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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549


FORM 10-KSB

ANNUAL REPORT UNDER SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934FOR THE FISCAL YEAR ENDED DECEMBER 31, 2002

COMMISSION FILE NUMBER
0-25124

SPANTEL COMMUNICATIONS INC.

A Florida Corporation
(Name of small business issuer in its charter)

1061 North Venetian Drive
Miami, Florida

Telephone Number (305) 586-3937

Securities registered under Section 12(g) of the Exchange Act: Common Stock (no
par value).

CHECK WHETHER THE ISSUER (1) FILED ALL REPORTS REQUIRED TO BE FILED BY SECTION
13 OR 15(D) OF THE EXCHANGE ACT DURING THE PAST 12 MONTHS (OR FOR SUCH SHORTER
PERIOD THAT THE REGISTRANT WAS REQUIRED TO FILE SUCH REPORTS), AND (2) HAS BEEN
SUBJECT TO SUCH FILING REQUIREMENTS FOR THE PAST 90 DAYS. YES
[X] NO [   ]

CHECK IF THERE IS NO DISCLOSURE OF DELINQUENT FILERS IN RESPONSE TO ITEM 405 OF
REGULATION S-B CONTAINED IN THIS FORM, AND NO DISCLOSURE WILL BE CONTAINED, TO
THE BEST OF REGISTRANTS KNOWLEDGE, IN DEFINITIVE PROXY OR INFORMATION STATEMENT
INCORPORATED BY REFERENCE IN PART III OF THIS FORM 10-KSB OR ANY AMENDMENT TO
THIS FORM 10-KSB. [   ]

STATE ISSUERS REVENUES FOR ITS MOST RECENT FISCAL YEAR: $11,496,723
AGGREGATE MARKET VALUE OF THE VOTING STOCK HELD BY NON-AFFILIATES AS OF
DECEMBER 31, 2002: $3,383,569



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AS OF DECEMBER 31, 2002, THERE ARE 21,858,746 SHARES OF COMMON STOCK
OUTSTANDING. THE ISSUER HAS NO OTHER CLASSES OF STOCK OUTSTANDING.

2002 ANNUAL REPORT ON FORM 10-KSB





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TABLE OF CONTENTS



|                  |                                                                                                                             |  |  |  |  |  |  | 
|----------------- | --------------------------------------------------------------------------------------------------------------------------- |  |  |  |  |  |  | 
|PART I           
|                  | ITEM 1. DESCRIPTION OF BUSINESS                                                                                            
|                  | ITEM 2. DESCRIPTION OF PROPERTY                                                                                            
|                  | ITEM 3. LEGAL PROCEEDINGS                                                                                                  
|                  | ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS                                                                
|PART II          
|                  | ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS                                                           
|                  | ITEM 6. MANAGEMENTS DISCUSSION AND ANALYSIS OR PLAN OF OPERATION                                                          
|                  | ITEM 7. FINANCIAL STATEMENTS                                                                                               
|                  | ITEM 8. CHANGES AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURES                                 
|PART III         
|                  | ITEM 9. DIRECTORS AND EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS; COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT.
|                  | ITEM 10. EXECUTIVE COMPENSATION                                                                                            
|                  | ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT                                                    
|                  | ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS                                                                    
|                  | ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K                                                                                  
|                  | ITEM 14. CONTROLS AND PROCEDURES                                                                                           
|CEO CERTIFICATION
|CFO CERTIFICATION

TABLE OF CONTENTS

|         |  |                                                                                                                   
|-------- |  | ------------------------------------------------------------------------------------------------------------------
|PART I  
|Item 1.  |  | Description of Business                                                                                           
|Item 2.  |  | Description of Property                                                                                           
|Item 3.  |  | Legal Proceedings                                                                                                 
|Item 4.  |  | Submission of Matters to a Vote of Security Holders                                                               
|PART II 
|Item 5.  |  | Market for Common Equity and Related Stockholder Matters                                                          
|Item 6.  |  | Managements Discussion and Analysis or Plan of Operation                                                         
|Item 7.  |  | Financial Statements                                                                                              
|Item 8.  |  | Changes and Disagreements with Accountants on Accounting and Financial Disclosures                                
|PART III
|Item 9.  |  | Directors and Executive Officers, Promoters and Control Persons; Compliance With Section 16(a) of the Exchange Act
|Item 10. |  | Executive Compensation                                                                                            
|Item 11. |  | Security Ownership of Certain Beneficial Owners and Management                                                    
|Item 12. |  | Certain Relationships and Related Transactions                                                                    
|Item 13. |  | Exhibits, List and Reports on Form 8-K                                                                            
|Item 14. |  | Controls and Procedures                                                                                           





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PART I




ITEM 1. DESCRIPTION OF BUSINESS



| | A. |  | BUSINESS DEVELOPMENT
| | -- |  | --------------------

We were incorporated pursuant to the Canada Business Corporations Act on May
17, 1984 under the name 133,166 Canada Inc and subsequently changed our name,
as follows:

|                              |  |                                   
|----------------------------- |  | ----------------------------------
|Effective Date of Name Change |  | New Name                          
|October 28, 1986              |  | Eleven Business Acquisitions, Inc.
|July 23, 1990                 |  | Ivana Capital Corporation         
|September 29, 1992            |  | First Ivana Technologies, Ltd     
|March 30, 1993                |  | VitaMed Pharmaceuticals, Ltd      
|July 12, 1993                 |  | Receptagen, Ltd                   
|October 30, 2001              |  | Spantel Communications, Inc       

We are a reporting issuer and our common shares have been listed on the OTC.BB
under the symbol SPAL. Our shares have been traded on the Over the Counter
Bulletin Board (OTCBB) since July 3, 2001.

Reverse Take-Over of Spantel Communications, Inc. (the Transaction): On July
12, 2001, our shareholders approved the Transaction at a shareholders meeting
duly held in accordance with applicable law. The terms of the Transaction
called for the acquisition by us of all (100%) of the issued and outstanding
common shares of Spantel Communications Inc. BVI (SCI). SCI is a British
Virgin Islands company that is the parent company of Spantel 2000 S.A., a
Spanish company engaged in the business of providing long-distance telephone
service in Spain.

Pursuant to and as a condition of the Transaction, we issued 16,500,000
post-consolidated common shares to the shareholders of SCI in exchange for 100%
of the SCI common shares. An additional condition of the Transaction was a
settlement of certain obligations, whereby we eliminated $528,399 of our
outstanding debt.

Additionally, a 10:1 share consolidation took place on October 16, 2001, prior
to the acquisition of SCI, as approved at the shareholders meeting held on
July 12, 2001. As a result of the 10:1 share consolidation, we had 1,193,636
common shares issued and outstanding immediately prior to the issuance of a
further 16,500,000 common shares for the acquisition of SCI.

Prior to the shareholders meeting, all of our shareholders received a
Management Information Circular that provided information to enable our
shareholders to make informed decisions concerning the Transaction.

Domestication in the State of Florida:

On October 18, 2001, we completed our domestication and incorporation in the
State of Florida, transferring our charter from Canadian federal jurisdiction.

