<PAGE>

                     SECURITIES AND EXCHANGE COMMISSION                       
                           Washington, D.C. 20549 

                                 FORM 10-QSB

            [X] Quarterly Report Pursuant To Section 13 or 15(d)
                   of the Securities Exchange Act of 1934

                           For Quarter Ended:  March 31, 1997
                        Commission file number:  0-12806 
     

                         Dynatec International, Inc.
                         ---------------------------
       (Exact name of small business issuer as specified in its charter)

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

     1820 South 3594 West
     Salt Lake City, UT                           84104
     ------------------                           --------
     (Address of principal                        (Zip Code)
     executive offices)

Registrant's telephone 
number, including area code: (801) 973-9500
                             --------------

     Indicate by check mark whether the issuer (1) has 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   
                          ---   --

       The number of shares outstanding of the issuer's common stock as of 
April 30, 1997 were 2,224,104. The aggregate market value of voting stock 
held by non affiliates of the Company at April 30, 1997 was $10,499,406.

Transitional small business disclosure format. Yes   No X 
                                                  --   ---

<PAGE>
                        PART 1. - FINANCIAL INFORMATION                       

ITEM 1-FINANCIAL STATEMENTS 
     Reference is made to the attached Unaudited Consolidated Financial
Statements for the first quarter ended March 31, 1997, and results of calendar
year 1996.  These Financial Statements are hereby incorporated by reference. The
information for the Company's first quarter ended March 31, 1997 and 1996 is
unaudited, but in the opinion of management reflects all adjustments which are
necessary for a fair presentation of operations for such periods. 
















                                      2

<PAGE>

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

RESULTS OF OPERATIONS 
     Total revenues for the first quarter of calendar year 1997 ending on March
31, 1997 were $2,554,618. Total revenues for the first quarter of calendar year
1996 ending on March 31, 1996 were $2,164,791. This represents a $389,827 (18%)
increase in revenues for the quarter ended March 31, 1997 compared to March 31,
1996. The telephone accessories products experienced a overall increase in
sales. Specifically, the Softalk product experienced an increase of $11,750
(3%) over the same period for the prior year while the Mini-Softalk had an
increase of $13,147 (14%). The Twisstop product experienced an increase of
$57,910 (16%) as a result of increased sales to volume wholesalers. Sales to
wholesalers are expected to rise in fiscal year 1997. TwistCord sales decreased
by $3,853 (6%). The Universal Softalk registered a sales increase of $2,831
(3%) for the three month period ending March 31, 1997 over the same period for
the prior calendar year. The Universal Softalk is currently marketed to AT&T on
an exclusive basis. The Softalk II product experienced sales increases of
$186,233 (69%). The Company introduced the Value Pack product in early 1996. 
The Value Pack includes a Softalk II, TwistCord and Twisstop in a retail
package. The Value Pack experienced sales of $4,486 in the first quarter of
1997, a decrease of $1,185 (21%) over the same period of the prior calendar
year. Hardware/Housewares products experienced an overall increase in sales of
$139,567 over the same period for the prior year principally caused by a
increase in Sofstop sales of $20,695 (37%), an increase in Expand-A-Shelf sales
of $35,209 (10%), and an increase in Mini Expand-A-Shelf sales of $27,083 (88%).
Several new home organization products were being marketed in late 1996 and
early 1997 including the Medicine Cabinet Organizer, Drawer Organizer, Freedom
Hanger, and Tote Bags. These items experienced sales of $119,796 collectively
in the first quarter of calendar year 1997. Various other hardware/housewares
products experienced sales decreases including; Cover-Up $32,374 (32%), Hide It
$926 (45%), Wedge $776 (2%), Mega Shelf $9,620 (7%), and the Expandable Book
Shelf $19,520 (59%). The miscellaneous product lines decreased by $100,078 as
the Company discontinued its sales efforts with Fuji Film, and contract
packaging for AT&T. The Company made the decision in 1996 to discontinue its
marketing efforts with the Fuji Novel line of dry cell batteries. Sales of the
batteries have decreased by $44,628 over the three month period of the previous
year. The management of the Company believes that a great opportunity exists
with the home organization products. This is an expanding market that the
Company will be concentrating efforts on. During late 1996, the Company entered
into the flashlight production and marketing business with a high end line of
flashlight products. The Company has been marketing several items under the
Nordic Lites name and operating a plant in Texas. Management has also begun
aggressively pursuing the production of lights in the far east and expects to
have product from such sources within the next calendar quarter. Such products
will allow for higher margins and product profitability. At this time
management is unsure of the future of the Texas facility. Sales during the
first quarter of calendar year 1997 of flashlight product amounted to $128,143.

     The Company experienced a net loss of $511,864 in the first quarter of

                                      3

<PAGE>

calendar year 1997. For the first quarter of the prior year the company
experienced a net loss of $112,316. The decrease in profitability is largely
due to the decline of margins in the telephone accessory products and
substantial increase in labor and the cost of plastics. The Company also had a
significant increase in selling costs, in particular; advertising, freight and
promotions. General and administrative costs have also increased. The Company
has also been involved in significant research and development costs for a new
line of wired and wireless headsets, a new telecommunications product, and the
development of an overseas supplier of flashlight products. Management believes
that such expenses will result in a line of new products within the next
calendar quarter.

LIQUIDITY AND CAPITAL RESOURCES
     The ratio of current assets to current liabilities is .96 at March 31, 1997
as compared to .96 as of December 31, 1996 calendar year-end 1996 audit date. 
The current assets at March 31, 1997 were $3,271,517 compared to $2,967,434 at
December 31, 1996. The current liabilities of the company at March 31, 1997
were $3,417,992 compared to $3,088,908 at December 31, 1996.

