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

                                  FORM 10-QSB/A
                                 Amendment No. 1

              [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
                     OF THE SECURITIES EXCHANGE ACT OF 1934

                        For Quarter Ended June 30, 1998,
                         Commission file number: 0-12806

                           Dynatec International, Inc.
                 (Name of small business issuer in its charter)

     Utah                                               87-0367267
(State or other jurisdiction                         (I.R.S. Employer
 of incorporation or                                Identification No.)
 organization)

                  3820 Great Lakes Drive
                  Salt Lake City, UT 84120
                  (Address of principal (Zip Code)
                  executive offices)
Issuer's telephone
 number:          (801) 973-9500

Securities registered under Section 12(b) of the Exchange Act: None

Securities registered under to Section 12(g) of the Exchange Act:
                   Common Stock (Par Value $0.01 per share)
                                   (Title of Class)

         Check whether the issuer (1) filed all reports  required to be filed by
Section 13 or 15(d) of the  Exchange  Act during the past 12 months (or for such
shorter period that the  registrant was required to file such reports),  and (2)
has been subject to such filing requirements for the past 90 days. Yes X No

         As of August 13, 1998, the  Registrant  had 2,675,112  shares of Common
Stock  outstanding.   The  aggregate  market  value  of  voting  stock  held  by
non-affiliates of the Company at August 13, 1998 was $13,704,878.

Transitional small business disclosure format.  Yes__  No  X 


<PAGE>






                                  INTRODUCTION

     This  Amendment  No.  1 to the  Quarterly  Report  on Form  10-QSB  for the
quarterly  period  ended June 30,  1998,  of Dynatec  International,  Inc.  (the
"Company") is submitted to amend the following Items:

Part I - Financial Information
         Item 1.  Financial Statements (Incorporated by reference)
         Item 2.  Management's Discussion and Analysis




                         PART I. - FINANCIAL INFORMATION


ITEM 1 - FINANCIAL STATEMENTS

         Reference  is made to the  attached  Unaudited  Consolidated  Condensed
Financial  Statements  for the  first six  months of the 1998 and 1997  calendar
years.  These  condensed   financial   statements  are  hereby  incorporated  by
reference.  The information for the Company's first six months of calendar years
1998 and 1997 ended June 30, 1998 and 1997 is  unaudited,  but in the opinion of
management  reflects all adjustments which are necessary for a fair presentation
of operations for such periods.



<PAGE>


ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
                  AND RESULTS OF OPERATIONS

RESULTS OF OPERATIONS:

     For the six  months  ended  June 30,  1998,  the  Company  generated  total
revenues of $7,783,758 compared to total revenues of $6,045,561 in the prior six
month  period  ended  June  30,  1997.  Comparative  period  revenues  increased
$1,738,197 or 29%,  reflecting  the largest  revenues ever earned by the Company
during  the  first  two  quarters  of any  calendar  year  since  the  Company's
inception.

     Overall,  the Company  experienced a net loss of $576,767 for the first two
quarters of 1998  compared to a net loss of $433,144  for the first two quarters
of 1997  primarily  due to  increased  interest  expense  related to the sale of
$1,500,000 of Convertible Debentures in May 1998 (the "Convertible Debentures"),
as well as  amortization  of  non-cash  interest  expense  associated  with debt
issuance costs. The Convertible  Debentures and associated equity line of credit
are described more fully in the Liquidity and Capital Resources section below.

Telephone Accessories:

     For the two quarters ended June 30, 1998,  there was an overall increase of
$379,542 (13%) in the revenues  generated from the telephone  accessory  product
segment of the Company  compared to total  revenues for the same period in 1997.
Although the sales mix for various shoulder rests changed slightly, overall 1998
sales of shoulder rests increased by approximately $212,219 over 1997 sales. The
remainder of the increase was attributable to increased volume on sales of other
telephone accessory products.

Hardware/Housewares:

     The  hardware/housewares  products segment produced an increase in revenues
during the six month  period  ended June 30, 1998 of $252,751 or 14% compared to
the period  ended June 30,  1997.  During the latter  part of 1997,  the Company
introduced  several new drawer  organizer  products which have accounted for the
majority of the increase in the current year.  Sales in this segment continue to
grow as the Company  continues to aggressively  market and expand the housewares
product lines.

Mass Market:

     Sales in the Mass Market  segment  were down from  $833,049 for the quarter
ended June 30, 1998  compared to $830,212  for the quarter  ended June 30, 1997.
Virtually  all  of  the  sales  in  this  segment  were  to   Dolgencorp,   Inc.
Historically, products in this segment have consisted of cameras, audio cassette
tapes, crayons, three piece flashlights, and disposable lighters.



<PAGE>


Flashlights:

     Total sales in the  Flashlight  segment were $635,665  compared to $404,178
for the  periods  ended  June  30,  1998 and  1997,  respectively.  The  Company
continues the  development of stronger  relationships  with overseas  vendors to
ensure  the timely  delivery  of  reliable,  high-quality  flashlight  products.
Earlier   plans   represented   by  a  letter   of   intent   to  form  a  joint
venture/partnership with a flashlight supplier in Taiwan have been determined to
not be in the best interest of the Company.

