[As adopted in Release No. 34-322131, April 28, 1993, 58 F.R. 26509]

                                  FORM 10-Q SB/A
                                   Amendment No. 1

                    U. S. SECURITIES AND EXCHANGE COMMISSION

                             Washington, D.C. 20549
                             -----------------------

              (X) Quarterly Report Pursuant to Section 13 or 15(d)
                     of the Securities Exchange Act of 1934
                  For the Quarterly Period Ended March 31, 1997

              ( ) Transition Report Pursuant to Section 13 or 15(d)
                     of the Securities Exchange Act of 1934
             For the transition period from __________ to _________

                           Commission File No. 0-27580

                           AVTEL COMMUNICATIONS, INC.
        (Exact name of small business issuer as specified in its charter)
                   A Utah Corporation                87-0378021
                (State or other jurisdiction of   (I.R.S. Employer
               incorporation or organization)     Identification No.)

           130 Cremona Drive, Suite C, Santa Barbara, California 93117
                    (Address of principal executive offices)

       Registrant's telephone number, including area code: (805) 685-0355

                                   (No Change)
 Former name, former address and former fiscal year, if changed since last 
                                    report.

  Check mark whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding
12 months (or for such shorter period that the registrant was required to file
such reports), and (2) has been subject to such filing requirements for the past
ninety days. Yes X No

                APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
                   PROCEEDING DURING THE PRECEDING FIVE YEARS

  Check whether the registrant filed all documents and reports required to be
filed by Section 12, 13 or 15(d) of the Exchange Act after the distribution of
securities under a plan confirmed by a court. Yes ____ No ____

                      APPLICABLE ONLY TO CORPORATE ISSUERS

State the number of shares outstanding of each of the issuer's classes of common
equity, as of the latest practical date: 7,135,807 Shares of Common Stock -
April 28, 1997

              Traditional Small Business Disclosure Forms Yes No X
   
EXPLANATORY NOTE: The Registrant is amending its Form 10-QSB for the quarterly 
period ended March 31, 1997, solely to file the Financial Data Schedule 
attached hereto as Exhibit 27, which was inadvertently omitted form the 
original filing.
    
                         PART I. FINANCIAL INFORMATION

ITEM 1.  FINANCIAL STATEMENTS

AVTEL COMMUNICATIONS, INC. AND SUBSIDIARIES
Consolidated Balance Sheets
September 30, 1996 and March 31, 1997 - (Unaudited)
<TABLE>
<CAPTION>
ASSETS                                   Three Months      Fiscal Year
                                            Ended              Ended
                                         March 31, 1997   September 30, 1996
                                        --------------    ------------------
<S>                                     <C>              <C>        
Current Assets
     Cash                               $   391,859    $   985,237
     Other Current Assets                    20,008             --
     Notes Receivable - Related Parties      75,000             --
     Accounts Receivable (Net of Allowance
     for Doubtful Accounts of ($-0-)         114,130          8,785
                                          -----------    -----------

          Total Current Assets               600,997        994,022
                                          -----------    -----------
Fixed Assets
     Equipment                                539,346             --
     Furniture and Fixtures                    12,750             --
     Less Accumulated Depreciation            (42,590)            --
                                           -----------   -----------

          Net Fixed Assets                    509,506             --
                                           -----------    -----------

Intangible Assets
     Goodwill                                 562,587             --
     Organization Costs                        19,209          6,698
     Less Accumulated Amortization             (4,697)            --
                                          -----------    -----------

          Total Intangible Assets             577,099             --
                                          -----------    -----------

          Total Assets                    $ 1,687,602    $ 1,000,720
                                          ===========    ===========
</TABLE>




   The accompanying notes are an integral part of these financial statements.