Name Change:





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On October 18, 2001 we filed appropriate documents with the State of Florida
changing our name from Receptagen Ltd. to Spantel Communications, Inc. The
name change became effective on October 30, 2001.



| | B. |  | BUSINESS OF ISSUER
| | -- |  | ------------------

Products and Services:

We are a provider of discount long distance telephone service and are
headquartered in Fuengirola, Spain. The Company had been headquartered in
Madrid, Spain from its inception until November 30, 2002 when all executive
activities were relocated. We market our services primarily to a broad base of
customers that includes small to medium enterprises and larger corporations,
governmental entities, educational institutions, and residential consumers. We
have been created with the mission of becoming the leading alternative operator
in the Spanish telecommunications market.

We believe that we can become an industry leader by (1) developing, marketing
and delivering the premier discount long distance service in the industry
through our sales and service-driven organization; and (2) leveraging our
industry experience and strategic relationships within the telecommunications
arena to provide us with competitive advantages in the areas of
telecommunications acquisition and distribution, call management and
maintenance, sales, marketing and customer services. Our philosophy is to grow
our business by investing in marketing, and delivering our services rather than
investing substantial resources in costly centralized facilities or buying
market share through premium-priced acquisitions.

We have ancillary proprietary products and services to enhance our customer
base in order to achieve maximum penetration and revenue. These products and
services include (1) SPANTECNICA(R), a service providing in-house technical
support and equipment sales/installations of telephone equipment and end user
systems, and (2) SPANPOWER(R), a discount residential electricity provider
serving the one-kilowatt market (which will be available upon deregulation).

We have conducted substantial research of the discount long distance industry.
We have also engaged various professionals to assist us in areas of industry
and competitive analysis, strategy formulation and corporate development. In a
short period of time, we have attracted a well-regarded and experienced
management team and board of directors with executive management and
entrepreneurial credentials as well as significant telecommunications industry
experience. We have also developed several strategic relationships within the
industry that we believe uniquely position us to capitalize on the growing
demand for discount long distance services.

Customers:

Our prospective customer base is essentially comprised of anyone who has a
fixed line telephone in Spain. Customers are small and large businesses,
government agencies, single family residences and resort facilities. Currently,
the customer base is made up of primarily





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residential and business users, with some entry being made into government
facilities.

Competition:

Telefonica has monopolized the telecommunications industry in Spain since phone
service was established approximately 75 years ago. Between 1924 and 1999
telecommunications costs in Spain were some of the highest in all of Europe and
probably would have remained there had it not been for the creation of the
European Union. In the 1990s many of Europes premier countries agreed to
major changes in the way the countries were governed and how businesses were
operated as a condition of entry. Utilities, such as telephone companies were
the first to be deregulated in order to rid the countries of costly monopolies
that hinder economic growth. Competition in long distance telecommunications
has been proven all over the world to lower prices and increase the services
available.

The telecommunications industry consists of numerous sectors that include:
local loop, provincial and inter-provincial calls, international calls, calling
cards, data transmission, point-to-point, voice over IP, video conferencing and
the Internet, to name just a few. While the voice telecommunications industry
is considered mature, the Internet and data transmission and video conferencing
sectors are considered to be in their infancy in Spain.




ITEM 2. DESCRIPTION OF PROPERTY

We lease the following properties from related party ABC Telemarketing S.L.,
for operations and management of our business:

Fuengirola Office, located in Malaga, Spain consists of approximately 2,000
square meters at a rate of 10,969.67 Euros/Month (USD $11,433/Month) expiring
January 2005;

Banus Office, located in Malaga, Spain consists of approximately 500 square
meters at a rate of 3,260.24 Euros/Month (USD $3,398/Month) expiring January
2004. As of the end of the 2002 fiscal year, the Company was considering
closing this office in order to cut costs and streamline operations;

Madrid Office, located in Madrid, Spain consisted of approximately 200 square
meters at a rate of 2,612.72 Euros/Month (USD $2,723/Month) expiring February
2004. On November 30, 2002 the Company closed the office in Madrid as its new
president resided in the Province of Malaga and the office was an unnecessary
expense. This office was closed without any financial penalty or cost to the
Company and is expected to save the company 15,000.00 Euros/Month (USD
$15,633/Month).

The monthly rental rate of each of the above properties is based on the
Consumer Price Index of Spain and is adjusted based on such on a yearly basis.




ITEM 3. LEGAL PROCEEDINGS





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To our knowledge, as of December 31, 2002 there were no legal proceedings
currently threatened or pending against us or our property or subsidiaries.




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

During the fiscal year covered by this report, no matters were submitted to a
vote of our security holders, through the solicitation of proxies or otherwise.




PART II




ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS



| | (a) |  | Market Information. There has been a trading market
on NASDAQs OTC Bulletin Board for our common stock since July
     , 2002 under the symbol SPAL.OB. The trading activity has
been generally sporadic and the price has dropped significantly
since trading began. The reported high and low sale prices for
the common stock are shown below for the periods indicated. The
prices reflect inter-dealer prices, without retail mark-up,
markdown or commissions, and may not always represent actual
transactions. There can be no assurance that an active trading
market will ever develop or if such a market does develop, that
it will continue.
| | --- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|                                   |  |          |      |         |  |  |      | 
|---------------------------------- |  | -------- | ---- | ------- |  |  | ---- | 
|                                   |  | High ($) |      | Low ($)
|                                   |  |          |      |        
|Fiscal 2002                        |  |          |      |         |  |  |      | 
|Third Quarter (07/01/02-09/31/02)  |  |          | 4.00 |         |  |  | 0.32 | 
|Fourth Quarter (10/01/02-12/31/02) |  |          | 0.38 |         |  |  | 0.10 | 



| | (b) |  | Holders. As of December 31, 2002 there were 1,135 shareholders of
record.                                             
| | --- |  | ----------------------------------------------------------------------------------------------------------------------
|
| | (c) |  | Dividends. There have been no dividends declared on our outstanding
common stock for the last three (3) fiscal years. 
|
| | (d) |  | Recent Sales of Unregistered Stock. We have not executed any sales of
unregistered securities in the last three years.




ITEM 6. MANAGEMENTS DISCUSSION AND ANALYSIS OR PLAN OF OPERATION

Forward-Looking Statements May Not Prove Accurate:

When used in this Form 10-KSB, the words anticipated, estimate, expect
and other similar expressions are intended to identify forward-looking
statements. Such statements are subject to certain risks, uncertainties and
assumptions, including the possibility that we will fail to generate projected
revenues. Should one or more of these risks or uncertainties materialize, or
should underlying assumptions prove incorrect, actual results may vary
materially from those anticipated, estimated or projected.





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Managements Discussion and Analysis:

The following discussion is intended to assist in an understanding of our
consolidated financial position as of December 31, 2002, and the results of our
operations for the year then ended. Unless indicated to the contrary, all
financial disclosures are in US dollars.

You should read the following discussion and analysis of financial condition
and results of our operations together with the consolidated financial
statements and notes, which appear elsewhere herein. This discussion contains
forward-looking statements that involve risks and uncertainties. As a result of
many factors, such as those set forth in Item 1 Description of Business our
actual results may differ materially from those anticipated in these
forward-looking statements.

Going Concern Qualification:

As discussed in the financial statements, which are an integral part of this
document, our independent auditors have advised us that as a result of
recurring losses from operations, substantial doubts have been raised about our
ability to continue as a going concern.

The ability of the Company to continue operations is contingent upon attaining
profitable operations and obtaining additional debt and/or equity capital to
fund its operations. Managements plans in this regard are to increase
revenue, reduce expenses and increase equity. The Company has closed one of
its small offices and intends to close another during 2003, and has reduced
personnel by approximately 30%. In addition, the Company is currently in
negotiations with a related party to convert approximately $1,200,000 of debt
into equity. The Company is also in the process of negotiating better prices
with certain suppliers.