Telecommunications Headsets

     Revenues in the telecommunication headset segment were $895,787 for the six
month period  ending June 30, 1998 compared to $-0- for the same period in 1997.
The  Company  has  been  aggressively  developing  a line of  telecommunications
products  to  include  wired  and  wireless  telephone   headsets,   telephones,
conference speakers,  and other products.  In the first quarter of 1998, initial
orders  for   telephonic   amplifiers  and  headsets  were  filled  with  Lucent
Technologies. The Company has been able to secure pages in several catalogues of
providers  for various  office  products  coming out during the second and third
quarters.


 Expenses

     Overall  gross  margins of the Company  for the six months  ending June 30,
1998 and 1997 were 35% and 32% ,  respectively.  This overall  increase in gross
margin is largely  attributable  to increased  sales of telephone  accessory and
headset products which have gross margins ranging from 35% to 50%.

     The Company spent $73,695 and $167,878 in research and development expenses
for the six months  ending  June 30,  1998 and 1997.  Most of the  research  and
development  expenses over these two periods was spent in developing the headset
and flashlight product lines.  Research and development  expenses have decreased
during 1998, as current year research and development  efforts relate to product
enhancements as opposed to initial product development.



<PAGE>


LIQUIDITY AND CAPITAL RESOURCES:

     At June 30,  1998,  the  Company  experienced  a net  decrease  in its cash
position of $111,908 from December 31, 1997.  The Company had a decrease in cash
from  operations  of  $2,149,629.  The  majority of this  decrease was caused by
increases in trade accounts receivable  ($1,011,812) and inventory  ($1,712,002)
as well as the net loss incurred during the period.  The increase in inventories
reflects  purchases  made to prepare for  catalogue  sales of telephony  headset
products and to fill mass  merchandise  orders received for the third and fourth
quarters. The Company experienced a net increase in cash position resulting from
financing  activities  reflecting the receipt of a deposit of $940,000 for stock
issuance,  as  authorized  by the Board of Directors  in March of 1997,  and the
issuance of $1,500,000 pursuant to the sale of Convertible Debentures (explained
more  fully  below).  A net use of cash in  investing  activities  reflects  the
capital  expenditures  of $356,232  during the first two  quarters of 1998.  The
Company  anticipates  that the  inventory  and related  payables  will  increase
throughout  1998 as  sales  increase  in the  flashlight  and  telecommunication
headset segments.

     Current assets increased from $5,092,374 at December 31, 1997 to $7,224,092
at June 30, 1998. Of this increase,  approximately $1,712,002 reflects increases
in inventory  partially funded by increases under the line of credit facility of
$307,545 as the Company  prepares  for  increased  sales in calendar  year 1998.
Additionally,  trade accounts  receivable  also increased due to increased first
quarter sales of approximately $656,509 over fourth quarter 1998.

     On May 22, 1998,  the Company  closed a  transaction  that has provided net
capital  proceeds of  $1,335,000.  These funds have been raised  pursuant to the
sale by the Company of  Convertible  Debentures in the face amount of $1,500,000
to meet  immediate  cash needs under an equity line of credit.  The  Convertible
Debentures  are  convertible  into common stock of the Company at the lesser of:
(i) seventy five  percent of the average of the three lowest  closing bid prices
of the Common Stock during the ten day trading period immediately  preceding the
conversion  date or (ii) one  hundred  percent of the  closing  bid price on the
trading  day  immediately  preceding  the  closing  date of the  agreement.  The
transaction  has been  accomplished  pursuant  to a  Convertible  Debenture  and
Private  Equity Line of Credit  Agreement (the "Credit  Agreement")  between the
Company  and  a  group  of  five  investors   which  have  not  previously  been
shareholders of the Company. In addition,  the Company can use a "put" mechanism
to  periodically  draw down up to  $10,000,000.  Under  the terms of the  Credit
Agreement,  a minimum of $1,000,000 must be drawn in increments of not less than
$50,000 in exchange for common stock of the Company  issued at 80 percent of the
average  of the three  lowest bid prices  during  the six day  valuation  period
consisting  of three  days  prior to the put and  ending  two days after the put
date. The put mechanism cannot be utilized until after the effective date of the
registration  statement for the common stock  underlying  the Credit  Agreement.
Additionally,  upon registration of the underlying shares which may be purchased
pursuant to the  Convertible  Debentures,  the Company  will sell an  additional
$500,000 principal amount of Convertible Debentures.