                                      - 2 -
<PAGE>
 
AVTEL COMMUNICATIONS, INC. AND SUBSIDIARIES
Consolidated Balance Sheets
September 30, 1996 and March 31, 1997 - (Unaudited)
LIABILITIES AND STOCKHOLDERS EQUITY
- -----------------------------------
<TABLE>
<CAPTION>

                                               Three Months    Fiscal Year
                                                  Ended           Ended
                                              March 31,1997  September 30, 1996
                                              -------------  ------------------
<S>                                           <C>            <C>        
Current Liabilities
    Accounts Payable - Trade                   $   265,430    $    31,945
    Accounts Payable - Officers                     58,358         40,683
    Accrued Liabilities                             64,334          6,024
    Deferred Revenue                               124,877             --
    Line of Credit                                   9,000             --
    Notes Payable                                   41,773             --
    Notes Payable - WestNet 
      Acquisition                                   188,325             --
     Notes Payable - Employee                       150,000             --
     Lease Obligations-Current Portion               32,368             --
                                                -----------    -----------

        Total Current Liabilities                   934,465         78,652
                                                -----------    -----------

Long Term Liabilities
     Lease Obligation                                94,842             --
                                                -----------    -----------

            Total Long Term Liabilities              94,842             --
                                                -----------    -----------

            Total Liabilities                   $ 1,029,307    $    78,652
                                                -----------    -----------

Stockholders Equity
     Preferred Stock - 5,000,000 
       authorized                                 1,000,000      1,000,000
     Common Stock (Par Value $.001)                   7,136          3,000
          50,000,000 shares authorized
          7,135,807 shares issued and
          outstanding 03/31/97
     Paid in Capital in Excess of 
       Par Value                                    135,475             --
     Retained Earnings/(Deficit)                   (484,316)       (80,932)
          Total Stockholders Equity                 658,295        922,068
                                                -----------    -----------
           Total Liabilities and
                 Stockholders Equity            $ 1,687,602    $ 1,000,720
                                                ===========    ===========
</TABLE>


   The accompanying notes are an integral part of these financial statements.

                                      - 3 -
<PAGE>
 
AVTEL COMMUNICATIONS, INC. AND SUBSIDIARIES
Consolidated Statement of Operations
For the Three Months and Six Months Ending March 31, 1997 and 1996 - 
(Unaudited)

<TABLE>
<CAPTION>
                                         Predecessor Company
                For The Three    For The Six   For The Three   For The Six
                 Months Ended    Months Ended   Months Ended   Months Ended
                March 31, 1997  March 31, 1997 March 31, 1996 March 31, 1996
                --------------  -------------- -------------- --------------
<S>             <C>            <C>            <C>            <C>        
REVENUES
- --------
  Sales          $   611,517    $   865,983    $    69,057    $   132,541
  Cost of Sales      140,835        227,319         19,778         32,878
                 -----------    -----------    -----------    -----------

    Gross Margin     470,682        638,553         49,279         99,663

EXPENSES
- --------
  General and Admin 661,799      1,056,556         73,601        134,519
   Bad Debt Expense     --           2,235            262          1,786
                -----------    -----------    -----------    -----------

     Total Operating
        Exp.        661,799     1,058,791          73,863         136,305
                -----------    -----------    -----------     -----------                      

Income (Loss) 
  from Oper.       (191,117)    (420,238)        (24,584)       (36,642)
                  ----------  -----------     -----------     -----------

Other Income/(Expense)
  Interest Income    3,897         13,449           1,022          1,196
  Miscellaneous 
    Income             234          7,274             811            867
  Interest Expense  (2,787)        (3,732)         (1,177)        (3,737)
                -----------    -----------     -----------    -----------

     Net Other 
        Income (Exp) 1,344         16,991             656         (1,674)
                -----------    -----------      -----------    -----------

Income/(Loss) 
 Before Taxes     (189,773)      (403,247)       (23,928)       (38,316)

Income Taxes           --             --             --             --

Minority Interest      --           (137)         1,764          1,764
                -----------    -----------    -----------    -----------

     Net Income 
          (Loss)  (189,773)      (403,384)      (22,178)       (36,552)
                  ========       ========       =======        ========

Weighted Average
  Shares 
  Outstanding     7,123,751      6,513,072      2,294,955      2,293,614

Earnings/(Loss)Per
 Common Share  $     (0.03)   $     (0.06)   $     (0.01)   $     (0.02)
                   ========      ========        =======       ========
</TABLE> 

   The accompanying notes are an integral part of these financial statements.