YEAR ENDING DECEMBER 31, 2002 VERSUS DECEMBER 31, 2001

Revenues:

Revenue is derived primarily from the number of minutes of use (or fractions
thereof) that are billed and recorded upon completion of telephone calls. We
maintain local market pricing structures for our services and generally price
our services at a discount to the prices charged by the local incumbent
telecommunications operators and other established carriers. We have
experienced, and expect to continue to experience, declining revenue per minute
in all of our markets as a result of increasing competition, which we expect
will be offset by increased minute volumes and decreased operating costs per
minute.

The main services we provide are the following:



| | a) |  | Post payment telephone services to residential and commercial clients
(international, national, local, mobile voice and data services).
| | -- |  | ---------------------------------------------------------------------------------------------------------------------------------------
|
|
| | b) |  | Prepayment telephone services to phone shops and small business.                                                                       





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| | c) |  | Direct access.       
| | -- |  | ---------------------
|
| | d) |  | Switch and phone set.
|
| | e) |  | Telephone cards.     
|
| | f) |  | Technical services.  

Revenue for the year ended December 31, 2002 was $11,496,723 versus $7,418,194
in fiscal year 2001. Total revenue was significantly higher than the previous
year due to the overall increase in number of customers and the amount of
service used by each customer.

We have been actively engaged in the telecommunications industry since 1999.
Our target customers are small to medium-sized businesses, and to some extent
niche consumer markets, including selected communities with significant
immigrant population. The Company also has contracts with various locotorios,
or public phone rooms, where we provide them with minutes on a pre-paid basis.

Our client contracts generally include an agreed-upon price schedule that
details both fixed and variable prices for contracted services. The client
contracts generally are indefinite and can be canceled at anytime by either
party. Our sales representatives can easily add additional services to existing
contracts, enabling clients to increase the number of locations through which
they access our network, increase the speed of that access, increase the
sophistication of the services they use, or extend the term for existing
services.

Components of Costs and Expenses:

COMMUNICATIONS EXPENSE

Our communications expense is primarily affected by the volume of traffic
relative to facilities leased on a point-to-point, fixed-cost basis and
capacity leased on a per minute basis with volume discounts. The majority of
our communications expense is variable, including local access charges and
transmission capacity leased on a per-minute of use basis. A significant
percentage of our international transmission facilities will continue to be
leased on a variable cost basis.

Communications expense for the year ended December 31, 2002 increased
$2,344,332 or 42.2% to $7,893,558, from $5,549,226 for the year ended December
31, 2001. As a result, our margin between communications expense and revenue
increased. This increase was primarily due to the expansion of our business
coupled with the increase in sales of higher margins on minutes in the current
period as a result of negotiations with our major suppliers.

MARKETING, SELLING, GENERAL AND ADMINISTRATIVE

Our marketing, selling, general and administrative expenses consist primarily
of costs incurred to gain new customers, introduction of products and services,
and providing ongoing customer service. These costs principally comprised of
costs associated with employee compensation, occupancy, insurance, professional
and consulting fees, sales and marketing and bad debt expenses.





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We expect that during periods of significant expansion, selling, general and
administrative expenses will increase materially. Accordingly, our results of
operations will vary depending on the timing and speed of our expansion
strategy and, during a period of rapid expansion, will not necessarily reflect
the performance of our more established markets.

These expenses decreased to $4,961,629 or 29.6% from $7,048,783 for the year
ended December 31, 2001. The principal reason for the decrease was a decrease
in marketing and selling expenses ($2,208,267 decrease) as the Company
discontinued certain arrangements with various advertisers and outside
marketers, thus reducing costs and commissions paid. Additionally, consulting
expenses decreased ($344,558) as the Company cancelled several arrangements
with various outside consultants.

BANDWIDTH AND RELATED COSTS

We have been operating as a switch-less reseller, therefore, not incurring
costs associated with bandwidth. As we grow and evolve into a
switched carrier,
bandwidth and related costs will primarily be comprised of leasing expenses
associated with network circuits. We will obtain backbone capacity through
short-term leases. We will bear leasing expenses regardless of whether we lease
directly or indirectly through another entity that may lease communications
lines locally on our behalf. As bandwidth prices drop and capacity becomes
available for purchase or long-term lease, we will use some short-term leases
on major international and regional routes with economical long-term solutions.
We expect to purchase such longer-term capacity where it is economical to do
so.

NETWORK OPERATIONS

Upon changing to a switched carrier, our network operation expenses will
include costs associated with our network management, operations and support
activities. These costs include in general leasing and outsourcing expenses.

Our earnings are subject to wide fluctuations since there are many factors over
which we have little or no control. In particular, the overall volume of usage,
the volatility and general level of long distance prices, are important
variables that may significantly affect our operations.

Spantel was granted a B1 license on
September 21, 2000, which gives the Company
the right to develop its own proprietary network with access code (1030). As
there is currently an overcapacity in Spain, Spantel made a request to the CMV
(telephone regulatory authority), which was granted, to outsource its network
operations to avoid incurring the substantial costs of establishing a network.

As a result of this approval, Spantel reached an agreement with BT Ignite, a
subsidiary of British Telecom, for the development, deployment and management
of a network throughout Spain using the 1030 access code. This is the first of
its kind agreement in Spain for a





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company such as Spantel to use the infrastructure of another carrier to carry
and manage its traffic.

The system was developed in 2002 and actual testing with our customer base
began January 1, 2003. We will run approximately 4 million minutes a month
through this network until April in order to assure the quality of service and
the reliability of the technology meets the criteria as set forth in the
contract. After the test period we will direct all new customers to the
network and look towards migrating our existing customer base in such a way as
not to disrupt our current revenues.

Management believes that this innovative agreement will help reduce our costs
and increase our efficiency and quality, enabling us to offer a wider array of
services that customers expect to receive from their carriers.

NET LOSS FROM CONTINUING OPERATIONS

Our net loss decreased to $1,902,664 for the year ended December 31, 2002
versus a net loss of $5,509,671 for the year ended December 31, 2001, or a
decrease of 65.5%. The decrease in net loss is attributable primarily to an
increase in our margins between minutes sold and the cost of the minutes, and
decreases in marketing, selling and general and administrative expenses.

ASSETS AND LIABILITIES

As of December 31, 2002, we had total assets of $7,545,924 and total
liabilities of $9,760,632, compared to $6,524,665 and $10,455,371,
respectively, as of December 31, 2001. No assurances can be made as to our
ability to meet our cash requirements in connection with any expansion of our
operations or any possible business combinations.

CASH FLOW

The cash flows for year ended December 31, 2002, reflect the volatile nature of
the telecommunications industry and the reallocation of our assets indicative
of a growing organization.

CAPITAL RESOURCES

Our capital resources have been provided primarily by capital contributions
from stockholders, stockholders loans and the exchange of outstanding debt
into our common stock.

WORKING CAPITAL AND LIQUIDITY

As of December 31, 2002, we had a working capital deficit of approximately
$4,344,270. We believe that it will be necessary to increase working capital.
This may be achieved by converting indebtedness from stockholders to common
stock or other securities and continuing to reduce operating costs while
increasing revenue and related margins.