<PAGE>


     In connection with the Credit Agreement,  the investors and placement agent
were issued  warrants.  These warrants have been issued as Series A and Series B
as follows:
<TABLE>
<CAPTION>

                                       Placement      Exercise
                        Investors        Agent         Price
                        ---------      ---------      -------- 
<S>                      <C>            <C>            <C>  
Series A Warrants        150,000        150,000        $6.50
Series B Warrants        150,000        300,000        $7.15
</TABLE>


The Company is to issue an additional  50,000 Series A warrants each to both the
placement  agent and the investors  upon receipt of the  additional  $500,000 of
gross sales  proceeds.  The market value for the Series A warrants issued to the
investors  has been written off as a one-time,  non-cash  debt  issuance cost of
$426,000 as the warrants are  immediately  exercisable.  The market value of the
Series A warrants issued to the placement  agent have been  capitalized and will
be  written  off by the  Company  over  the 36  month  life  of the  Convertible
Debentures.  Although these debt issuance costs are non-cash items, current GAAP
requires  disclosure  for  the  market  value  of  warrants  issued  along  with
Convertible  Debentures.  In addition,  because the  Convertible  Debentures are
convertible  at a 25 percent  discount  from the  market  value,  an  additional
$500,000  (the  intrinsic  value of the  beneficial  conversion  premium) of the
proceeds received were established as a contr-debt  account and $166,667 of this
premium was written  off as a non-cash  expense for the second  quarter of 1998.
These non-cash amortization and write-off of the market value of warrants issued
are included with interest expense in the income  statement.  Upon the effective
date of the registration  statement,  the market value of the warrants issued to
the  investors  in  connection  with  the  additional  $500,000  of  Convertible
Debentures  (estimated to be an additional  third  quarter  non-cash  expense of
$121,500) and the remaining beneficial conversion premium will be written off as
a third  quarter,  non-cash  item.  The Series B warrants which have been issued
have no current impact to the Company financial statements,  as they were issued
in connection with the equity line of credit.

     On May 27, 1998, the Company obtained a new, revolving  line-of-credit from
a financing  institution  up to $5,000,000  bearing  interest at a rate of prime
plus one percent  with  interest  payable  monthly.  The line is secured by both
accounts  receivable and  inventories.  The note is due May 26, 2001.  Under the
terms of the agreement,  the Company is required to maintain  certain  covenants
and ratios including book net worth, net income, and debt service coverage.

     In March 1998, the Company  received  $580,000 as a  nonrefundable  payment
under an agreement with a third party pursuant to which the third party acquired
nonexclusive rights to market certain of the Company's products internationally.
The cash paid to the Company was obtained from the sale of the Company's  common
stock by such third  party.  The Company is  therefore  of the opinion  that the
proceeds of such  transaction  were not  attributable  to the  culmination of an
earnings  process.  Consequently,  such  proceeds  have been  accounted for as a
capital addition in the accompanying consolidated financial statements.



<PAGE>





                                   SIGNATURES


         Pursuant to the  requirements  of the Securities  Exchange Act of 1934,
the Registrant has duly caused this amended report to be signed on its behalf by
the undersigned hereunto duly authorized on the March 31, 1999.


                           DYNATEC INTERNATIONAL, INC.

                           /s/Frederick W. Volcansek, Sr.
                           -----------------------------------
                           Frederick W. Volcansek, Sr.
                           Chairman and Chief Executive Officer


                           /s/Paul A. Boyer
                           -----------------------------------
                           Paul A. Boyer
                           Senior Vice President-Chief Financial Officer


<PAGE>












                           DYNATEC INTERNATIONAL, INC.

                         CONDENSED FINANCIAL STATEMENTS

                             June 30, 1998 and 1997




















<PAGE>



                                 C O N T E N T S



                                                                         Page

CONDENSED BALANCE SHEETS                                                  3

CONDENSED STATEMENTS OF OPERATIONS                                        5

CONDENSED STATEMENTS OF CASH FLOWS                                        6

NOTES TO CONDENSED FINANCIAL STATEMENTS                                   8








<PAGE>

<TABLE>
<CAPTION>

                                                      DYNATEC INTERNATIONAL, INC.
                                                       Condensed Balance Sheets
                                                  June 30, 1998 and December 31, 1997


                                                                                  June 30, 1998                Dec. 31, 1997
ASSETS                                                                             (Unaudited)                   (Audited)
                                                                          --------------------------     ------------------------
<S>                                                                       <C>                              <C>
CURRENT ASSETS                                                                (Restated-see Note2)
 Cash                                                                           $       220,986                $     332,894
 Trade accounts receivable, net of allowance for doubtful
accounts of $31,257 in 1998 and $29,684 in 1997                                       2,551,700                    1,549,888
 Related part and other receivables                                                      43,728                      426,131
 Inventories (Note 3)                                                                 4,234,151                    2,522,149
 Prepaid expenses                                                                       151,997                      234,120
 Other                                                                                   21,530                       27,192
                                                                          ---------------------------     -----------------------
         TOTAL CURRENT ASSETS                                                         7,224,092                    5,092,374

PROPERTY, PLANT AND EQUIPMENT, NET                                                    4,014,377                    3,941,587

OTHER ASSETS
 Deposits                                                                                69,425                      107,631
 Debt Issue costs (Note 10)                                                             682,150                            -
 Intangible assets, net                                                                 236,834                      267,825
                                                                           --------------------------     -----------------------
       TOTAL OTHER ASSETS                                                               988,409                      375,456
                                                                           --------------------------     -----------------------

            TOTAL ASSETS                                                        $    12,226,878                $   9,409,417
                                                                            =========================     =======================