                                      - 4 -
<PAGE>
 
AVTEL COMMUNICATIONS, INC.  AND SUBSIDIARIES
Consolidated Statement of Cash Flows
For the Six Months Ending March 31, 1997 and 1996 - Unaudited
<TABLE>
<CAPTION>
                                              For The Six     For The Six
                                              Months Ended    Months Ended
                                             March 31, 1997  March 31, 1996
                                             --------------  --------------
<S>                                         <C>              <C>       
Cash Flows From Operating Activities:
- -------------------------------------
Net Loss                                      $(403,384)   $ (36,552)
Adjustments to reconcile net loss net cash:
     Minority Interest                               --       (1,764)
     Depreciation Expense                        42,590       24,767
     Amortization Expense                         4,697           --
     (Increase)/decrease in:
        Accounts Receivable                       9,159       (1,157)
        Other Assets                             18,657           --
        Interest Receivable                          --        9,309
     Increase/(Decrease) in:
          Accounts Payable                      (13,288)       9,505
          Accounts Payable - Officers            17,675           --
          Accrued Expenses                        4,369           --
          Deferred Income                        38,152           --
          Interest Payable                           --      (41,892)
                                              ---------    ---------

Net Cash Used in
    Operating Activities:                      (281,374)     (37,784)
                                               ---------    ---------

Cash Flows From Investing Activities
- ------------------------------------
     Cash Received from
       acquisition of subsidiaries               57,094           --
     Purchase of fixed assets                   (19,306)     (13,952)
     Purchase of intangible assets             (177,360)          --
                                               ---------    ---------

Net Cash Provided (Used) 
   By Investing Activities                     (139,572)     (13,952)
                                               ---------    ---------

Cash Flows From Financing Activities:
- -------------------------------------
     Cash paid for short 
       term loan receivable                     (75,000)          --
     Cash paid on capital lease                 (23,038)      (1,973)
     Borrowing on notes payable                   7,500       46,000
     Cash payments on 
        notes payable                           (81,896)     (26,900)
     Issuance of common stock                        --       24,500
                                               ---------    ---------

Net Cash Provided (Used) 
     By Financing Activities                    (172,434)      41,627
                                                ---------    ---------

Increase/(Decrease) in cash
     and cash equivalents                        (593,380)     (10,109)

Cash and Cash Equivalents
     at Beginning of Period                       985,237       17,267
                                                 ---------    ---------

Cash and Cash 
 Equivalents at End of Period                   $ 391,857    $   7,158
                                                =========    =========
</TABLE> 
                                      - 5 -
<PAGE>
 
AVTEL COMMUNICATIONS, INC.  AND SUBSIDIARIES
Consolidated Statement of Cash Flows
For the Six Months Ending March 31, 1997 and 1996 - Unaudited
(Continued)
<TABLE>
<CAPTION>
                                             For The Six          For The Six 
                                            Months Ended          Months Ended
                                           March 31, 1997        March 31, 1996
                                           --------------        --------------
<S>                                        <C>                   <C>      
Supplemental Disclosures of Cash Flow Information
- -------------------------------------------------

      Cash paid for:
            Interest expense                $   5,505              $  45,077    
             Income taxes                           0                    200

       Non-cash transactions:

     115,000 Shares Common Stock Issued
      in Exchange for Interest in
      Silicon Beach
     4,452,508 Shares of Common Stock 
      and 1,000,000 Shares of $1.00 
      par value Series A Convertible 
      Preferred Stock for acquisition 
      of AvTel Holdings, Inc.
    35,000 Shares of Common Stock
     for the acquisition of WestNet Communications, Inc.
</TABLE>


   The accompanying notes are an integral part of these financial statements.