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Plan of Operation:

The Company plans to internally grow our existing customer base through our
marketing plan. This marketing plan features a combination of services to
build revenues both with existing and new customers. This campaign is designed
to enhance customer service and to both entice and hold customer loyalty. We
are also looking to add new products.

We have contracted with Uni2, BT, among others, to purchase telephone time.
The contracts are variable by the number of minutes used and the point-to-point
destination of the call. We have negotiated better prices and more facilities
with these suppliers, therefore we should be able to increase current margins
in cost of minutes versus revenue minutes sold.

We are planning to close one office located in Marbella, Spain. Additionally,
we have already reduced the personnel of the Company by approximately 30%, but
without reducing the normal operations of the Company. Additionally, we are
negotiating with banks to reduce the current charges and other financial fees
charged.

YEAR ENDING DECEMBER 31, 2001 VERSUS DECEMBER 31, 2000

Revenues:

Revenues of the year ended December 31, 2001, were $7,418,194 versus $2,002,845
in fiscal year 2000. Total revenues were significantly higher than the previous
year due to the overall increase in number of customers and the amount of
service used by each customer.

We have been actively engaged in the telecommunications industry since 1999.
Our target customers are small to medium-sized businesses, and to some extent
niche consumer markets, including selected communities with significant
immigrant population.

Our client contracts generally include an agreed-upon price schedule that
details both fixed and variable prices for contracted services. The client
contracts generally are indefinite and can be canceled at anytime by either
party. Our sales representatives can easily add additional services to existing
contracts, enabling clients to increase the number of locations through which
they access our network, increase the speed of that access, increase the
sophistication of the services they use, or extend the term for existing
services.

Components of Costs and Expenses:

COMMUNICATIONS EXPENSE

Our cost of services is primarily affected by the volume of traffic relative to
facilities leased on a point-to-point, fixed-cost basis and capacity leased on
a per minute basis with volume discounts. The majority of our cost of services
are variable, including local access charges and transmission capacity leased
on a per-minute of use basis. A significant percentage of our international
transmission facilities will continue to be leased on a variable cost basis.





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SELLING, GENERAL AND ADMINISTRATIVE

Our selling, general and administrative expenses consist primarily of costs
incurred to gain new customers, introduction of new products and services,
provide on going customer service and continued expansion. These costs are
principally comprised of costs associated with employee compensation,
occupancy, insurance, professional fees, sales and marketing (including sales
commissions) and bad debt expenses.

We expect that during periods of significant expansion, selling, general and
administrative expenses will increase materially. Accordingly, our results of
operations will vary depending on the timing and speed of our expansion
strategy and, during a period of rapid expansion, will not necessarily reflect
the performance of our more established markets.

Operating expenses increased to $7,048,783 during the fiscal year ended
December 31, 2001 compared to $4,110,391, for the year ended December 31, 2000,
a 71% increase over the prior year. The principal reasons for the increase was
the continued aggressive marketing campaign, as well as our variable costs such
as marketing and selling, consulting, professional fees, general and
administrative and infrastructure upgrades and maintenance.

BANDWIDTH AND RELATED COSTS

We have been operating as a switch-less reseller, therefore, not incurring
costs associated with bandwidth. As we grow and evolve into a switched carrier,
bandwidth and related costs will primarily be comprised of leasing expenses
associated with network circuits. We will obtain backbone capacity through
short-term leases. We will bear leasing expenses regardless of whether we lease
directly or indirectly through another entity that may lease communications
lines locally on our behalf. As bandwidth prices drop and capacity becomes
available for purchase or long-term lease, we will use some short-term leases
on major international and regional routes with economical long-term solutions.
We expect to purchase such longer-term capacity where it is economical to do
so.

DISCONTINUED OPERATIONS

We reported a gain on the disposal of discontinued operations of $312,690, for
the year ended December 31, 2001, compared to a loss from discontinued
operations of $312,690 for the year ended December 31, 2000. This was the
result of the disposal of the net assets of the wholly owned subsidiary,
Spansurf, S.L., an Internet service provider, at the end of the year 2000.

NETWORK OPERATIONS

Upon changing to a switched carrier, our network operation expenses will
include costs associated with our network management, operations and support
activities. These costs include in, general, leasing and outsourcing expenses.

Our earnings are subject to wide fluctuations since there are many factors over
which we have little or no control. In particular, the





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overall volume of usage, the volatility and general level of long distance
prices, are important variables that may significantly affect our operations.

NET LOSS FROM CONTINUING OPERATIONS

Our net loss increased to $5,509,671 during the fiscal year ended December 31,
2001, a 43% increase over the prior year. The increase in the net loss is
attributable primarily to an increase in our operating costs, marketing costs,
and our general and administrative expenses.

ASSETS AND LIABILITIES

As of December 31, 2001, we had total assets of $6,524,665 and total
liabilities of $10,455,371, compared to $5,036,144 and $9,228,830,
respectively, as of December 31, 2000. No assurances can be made as to our
ability to meet our cash requirements in connection with any expansion of our
operations or any possible business combinations.

CASH FLOW

The cash flows for year ended December 31, 2001, reflect the volatile nature of
the telecommunications industry and the reallocation of our assets indicative
of a growing organization.

CAPITAL RESOURCES

Our capital resources have been provided primarily by capital contributions
from stockholders, stockholders loans and the exchange of outstanding debt
into our common stock.

Uncertainties:

COSTS OF CONDUCTING BUSINESS

We will be required to incur substantial costs for purchasing new equipment,
increasing marketing operations and related costs. A substantial portion of
those costs must be paid whether or not any of our telephone and communication
services prove to be commercially successful on a broad scale. The ability to
generate a profit depends, among other factors, on the amount of equipment
acquisition costs incurred, the amount of revenues from the sale of our
services and other products, and our operating costs.

COMPETITION

The telecommunication business is highly competitive. Companies in the industry
have substantially greater financial, marketing, and technical resources than
us. Further, the entry into this industry does not necessarily require a large
capital expenditure and, accordingly, it can be expected that additional
competitors may enter the industry in the future. It may be particularly
difficult for a relatively small independent company to compete with larger
companies, which have significantly greater resources. There can be no
assurance that we will be able to successfully compete in such an environment.





---



##### 



TECHNOLOGICAL CHANGE

We expect that many new technologies and products will be introduced in the
telecommunication industry over the next several years. Our success will
depend, among other things, on our ability to develop and maintain a
competitive position technologically. There can be no assurance that we will
have access to subsequently developed technology by other entities.
Technological advances by a competitor may result in our present or future
products becoming noncompetitive or obsolete. We cannot be assured that
competitors will not develop functionally similar or superior services and
products, which event could have an adverse effect on our business.

FLUCTUATIONS IN OPERATING RESULTS

Our revenues and results of operations may vary significantly in the future.
Our revenues and results of operations are difficult to forecast and could be
adversely affected by many factors, some of which are outside our control,
including, among others, the expected relatively long sales and implementation
cycles for our services and products; the size and timing of individual license
transactions and joint venture arrangements; seasonality of revenues; changes
in our operating expenses; changes in the mix of products and services sold;
timing of introduction or enhancement of our products or competitors; market
acceptance of new products; changes in technology; personnel changes and
difficulties in attracting and retaining qualified sales, marketing, technical
and consulting personnel; changes in customers budgeting cycles; quality
control of products sold; and economic conditions generally and in Spain in
particular and in specific industry segments, particularly the communications
industry.