</TABLE>












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


<PAGE>
<TABLE>
<CAPTION>


                                                      DYNATEC INTERNATIONAL, INC.
                                                 Condensed Balance Sheets (Continued)
                                                  June 30, 1998 and December 31, 1997


                                                                                    June 30, 1998                   Dec. 31, 1997
LIABILITIES AND EQUITY                                                               (Unaudited)                      (Audited)
                                                                                --------------------           ---------------------
<S>                                                                             <C>                               <C>
CURRENT LIABILITIES                                                             (Restated-see Note2)
 Short-term note payable                                                          $     1,638,714                 $     1,331,169
 Current portion of long-term debt                                                        174,673                       1,003,477
 Current portion of capital lease obligations                                              15,892                          15,699
 Accounts payable                                                                         947,216                         992,632
 Accounts payable-other (Note 8)                                                        1,232,375                          85,000
 Accrued expenses                                                                         205,110                         238,121
 Accrued advertising                                                                      191,595                         350,000
 Accrued royalties payable                                                                 38,235                          17,882
 Accrued income taxes                                                                           -                               -
                                                                                ---------------------          ---------------------
            TOTAL CURRENT LIABILITIES                                                   4,443,810                       4,033,980

LONG-TERM LIABILITIES
 Long-term debt                                                                         2,118,937                       1,994,355
 Capital lease obligations                                                                 37,507                          46,086
 Deferred income taxes                                                                      5,036                           5,036
 Convertible debentures, net (Note 10)                                                  1,186,393                               -
                                                                                ----------------------         ---------------------
            TOTAL LIABILITIES                                                                                                    
                                                                                        7,791,683                       6,079,457

STOCKHOLDERS' EQUITY (Note 8)
  Common stock, $.01 par value,  authorized  100,000,000 shares 2,766,627 issued
     at June 30, 1998 and
     2,859,940 issued at December 31, 1997                                                 27,667                          28,599
 Treasury Stock, at cost, 91,515 shares                                                  (915,150)                       (915,150)
 Additional paid-in capital                                                             7,279,774                       5,596,840
 Accumulated deficit                                                                   (1,957,096)                     (1,380,329)
                                                                                ----------------------          --------------------
              TOTAL STOCKHOLDERS' EQUITY                                                4,435,195                       3,329,960
                                                                                ----------------------          --------------------

TOTAL LIABILITIES & STOCKHOLDERS' EQUITY                                          $     12,226,878                 $    9,409,417
                                                                                ======================          ====================
</TABLE>





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


<PAGE>

<TABLE>
<CAPTION>

                           DYNATEC INTERNATIONAL, INC.
                       Condensed Statements of Operations
            For the Three and Six Months ended June 30, 1998 and 1997
                                   (Unaudited)

                                                   Three months          Three months           Six months            Six months
                                                  Ended June 30,        Ended June 30,        Ended June 30,        Ended June 30,
                                                        1998                  1997                  1998                  1997
                                                ------------------    ------------------    ------------------    ------------------
                                                                                                        (Restated-see
                                                                                                           Note 2)
<S>                                                            <C>                   <C>                   <C>                   <C>
REVENUE                                             $  4,135,972          $  3,490,943          $  7,783,758          $  6,045,561
COST OF SALES                                          2,746,298             2,344,651             5,027,349             4,124,434
                                                 ------------------    ------------------    ------------------    -----------------

GROSS PROFIT                                           1,389,674             1,146,292             2,756,409             1,921,127

EXPENSES
  Selling expenses                                       721,364               531,829             1,387,131             1,119,578
  Research and development                                40,495                31,724                73,695               167,878
  General and administrative expenses                    510,755               468,030               949,970               925,594
  Provision for losses on accounts receivable             10,000                 8,500                10,000                13,500
                                                 ------------------    ------------------    ------------------    -----------------
         TOTAL EXPENSES                                1,282,614             1,040,083             2,420,796             2,226,550
                                                 ------------------    ------------------    ------------------    -----------------

OPERATING GAIN (LOSS)                                    107,060               106,209               335,613             (305,423)

OTHER INCOME/(EXPENSE)
  Interest income                                              -                 2,033                 3,340                 6,015
  Interest expense (Note 10)                            (787,379)             (120,058)             (894,388)             (223,772)
  Loss on sale of asset                                     (326)                     -              (21,332)                     -
  Miscellaneous                                                -                90,536                     -                90,536
                                                 ------------------    ------------------    ------------------    -----------------

TOTAL OTHER EXPENSE                                     (787,705)              (27,489)             (912,380)             (127,221)
                                                 ------------------    ------------------    ------------------    -----------------

INCOME (LOSS) FROM CONTINUING OPERATIONS                (680,645)                78,720             (576,767)             (432,644)

INCOME TAX EXPENSE (Note 7)                                    -                     -                     -                  (500)
                                                 ------------------    ------------------    ------------------    -----------------

NET INCOME (LOSS)                                    $  (680,645)           $    78,720          $  (576,767)          $  (433,144)
                                                 ==================    ==================    ==================    =================

BASIC NET INCOME (LOSS) PER SHARE                    $     (0.24)           $      0.04          $     (0.21)          $     (0.20)
                                                 ==================    ==================    ==================    =================

