactions

     The  company  has  entered  into  cancelable  operating  agreements  with a
     telecommunications service provider who is a shareholder of common stock of
     the company.  The company has agreed to a $12,040  monthly  minimum  charge
     with the  service  provider.  The  current  and future  contracts  with the
     service  provider have been and are anticipated to be at market rates.  The
     company also purchased computer equipment and software from this provider.

     During 1995,  the company issued 315,000 shares valued at $.50 per share to
     the company's attorney for legal services.

14.  Supplemental Schedule of Non-Cash Financing Activities

     During the year ended  August 31,  1996,  the company  entered into capital
     leases in the amount of $108,213 to purchase office equipment.

     During  the year  ended  August  31,  1996,  the  company  entered  into an
     agreement with switch to exchange an equity  interest in the company for an
     equity interest in switch (note 4). The company issued  1,544,110 shares of
     its common stock in exchange for 5 shares of the common stock of switch.

     During the year ended August 31, 1996, the company issued 250,000 shares of
     common stock for consulting services.

     On March 8, 1995,  the company issued  6,000,000  common shares in exchange
     for the 100% of the  outstanding  common  stock of  Interpretel,  Inc.  The
     transaction has been accounted for as a reverse purchase with the valuation
     of the shares  issued  based on the fair  value of the net assets  acquired
     (note 4).

     Supplemental disclosure of cash flow information:

     Cash paid during the period for:

     Income taxes            $    50       $   50      $ 54
                             =======       ======      ====
     Interest                $39,327       $1,941      $140
                             =======       ======      ====

15.  Subsequent Events

     Subsequent  to August 31,  1995,  the  company  entered in to a  cancelable
     operating  agreement with a consulting  firm. The fee for these services is
     $5,000 per month of which  $3,000 will be in cash and $2,000 will be shares
     of common  stock.  The  agreement  also  provides for a five year option on
     100,000 share of common stock at an exercise price of $1.00 per share.

     Subsequent  to August 31,  1996,  the company  entered  into a stock option
     agreement with a customer.  The agreement  allows options on 200,000 shares
     of common stock at an exercise  price of the closing bid on the date of the
     agreement.  The  options  shall vest over a period of time which  coincides
     with a schedule of active usage of the Interpretel system.


Item 8. Changes in and Disagreements With Accountants.

     None.

                                       21
<PAGE>
                                    PART III

ITEM 9. DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY; COMPLIANCE WITH SECTION
        16 (a) OF THE EXCHANGE ACT

DIRECTORS AND OFFICERS
   
          The Board of  Directors  currently  consists  of three  members.  Each
Director  is  elected  each year to serve for a term of one year  until the next
annual  meeting  of  stockholders  after  election  and  until  such  Director's
successor has been duly elected and qualified,  or until the earlier resignation
or removal.  All officers serve at the pleasure of the Board of Directors of the
Company.

          The names of all Directors and executive officers of the Company as of
August 31, 1996 and certain information about them, are as follows:

        NAME            AGE              POSITIONS WITH COMPANY
        ----            ---              ----------------------
Terence E. Belsham      61    Chairman of the Company's Board of Directors
Gerald I. Quinn         53    President, Chief Executive Officer, and a member 
                              of the Company's Board of Directors
Richard P. Freeman      40    Vice President, Investor Relations and Product 
                              Development, and a member of the Company's
                              Board of Directors
Lydia M. Montoya        44    Chief Financial Officer and Treasurer
Donna S. Moore          42    Vice President, Operations

TERENCE E. BELSHAM was a co-founder  of  Interpretel,  Inc.  ("Interpretel"),  a
wholly-owned  subsidiary of the Company.  Since it was founded in 1992 until May
1996,  Mr.  Belsham was the  President and CEO of  Interpretel.  From March 1995
until May 1996, Mr. Belsham was the Company's President and CEO. Mr. Belsham has
also served as the Company's  Chairman of the Board since March 1995.  From 1989
until 1992, Mr. Belsham was President of Intran Systems, Inc. From 1983 to 1989,
Mr. Belsham owned Sinclair  Associates,  a real estate  marketing and management
firm.  From  1965 to 1983,  Mr.  Belsham  was  president  and  owner  of  Lackie
Manufacturing  Company,  Ltd., a jewelry  manufacturing  company in Canada.  Mr.
Belsham graduated from the business school of the University of Western Ontario.
Mr.  Belsham has been active in Rotary  International,  the  Canadian  Jeweler's
Association and the 24 Karat Club.