There can be no assurance that our products will achieve broad market
acceptance or that we will be successful in marketing our services and products
or enhancements thereto. In the event that our current or future competitors
release new products that have more advanced features, offer better
performance, or are more price competitive than our services and products,
demand for our products would decline. A decline in demand for, or market
acceptance of, our services and other products as a result of competition,
technological change, or other factors would have material adverse effects on
our business, financial condition, and results of operations.

RAW MATERIALS

The basic raw materials and components for the telecommunication services and
other products being developed by us are readily available. We do not expect to
experience any significant delays in obtaining timely delivery of our
telecommunication equipment and components.

SEASONALITY

We expect to experience seasonal variations in revenues and operating costs
because sales activity for our services and products may increase in the summer
and winter seasons, which is expected to cause our operations to increase
during such periods.





---



##### 



Quantitative and Qualitative Disclosures About Market Risk:

We are exposed to market risks, which arise during the normal course of
business from changes in foreign exchange rates and interest rates. A
discussion of the primary market risks associated with our foreign currency
transactions, available-for-sale securities, and long-term debt exposure is
presented below.

FOREIGN EXCHANGE RISK

We conduct our operations primarily in Spain, and other countries around the
world with a number of different currencies. There is exposure to future
earnings when foreign exchange rates change and certain receivables, payables
and inter-company transactions are denominated in foreign currencies. We
monitor our exposure to foreign currencies through our regular operating
activities and have not historically used derivatives to hedge foreign exchange
risk.

Our exposure to exchange rate fluctuations primarily arises from outsourcing
services and assignment agreements, which are denominated in Euros, as well as
operating costs associated with such agreements. The euro-denominated gross
profit offset by other euro-denominated operating costs generally results in a
natural hedge. However, timing of settlement of euro-denominated accounts
receivables and payables subjects us to exchange rate risk on settlement of the
receivables and payables.

As of December 31, 2002, we were primarily exposed to the following currencies:
the Euro.

EURO CONVERSION

On January 1, 1999, 11 of the 15 member countries of the European Union
introduced a new currency, the Euro. The conversion rates between the Euro
and the participating nations existing legacy currencies were fixed
irrevocably as of December 31, 1998. Prior to full implementation of the new
currency on January 1, 2002, there was a transition period during which parties
may, at their discretion, use either the legacy currencies or the Euro for
financial transactions.

We are not aware of any material operational issues or costs associated with
preparing internal systems for the Euro. While it is not possible to accurately
predict the impact the Euro will have on the our business or on the economy in
general, management does not anticipate that the Euro conversion will have a
material adverse impact on the our market risk with respect to foreign
exchange, our results of operations, or our financial condition.




ITEM 7. FINANCIAL STATEMENTS

Financial statements are audited and included herein beginning at page F-1 and
are incorporated herein by reference.



---



##### 



|                                             
|---------------------------------------------
|SPANTEL COMMUNICATIONS, INC.
AND SUBSIDIARIES
|                                             
|FINANCIAL
STATEMENTS                         
|                                             
|YEARS ENDED
DECEMBER 31, 2002 AND 2001       





---



##### 



SPANTEL COMMUNICATIONS, INC.
AND SUBSIDIARIES

TABLE OF CONTENTS

|                                                            |  |      |        | 
|----------------------------------------------------------- |  | ---- | ------ | 
|                                                            |  | Page
|                                                            |  |     
|Independent Auditors Report                                |  |      | F-2    | 
|Consolidated Balance Sheets                                 |  |      | F-3    | 
|Consolidated Statements of Operations                       |  |      | F-4    | 
|Consolidated Statements of Comprehensive Income (Loss)      |  |      | F-5    | 
|Consolidated Statements of Changes in Shareholders Deficit |  |      | F-6    | 
|Consolidated Statements of Cash Flows                       |  |      | F-7    | 
|Notes to Consolidated Financial Statements                  |  |      | F-8-14 | 

F-1



---



##### 



INDEPENDENT AUDITORS
REPORT

To the Board of Directors
Spantel Communications, Inc.

We have audited the accompanying consolidated balance sheets of Spantel
Communications, Inc. and Subsidiaries as of December 31, 2002 and 2001, and the
related consolidated statements of operations, comprehensive income (loss),
changes in shareholders deficit, and cash flows for the years then ended.
These financial statements are the responsibility of the Companys management.
Our responsibility is to express an opinion on these financial statements based
on our audits.

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

In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Spantel
Communications, Inc. and Subsidiaries as of December 31, 2002 and 2001, and the
results of their operations and their cash flows for the years then ended, in
conformity with accounting principles generally accepted in the United States
of America.

The accompanying consolidated financial statements have been prepared assuming
the Company will continue as a going concern. As discussed in Note 1 to the
consolidated financial statements, the Company has suffered recurring losses
from operations that raise substantial doubt about the Companys ability to
continue as a going concern. Managements plans in this regard are also
discussed in Note 1. The financial statements do not include any adjustments
that might result from the outcome of this uncertainty.

|                          
|--------------------------
|/s/ SPICER, JEFFRIES & CO.

Denver, Colorado
March 7, 2003

F-2



---



##### 



SPANTEL COMMUNICATIONS, INC.
AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