DILUTED NET INCOME (LOSS) PER SHARE (Note 4)         $     (0.24)           $      0.03          $     (0.21)          $     (0.20)
                                                 ==================    ==================    ==================    =================

</TABLE>




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


<PAGE>
<TABLE>
<CAPTION>


                                                      DYNATEC INTERNATIONAL, INC.
                                                  Condensed Statements of Cash Flows
                                            For the Six Months ended June 30, 1998 and 1997
                                                              (Unaudited)


                                                                        Six months ended June 30,        Six months ended June 30,
                                                                                  1998                             1997
                                                                       ---------------------------       --------------------------
<S>                                                                          <C>                              <C>
CASH FLOWS FROM OPERATING ACTIVITIES:                                      (Restated-see Note2)
Net Loss                                                                       $      (576,767)                 $      (433,144)
Adjustments to reconcile net loss to net cash
 used in operating activities:
Depreciation                                                                           203,198                          224,220
Amortization                                                                            30,741                           32,134
Interest expense on convertible debentures (Note 10)                                   624,226                                -
Loss on sale of assets                                                                  21,332                                -
Provision for losses on accounts receivable                                             10,000                           13,500
Changes in operating assets and liabilities:
  Trade accounts receivable                                                         (1,011,812)                        (617,979)
  Related party and other accounts receivable                                          382,403                             (410)
  Inventories                                                                       (1,712,002)                        (403,990)
  Prepaid expenses                                                                      82,123                         (173,531)
  Other                                                                                  5,662                          (87,492)
  Deposits                                                                              38,206                          (96,032)
  Accounts payable                                                                     (45,416)                         107,174
  Accounts payable-other                                                               (42,625)                               -
  Accrued Expenses                                                                     (20,846)                         289,439
  Accrued advertising                                                                 (158,405)                               -
  Accrued royalties payable                                                             20,353                           11,555
  Income tax payable                                                                         -                             (100)
                                                                        ---------------------------      --------------------------

NET CASH USED IN OPERATING ACTIVITIES                                          $    (2,149,629)                 $    (1,134,656)
                                                                        ---------------------------      --------------------------

</TABLE>










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


<PAGE>

<TABLE>
<CAPTION>

                                                      DYNATEC INTERNATIONAL, INC.
                                            Consdensed Statements of Cash Flows (Continued)
                                            For the Six Months ended June 30, 1998 and 1997
                                                              (Unaudited)

                                                                          Six months ended June 30,        Six months ended June
                                                                                  1998                          30, 1997
                                                                        ----------------------------     -------------------------
                                                                           (Restated-see Note2)
<S>                                                                        <C>                               <C>
CASH FLOWS FROM INVESTING ACTIVITIES:
  Proceeds from sales of assets                                               $       47,000                   $         -
  Receivable from related parties                                                          -                       115,419
  Capital expenditures                                                              (356,232)                     (132,293)
                                                                         ----------------------------     -------------------------

NET CASH USED IN INVESTING ACTIVITIES                                               (309,232)                      (16,874)
                                                                         ----------------------------     -------------------------

CASH FLOWS FROM FINANCING ACTIVITIES:
  Net borrowings under line of credit agreements                                     307,545                       249,080
  Increase in debt issuance costs                                                   (267,983)                             -
  Net borrowings (payments) on long-term debt                                       (704,222)                       285,433
  Net borrowings (payments) on capital lease obligations                              (8,387)                      (12,784)
  Proceeds from capital addition (Note 8)                                            580,000                             -
  Net borrowings under convertible debentures (Note 10)                            1,500,000                             -
  Proceeds from deposit for stock issuance (Note 8)                                  940,000                             -
  Issuance of Stock pursuant to Regulation S offerings                                     -                       500,000
                                                                         ----------------------------     -------------------------

NET CASH PROVIDED BY FINANCING ACTIVITIES                                          2,346,953                     1,021,729
                                                                         ----------------------------     -------------------------

DECREASE IN CASH                                                                    (111,908)                     (129,801)

CASH AT BEGINNING OF PERIOD                                                          332,894                       240,145
                                                                         ----------------------------     -------------------------

CASH AT END OF PERIOD                                                         $       220,986                 $     110,344
                                                                         ============================     =========================

SUPPLEMENTAL DISCLOSURES OF CASH FLOW
  INFORMATION:

Cash paid for interest                                                        $       118,818                 $      93,587
Cash paid for income taxes                                                                  -                           400
Share certificate cancelled (Note 8)                                                  250,000                             -
Debt issuance cost attributable to warrants to placement agent                        426,000                             -
Convertible debt discount associated with warrants to investors                       426,000                             -

</TABLE>



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


<PAGE>


                           DYNATEC INTERNATIONAL, INC.
                     Notes to Condensed Financial Statements
                 For the Six Months Ended June 30, 1998 and 1997


  NOTE 1 -        BASIS OF PRESENTATION

                    The accompanying  unaudited,  condensed financial statements
                    have been prepared in accordance  with the  instructions  to
                    Form 10-QSB,  and therefore,  do not include all information
                    and footnotes  necessary for a complete  presentation of the
                    results of  operations,  the  financial  position,  and cash
                    flows,  in conformity  with  generally  accepted  accounting
                    principles.  This  report on Form  10-QSB for the six months
                    ended June 30, 1998 should be read in  conjunction  with the
                    Company's  annual  report on form  10-KSB for the year ended
                    December 31, 1997.