     For the three month period ending March 31, 1997 the Company experienced a
decrease in their cash position of $178,657. For the three month period ending
March 31, 1996 the company experienced an $18,817 increase in cash. 

     The cash decrease for the three month period ending March 31, 1997 was a
result of cash being used by operating activities in excess of cash inflow from
operations of $612,622, cash being used to pay down net borrowings $39,212, and
cash being generated by investing activities $473,177.

     At March 31, 1997, the stockholders' equity was $2,632,418. At December
31, 1996 the stockholders' equity was $2,644,282.  

                            PART II-OTHER INFORMATION                         
ITEM 3.   EXHIBITS, FINANCIAL STATEMENTS, SCHEDULES AND REPORTS ON FORM 8-K

(a)  Exhibit List.
     Exhibit 27-SDS

(b)  Reports on Form 8-K.
     None

                                      4

<PAGE>

                                 SIGNATURES                             

     Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized on the ___th day of May, 1997.    

                        DYNATEC INTERNATIONAL, INC. 



                  /s/ Donald M. Wood 
                  ----------------------------------------
                  Donald M. Wood
                  President-Chief Executive Officer





                  /s/ David J. White 
                  ----------------------------------------
                  David J. White, 
                  Vice-President - Chief Financial Officer
                  (Principal Financial and Accounting Officer) 


                                      5
<PAGE>

                          DYNATEC INTERNATIONAL, INC.                     
                                        
                  UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS 

                           March 31, 1997 and 1996










                                      1

<PAGE>

                                C O N T E N T S 

     
                                                                            Page

UNAUDITED CONSOLIDATED BALANCE SHEETS. . . . . . . . . . . . . . . . . . . .3

UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS. . . . . . . . . . . . . . .5  

UNAUDITED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY . . . .6

UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS. . . . . . . . . . . . . . .7

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS . . . . . . . . . . . .9

UNAUDITED CONSOLIDATED COSTS OF SALES (SCHEDULE 1) . . . . . . . . . . . . 20

UNAUDITED CONSOLIDATED SELLING EXPENSES (SCHEDULE 2) . . . . . . . . . . . 21

UNAUDITED CONSOLIDATED GENERAL & ADMINISTRATIVE EXPENSES (SCHEDULE 3). . . 22

                                      2

<PAGE>

The information for the Company's first quarter ended March 31, 1997 is
unaudited, but in the opinion of management reflects all adjustments which are
necessary for a fair presentation of the results of operations for such period. 
Results for interim periods should not be considered as indicative of results
for a full year. 


                          DYNATEC INTERNATIONAL, INC.                        
                     UNAUDITED CONSOLIDATED BALANCE SHEETS
                      March 31, 1997 and December 31, 1996

<TABLE>
<CAPTION>
                                                                                           Audited
                                                                                           Calendar
                                                                      Unaudited            Year-End
    ASSETS                                                             March 31           December 31
                                                                         1997                1996
                                                                    -------------        -----------
<S>                                                                 <C>                  <C>
CURRENT ASSETS 
 Cash                                                                   $  61,488         $  240,145
Receivables
 Trade accounts-net                                                     1,511,895          1,125,750
 Employee advances                                                            -                  -     
 Related parties (Note 12)                                                 84,543            145,419
 Inventory (Note 2)                                                     1,407,947          1,256,440
 Prepaid expenses                                                         149,716            133,997
 Prepaid Income Tax                                                        46,160             46,160
 Trade Show Deposits                                                        9,117             15,617
 Unamortized debt issue costs                                                 651              3,906
                                                                        ---------         ----------
                     TOTAL CURRENT ASSETS                               3,271,517          2,967,434

PROPERTY AND EQUIPMENT (Note 3)                                         4,651,027          4,673,999

OTHER ASSETS
 Deposits                                                                  52,645             22,355
 Deferred tax asset                                                        69,960             69,960
 Note receivable-related party (Note 12)                                  150,000            150,000
 License, patents and agreements (Note 4)                                 316,026            332,092
                                                                       ----------        -----------
                      TOTAL OTHER ASSETS                                  588,631            574,407
                                                                      -----------        -----------

                      TOTAL ASSETS                                    $ 8,511,175        $ 8,215,840
                                                                      -----------        -----------
                                                                      -----------        -----------
</TABLE>

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

                                      3

<PAGE>

                          DYNATEC INTERNATIONAL, INC.                         
                UNAUDITED CONSOLIDATED BALANCE SHEETS (CONTINUED)
                      March 31, 1997 and December 31, 1996 

<TABLE>
<CAPTION>
                                                                                           Audited
                                                                                           Calendar
                                                                      Unaudited           Year-End   
  LIABILITIES AND EQUITY                                               March 31          December 31
                                                                         1997               1996
                                                                    -------------        -----------
<S>                                                                 <C>                  <C>
CURRENT LIABILITIES 
 Short-term notes payable (Note 5)                                  $     850,507       $  1,222,722
 Current portion of long-term debt (Note 6)                             1,149,718            795,415
 Current portion of capital lease obligations  (Note 7)                    22,948             22,363
 Accounts payable                                                         925,326            523,668
 Accrued expenses                                                         426,827            489,552
 Accrued royalties - related parties (Note 12)                             42,066             34,688
 Income taxes - current                                                       600                500
                                                                         --------           --------
              TOTAL CURRENT LIABILITIES                                 3,417,992          3,088,908

LONG-TERM LIABILITIES 
 Long-term debt (Note 6)                                                2,378,560          2,393,052
 Capital lease obligations (Note 7)                                        68,803             76,196
 Deferred income taxes                                                     13,402             13,402
                                                                       ----------         ----------
              TOTAL LIABILITIES                                         5,878,757          5,571,558