|                                       |                                                                                                                                     |                                                |                             |                                             |           |             |           |             |           |            |           | 
|-------------------------------------- | ----------------------------------------------------------------------------------------------------------------------------------- | ---------------------------------------------- | --------------------------- | ------------------------------------------- | --------- | ----------- | --------- | ----------- | --------- | ---------- | --------- | 
|                                       |                                                                                                                                     |                                                |                             |                                             |           | December31, |           | December31,
|                                       |                                                                                                                                     |                                                |                             |                                             |           | 2002        |           | 2001       
|                                       |                                                                                                                                     |                                                |                             |                                             |           |             |           |            
|ASSETS                                 |                                                                                                                                     |                                                |                             |                                             |           |             |           |            
|CURRENT ASSETS:                        |                                                                                                                                     |                                                |                             |                                             |           |             |           |            
|                                       | Cash and cash equivalents (Notes 1 and 4)                                                                                           |                                                | $                           | 1,845,910                                   |           |             | $         | 983,134     |          
|                                       | Receivables:                                                                                                                        |                                                |                             |                                             |           |             |           |             |          
|                                       |                                                                                                                                     | Trade, net of allowances for doubtful accounts |                             |                                             | 2,018,566 |             |           |             | 2,285,672 |           
|                                       |                                                                                                                                     | Related parties (Note 6)                       |                             |                                             | 250,954   |             |           |             | 251,163   |           
|                                       |                                                                                                                                     | Taxes                                          |                             |                                             | 715,859   |             |           |             | 571,346   |           
|                                       | Deferred subscriber acquisition costs (Note 6)                                                                                      |                                                |                             | 310,193                                     |           |             |           | 399,063     |          
|                                       | Other current assets                                                                                                                |                                                |                             | 74,880                                      |           |             |           | 81,087      |          
|                                       |                                                                                                                                     |                                                |                             |                                             |           |             |           |             |          
|                                       |                                                                                                                                     |                                                | Total
current assets        |                                             |           | 5,216,362   |           |             |           | 4,571,465  |          
|                                       |                                                                                                                                     |                                                |                             |                                             |           |             |           |             |          
|OTHER ASSETS:                          |                                                                                                                                     |                                                |                             |                                             |           |             |           |            
|                                       | Property and equipment, net (Note 2)                                                                                                |                                                |                             | 1,010,793                                   |           |             |           | 712,667     |          
|                                       | Deferred subscriber acquisition costs (Note 6)                                                                                      |                                                |                             | 1,240,771                                   |           |             |           | 1,197,189   |          
|                                       | Deposits                                                                                                                            |                                                |                             | 77,998                                      |           |             |           | 43,344      |          
|                                       |                                                                                                                                     |                                                |                             |                                             |           |             |           |             |          
|                                       |                                                                                                                                     |                                                | Total other assets          |                                             |           | 2,329,562   |           |             |           | 1,953,200  |          
|                                       |                                                                                                                                     |                                                |                             |                                             |           |             |           |             |          
|                                       |                                                                                                                                     |                                                |                             | TOTAL ASSETS                                |           | $           | 7,545,924 |             |           | $          | 6,524,665 | 
|                                       |                                                                                                                                     |                                                |                             |                                             |           |             |           |             |          
|LIABILITIES AND SHAREHOLDERS DEFICIT  |                                                                                                                                     |                                                |                             |                                             |           |             |           |            
|CURRENT LIABILITIES:                   |                                                                                                                                     |                                                |                             |                                             |           |             |           |            
|                                       | Accounts payable and accrued expenses                                                                                               |                                                | $                           | 4,509,339                                   |           |             | $         | 3,071,983   |          
|                                       | Advances from bank (Note 4)                                                                                                         |                                                |                             | 1,262,609                                   |           |             |           | 723,571     |          
|                                       | Due to related parties (Note 6)                                                                                                     |                                                |                             | 3,788,684                                   |           |             |           | 6,659,817   |          
|                                       |                                                                                                                                     |                                                |                             |                                             |           |             |           |             |          
|                                       |                                                                                                                                     |                                                | Total current liabilities   |                                             |           | 9,560,632   |           |             |           | 10,455,371 |          
|                                       |                                                                                                                                     |                                                |                             |                                             |           |             |           |             |          
|CONVERTIBLE NOTE PAYABLE (Note 8)      |                                                                                                                                     |                                                | 200,000                     |                                             |           |             |          |            
|                                       |                                                                                                                                     |                                                |                             |                                             |           |             |           |             |          
|COMMITMENTS AND CONTINGENCIES (Note 8) |                                                                                                                                     |                                                |                             |                                             |           |             |           |            
|SHAREHOLDERS DEFICIT(Note 3):         |                                                                                                                                     |                                                |                             |                                             |           |             |           |            
|                                       | Common stock, $.001 par value, 100,000,000 shares authorized,
21,858,746 and 17,693,636 shares issued and outstanding, respectively |                                                |                             | 21,859                                      |           |             |           | 17,694      |          
|                                       | Additional paid-in capital                                                                                                          |                                                |                             | 3,895,402                                   |           |             |           | 5,226,400   |          
|                                       | Accumulated other comprehensive income                                                                                              |                                                |                             | 63,059                                      |           |             |           | 268,602     |          
|                                       | Deficit                                                                                                                             |                                                |                             | (6,195,028                                  | )         |             |           | (9,443,402  | )        
|                                       |                                                                                                                                     |                                                |                             |                                             |           |             |           |             |          
|                                       |                                                                                                                                     |                                                | Total shareholders deficit |                                             |           | (2,214,708  | )         |             |           | (3,930,706 | )        
|                                       |                                                                                                                                     |                                                |                             |                                             |           |             |           |             |          
|                                       |                                                                                                                                     |                                                |                             | TOTAL LIABILITIES AND SHAREHOLDERS DEFICIT |           | $           | 7,545,924 |             |           | $          | 6,524,665 | 
|                                       |                                                                                                                                     |                                                |                             |                                             |           |             |           |             |          

The accompanying notes are an integral part of these statements.

F-3



---



##### 



SPANTEL COMMUNICATIONS, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS

|                                         |                                                    |                          |                      |                                     |            |              |            |           |            |            |            |  
|---------------------------------------- | -------------------------------------------------- | ------------------------ | -------------------- | ----------------------------------- | ---------- | ------------ | ---------- | --------- | ---------- | ---------- | ---------- | -
|                                         |                                                    |                          |                      |                                     |            | Year Ended  
|                                         |                                                    |                          |                      |                                     |            | December 31,
|                                         |                                                    |                          |                      |                                     |            | 2002         |            | 2001     
|                                         |                                                    |                          |                      |                                     |            |              |            |          
|SALES                                    |                                                    | $                        | 11,496,723           |                                     |            | $            | 7,418,194  |          
|EXPENSES:                                |                                                    |                          |                      |                                     |            |              |            |          
|                                         | Communications                                     |                          |                      | 7,893,558                           |            |              |            | 5,549,226 |           
|                                         | Marketing and selling                              |                          |                      | 3,107,826                           |            |              |            | 5,316,093 |           
|                                         | Consulting (Note 6)                                |                          |                      | 287,361                             |            |              |            | 631,919   |           
|                                         | Professional fees (Note 3)                         |                          |                      | 468,831                             |            |              |            | 338,232   |           
|                                         | General and administrative                         |                          |                      | 847,610                             |            |              |            | 635,522   |           
|                                         | Depreciation and amortization                      |                          |                      | 250,001                             |            |              |            | 127,017   |           
|                                         |                                                    |                          |                      |                                     |            |              |            |          
|                                         |                                                    | Total operating expenses |                      |                                     | 12,855,187 |              |            |           | 12,598,009 |           
|                                         |                                                    |                          |                      |                                     |            |              |            |          
|                                         |                                                    |                          | Loss from operations |                                     |            | (1,358,464   | )          |           |            | (5,179,815 | )         
|OTHER EXPENSES:                          |                                                    |                          |                      |                                     |            |              |            |          
|                                         | Interest expense                                   |                          |                      | (544,200                            | )          |              |            | (309,114  | )         
|                                         | Other                                              |                          |                      |                                    |            |              |            | (20,742   | )         
|                                         |                                                    |                          |                      |                                     |            |              |            |          
|                                         |                                                    | Total other expenses     |                      |                                     | (544,200   | )            |            |           | (329,856   | )         
|                                         |                                                    |                          |                      |                                     |            |              |            |          
|                                         |                                                    |                          |                      | Net loss from continuing operations |            |              | (1,902,664 | )         |            |            | (5,509,671 | )
|DISCONTINUED OPERATIONS (Note 5):        |                                                    |                          |                      |                                     |            |              |            |          
|                                         | Gain (loss) on disposal of discontinued operations |                          |                      |                                    |            |              |            | 312,690   |           
|                                         |                                                    |                          |                      |                                     |            |              |            |          
|NET LOSS                                 |                                                    | $                        | (1,902,664           | )                                   |            | $            | (5,196,981 | )        
|                                         |                                                    |                          |                      |                                     |            |              |            |          
|BASIC AND DILUTED LOSS PER COMMON SHARE: |                                                    |                          |                      |                                     |            |              |            |          
|                                         | Net loss from continuing operations                |                          | $                    | (0.10                               | )          |              | $          | (0.32     | )         
|                                         |                                                    |                          |                      |                                     |            |              |            |          
|                                         | Discontinued operations                            |                          | $                    |                                    |            |              | $          | .02       |           
|                                         |                                                    |                          |                      |                                     |            |              |            |          
|                                         | Net loss                                           |                          | $                    | (0.10                               | )          |              | $          | (0.30     | )         
|                                         |                                                    |                          |                      |                                     |            |              |            |          
|WEIGHTED AVERAGE SHARES OUTSTANDING      |                                                    |                          | 19,903,585           |                                     |            |              | 17,297,337 |          
|                                         |                                                    |                          |                      |                                     |            |              |            |          

The accompanying notes are an integral part of these statements.