                    The accompanying  unaudited condensed consolidated financial
                    balance  sheets,  statements  of  operations  and cash flows
                    reflect  all normal  recurring  adjustments  which  are,  in
                    management's  opinion,  necessary for a fair presentation of
                    the Company's financial position,  results of operation, and
                    cash flows. The results of operations for the interim period
                    ended June 30, 1998 are not  necessarily  indicative  of the
                    results to be expected for the full year.


  NOTE 2 - RESTATEMENT OF QUARTERLY FINANCIAL INFORMATION

                    In  March  1998,   the  Company   received   $580,000  as  a
                    nonrefundable  payment under an agreement with a third party
                    pursuant  to which the  third  party  acquired  nonexclusive
                    rights  to  market   certain  of  the   Company's   products
                    internationally.  The cash paid to the Company was  obtained
                    from the sale of the  Company's  common  stock by such third
                    party.  The Company is  therefore  of the  opinion  that the
                    proceeds of such  transaction  were not  attributable to the
                    culmination  of  an  earnings  process.  Consequently,  such
                    proceeds have been  accounted  for as a capital  addition in
                    the accompanying consolidated financial statements.

     The  following  table  outlines the  revisions to the  previously  reported
condensed consolidated financial statements:
<TABLE>
<CAPTION>

                                                                                          Six Months Ended
                                                                                           June 30, 1998
                                                                       ---------------------------------------------------------
                                                                               As Restated            As Previously Reported
                                                                        -------------------------    --------------------------
                  <S>                                                     <C>                          <C>       
                  Product revenue...............................               $7,783,758                   $8,363,758

                  Gross profit..................................                2,756,409                    3,336,409 

                  Operating gain................................                  335,613                      915,613

                  Income (loss) from operations.................                 (576,767)                       3,233

                  Net income....................................                 (576,767)                       3,233

                  Basic net income (loss) per share.............                   (0.21)                        0.00

                  Diluted net income (loss) per share...........                   (0.21)                        0.00

</TABLE>

<PAGE>



  NOTE 2 - RESTATEMENT OF QUARTERLY FINANCIAL INFORMATION (Continued)
<TABLE>
<CAPTION>


                                                                                            Six Months Ended
                                                                                              June 30, 1998
                                                                                  ------------------------------------------  
                                                                                  As Restated       As Previously Reported
                                                                                  --------------      ---------------------- 
                                                                                                 (Unaudited)
                  <S>                                                              <C>                      <C>        
                  Additional paid-in capital............................          $ 7,279,774              $ 6,699,774

                  Accumulated deficit...................................           (1,957,096)              (1,377,096) 

</TABLE>


  NOTE 3  -       INVENTORIES

                    Effective  January 31, 1998, the Company  changed its method
                    of determining the cost of inventory from last-in, first-out
                    (LIFO) to  first-in,  first-out  (FIFO).  Historically,  the
                    difference between the LIFO and current costs of inventories
                    has been immaterial.

                    Inventories,  consisting principally of telephone accessory,
                    hardware/houseware, flashlights, telecommunication headsets,
                    and  other  miscellaneous   products  sold  to  mass  market
                    merchandisers  as of June 30, 1998 and December 31, 1997 are
                    summarized as follows:
<TABLE>
<CAPTION>

                                         June 30                  December 31
                                          1998                       1997       
                                      ------------              ------------
                 <S>                 <C>                        <C>        
                  Raw                $ 1,382,766                $   831,483
                  Finished             2,851,385                  1,690,666
                                      ------------              -------------
                                     $ 4,234,151                $  2,522,149
                                      ===========                ============
</TABLE>


NOTE 4 -   NET EARNINGS PER SHARE

                    On December 31, 1997, the Company  adopted the provisions of
                    FAS No.  128,  Earnings  Per  Share.  FAS 128  requires  the
                    presentation  of both basic and diluted  earnings  per share
                    (EPS). Basic EPS is the amount of net income or loss divided
                    by the  weighted  average  number of shares of common  stock
                    outstanding. Diluted EPS is the amount of income or loss for
                    the period divided by the weighted  average number of shares
                    plus all potentially dilutive common shares.