GERALD  I.  QUINN  has  been the  President  of  Interpretel  (Canada)  Inc.,  a
subsidiary  of the  Company,  since  1995.  In May 1996,  Mr.  Quinn  became the
President,  Chief Executive Officer and a Director of the Company.  From 1986 to
1994, Mr. Quinn was Vice President of University  Affairs and Development at the
University  of Guelph,  which is one of Canada's  leading  teaching and research
universities.  While at the University of Guelph,  Mr. Quinn's  responsibilities
included  marketing,   image  development,   constituent   relations  and  media
relations,  including systems development,  telemarketing and the development of
affinity   programs.   From  1975  until  1986,   Mr.  Quinn  held  many  senior
administrative  positions  with  Canada's  largest  college of applied  arts and
technology,    including    positions    relating   to   the   development   and
commercialization  of  technology  and  multimedia  based  interactive  learning
programs.  Since  1984,  Mr.  Quinn has  served as a  consultant  to  Cableshare
Interactive  Technology,  Inc.  ("Cableshare"),  a Canadian  TSE  listed  public
company that operates in the interactive television industry. Mr. Quinn has been
a director of  Cableshare  since 1993 and chairs its board  committee on mergers
and  acquisitions.  Mr.  Quinn is active  in  numerous  civic  and  professional
organizations  and has  been  recognized  for  his  work  in  marketing,  sales,
promotion and public relations by various trade organizations. Mr. Quinn has two
arts  degrees  with majors in English,  Economics  and  Political  Science.  Mr.
Quinn's sister is married to Terrence H. Pocock.
    
                                       22
<PAGE>
   
RICHARD  P.  FREEMAN  was  a  co-founder  of  Interpretel   and  has  served  as
Interpretel's  Vice President since 1993; and as a Director of the Company since
March 1995. Prior to joining Interpretel, Mr. Freeman was a principal in several
entrepreneurial  companies located in Arizona,  which were primarily involved in
the tourism and travel  industries.  Those companies  included Desert Divers,  a
scuba retail and boat charter  company,  and  Vacation,  Etc., a tour and travel
company which focused on corporate, leisure and adventure travel, wholesale tour
operations  and  escorted  senior  travel.  Mr.  Freeman  has also  served  as a
consultant to several travel-related organizations, including the Business Radio
Network,  a national radio network.  Mr. Freeman holds a Bachelor of Arts degree
from the  University  of Arizona  and is active in various  civic and  community
organizations.

DONNA S. MOORE joined the Company in May 1995 as Director of Client Services. In
May 1996,  Ms. Moore was promoted to her current  position as Vice  President of
Operations.  Prior to joining the Company,  Ms.  Moore  founded and operated two
service-based  businesses.  From 1991 to 1995,  Ms. Moore  operated The Greeting
Connection,  a wholesale greeting card distributorship in southern Arizona. From
1981 to 1990,  Ms. Moore  operated  Simonsen  Generator  Service,  an industrial
generator sales and service company in Tucson, Arizona. Ms. Moore has degrees in
Consumer Services and Journalism/Communications from Iowa State University.

LYDIA M.  MONTOYA  joined the Company in September  1996 as its Chief  Financial
Officer.  From May 1994 until September 1996, Ms. Montoya was self-employed as a
certified  public  accountant.  Ms.  Montoya  was  Controller  of Ugly  Duckling
Corporation,  a publicly traded company ("Ugly  Duckling") from November 1992 to
May 1994.  Ugly  Duckling  is an  operator  of nine Buy  Here-Pay  Here used car
dealerships  which also  finances  and  services  retail  installment  contracts
generated  from the sale of used  cars by its  dealerships.  From  July  1987 to
October  1992,  Ms.  Montoya was Director of  Partnership  Accounting  for Verde
Investments, Inc., a real estate development company that constructed,  operated
and sold over 5,000 apartment units. Ms. Montoya began her career with Coopers &
Lybrand. Ms. Montoya has a B.S. in Accounting from the University of Arizona and
a B.S. in Sociology from Arizona State University.

COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT

          Section  16(a) of the  Securities  Exchange  Act of 1934  requires the
Company's officers and Directors, and persons who beneficially own more than 10%
of a registered  class of the Company's  equity  securities,  to file reports of
ownership and changes in ownership with the SEC. Officers, Directors and greater
than 10%  stockholders  are required by Exchange Act  regulations to furnish the
Company with copies of all Section 16(a) forms they file.

          In 1995,  Terence E. Belsham and Richard P.  Freeman  failed to timely
report their election to the Company's Board of Directors and their  appointment
as  executive  officers  of the  Company on Form 3's.  In 1996,  Gerald I. Quinn
failed to timely report that he had become a director and  executive  officer of
the Company on a Form 3. In 1996, Messrs.  Belsham,  Freeman and Quinn failed to
timely  report the grant of certain stock options on Form 4's, and Ms. Moore and
Ms. Montoya failed to timely report initial  statements of beneficial  ownership
on Form 3. In addition,  Switch  Telecommunications  Pty. Ltd.  failed to timely
report the acquisition of certain stock of the Company on Form 3.
    
                                       23
<PAGE>

ITEM 10. EXECUTIVE COMPENSATION

(A)  CASH COMPENSATION
   
     The Company had 16  employees as of August 31, 1996.  The  following  table
     summarizes  all  compensation  paid to the  Company's  President  and Chief
     Executive  Officer  and to the  Company's  other  most  highly  compensated
     executive  officer  other  than the  President  (collectively,  the  "Named
     Executive  Officers"),  for  services  rendered  in all  capacities  to the
     Company during the fiscal year ended August 31, 1996.

                           SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
                                                                   Long Term Compensation
                                                                   ----------------------
                                                                           Awards
                                                                           ------
                                            Annual Compensation    Restricted   Securities
            Name and               Fiscal    -------------------     Stock      Underlying
        Principal Position          Year       Salary    Bonus      Award(s)     Option(s)
        ------------------          ----       ------    -----      --------     ---------
    <S>                            <C>        <C>         <C>       <C>           <C>    
     Terence E. Belsham             1996       $85,000     $ 0       $979,023      200,000
     Chairman of the Board (1)

     Gerald I. Quinn                1996       $85,000     $ 0       $203,637      500,000
     President and Chief
      Executive Officer (1)
</TABLE>
----------

(1)  Terence E. Belsham served as the Company's  Chief  Executive  Officer until
     February  1996,  at which time Gerald I. Quinn became the  Company's  Chief
     Executive Officer.

          The following  table sets forth certain  information  concerning  each
exercise of stock  options  during the year ended August 31, 1996 by each of the
Named  Executive  Officers  and the  aggregated  fiscal  year-end  value  of the
unexercised options of each such Named Executive Officer.

            AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR ANDOPTION
                           VALUE AS OF AUGUST 31, 1996
<TABLE>
<CAPTION>
                                                                           Value of Unexercised
                                               Number of Unexercised           In-the-Money
                      Shares                          Options                Options at Fiscal 
                    Acquired on     Value       at Fiscal Year End (#)          Year End ($)
       Name         Exercise(#)  Realized($)  Exercisable Unexercisable  Exercisable Unexercisable
------------------  -----------  -----------  ----------- -------------  ----------- -------------
<S>                  <C>          <C>         <C>          <C>              <C>        <C>
Terence E. Belsham      0            $ 0             0       200,000          $ 0        $ 0
Gerald I. Quinn         0            $ 0       300,000       500,000          $ 0        $ 0

          The  following  table sets  forth  information  concerning  individual
grants of stock  options made to the Named  Executive  Officers  during the last
fiscal year.
    