F-4



---



##### 



SPANTEL COMMUNICATIONS, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

|                                   |  |              |            |      |  |   |            |  
|---------------------------------- |  | ------------ | ---------- | ---- |  | - | ---------- | -
|                                   |  | Year Ended  
|                                   |  | December 31,
|                                   |  | 2002         |            | 2001
|                                   |  |              |            |     
|NET LOSS                           |  | $            | (1,902,664 | )    |  | $ | (5,196,981 | )
|OTHER COMPREHENSIVE INCOME (LOSS): |  |              |            |      |  |   |            |  
|Exchange gains and losses          |  |              | (205,543   | )    |  |   | 337,304    |  
|                                   |  |              |            |      |  |   |            |  
|COMPREHENSIVE LOSS                 |  | $            | (2,108,207 | )    |  | $ | (4,859,677 | )
|                                   |  |              |            |      |  |   |            |  

The accompanying notes are an integral part of these statements.

F-5



---



##### 



SPANTEL COMMUNICATIONS, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS DEFICIT

|                                                  |  |        |            |        |  |        |            |        |  |         |            |               |  |            |        |       |  |   |            |   |  |             |          |   |  |   |            |  
|------------------------------------------------- |  | ------ | ---------- | ------ |  | ------ | ---------- | ------ |  | ------- | ---------- | ------------- |  | ---------- | ------ | ----- |  | - | ---------- | - |  | ----------- | -------- | - |  | - | ---------- | -
|                                                  |  |        |            |        |  |        |            |        |  |         |            |               |  |            |        |       |  |   |            |   |  | Accumulated |          |   |  |  
|                                                  |  |        |            |        |  | Common |            |        |  |         |            | Common        |  | Additional |        | Other |  |   |            |  
|                                                  |  | Common |            | Stock  |  | Common |            | Stock  |  | Paid-In |            | Comprehensive |  |            |        |      
|                                                  |  | Shares |            | Amount |  | Shares |            | Amount |  | Capital |            | Income        |  | Deficit   
|                                                  |  |        |            |        |  |        |            |        |  |         |            |               |  |           
|BALANCES, December 31, 2000                       |  |        | 20,500     |        |  | $      | 122,437    |        |  |         |           |               |  | $          |       |       |  | $ |           |   |  | $           | (68,702  | ) |  | $ | (4,246,421 | )
|Issuance of common stock                          |  |        | 2,000,000  |        |  |        | 6,312,605  |        |  |         |           |               |  |            |       |       |  |   |           |   |  |             |         |   |  |   |           |  
|Reverse acquisition
of Receptagen (Notes 1 and 3) |  |        | (2,020,500 | )      |  |        | (6,435,042 | )      |  |         | 17,693,636 |               |  |            | 17,694 |       |  |   | 5,226,400  |   |  |             |         |   |  |   |           |  
|Other comprehensive income                        |  |        |           |        |  |        |           |        |  |         |           |               |  |            |       |       |  |   |           |   |  |             | 337,304  |   |  |   |           |  
|Net loss                                          |  |        |           |        |  |        |           |        |  |         |           |               |  |            |       |       |  |   |           |   |  |             |         |   |  |   | (5,196,981 | )
|                                                  |  |        |            |        |  |        |            |        |  |         |            |               |  |            |        |       |  |   |            |   |  |             |          |   |  |   |            |  
|BALANCES, December 31, 2001                       |  |        |           |        |  |        |           |        |  |         | 17,693,636 |               |  |            | 17,694 |       |  |   | 5,226,400  |   |  |             | 268,602  |   |  |   | (9,443,402 | )
|Issuance of common stock                          |  |        |           |        |  |        |           |        |  |         | 4,115,110  |               |  |            | 4,115  |       |  |   | 4,110,995  |   |  |             |         |   |  |   |           |  
|Issuance
of common stock for services             |  |        |           |        |  |        |           |        |  |         | 50,000     |               |  |            | 50     |       |  |   | 99,950     |   |  |             |         |   |  |   |           |  
|Recapitalization (Note 3)                         |  |        |           |        |  |        |           |        |  |         |           |               |  |            |       |       |  |   | (5,541,943 | ) |  |             | 390,905  |   |  |   | 5,151,038  |  
|Other comprehensive loss                          |  |        |           |        |  |        |           |        |  |         |           |               |  |            |       |       |  |   |           |   |  |             | (596,448 | ) |  |   |           |  
|Net loss                                          |  |        |           |        |  |        |           |        |  |         |           |               |  |            |       |       |  |   |           |   |  |             |         |   |  |   | (1,902,664 | )
|                                                  |  |        |            |        |  |        |            |        |  |         |            |               |  |            |        |       |  |   |            |   |  |             |          |   |  |   |            |  
|BALANCES, December 31, 2002                       |  |        |           |        |  | $      |           |        |  | $       | 21,858,746 |               |  | $          | 21,859 |       |  | $ | 3,895,402  |   |  | $           | 63,059   |   |  | $ | (6,195,028 | )
|                                                  |  |        |            |        |  |        |            |        |  |         |            |               |  |            |        |       |  |   |            |   |  |             |          |   |  |   |            |  

The accompanying notes are an integral part
of these statements.

F-6



---



##### 



SPANTEL COMMUNICATIONS, INC.
AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