STOCKHOLDERS' EQUITY
 Common stock, $.01 par value (Note 10)
 Authorized  100,000,000 shares 
 Issued      2,224,104 shares at March 31, 1997 
             1,974,104 shares at December 31, 1996                         22,241             19,741
 Additional paid-in capital                                             4,093,199          3,595,699
 Retained earnings                                                     (1,483,022)          (971,158)
                                                                   ---------------     --------------
              TOTAL STOCKHOLDERS' EQUITY                                2,632,418          2,644,282 
                                                                     -------------       ------------

TOTAL LIABILITIES & STOCKHOLDERS' EQUITY                              $ 8,511,175        $ 8,215,840 
                                                                     -------------       ------------
                                                                     -------------       ------------
</TABLE>

                                      4

<PAGE>

                          DYNATEC INTERNATIONAL, INC.                         
                UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS 
                       For the Three Month Periods Ended 
                             March 31, 1997 and 1996

<TABLE>
<CAPTION>
                                                                    Three Months         Three Months
                                                                    Ended March 31       Ended March 31
                                                                         1997                 1996
                                                                    --------------       --------------
<S>                                                                 <C>                  <C>
SALES                                                                  $ 2,554,618          $ 2,164,791
COST OF SALES (Schedule 1)                                               1,779,783            1,335,753 
                                                                       -----------          -----------

GROSS PROFIT                                                               774,835              829,038 

OPERATING EXPENSES
 Selling expenses (Schedule 2)                                             587,749              472,788 
 Research & Development Expenses                                           136,154                8,754 
 General & Administrative (Schedule 2)                                     457,563              375,591 
                                                                       -----------          -----------
             TOTAL EXPENSES                                              1,181,466              857,133 
                                                                       -----------          -----------

OPERATING INCOME/(LOSS)                                                  (406,631)             (28,095)
                                                                       -----------          -----------

OTHER INCOME/(EXPENSE)
 Interest Income                                                            3,982                 6,684 
 Interest Expense                                                        (103,715)              (41,070)
 Consulting Income                                                            -                  16,667 
 Loss from affiliate                                                          -                 (50,202)
 Bad Debts                                                                 (5,000)              (16,000)
                                                                       -----------          -----------
TOTAL OTHER INCOME/(EXPENSE)                                             (104,733)              (83,921)
                                                                      ------------          ------------

Income/(loss) from
Continuing Operations                                                    (511,364)             (112,016)

INCOME TAX EXPENSE 
 Income tax expense
  (Note 8)                                                                    500                    300
                                                                     -------------          -------------
   NET INCOME/(LOSS)                                                 $   (511,864)          $   (112,316)
                                                                     -------------          -------------
                                                                     -------------          -------------

Earnings/ (loss) per share:
 Continuing Operations                                                       (.23)                  (.08)
                                                                     -------------           ------------
NET EARNINGS/
  (loss) PER SHARE                                                     $     (.23)            $     (.08)
                                                                     -------------           ------------
                                                                     -------------           ------------
</TABLE>

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

                                      5

<PAGE>

                          DYNATEC INTERNATIONAL, INC. 
      UNAUDITED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
            For the Three Month Periods Ended March 31, 1997 and 1996


<TABLE>
<CAPTION>
                                                                  Three month period ending March 31, 1997
                                                                  ----------------------------------------
                                                         Total                       Additional
                                                        Shares         Common         Paid-In        Retained
                                                        Issued         Stock          Capital        Earnings
                                                       --------       -------       -----------    ------------
<S>                                                    <C>            <C>           <C>             <C>
BALANCE DECEMBER 31, 1996                             1,974,104      $ 19,741      $  3,595,699     $ (971,158) 

Shares issued pursuant to
 Regulation S Offshore
 Stock offering                                         250,000         2,500           497,500              -    
Net Income (March 31, 1997)                                 -           -                -            (511,864)

                                                 --------------     ---------     -------------     ------------
                                                 --------------     ---------     -------------     ------------
BALANCE MARCH 31, 1997                                2,224,104     $  22,241      $  4,093,199     $(1,483,022)

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


                                                                  Three month period ending March 31, 1996
                                                                  ----------------------------------------

                                                         Total                       Additional
                                                        Shares         Common         Paid-In        Retained 
                                                        Issued         Stock          Capital        Earnings 
                                                       --------       -------       -----------     ----------
BALANCE DECEMBER 31, 1995                             1,411,829      $ 14,118      $ 2,694,532       $ 73,991 


Shares issued for rights
 & non-compete                                            3,153            32            6,631       (112,319)

Net Income (March 31, 1996)                                -              -                -              -     
                                                      ---------      --------      -----------       --------
                                                      ---------      --------      -----------       --------

BALANCE MARCH 31, 1996                                1,414,982      $ 14,150      $ 2,701,163       $ (38,328)
                                                   ------------     ----------    -------------     -----------
                                                   ------------     ----------    -------------     -----------

</TABLE>
The accompanying notes are an integral part of these financial statements

                                      6

<PAGE>
                          DYNATEC INTERNATIONAL, INC. 
                 UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS
            For The Three Month Periods Ended March 31, 1997 and 1996

                      RECONCILIATION OF NET INCOME TO NET 
                     CASH PROVIDED BY OPERATING ACTIVITIES


                                                March 31              March 31 
                                                  1997                  1996
                                               -----------          ------------