</TABLE>

                                       24
<PAGE>
   
                        OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
                                         Percent of Total
                                         Options Granted
                        Options Granted  to Employees in    Exercise Price    Expiration
          Name                (#)           Fiscal Year         ($/Sh)           Date
          ----              -------      ---------------    --------------    ----------    
    <S>                    <C>                <C>              <C>                <C> 
     Terence E. Belsham     200,000            18%              $1.75(1)       May 2006
     Gerald I. Quinn        300,000            73%            $1.3875(1)       May 2006
                            500,000                             $1.75(1)       May 2006
</TABLE>

(1)  In January of 1997, the Company's  stock price had decreased  significantly
     from the date these options were granted. In addition,  the Company's Board
     of  Directors  approved  the  Company's  1997  Stock  Incentive  Plan.  The
     Company's  Board of Directors  determined that these options were no longer
     providing appropriate  incentives to the officers of the Company due to the
     significant  decrease  in  market  price  of the  Company's  common  stock.
     Accordingly, in January of 1997, the Company agreed to cancel these options
     and issue an equal number of options under the 1997 Stock Incentive Plan to
     these  officers  at an  exercise  price per share  equal to the closing bid
     price of the Company's common stock on the date of grant.


(B)  COMPENSATION PURSUANT TO PLANS

     None.

(C)  COMPENSATION OF DIRECTORS

     All Directors are reimbursed for their  reasonable  out-of-pocket  expenses
     incurred in connection with attendance at Board Meetings. Directors who are
     employees  of the  Company do not receive  compensation  for service on the
     Board other than their compensation as employees.

(D)  TERMINATION OF EMPLOYMENT AND CHANGE OF CONTROL ARRANGEMENTS

     EMPLOYMENT CONTRACTS

          In May 1996,  the Board of  Directors  approved a two-year  employment
agreement  with Gerald I. Quinn for  services as President  and Chief  Executive
Officer. The agreement requires Mr. Quinn to devote his full time to the Company
and provides  for a salary of $85,000  annually.  Mr. Quinn is also  entitled to
receive any fringe benefits extended to the employees of the Company,  including
medical,  disability and life insurance. Mr. Quinn also has the right to receive
certain sales commissions from the Company under the agreement.

          In May 1996,  the Board of  Directors  approved a one-year  employment
agreement with Terence E. Belsham for services as Chairman.  In September  1996,
the agreement was amended to eliminate Mr. Belsham's  responsibilities  as Chief
Financial  Officer  because the Company  retained  Lydia Montoya to serve as its
Chief  Financial  Officer.  The  agreement  requires  Mr.  Belsham to devote his
full-time  to the Company and  provides  for a salary of $85,000  annually.  Mr.
Belsham  is also  entitled  to  receive  any  fringe  benefits  extended  to the
employees of the Company, including medical, disability and life insurance.

          In June 1996,  the Board of Directors  approved a one-year  employment
agreement with Richard P. Freeman for services as Vice President.  The agreement
provides for a base salary of $72,000 per year. The agreement  requires  Richard
P. Freeman to devote his full time to the Company.

          After their  initial  terms,  each of the  above-described  agreements
continue at will,  terminable with/on ninety days written notice by either party
to the  other.  The  agreements  terminate  upon  the  occurrence  of any of the
following events: (i) if the employee voluntarily terminates;  (ii) the death of
the  employee;  (iii) if the  employee  is  unable  to  properly  discharge  his
obligations  under  his  employment  agreement  due to  illness,  disability  or
    
                                       25
<PAGE>
   
accident for three consecutive  months or for a period aggregating six months in
any continuous  twelve  months;  (iv) if the employee is convicted of a crime of
moral  turpitude  by a court of competent  jurisdiction;  (v) if the employee is
convicted of a felony,  except to the extent that the charge  arises from an act
taken at the board's direction;  or (vi) if the employee is grossly negligent or
guilty of wilful  misconduct in connection  with the  performance of his duties,
which negligence or misconduct,  if curable, is not cured within fifteen days of
a  notice  of  cure by the  Board  or the  Chairman  of the  Board.  Each of the
above-described agreements provides that the employee shall not compete with the
Company  during  the  term  of the  agreement  and  for a  period  of  one  year
thereafter.

ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

          The  following  table  sets  forth as of  February  14,  1997  certain
information with regard to the record and beneficial  ownership of the Company's
Common Stock by (i) each shareholder owning of record or beneficially 5% or more
of the  Company's  Common Stock (ii) each director  individually,  and (iii) all
officers and directors and officer of the Company as a group:

<TABLE>
<CAPTION>

Name and Address of                         Number of Shares           Percent of
Beneficial Owner                            Beneficially Held          Ownership(1)
-------------------                         -----------------          ------------
<S>                                          <C>                      <C> 
Terence E. Belsham (2)                        1,079,023 (3)                 7.2%
Richard P. Freeman (2)                        1,079,023 (4)                 7.2%
Len B. Casebier (2)                             979,023                     6.5%
Gerald I. Quinn (2)                             803,637 (5)                 5.4%
Richard Baillie (2)                                 -0-                       0%
Terry Cuthbertson (2)
Terrence H. Pocock (2)                              -0-                       0%
Switch Telecommunications Pty. Limited        3,544,110 (6)                23.7%
  55 Mentmore Ave.
  Rosebery, New South Wales 2018
  Australia
ALL OFFICERS AND DIRECTORS AS A GROUP
  (7 IN NUMBER)                               3,450,844 (3)(4)(5)(7)       23.1%
</TABLE>

----------
(1)  The percentages  shown include the shares of Common Stock actually owned as
     of January  14, 1997 and the shares of Common  Stock with  respect to which
     the person had the right to acquire beneficial  ownership within 60 days of
     such  date  pursuant  to  options.  All  shares of  Common  Stock  that the
     identified  person had the right to acquire  within 60 days of February 14,
     1997  upon the  exercise  of  options  are  deemed to be  outstanding  when
     computing the  percentage of the securities  owned by such person,  but are
     not  deemed  to  be  outstanding  when  computing  the  percentage  of  the
     securities owned by any other person.

(2)  Each of these  holders has an address at c/o the Company,  5210 E. Williams
     Circle, Suite 200, Tucson, Arizona 85711.

(3)  Includes  100,000  common  shares  issuable in  connection  with options to
     purchase common stock.

(4)  Includes  100,000  common  shares  issuable in  connection  with options to
     purchase common stock.

(5)  Includes  600,000  common  shares  issuable in  connection  with options to
     purchase common stock.

(6)  Includes an  immediately  exercisable  warrant to purchase up to  2,000,000
     common shares at $1.50 per share.

(7)  Includes  800,000  common  shares  issuable in  connection  with options to
     purchase common stock.
    
                                       26
<PAGE>

(C)  CHANGE IN CONTROL

     On March 8, 1995, the Company  entered into an agreement  with  Interpretel
     pursuant  to which  the  Company  agreed to issue  6,000,000  shares of its
     common stock in exchange for 100% of the  outstanding  1,532,140  shares of
     common  stock  of  Interpretel.  The  transaction  resulted  in the  former
     shareholders  of Interpretel  owning  approximately  80% of the outstanding
     shares of the Company.  In  accordance  with  Accounting  Principles  Board
     Opinion No. 16, "Business Combinations," the Acquisition has been accounted
     for as a reverse acquisition with Interpretel deemed to be acquiring entity
     of the Company.

     The  common  shares  in  connection  with the  Acquisition  were  valued at
     $2,000,000,  which is based on the fair market value of the Company's  only
     major asset, undeveloped land located in Ohio.

     The  Acquisition  agreement also provides that during the three year period
     following the March 8, 1995 closing, former shareholders of Interpretel can
     receive an additional  7,500,000  common  shares of the Company  through an
     "earn-out"  based upon  before tax net  profit.  During the two year period
     following  closing,  former  shareholders  of  Interpretel  can  earn up to
     3,750,000  common shares of the Company for every $1.00 of cumulative total
     net profit  before  taxes.  During the third year  following  closing,  any
     shares not  previously  issued  pursuant to this agreement can be earned at
     $1.50 net profit before taxes per share.  These additional  shares will not
     be considered in recording the Acquisition  transaction  until such time as
     the earnings targets have been met.

ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

   
     In August 1996,  the Company  entered into certain  agreements  with Switch
     Telecommunications  Pty. Ltd., an Australian  corporation  ("Switch") which
     owns  approximately  10% of the  Company's  issued and  outstanding  Common
     Stock.  Pursuant to such agreements,  Switch was issued 1,544,110 shares of
     Common  Stock of the Company in exchange for 5% of the  outstanding  common
     stock of Switch as well as the right to  purchase a warrant to  purchase up
     to 2,000,000  shares of the Company's  Common Stock at a price of $1.50 per
     share in exchange for  consideration of $20,000.  The Company also licensed
     Switch to use certain  technology  of the Company in Australia  and various
     other Asian countries.
    










                                       27
<PAGE>

                                     PART IV

ITEM 13. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K.

(A)  THE  FOLLOWING  DOCUMENTS  ARE FILED AS A PART OF THIS FORM 10-KSB/A AS THE
     PAGE INDICATED.
   
EXHIBITS              DESCRIPTION                                  FILING METHOD
--------              -----------                                  -------------
 3.1       Certificate of Incorporation of the Company                        *

 3.2       By-Laws of the Company                                             *

 3.4       Certificate of Incorporation of Applied
           Environmental Technology, Inc.                                     **

10.28      Purchase Agreement dated June 6, 1991 between the Company
           and Laurel Mountain Trust (relating to IES Ohio 
           landfill purchase)                                                ***

10.29      Royalty Agreement dated June 7, 1991 between the Company,
           Laurel Mountain Trust and IES                                     ***

10.30      Employment Contract dated May 21, 1996, between the Company
           and Terence E. Belsham, Chairman and Chief Financial Officer     ****

10.31      Employment Contract dated June 17, 1996 between the Company
           and Richard P. Freeman, Vice President, Product Development
           & Strategic Planning                                             ****

10.32      Employment Contract dated May 21, 1996 between the Company
           and Gerald I. Quinn, President and Chief Executive Officer       ****

22         Subsidiaries of Registrant                                       ****

23         Consent of Addison, Roberts & Ludwig, P.C.                      *****

27         Financial Data Schedule                                          ****
----------
*    Incorporated  by reference  from the like  numbered  exhibit to a Form S-18
     Registration Statement, SEC File No. 33-8353.

**   Incorporated by reference from the like numbered exhibit to  Post-effective
     Amendment No. 1 to Form S-18 Registration  Statement,  SEC File No. 33-8353
     filed September 2, 1988.

***  Incorporated  by reference from the like numbered  exhibit to Form 10-K for
     the year ending August 31, 1991.

**** Previously Filed

***** Filed herewith
    

(b)  REPORTS ON FORM 8-K FILED DURING THE LAST QUARTER OF THE PERIOD  COVERED BY
     THIS REPORT ARE AS FOLLOWS:

     None.
                                       28
<PAGE>
                                   SIGNATURES

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

                                            WAVETECH, INC.

   
DATED: March 12, 1997                 BY: /s/ Gerald I. Quinn
                                         ----------------------------------
                                          GERALD I. QUINN, PRESIDENT AND
                                          CHIEF EXECUTIVE OFFICER, DIRECTOR


DATED: March 12, 1997                 BY: /s/ Lydia M. Montoya
                                         -----------------------------------
                                         LYDIA M. MONTOYA, CHIEF FINANCIAL
                                         OFFICER

    
In accordance  with the  Securities  Exchange Act of 1934,  this report has been
signed  on  behalf  of  Wavetech,  Inc.  by  the  following  persons  and in the
capacities and on the dates indicated.

   
DATED: March 12, 1997                 BY: /s/ Gerald I. Quinn
                                         -----------------------------------
                                         GERALD I. QUINN, PRESIDENT AND
                                         CHIEF EXECUTIVE OFFICER, DIRECTOR


DATED: March 12, 1997                 BY: /s/ Terence E. Belsham
                                         -----------------------------------
                                         TERENCE E. BELSHAM, CHAIRMAN OF THE
                                         BOARD OF DIRECTORS

DATED: March 12, 1997                 BY: /s/ Richard P. Freeman
                                         -----------------------------------
                                         RICHARD P. FREEMAN, DIRECTOR
    

                                       29