<PAGE>



NOTE 4 -   NET EARNINGS PER SHARE (Continued)

                    In calculating  EPS, the earnings were the same for both the
                    basic and diluted  calculation.  The effect of common  stock
                    options  is not  included  in the 1997  calculation  as such
                    options would be anti-dilutive. A reconciliation between the
                    basic  and   diluted   weighted-average   number  of  shares
                    outstanding  as of June 30, 1998 and 1997 is  summarized  as
                    follows:
<TABLE>
<CAPTION>

                                                                                 1998                        1997
                                                                       ----------------------------     -----------------
                                                                          (Restated-see Note  2)
      <S>                                                               <C>                              <C>      
      Basic weighted-average number of common shares                           2,785,241                   2,160,913
      Weighted-average number of shares of potential common stock                672,499                     150,336
                                                                        ============================     =================
                 Diluted weighted-average number of shares                     3,457,740                   2,311,249
                                                                        ============================     =================
</TABLE>

NOTE 5 -   YEAR 2000

                  During  1997,  the  Company  developed a plan to deal with the
                  Year 2000 problem and began converting its computer systems to
                  be Year 2000 compliant.  During the fourth quarter of 1997 and
                  the first quarter of 1998,  the Company began  converting to a
                  new  accounting  and  materials   resource  planning  software
                  program.  The Year 2000  problem is the result of the computer
                  programs  being  written  using two digits rather than four to
                  define the applicable year. The Company is capitalizing  costs
                  associated  with the new software as the new software is being
                  implemented   to  provide   better   inventory   tracking  and
                  accounting  controls.  All  other  system  changes  are  being
                  expensed as incurred. The Company does not anticipate any year
                  2000 compliance problems.

  NOTE 6 - NEW ACCOUNTING PRONOUNCEMENTS

                  The Company  adopted  Financial  Accounting  Standards No. 130
                  (SFAS 130), Reporting Comprehensive Income,  effective January
                  1, 1998.  SFAS 130  establishes  standards  for  reporting and
                  displaying   comprehensive  earnings  and  its  components  in
                  financial statements. As of March 31, 1998, the Company has no
                  items to report as components of comprehensive income.



<PAGE>



NOTE 7  -         INCOME TAXES

                  The Company has net operating  loss  carryforwards  from prior
                  years which will exceed the income generated for the first two
                  quarters  of 1998.  The  deferred  tax asset  related to these
                  carryforwards was fully reserved for as of December 31, 1997.

NOTE 8 -          STOCKHOLDERS' EQUITY

                  As of June 30, 1998,  $940,000 in funds,  which is included in
                  accounts  payable-other in the accompanying  condensed balance
                  sheet, has been received in anticipation of future  Regulation
                  S common stock offerings as approved by the Board of Directors
                  in March  1997.  The terms  and  agreements  for  these  stock
                  offerings are still under  negotiation.  Regulation S stock is
                  typically  sold at a  significant  discount  from market value
                  because of its restricted nature.

                  On June 16, 1998, Canaccord Capital Corporation ("Canaccord"),
                  a Canadian broker/dealer,  filed an action against the Company
                  in the U.S. District Court in Salt Lake City, Utah. The action
                  seeks an order  compelling  the issuance of 125,000  shares of
                  Dynatec  stock.  Canaccord  and the  Company  agree  that  the
                  Company,  or its transfer agent,  had erroneously  over-issued
                  shares of stock to Canaccord in early 1997. In September 1997,
                  Canaccord   tendered   certificates   for   other   shares  in
                  acknowledgment of a separate over-issuance.  Management of the
                  Company  believed that an additional  125,000  shares had been
                  over  issued.   The  disputed   certificate  was  subsequently
                  returned  to  the  transfer  agent  and  cancelled  under  the
                  direction  of the  Board of  Directors  of the  Company.  This
                  action was taken by the Company  based upon the  understanding
                  of  management  that the entity  believed by the Company to be
                  holding the  beneficial  interest in the  certificate  had not
                  paid for the  shares,  and was not a holder in due course or a
                  "protected  person" under applicable  Uniform  Commercial Code
                  provisions.  On August 3,  1998,  the Court  entered  an order
                  granting the preliminary  injunction in favor of Canaccord and
                  compelling the issuance of a stock  certificate to Canaccord's
                  designee for the disputed  125,000 shares of stock.  If one of
                  the  other  entities  now  named  in  the  litigation   should
                  subsequently  establish  a right to the  issuance  of  125,000
                  shares of the stock of the Company, Dynatec may be required to
                  issue additional shares. Dynatec intends to continue to pursue
                  its  claim  for  damages  and   declaratory   relief  in  this
                  litigation.




<PAGE>


NOTE 9 - STOCK OPTIONS

     A summary  of stock  options is as  follows  for the period  ended June 30,
1998:
<TABLE>
<CAPTION>

                      FIXED OPTIONS:                                          Shares
                                                                          (Restated-see
                                                                             Note 2)            Exercise
                                                                             (000's)             Price
                                                                          ---------------     -------------
                     <S>                                                   <C>               <C>  
                      Outstanding at December 31, 1997                         934               $2.50
                      Exercised                                                (12)              $2.50
                                                                          ===============
                      Outstanding at June 30, 1998                             922              Various
                                                                          ===============
                      Options exercisable at June 30, 1998                     184               $2.50
                                                                          ===============
                      Weighted average fair value of
                        options granted during first quarter...               $0.00

                      Weighted average remaining
                         contractual life for exercisable
                         options at June 30, 1998                           3.55 years