Net Income (loss)                                 (511,864)         $  (112,316)
Adjustments to reconcile
 net (loss) to net cash 
 provided by operating 
 activities: 
  Depreciation                                     110,670               69,709 
  Amortization                                      16,067               25,442 
  Provisions for losses 
   on accounts receivable                          (14,577)              (3,899)
  Change in assets & liabilities: 
    Decrease (increase) in 
     accounts receivable                          (371,568)             274,153 
    Decrease (increase) in
     Employee advances                                 -                  1,105 
    Decrease (increase) in 
     inventory                                    (151,507)             (30,282)
    Decrease (increase) in 
     prepaids                                      (15,719)              33,750 
    Decrease (increase) in
     trade show deposits                             6,500                  -   
    Decrease (increase) in 
     deposits                                      (30,290)             (11,283)
    Decrease (increase) in
     debt issue costs                                3,255                2,344 
    Decrease (increase) in
     other assets                                      -                 (5,534)
    Increase (decrease) in
     royalties payable-
     related                                         7,378               24,260 
    Increase (decrease) in
     accounts payable                              401,658              (54,306)
    Increase (decrease) in 
     accrued expenses                              (62,725)             (95,058)
    Increase (decrease) in 
     income tax payable                                100              (17,950)

     TOTAL ADJUSTMENTS                         $  (100,758)          $  212,451
                                               ------------          ----------

NET CASH PROVIDED 
    (USED) BY OPERATING 
    ACTIVITIES                                 $  (612,622)          $  100,135
                                               ------------          ----------
                                               ------------          ----------

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

                                      7

<PAGE>

                          DYNATEC INTERNATIONAL, INC. 
                 UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS
            For The Three Month Periods Ended March 31, 1997 and 1996


                                                March 31              March 31 
                                                  1997                  1996
                                               -----------          ------------

CASH FLOWS FROM INVESTING 
 ACTIVITIES: 
  Received from related parties                    60,876                13,121 
  Stock issuance for rights
    and non-compete                                   -                   6,664 
  Issuance of stock pursuant
    to Regulation S offering                      500,000                   -   
  Capital expenditures                            (87,699)              (28,852)
  Minority Interest in affiliate                      -                  50,202 
  Construction in Progress                            -                (373,197)
  Advances to affiliate                               -                (149,352)
                                              ------------         -------------
NET CASH PROVIDED (USED) 
 BY INVESTING ACTIVITIES                          473,177              (481,414)

CASH FLOWS FROM FINANCING
 ACTIVITIES: 
  Net borrowings (payments) 
   under line of credit
   agreements                                    (372,215)              100,000 
  Net (payments) borrowings
   under capital lease 
   obligations                                     (6,808)               (4,712)
  Net (payments) borrowings
   on long-term debt                              339,811                 4,111 
  Net short-term (payments)
   borrowings                                        -                      -   
  Net borrowings (payments)
   on construction obligations                       -                  300,697
                                                  --------           ----------
NET CASH (USED) BY 
FINANCING ACTIVITIES                              (39,212)              400,096 

NET INCREASE (DECREASE)
   IN CASH                                        (178,657)              18,817 
  CASH AT BEGINNING OF 
   PERIOD                                          240,145              318,923 

  CASH AT END OF PERIOD                         $   61,488          $   337,740 
                                                ----------          -----------
                                                ----------          -----------

CASH PAID FOR:
   Interest                                         93,587               40,059
   Income taxes                                        400               18,250

NON-CASH INVESTING AND
 FINANCING ACTIVITIES
   Issuance of stock for rights
     and non-compete agreement                         -                  6,664
   Issuance of stock for capital                   500,000                  -   
   Acquisition of property and
     equipment by accounts payable                  87,699               28,852


                                      8

<PAGE>

                           DYNATEC INTERNATIONAL, INC.
              NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS 
                             March 31, 1997 and 1996



NOTE 1 -       SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
               Dynatec International, Inc. (the Company) was incorporated in the
               State of Utah on January 29, 1981.  The Company and its
               subsidiaries are principally engaged in the manufacture, assembly
               and distribution of consumer products consisting primarily of
               telephone accessories, hardware and housewares and other related
               products.

               PRINCIPLES OF CONSOLIDATION
               The consolidated financial statements include the accounts of the
               Company and its wholly-owned subsidiaries,  Softalk, Inc., Arnco
               Marketing, Inc., Softalk Communications, Inc. and Nordic
               Technologies, Inc.  All significant intercompany accounts and
               transactions have been eliminated.

               Softalk Communications, Inc. was incorporated in the State of
               Utah on December 23, 1996 and is engaged in research and
               development of a telephone headset product.  Through March 31,
               1997, this subsidiary has incurred $89,898 of expenditures with
               respect to this product which have been reflected as research and
               development expenses in the accompanying consolidated financial
               statements.  The product is not yet in production and,     
               accordingly, no related sales have occurred.  Softalk, Inc., has
               also been involved in research and development on various
               products.  The total spent on such research and development was
               $46,256.

               Nordic Technologies, Inc. (Nordic) was incorporated in the State
               of Utah on October 25, 1996.  Effective December 1, 1996, Nordic
               and the Company entered into an agreement with unrelated parties
               to acquire certain assets and assume certain related liabilities
               in exchange for 550,000 shares of restricted common stock of the
               Company.  This acquisition has been accounted for using the
               purchase method.  The assets and liabilities were placed into
               Nordic and valued at the estimated market value of the Company's
               common stock which approximated fair market or replacement value
               of the acquired assets, net of the assumed liabilities.  These
               assets are being utilized to manufacture and assemble flashlight
               products.

               CONSOLIDATED FINANCIAL STATEMENT PRESENTATION
               Certain amounts in the consolidated financial statements of prior
               periods have been reclassified to be consistent with the current
               year presentation.

                                      9

<PAGE>

                  DYNATEC INTERNATIONAL, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                             March 31, 1997 and 1996


NOTE 1 -       SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

               CHANGE OF REPORTING PERIOD
               The Company elected to change its year-end from June 30 to
               December 31, first effective for the period ended December 31,
               1995.