                                      - 6 -
<PAGE>
 
AVTEL COMMUNICATIONS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(Unaudited)

Note 1  -  INTERIM REPORTING
- ----------------------------

         The unaudited consolidated financial statements included herein have
been prepared by AvTel Communications, Inc. and its subsidiaries (the "Company")
in accordance with generally accepted accounting principles and pursuant to the
rules and regulations of the Securities and Exchange Commission. Accordingly,
certain information and footnote disclosures normally included in complete
financial statements prepared in accordance with generally accepted accounting
principles have been omitted. The unaudited consolidated financial statements
and selected notes included herein should be read in conjunction with the
audited consolidated financial statements and the notes hereto included in the
Company's Annual Report on Form 10-KSB for the year ended September 30, 1996.
Operating results for the three month and six month period ended March 31, 1997,
are not necessarily indicative of the results that may be expected for the year
ended September 30, 1997.

The foregoing unaudited consolidated financial statements reflect all
adjustments, which, in the opinion of management, are necessary to present
fairly the consolidated financial position and results of operations for the
periods presented. The financial statements have been presented reflecting the
effects of a merger transaction involving the merger of a wholly owned
subsidiary of the Company with and into AvTel Holdings, Inc., a California
corporation ("AHI"), which transaction has been treated as a reverse merger for
accounting purposes (see Note 2). The effects of the reverse merger are to
report the financial statements of AHI as if it were the parent company.
Accordingly, the balance sheets reflected in the consolidated financial
statements are that of AHI. The statement of operations has been presented with
the operating results of AHI and the historical operating results of Hi, Tiger
International, Inc. ("HITI"), the predecessor company, a Utah corporation, which
was renamed "AvTel Communications, Inc." pursuant to the merger transaction.
This presentation has been made since AHI has only been in operation since
April, 1996. Accordingly, the cash flow statement is presented reflecting the
current changes of AHI as the parent company and the historical information 
for HITI.

Note 2  -  ACQUISITIONS
- -----------------------

         In connection with its acquisition of all the issued and outstanding
capital stock of AHI, on October 23, 1996, the Company amended and restated its
Articles of Incorporation to, among other things, authorize 5,000,000 shares of
preferred stock. The Company's Board of Directors is authorized to designate 
one or more series of such preferred stock and to designate the rights, 
preferences and privileges of each such series. The AHI acquisition was 
completed in accordance with an Acquisition Agreement dated August 30, 1996 
("Acquisition Agreement"). The transaction was accomplished by way of a merger
(the "Merger") in which a wholly owned subsidiary of the Company was merged
with and into AHI which was the surviving entity and became a wholly owned 
subsidiary of the Company. Pursuant to the Merger, the Company authorized and
issued 1,000,000 shares of Series A Convertible Preferred Stock which have
certain liquidation preferences, bear a cumulative dividend, payable 
semi-annually, at 8% and are convertible, upon the happening of certain events,
into shares of the Company's $.001 par value common stock. The Merger has been
accounted for as a reverse purchase by AHI of the Company whereby the holders 
of AHI's Common Stock acquired, after giving effect to the Merger, a 
controlling interest in the Company.  Accordingly, the assets and liabilities
of the Company and its subsidiary, The Friendly Net, LLC, are reflected at their
fair market values, as are the assets and liabilities of Silicon Beach 
Communications, Inc., which was acquired in November, 1996. The foregoing
unaudited financial statements reflect, for the previous periods noted,
comparative data as to AHI only. AHI began operations in April, 1996.



                                      - 7 -
<PAGE>
 
         In November, 1996, the Company, through a subsidiary, acquired all the
issued and outstanding capital stock of Silicon Beach Communications, Inc., a
California corporation ("SBC") that serves as an Internet Serv ice Provider
("ISP") and provides software development services.