</TABLE>
<TABLE>
<CAPTION>


                      VARIABLE  OPTIONS:                                      Shares
                                                                          (Restated-see
                                                                             Note 2)            Exercise
                                                                             (000's)             Price
                                                                       ---------------       -------------
                      <S>                                              <C>               <C>  
                      Outstanding at December 31, 1997                         945               $2.50
                                                                       ---------------
                      Outstanding at June 30, 1998                             945              Various
                                                                       ===============
                      Weighted average fair value of
                        options granted during first quarter...               $0.00

</TABLE>


NOTE 10 -         CONVERTIBLE DEBENTURES

                  On May 22, 1998,  the Company  closed a  transaction  that has
                  provided net capital proceeds of $1,335,000.  These funds have
                  been  raised  pursuant  to  the  sale  by  the  Company  of  a
                  Convertible  Debenture in the face amount of  $1,500,000.  The
                  debentures are convertible into common stock of the Company at
                  the lessor of: (i) seventy  five percent of the average of the
                  three lowest closing bid prices of the Common Stock during the
                  ten day trading  period  immediately  preceding the conversion
                  date or (ii) one  hundred  percent of the closing bid price on
                  the trading day immediately  preceding the closing date of the
                  agreement. The transaction has been accomplished pursuant to a
                  Convertible  Debenture  and  Private  Equity  Line  of  Credit
                  Agreement


<PAGE>



NOTE 10 -         CONVERTIBLE DEBENTURES (Continued)

                 (the  "Credit  Agreement")  between  the Company and a group of
                 five investors which have not previously  been  shareholders of
                 the Company. In addition, the Company can use a "put" mechanism
                 to periodically draw down up to $10,000,000. Under the terms of
                 the Credit Agreement,  a minimum of $1,000,000 must be drawn in
                 increments  of not less than  $50,000  in  exchange  for common
                 stock of the Company issued at 80 percent of the average of the
                 three  lowest bid prices  during the six day  valuation  period
                 consisting  of three  days prior to the put and ending two days
                 after the put date. The put mechanism  cannot be utilized until
                 after the effective date of the registration  statement for the
                 underlying stock of the Credit  Agreement.  Additionally,  upon
                 registration  of the  underlying  shares which may be purchased
                 pursuant  to  the  convertible  debentures,  the  Company  will
                 receive an additional $500,000 of gross sales proceeds.

                  In  connection  with the Credit  Agreement,  the investors and
                  placement agent were issued warrants. These warrants have been
                  issued as Series A and Series B as follows:
<TABLE>
<CAPTION>

                                                                                         Placement          Exercise
                                                                      Investors            Agent              Price
                                                                    --------------     ---------------     ------------
                  <S>                                               <C>                <C>                 <C>  
                  Series A Warrants                                    150,000            150,000             $6.50
                  Series B Warrants                                    150,000            300,000             $7.15

</TABLE>

                  The Company is to issue an additional 50,000 Series A warrants
                  each to both  the  placement  agent  and  the  investors  upon
                  receipt of the  additional  $500,000 of gross sales  proceeds.
                  The  market  value  for the  Series A  warrants  issued to the
                  investors  has been written off as a one-time,  non-cash  debt
                  issuance  cost of $426,000  as the  warrants  are  immediately
                  exercisable.  The market value of the Series A warrants issued
                  to the  placement  agent  have  been  capitalized  and will be
                  written  off by the  Company  over  the 36  month  life of the
                  debentures.  Although  these debt issuance  costs are non-cash
                  items,  current GAAP requires  disclosure for the market value
                  of  warrants  issued  along with  convertible  debentures.  In
                  addition,  because  the  debentures  are  convertible  at a 25
                  percent discount from the market value, an additional $500,000
                  (the intrinsic value of the beneficial  conversion premium) of
                  the proceeds received were established as a contr-debt account
                  and  $166,667  of this  premium  was written off as a non-cash
                  expense  for  the  second  quarter  of  1998.  These  non-cash
                  amortization  and  write-off  of the market  value of warrants
                  issued  are  included  with  interest  expense  in the  income
                  statement.   Upon  the  effective  date  of  the  registration
                  statement,  the  market  value of the  warrants  issued to the
                  investors  in  connection  with the  $500,000  of  convertible
                  debentures  (estimated  to  be  an  additional  third  quarter
                  non-cash  expense of $121,500)  and the  remaining  beneficial
                  conversion  premium  will be written  off as a third  quarter,
                  non-cash  item.  The Series B warrants  which have been issued
                  have no current impact to the Company financial statements, as
                  they were issued in connection with the equity line of credit.



<PAGE>


NOTE 11 -         OTHER

                  The Board of Directors of the Company has unanimously approved
                  an  investigation  of the foregoing  transactions and matters,
                  the Company's  relationship  and practices  with the Company's
                  transfer agent,  certain related party  transactions and other
                  issues which were the subject of a recent preliminary  inquiry
                  conducted by certain  members of the Board of  Directors,  the
                  actions  of  officers  of the  Company  with  regard  to  such
                  matters,  and other related and unrelated corporate activities
                  to assure that proper  safeguards and policies are in place or
                  are  implemented  which will assist the Board of  Directors in
                  monitoring the business  activities of the Company.  The Board
                  is to be  assisted  in  this  review  by  independent  outside
                  counsel who will coordinate his efforts with current corporate
                  counsel.