               The accompanying consolidated financial statements present the
               results of operations, changes in stockholders' equity and cash
               flows for the three months ended March 31, 1997 and 1996.

               CASH AND CASH EQUIVALENTS
               For purposes of financial statement presentation, the Company
               considers all highly liquid investments with a maturity of three
               months or less, from the date of purchase, to be cash
               equivalents.

               ACCOUNTS RECEIVABLE
               Accounts receivable are reflected net of allowance for doubtful
               accounts in the accompanying consolidated financial statements. 
               These amounts were determined to be $14,423 and $29,000 at March
               31, 1997 and December 31, 1996 respectively.

               INVENTORY
               Inventory is recorded in the Company's subsidiaries Softalk, Inc.
               and Nordic Technologies, Inc. at the lower of cost, (last-in,
               first-out) or market.

               PROPERTY AND EQUIPMENT
               Property and equipment are stated at cost with depreciation
               computed on the straight line method.  Property and equipment are
               depreciated over the following estimated useful lives:
                      Capital Leases                5-7 years
                      Machinery and Equipment       5-10 years
                      Office Equipment              5-7 years
                      Signs                         5-7 years
                      Vehicles                      5 years

               UNAMORTIZED DEBT ISSUE COSTS
               Unamortized debt issue costs represent costs associated with
               borrowings and are amortized using the straight-line method over
               the life of the respective debt issue.

                                      10

<PAGE>

                   DYNATEC INTERNATIONAL, INC AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                             March 31, 1997 and 1996


NOTE 1  -      SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

               INCOME TAXES
               The Company and its subsidiaries file a consolidated Federal
               income tax return. Income taxes are provided for the tax effects
               of transactions reported in the consolidated financial statements
               and consist of taxes currently due plus deferred taxes. Deferred
               taxes are recognized for differences between the basis of assets
               and liabilities for financial statement and income tax purposes.

               The differences relate primarily to depreciable assets and
               intangible assets, which use different methods and lives for
               depreciation and amortization for financial statement and income
               tax purposes, and inventory differences between financial
               statement and income tax reporting. The deferred tax assets and
               liabilities represent the future tax consequences of those
               differences, which will either be taxable or deductible when the
               assets and liabilities are recovered or settled.

               NET INCOME (LOSS) PER SHARE
               Net income (loss) per share is calculated using a weighted
               average of common stock. Stock options issued are not considered
               to be common stock equivalents for purposes of calculating net
               income (loss) per share as they are anti-dilutive.

               CASH FLOWS
               For purposes of reporting cash flows, cash and cash equivalents
               include cash on hand and cash on deposit with banks.

               REVENUE RECOGNITION
               Revenue is recognized on an accrual basis when goods are shipped
               to a customer.

               FORWARD STOCK SPLIT
               On November 12, 1996, the shareholders and board of directors
               authorized the Company to forward split its shares of common
               stock on a 1 1/2 shares for 1 share basis. All references to
               shares outstanding and net income (loss) per share have been
               restated on a retroactive basis to reflect this forward stock
               split.

                                      11

<PAGE>

                   DYNATEC INTERNATIONAL, INC AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                             March 31, 1997 and 1996


NOTE 1  -      SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

               CONCENTRATIONS OF CREDIT RISK
               Financial instruments which potentially subject the Company to
               concentrations of credit risk consist principally of trade
               receivables.  The Company provides credit to its customers in the
               normal course of business.  However, the Company performs ongoing
               credit evaluations of its customers and maintains allowances for
               potential credit losses.  Concentrations of credit risk with
               respect to trade receivables is limited due to the Company's
               large number of customers and their dispersion across many
               geographies.

               The Company places its temporary cash investments with high
               quality financial institutions.  At times such investments may be
               in excess of the FDIC insurance limit.  At December 31, 1996, the
               Company had bank deposits in excess of federally insured limits.

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

NOTE 2  -      INVENTORY 
               Inventory as of March 31, 1997 and December 31, 1996 is
               summarized as follows: 

                                         March 31           December 31
                                           1997                1996       
                                        ----------          -----------
               Raw                     $  771,822           $   583,138
               Finished                   636,125               673,302
                                       -----------          -----------

                                       $1,407,947           $ 1,256,440
                                       -----------          -----------
                                       -----------          -----------

               Dynatec inventories are stated at the lower of cost or market,
               cost being determined using the last-in, first-out (LIFO) method.
          
               The current cost of inventories exceeded the carrying amount by
               approximately $2,000 at March 31, 1997.

                                      12

<PAGE>

                          DYNATEC INTERNATIONAL, INC. 
        NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                             March 31, 1997 and 1996


NOTE 3 -       PROPERTY AND EQUIPMENT 
               Property and equipment as of March 31, 1997 and December 31, 1996
               are detailed in the following summary:

                                         March 31         December 31
                                        ----------        -----------
                                           1997              1996
                                        ----------        -----------
     Equipment                         $ 3,012,189       $  2,977,130 
     Office equipment & furniture          310,582            301,114 
     Signs & Show booths                    21,901             17,198 
     Vehicles                               65,588             65,588 
     Capital leases                         82,357             91,857 
     Land                                  626,153            626,153 
     Building & Improvements             2,214,144          2,214,144
                                        ----------        -----------
                                        $6,332,914       $ 6,293,184

     Less Accumulated Depreciation      (1,681,887)       (1,619,185)
                                      -------------      ------------
     Net Property & Equipment         $  4,651,027      $  4,673,999 
                                      -------------     ------------
                                      -------------     ------------

          Depreciation expense is computed principally on the straight line
          method in amounts sufficient to write off the cost of depreciable
          assets over their estimated useful lives. Depreciation for the three
          months ended March 31, 1997 amounted to $110,670 ($ 69,709 for March
          31, 1996).