         In February, 1997, the Company, through a subsidiary, acquired all of
the issued and outstanding capital stock of WestNet Communications, Inc., a
California corporation ("WNC") that serves as an ISP in certain regions of
southern California.
         In March , 1997, the Company, acquired the 20% minority interest in The
Friendly Net, LLC, a Utah limited liability company held by Tree of Stars, Inc.
(TOSI), a Nevada corporation of which Paul G. Begum is President and a 
principle
shareholder. Mr. Begum is the former President and Chief Executive Officer of
the Company who, together with TOSI owns directly or indirectly approximately
9.8% of the issued and outstanding common stock of the Company. The acquisition
was facilitated through a payment of cash in the amount of $10,000 and the
issuance of $20,000 of short term loans. In addition, a loan payable to Mr.
Begum has been discounted from $40, 900 to zero. The note payable was in
consideration of consulting services performed by Mr. Begum prior to the Merger.
This amount has been set aside in a reserve account that will be used to offset
any unexpected expenses that may arise relating to the Company's operation prior
to the Merger. At the end of the period a total of $12,500 had been applied to
the reserve account. The Company expects to recognize a gain on the note
discount in the third quarter of 1997.

Note 3  -  RECENT DEVELOPMENTS
- ------------------------------

         In April, 1997, the Company entered into a Stock Exchange Agreement
(the "Stock Exchange Agreement") with Matrix Telecom, Inc., a Texas corporation
("Matrix") pursuant to which the Company will issue to persons who own 100% of
the issued and outstanding common stock of Matrix (the "Matrix Stockholders") an
aggregate of 34,590,049 of the Company's $.001 par value common stock in
exchange for 100% of the issued and outstanding capital stock of Matrix. As a
result of the transaction, the Matrix Stockholders will, after giving effect to
the exchange, acquire and hold approximately 79% of the issued and outstanding
common stock of the Company on a fully diluted basis. The consummation of the
transaction under the Stock Exchange Agreement is subject to the satisfaction of
a number of terms and conditions, including a condition that prior to the
exchange, the Company's shareholders shall have approved the transaction as well
as a proposal to reincorporate the Company in the state of Delaware. The Stock
Exchange Agreement also provides for the Company to effect either a reverse
stock split prior to the reincorporation or reduce the number of the Company's
common stock (or other securities convertible into common stock) that will be
issued to the Company's shareholders in the reincorporation to such lesser
number of common stock (or such other securities) as the Company and Matrix
shall agree. The Stock Exchange Agreement additionally provides for Matrix to
provide to the Company a secured loan in the maximum aggregate amount of
$500,000, that the transaction is to be treated as a pooling of interest for
financial reporting purposes and that it is intended to be a tax free
reorganization.


                                      - 8 -
<PAGE>
 
AVTEL COMMUNICATIONS, INC.  AND SUBSIDIARIES
Notes to Consolidated Financial Statements - Unaudited (Continued)

ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION

GENERAL

     The following discusses the financial position and results of operations of
the Company and its consolidated subsidiaries, The Friendly Net LLC, a Utah
Limited Liability Company ("TFN"), Silicon Beach Communications, Inc., a
California corporation ("SBC"), WestNet Communications, Inc. ("WNC"), and AvTel
Holdings, Inc., a California corporation ("AHI").

     On October 23, 1996, the Company completed a merger transaction (the
"Merger") in which it acquired 100% of the issued and outstanding capital stock
of AHI, in exchange for 4,252,508 shares of the Company's $.001 par value common
stock ("Common Stock"), comprising approximately 61% of the Company's issued and
outstanding Common Stock after giving effect to the Merger, and 1,000,000 shares
of newly authorized shares of the Company's Series A Convertible Preferred
Stock. The Merger, which was consummated in accordance with the terms of an
Acquisition Agreement dated August 30, 1996, was approved by the Company's
shareholders at a special meeting held October 23, 1996. The transaction has
been accounted for as a reverse acquisition for accounting purposes.
Accordingly, the assets and liabilities of AHI are reflected at their fair
market value whereby the holders of AHI's Common Stock acquired, after giving
effect to the Merger, a controlling interest in the Company. Accordingly, the
assets and liabilities of the Company and TFN are reflected at their fair market
values. (See Note 2 to Consolidated Financial Statements - Unaudited)

     On November 22, 1996, the Company completed the acquisition of SBC. The
acquisition was structured as a stock for stock transaction in which the Company
issued an aggregate of 115,000 shares of its Common Stock in exchange for all
the issued and outstanding capital stock of SBC. This transaction has been
accounted for as a purchase. Accordingly, assets and liabilities of SBC are
reflected at their fair market values.