          Rental expense charged to operations for the three month periods
          ending March 31, 1997 and 1996 is summarized below: 

                                          03-31-97          03-31-96
                                          --------          --------

          Gross rental expense           $ 19,901           $ 35,165

NOTE 4  -      LICENSE, PATENTS AND AGREEMENTS 
               These agreements represent amounts paid for the rights to
               manufacture, produce, sell and market various products. In March
               1995, the Company purchased the rights and customer list for the
               doorstop product line from All R Prodx, Inc. for $100,000.  In
               addition, a five year non-competition agreement was entered into
               with All R Prodx, Inc. and its shareholder for $150,000.  The
               majority of said costs are associated with agreements for the
               telephone accessory lines.  Such costs are amortized on the
               straight-line method in amounts sufficient to write off the costs
               over their estimated economic  lives.  Most of these rights are
               non-exclusive. Amortization for the three months ended March 31,
               1997 amounted to $16,067  ($25,442 for 1996).

                                      13

<PAGE>

                          DYNATEC INTERNATIONAL, INC. 
        NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                             March 31, 1997 and 1996


NOTE 5  -      SHORT-TERM NOTES PAYABLE
               Short-term notes payable as of March 31, 1997 and December 31,
               1996, are detailed in the following summary: 

               The short-term note payable consists of a revolving line-of-
               credit with a bank up to $1,500,000 bearing interest at a rate
               1.0% over prime, with interest payable monthly.  The note is
               secured by accounts receivable, inventory and equipment and is
               personally guaranteed by the chief executive officer of the
               Company who is also a director.  The note is due April 30, 1997.
               As of March 31, 1997 and December 31, 1996, the outstanding
               balance of this revolving line-of-credit note payable was
               $850,507 and $1,222,722 respectively.

               Under the terms of the aforementioned bank line-of-credit, the
               Company is required to maintain certain financial covenants and
               ratios.  The bank may withdraw the lines-of-credit upon default
               by the Company of various provisions in the line-of-credit
               agreement.  At March 31, 1997 the Company had a ratio of current
               assets to current liabilities of .96 to 1 which is not in
               compliance with the provisions requiring a ration of no less than
               1.5 to 1.

               Pertinent data regarding aggregate short-term borrowings as of
               March 31, 1997 and December 31, 1996 is as follows:

<TABLE>
<CAPTION>
                                                                      March 31 
                                                                        1997              1996
                                                                     ----------        ----------
               <S>                                                   <C>               <C>
               Maximum outstanding                                  $ 1,176,976       $ 1,453,340
               Average outstanding                                      985,019         1,038,877
               Weighted average interest rate                             9.25%             9.27%

</TABLE>

                                      14

<PAGE>

                          DYNATEC INTERNATIONAL, INC. 
        NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                             March 31, 1997 and 1996

NOTE 6  -      LONG-TERM DEBT 
               Long-term notes payable as of March 31, 1997 and December 31,
               1996, are detailed in the following summary: 

<TABLE>
<CAPTION>
                                                                      March 31        December 31
                                                                        1997             1996
                                                                     ----------      -------------
               <S>                                                    <C>             <C>
               Revolving line of credit up to $1,000,000
                payable to a bank, interest at prime
                plus 1.0% until April 30, 1997; 
                secured by machinery & equipment 
                amortized over 60 months.                              989,918             620,552
               Note payable to a company due in
                quarterly installments of $15,908
                with interest at 8.0%  due 
                December 1996.                                             -                15,596 
               Note payable to a company due in 
                a lump sum of $25,000;
                due March 1997 or sooner
                based on product sales; interest at 
                8% unsecured.                                           25,000              25,000 
               Note payable to a company;
                due in annual installments of
                $79,560 plus interest at 7%
                beginning December 31, 1997;
                unsecured.                                             238,680             238,680 
               Note payable to a financial
                institution; due in monthly
                installments of $455 for 
                60 months through November
                2001 with interest at 8.92%;
                secured by a vehicle.                                   20,778              21,958 
               Note payable to an unrelated company;
                due in monthly installments of
                $1,160 plus accrued interest for
                72 months through December 2002
                with interest at 7.9%; secured by
                machinery & equipment.                                  78,920              82,400 
        
</TABLE>

                                      15

<PAGE>

                          DYNATEC INTERNATIONAL, INC. 
        NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                             March 31, 1997 and 1996

NOTE 6  - LONG-TERM DEBT (CONTINUED)

<TABLE>
<CAPTION>
                                                                      March 31        December 31
                                                                        1997             1996
                                                                     ----------      -------------
          <S>                                                        <C>             <C>
          Note payable to a bank; due in 
           monthly installments of $10,234 for
           300 months through November 2021
           with interest at 9.25%; secured by an
           office and warehouse building and 
           related land and personal guarantees
           and real estate of the Company's CEO
           who is also a director.                                    1,191,044        1,194,602 
          Note payable to the small business
           administration; due in monthly
           installments of $8,541 for 240 months
           with interest at 7.31% through August
           2016; secured by an office and warehouse
           building, land and personal guarantees
           of the Company's CEO who is also 
           a director.                                                  983,938          989,679 

          Total long-term debt                                        3,528,278        3,188,467 
          Less: current portion                                      (1,149,718)        (795,415)
                                                                   -------------      -----------

          Total long-term debt excluding 
           current portion                                        $   2,378,560     $   2,393,052
                                                                  -------------     -------------
                                                                  -------------     -------------

           Aggregate maturities are as follows:

          Year ending March 31, 1998                            $357,800
                                1999                             336,273
                                2000                             337,803
                                2001                             264,875
                                2002                             267,095
                                Later                          1,964,432
                                                              ----------

          Total long-term debt                               $ 3,528,278
                                                             -----------
                                                             -----------
</TABLE>

                                      16

<PAGE>

                          DYNATEC INTERNATIONAL, INC. 
        NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                             March 31, 1997 and 1996


NOTE 7  -      LEASES 
               All non-cancelable leases with an initial term greater than one
               year have been categorized as capital or operating leases in
               conformity with the definitions in Financial Accounting Standards
               Board Statement No. 13, "Accounting for Leases".

               The following analysis represents property under capital lease at
               March 31, 1997 and December 31, 1996.

<TABLE>
<CAPTION>
                                                                      March 31        December 31
                                                                        1997              1996
                                                                      ---------       -----------
               <S>                                                    <C>             <C>
               Equipment                                               $ 82,357         $ 91,857 
               Less:  Accumulated depreciation                           (8,687)          (5,211)
                                                                     -----------       ----------
               Net property under capital lease                       $  73,670        $  86,646 
                                                                      ---------        ---------
                                                                      ---------        ---------

               At March 31, 1997, the Company is liable under the terms of non-
               cancelable leases for the following minimum lease commitments:

                                                                      Capital         Operating 
                                                                      Leases            Leases
                                                                   ------------     ------------


               Year Ended March 31:
                      1998                                             30,477             29,561
                      1999                                             30,477             10,330
                      2000                                             22,549              2,287
                      2001                                             14,918                -     
                      2002                                              6,216 
               Later years                                                -                  -     
                                                                   ------------     ------------
               Total minimum lease payments                        $  104,637         $   42,178
                                                                                      ----------
                                                                                      ----------
               Less:  Interest                                        (12,886)
                                                                   -----------
               Present value of net minimum                
                lease payments                                      $  91,751 
               Less:  Current portion                                 (22,948)
                                                                   -----------
               Capital lease obligations
               payable long-term                                   $   68,803 
                                                                   -----------
                                                                   -----------

</TABLE>

                                      17

<PAGE>

                           DYNATEC INTERNATIONAL, INC.
        NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                             March 31, 1997 and 1996


NOTE 8  -      INCOME TAX EXPENSE 
               The provisions for taxes on earnings from continuing operations
               consisted of the following: 

<TABLE>
<CAPTION>
                                                              03-31-97        03-31-96
                                                              --------        --------
               <S>                                            <C>             <C>
               Current
                 Federal                                      $   -           $   -   
                 State                                             500             300
                                                              --------        --------
                                                                   500             300
                                                              --------        --------
                                                              --------        --------

</TABLE>

NOTE 9 -       MAJOR CUSTOMERS
               Sales to major customers for the three months ended March 31,
               1997 are summarized as follows:

                                                              Percent of
                                              Sales          Company Wide
               Customer                       Dollars          Revenues
               --------                       -------          --------

               United Stationers              316,287             12%
          

NOTE 10 -      COMMON STOCK
               During the first quarter of calendar year 1997, the Company
               approved a regulation S offering of its company stock.  The stock
               was made available to foreign off-shore investors at $2.00 per
               share.  During the first quarter the Company sold 250,000 shares
               at $2.00 per share.

NOTE 11 -      STOCK OPTION PLAN
               In 1996 and 1992, the Company stockholders approved Incentive
               Stock Options Plans for the benefit of the officers and employees
               of the Company and its subsidiaries.  Options to issue a total of
               117,000 shares of the Company's common stock were authorized,
               granted and exercised pursuant to these plans prior to December
               31, 1995 at prices ranging from $1.00 to $1.38 per share, taking
               into account all reverse and forward splits of the Company's
               common stock.  In November 1996, the stockholders of the Company
               approved an additional Incentive Stock Option Plan for the
               benefit of the officers and employees of the Company and its
               subsidiaries.

               The November 12, 1996 plan authorizes the officers and directors
               of the Company to grant for a period of up to 10 years, options
               to issue 300,000 shares of the Company's common stock, taking
               into consideration the 1  1/2 for 1 stock split, at a price equal
               to market value as of the date the option is granted.  Options
               granted are for five years and are exercisable upon issuance.  As
               of December 31, 1996, 104,000 options have been granted pursuant
               to this plan.

                                      18

<PAGE>

                           DYNATEC INTERNATIONAL, INC.
        NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                             March 31, 1997 and 1996


NOTE 12 -      RELATED PARTY TRANSACTIONS
               The Company's subsidiary, Softalk, Inc. maintains a royalty
               agreement for patent and trade-mark rights on telephone
               accessories from WAC Research, a Utah corporation.  Don Wood, CEO
               and director of the Company is the beneficial owner of one-half
               of WAC Research.  Prepaid royalties owed to the Company amounted
               to $55,882 at March 31, 1997.

               During the first three months of calendar year 1995 the Company
               paid the personal credit card bills for a member of the Board of
               Directors.  The amount is generally paid back to the Company the
               next month.  At March 31, 1997 the amount owed to the company was
               $1,386.

               During 1995, the Company sold all rights and interest in various
               products to WAC Research for $150,000 in the form of a demand
               note bearing 8% interest.  The entire balance of the note along
               with accrued interest of $1,967 remains outstanding at March 31,
               1997.

               As part of the transaction, inventory was sold at cost for
               $38,441 at June 30, 1995.  The outstanding receivable due from
               WAC Research at March 31, 1997 is $5,570.

               During the first quarter of 1997, Mr. Wood voluntarily and
               retroactively reduced his annual compensation by $100,000.  The
               receivable due at March 31, 1997 was $19,737.