         On February 2, 1997, the Company completed, through a subsidiary, the
acquisition of WNC. The acquisition was structured as a stock purchase in which
the Company acquired all of the issued and outstanding stock of WNC in exchange
for $100,000, 35,000 shares of the Company's $0.001 common stock and promissory
notes secured by the Company's subsidiary in aggregate of $177,000 which notes
are secured by certain assets of WNC and by a pledge in the capital stock of WNC
being acquired.

         In February, 1997, the Company, entered into an agreement to acquire
directly or indirectly, through a subsidiary, the 20% minority interest in TFN
from Tree of Stars, Inc.

FINANCIAL CONDITION AND RESULTS OF OPERATIONS

     The decrease in total current assets from the fiscal year ended September
30, 1996, to the three months ended March 31, 1997, relates, primarily, to the
use of cash for operating activities relating to the integration of the Company
and AHI following the Merger, the integration of SBC and increased general
administrative expenses. The increase in net fixed assets over the periods
resulted primarily from the acquisitions of SBC and WNC in November, 1996 and
February, 1997 respectively. The increase in notes receivable-related party is
due to a short term loan to the Company's Senior Vice President of Software
Development. The Company anticipates the repayment of the note in full by
October 31, 1997.

     The increase in total liabilities from the year ended September 30, 1996,
to the quarter ended March 31, 1997, arose, primarily, from the increase in
trade payables arising from the Merger and the acquisition of SBC and WNC; the
increase in deferred revenue associated with the acquisition of SBC and WNC 
which,

                                      - 9 -
<PAGE>
 
in the course of its business, is paid in advance by certain customers for ISP
services; the increase in notes payable relating to certain promissory notes
issued in connection with the Merger and acquisitions of SBC and WNC; and
certain deferred compensation arrangements and accounts payable with certain
officers and directors.

     Stockholders' equity decreased from September 30, to March 31, 1997, as a
result of the operating losses experienced during the quarter due, primarily, to
substantial costs and expenses incurred in connection with the Merger with AHI,
the acquisitions of SBC and WNC, and increased management and other costs
relating to the development and implementation of the Company's marketing
strategies. The Merger involving the Company and AHI is treated, for accounting
purposes, as a reverse purchase whereby the holders of AHI's Common Stock
acquired, after giving effect to the Merger, a controlling interest in the
Company. For financial reporting purposes, comparative data for periods prior to
the quarter ended March 31, 1997, reflects the financial condition and results
of operation of AHI only. Since AHI did not begin operations until April, 1996,
no comparative financial analysis is available for AHI, with respect to the
quarter ended December 31, 1995, as compared to similar data for the Company,
for the same quarter in 1995, as to revenues, operating income and expenses, net
income, cash and other topics that would normally be addressed in statements of
operations and cash flows.

LIQUIDITY AND CAPITAL RESOURCES

         Consistent with management's intentions to develop and execute the
Company's business sales and marketing strategies, it is anticipated that the
Company's needs for capital will in the near term exceed funds generated from
operations. The Company has, as a result of the Merger with AHI acquired access
to the capital resources of AHI. While these funds have been employed to support
the recent implementation of the Company's business and other strategies, other
capital resources will continue to be explored. Accordingly, management has
evaluated a number of alternative solutions to the Company's capital needs,
including secured and unsecured debt, capital equipment leases to facilitate the
anticipated growth of sales, marketing and technical development, issuance of
debt or equity securities, strategic alliances, or any combination of the
foregoing.

         In connection with the contemplated acquisition by the Company of all
of the issued and outstanding capital stock of Matrix Telecom, Inc., a Texas
corporation ("Matrix"), the Company has entered into a Stock Exchange Agreement
with Matrix which provides, among other things, for Matrix to provide to the
Company a secured loan (the "Matrix Loan") in the maximum aggregate amount of
$500,000. The loan is in the form of a revolving credit facility under which the
Company may draw down up to two increments of $250,000 each.