NOTE 13 -      CONTINGENCIES
               The Company known as P.I.E. Nationwide, Inc. filed a Chapter 7
               bankruptcy petition prior to June 1992.  On June 19, 1992 the
               trustee of the estate of Olympia Holding Corporation formerly
               known as P.I.E. Nationwide, Inc. filed suit in the United States
               Bankruptcy Court Middle District of Florida, Jacksonville
               Division against the Company.  The plaintiff claims that P.I.E.
               improperly undercharged the Company for freight and therefore,
               claims the Company owes P.I.E. approximately $4,500.  The Company
               is representing itself and expects to prevail.

NOTE 14 -      NON-QUALIFIED STOCK OPTIONS
               The board of directors of the Company authorized during 1996 the
               granting of stock options which are tied to the profitability of
               the Company and based upon minimum years of employment.  A total
               of 840,000 shares at a strike price of $1.25 per share were
               authorized.  Employment must continue through the year 2001, the
               Company must be profitable three out of the four years commencing
               January 1, 1998.

               The board of directors also authorized 537,500 shares to Muito
               Bem at $1.25 for consideration of all knowledge, trade secrets
               and a continuing non-compete, regarding the telephone headset
               product line, as well as personal real estate pledged as
               collateral on Company debts.

               In addition, WAC Research, Inc., is authorized to receive 200,000
               shares at a strike price of $1.25 per share for past forgiveness
               and the reduction of royalties as well as the assumption of
               Company travel liabilities and the purchasing of questionable
               assets from the Company as a financial assistance to the Company.

                                      19

<PAGE>

                  DYNATEC INTERNATIONAL, INC. AND SUBSIDIARIES
                             SUPPLEMENTAL SCHEDULES
               For the Three Months Ended March 31, 1997 and 1996

                                                                      Schedule 1

                      UNAUDITED CONSOLIDATED COST OF SALES

<TABLE>
<CAPTION>
                                                                      March 31        March 31
                                                                        1997            1996   
                                                                      --------        --------
                                                                     (3 months)      (3 months)
<S>                                                                   <C>             <C>
COST OF GOODS MANUFACTURED

     Beginning inventory - raw materials                            $  583,138       $  390,490 
     Raw materials purchased                                         1,252,467          884,820 
     Freight                                                            65,098           61,207 
     Depreciation                                                       87,013           47,069 
     Labor                                                             266,233          137,825 
     Repairs and maintenance                                             4,565            6,994 
     Miscellaneous direct                                               25,295           15,597 
     Engineering, other                                                 28,984               -    
     Less: ending inventory - raw materials                           (771,822)        (379,950)
                                                                      ---------        ---------

        TOTAL COST OF GOODS MANUFACTURED                             1,540,971        1,164,052
                                                                     ---------        ---------
                                                                     ---------        ---------

COST OF FINISHED GOODS

     Beginning inventory -finished goods                               673,302          866,690 
     Purchases                                                         115,628          130,313 
     Amortization                                                       15,942           25,317 
     Less: ending inventory - finished goods                          (636,125)        (907,512)
                                                                      ---------        ---------

        TOTAL COST OF FINISHED GOODS                                   168,747           114,808 
                                                                       -------           -------

ROYALTIES                                                               70,065            56,893 
                                                                       -------           -------

        TOTAL COST OF SALES                                        $ 1,779,783        $ 1,335,753
                                                                   -----------        -----------
                                                                   -----------        -----------

</TABLE>

                                      20

<PAGE>

                  DYNATEC INTERNATIONAL, INC. AND SUBSIDIARIES
                             SUPPLEMENTARY SCHEDULES
               For the Three Months Ended March 31, 1997 and 1996


                     UNAUDITED CONSOLIDATED SELLING EXPENSES

                                                                      Schedule 2

                                         March 31            March 31
                                           1997                1996
                                         --------            --------
                                        (3 Months)          (3 Months)

Advertising                               $ 87,543            $ 34,895
Commissions                                126,128             133,394
Depreciation - selling                       4,590              12,230
Freight                                    102,521              89,236
Miscellaneous                                4,565               1,208
Promotions & Literature                     61,868              41,384
Salaries - sales                           126,947             115,145
Travel and entertainment                    73,587              45,296
                                         ---------           ---------

   TOTAL SELLING EXPENSES                $ 587,749           $ 472,788
                                         ---------           ---------
                                         ---------           ---------

                                      21

<PAGE>

                  DYNATEC INTERNATIONAL, INC. AND SUBSIDIARIES
                             SUPPLEMENTARY SCHEDULES
               For the Three Months Ended March 31, 1997 and 1996


           UNAUDITED CONSOLIDATED GENERAL AND ADMINISTRATIVE EXPENSES

                                                                      Schedule 3

                                         March 31              March 31
                                           1997                  1996
                                         --------              --------
                                        (3 months)            (3 months)
Amortization                               $   125               $ 125
Automobile                                      75                  -  
Bank Charges                                 4,128               1,951
Consulting                                  12,690                  -  
Corporate expense                           63,767              46,376
Depreciation - office                       19,067              10,410
Dues and subscriptions                       1,366                 225
Insurance                                   68,097              46,782
Janitorial                                   1,778               1,227
Legal and accounting                        32,776              35,308
Miscellaneous                                2,201               4,308
Office expense                              34,735              17,085
Payroll taxes                               53,459              45,156
Rent                                        19,901              35,165
Repairs and maintenance                      2,455               2,897
Salaries - office                           97,359             100,291
Taxes                                        8,390               2,902
Telephone                                   22,069              12,614
Utilities                                   13,125              12,769
                                         ---------            --------

   TOTAL GENERAL AND 
     ADMINISTRATIVE EXPENSES            $  457,563          $  375,591
                                        ----------          ----------
                                        ----------          ----------

                                      22