         Subsequent to the quarter ended March 31, 1997 and pursuant to the
terms of the Stock Exchange Agreement, the Company has availed itself of an
aggregate of $250,000 under the Matrix Loan. All amounts of principal and
interest outstanding under the Matrix Loan are due and payable on the earlier to
occur of one hundred eighty (180) days after termination of the Stock Exchange
Agreement or December 1, 1997. Management expects that, following consummation
of the transactions contemplated by the Stock Exchange Agreement, the Company
will be able to avail itself of the additional capital resources of Matrix.
While these additional resources should be sufficient to support the near term
business development and other strategies of the combined companies, other
capital resources may from time to time be required by the Company.

         There are no assurances that such other capital resources will be
available to implement management's objectives with respect to the combined
companies assuming that the transactions contemplated by the Stock Exchange
Agreement are consummated. Further, if for some reason the transactions
contemplated by the Stock Exchange Agreement are not consummated, the amounts
outstanding under the Matrix loan would become due and payable as early as
December 1, 1997. In such a
                                     - 10 -
<PAGE>
 
case, management would be required to explore alternative solutions to fulfill
the Company's capital requirements, including, payment of the indebtedness under
the Matrix Loan.

         Under the circumstances, there are no assurances that the additional
funds necessary to satisfy the Company's repayment obligations and future
capital needs will be available, or, if available, that they will be in
sufficient amounts and under terms and conditions acceptable to the Company. If
these additional funds are not available in sufficient amounts or at the times
and under term acceptable to the Company, management may be required to
significantly curtail, restrict or delay the execution of some parts of the
Company's business strategy and such actions could have a material adverse
effect on the Company's ability to execute its business plan and strategy.


                                     - 11 -
<PAGE>
 
                           PART II - OTHER INFORMATION

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

         At the Company's Annual Meeting of Shareholders held February 27, 1997,
the Company's shareholders voted on three proposals that had been submitted to
the shareholders in the Company's combined form of Notice of Annual Meeting and
Proxy Statement dated January 8, 1997 (the "Proxy Statement") as filed with the
Securities and Exchange Commission in definitive form on or about January, 1997.
The proposals submitted to the shareholders in the Proxy and approved by the
requisite number of shares outstanding and entitled to vote therein as of record
date, December 30, 1996, were as follows:

                    (a) Election of Messrs. Anthony E. Papa, James P. Pisani,
                    Barry Peters and Frank Dzuiba as members of the Board of
                    Directors for the ensuing year. The number of vote cast for,
                    against or withheld or abstentions as to each directors were
                    as follows:
<TABLE>
<CAPTION>

 Director                     Votes For         Votes Against        Abstentions
                                                                     or Withheld
--------                     ---------         ------------        -----------
<S>                          <C>              <C>                    <C>   
 Anthony E. Papa             4,571,863              -0-                24,860
 James P. Pisani             4,571,863              -0-                24,860
 Barry Peters                4,571,863              -0-                24,860
 Frank Dziuba                4,571,863              -0-                24,860
</TABLE>

         (b)      Approval of the Company's 1997 Incentive Stock Plan.  Votes 
                  "for", 4,422,780 shares, "against" or "withheld", 149,081 
                  shares, "abstentions", 24,860 shares.

         (c)      Ratification of the selection of Ernst & Young LLP,
                  independent certified public accountants, as auditors for 
                  the fiscal year ended September 30, 1997. 
                  Votes "for", 4,594,225 shares, "against" or "withheld",
                  none and "abstentions", 2,498 shares.

ITEM 6.  EXHIBITS AND REPORTS ON FORM 8-K

     (a)     Exhibits (none)

     (b)     Reports on Form 8-K.

         On March 6, 1997 the Company filed a Report on Form 8-K to report the
consummation of the transaction pursuant to which the Company acquired all of
the outstanding capital stock of WestNet Communications, Inc. (WNC).

                                SIGNATURES


     In accordance with the requirements of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto 
duly
authorized.

                                   AvTel Communications, Inc.
                                         (Registrant)




DATE:       October 9, 1997        By: /s/ JAMES P. PISANI
                                   --------------------------------
                                   James P. Pisani
                                    Its Principal Financial & Accounting 
Officer

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