|                                                                        |                                                                                 |                                                   |                                           |            |              |           |           |            |            |          |  
|----------------------------------------------------------------------- | ------------------------------------------------------------------------------- | ------------------------------------------------- | ----------------------------------------- | ---------- | ------------ | --------- | --------- | ---------- | ---------- | -------- | -
|                                                                        |                                                                                 |                                                   |                                           |            | Year Ended  
|                                                                        |                                                                                 |                                                   |                                           |            | December 31,
|                                                                        |                                                                                 |                                                   |                                           |            | 2002         |           | 2001     
|                                                                        |                                                                                 |                                                   |                                           |            |              |           |          
|CASH FLOWS FROM OPERATING ACTIVITIES:                                   |                                                                                 |                                                   |                                           |            |              |           |           |           
|                                                                        | Net loss from continuing operations                                             |                                                   | $                                         | (1,902,664 | )            |           | $         | (5,509,671 | )         
|                                                                        | Adjustments to reconcile net loss to net cash provided by
operating activities: |                                                   |                                           |            |              |           |           |            |           
|                                                                        |                                                                                 | Depreciation and amortization                     |                                           |            | 250,001      |           |           |            | 127,017    |         
|                                                                        |                                                                                 | Issuance
of common stock for services             |                                           |            | 100,000      |           |           |            |           |         
|                                                                        |                                                                                 | Decrease (increase) in accounts receivable, net   |                                           |            | 267,106      |           |           |            | (1,647,348 | )       
|                                                                        |                                                                                 | Increase in taxes receivable                      |                                           |            | (144,513     | )         |           |            | (119,308   | )       
|                                                                        |                                                                                 | Decrease in prepaid commissions                   |                                           |            | 45,288       |           |           |            | 601,136    |         
|                                                                        |                                                                                 | Increase in other assets                          |                                           |            | (28,447      | )         |           |            | (35,616    | )       
|                                                                        |                                                                                 | Increase in advances from bank                    |                                           |            | 539,038      |           |           |            | 200,150    |         
|                                                                        |                                                                                 | Decrease in receivable from related parties       |                                           |            | 209          |           |           |            | 4,272,361  |         
|                                                                        |                                                                                 | Increase in due to related parties                |                                           |            | 1,062,054    |           |           |            | 723,571    |         
|                                                                        |                                                                                 | Increase in accounts payable and accrued expenses |                                           |            | 1,428,374    |           |           |            | 1,664,910  |         
|                                                                        |                                                                                 |                                                   |                                           |            |              |           |           |            |           
|                                                                        |                                                                                 |                                                   | Net cash provided by operating activities |            |              | 1,616,446 |           |            |            | 277,202  |  
|                                                                        |                                                                                 |                                                   |                                           |            |              |           |           |            |           
|CASH FLOWS FROM INVESTING ACTIVITIES:                                   |                                                                                 |                                                   |                                           |            |              |           |           |           
|                                                                        | Cash acquired on reverse acquisition                                            |                                                   |                                           |           |              |           |           | 46         |           
|                                                                        | Purchases of property and equipment                                             |                                                   |                                           | (548,127   | )            |           |           | (308,238   | )         
|                                                                        |                                                                                 |                                                   |                                           |            |              |           |           |            |           
|                                                                        |                                                                                 |                                                   | Net cash used in investing activities     |            |              | (548,127  | )         |            |            | (308,192 | )
|                                                                        |                                                                                 |                                                   |                                           |            |              |           |           |            |           
|EFFECT OF EXCHANGE RATE CHANGES ON CASH                                 |                                                                                 |                                                   | (205,543                                  | )          |              |           | 337,304   |           
|                                                                        |                                                                                 |                                                   |                                           |            |              |           |           |            |           
|NET INCREASE IN CASH                                                    |                                                                                 |                                                   | 862,776                                   |            |              |           | 306,314   |           
|CASH,beginning of year                                                  |                                                                                 |                                                   | 983,134                                   |            |              |           | 676,820   |           
|                                                                        |                                                                                 |                                                   |                                           |            |              |           |           |            |           
|CASH,end of year                                                        |                                                                                 | $                                                 | 1,845,910                                 |            |              | $         | 983,134   |           
|                                                                        |                                                                                 |                                                   |                                           |            |              |           |           |            |           
|SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:                       |                                                                                 |                                                   |                                           |            |              |           |           |           
|                                                                        | Interest paid                                                                   |                                                   | $                                         | 544,200    |              |           | $         | 309,114    |           
|                                                                        |                                                                                 |                                                   |                                           |            |              |           |           |            |           
|SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING
AND FINANCING ACTIVITIES: |                                                                                 |                                                   |                                           |            |              |           |           |           
|Issuance of note payable for payment of related party advances          |                                                                                 | $                                                 | 200,000                                   |            |              | $         |          |           
|                                                                        |                                                                                 |                                                   |                                           |            |              |           |           |            |           
|Liabilities assumed on reverse acquisition, net of cash acquired        |                                                                                 | $                                                 |                                          |            |              | $         | 1,190,948 |           
|                                                                        |                                                                                 |                                                   |                                           |            |              |           |           |            |           
|Common stock issued for shareholder advances                            |                                                                                 | $                                                 | 4,115,110                                 |            |              | $         | 6,312,605 |           
|                                                                        |                                                                                 |                                                   |                                           |            |              |           |           |            |           

The accompanying notes are an integral part of these statements.

F-7



---



##### 



SPANTEL COMMUNICATIONS, INC.
AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1 - ORGANIZATION, OPERATIONS AND SIGNIFICANT ACCOUNTING POLICIES

Organization, Business and Going Concern

In October 2001 Spantel Communications, Inc. (Spantel) completed its
domestication and incorporation in the State of Florida, transferring the
Companys charter from Canadian Federal jurisdiction. Subsequently, the
shareholders approved an exchange of common stock of the Company for all of the
outstanding common stock of Spantel Communications, Inc. BVI (BVI), a company
incorporated on June 9, 1999 in the British Virgin Islands. The stock exchange
between Spantel and BVI has been considered a reverse acquisition (see Note 3).
BVI carries on its business through Spantel S.A. (Spantel S.A.), a company
incorporated in Spain. Spantel S.A. is a provider of telephone services to
both residential and commercial customers in Spain. It operates as a reseller
of telephone services whereby it purchases blocks of telephone time from
various providers and resells it to its customers. All of the Companys
revenues were generated in Spain and additionally, all of the Companys assets
are located there.

The consolidated financial statements include the accounts of Spantel since the
date of the reverse acquisition and the historical accounts of its wholly owned
subsidiaries, BVI and Spantel S.A. (collectively, the Company). All
significant intercompany balances and transactions have been eliminated in
consolidation.

The Company has a shareholders deficit at December 31, 2002 of $2,214,708 and
a working capital deficit of $4,344,270 that raise substantial doubt about its
ability to continue as a going concern. The ability of the Company to continue
operations is contingent upon attaining profitable operations and obtaining
additional debt and/or equity capital to fund its operations. Managements
plans in this regard are to increase revenue, reduce expenses and increase
equity. The Company has closed one of its small offices and intends to close
another during 2003, and is planning on reducing personnel by 30%. In
addition, the Company is currently in negotiations with a related party to
convert approximately $1,200,000 of debt into equity. The Company is also in
the process of negotiating better prices with certain suppliers.

Cash Equivalents

All highly liquid investments purchased with an original maturity of three
months or less are considered to be cash equivalents. At December 31, 2002 and
2001, cash and cash equivalents includes $1,745,622 and $817,602 in money
market funds that secure advances from the Companys bank in the amount of
$1,262,609 and $723,571 (see Note 4).

Accounts Receivable

Accounts receivable are net of allowance for doubtful accounts of $449,091 and
$705,519 as of December 31, 2002 and 2001, respectively. The Company believes
all other receivables are collectible. The Company establishes an allowance
for doubtful accounts based upon factors surrounding the credit risk of
specific subscribers, historical trends and other information.

Deferred Subscriber Acquisition Costs

According to the terms of prevailing contracts, the Company established
commercial relations with a series of telemarketing agencies that provided the
Company with marketing and customer targeting services. Commissions ranging
from 5% to 8% are accrued for these services based on consumption generated by
customers gained by these various agencies. These amounts represent certain
amounts due in the future that have been advanced to the various agencies. The
telemarketing services of the unrelated agencies ceased during 2001.

Property and Equipment

The Company provides for depreciation and amortization of these assets using
both straight-line and accelerated methods based on estimated useful lives of,
generally, three to ten years.

F-8



---



##### 



SPANTEL COMMUNICATIONS, INC.
AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)

NOTE 1 - ORGANIZATION, OPERATIONS AND SIGNIFICANT ACCOUNTING POLICIES(continued)

Revenue Recognition

Revenue is recognized at the time the services are provided to subscribers.

Foreign Currency

The Companys foreign subsidiary uses the local currency as their functional
currency. Accordingly, assets and liabilities of the foreign subsidiary are
translated into United States dollars at end-of-period exchange rates. Revenue
and expenses are translated at average exchange rates in effect during the
period. Gains or losses from foreign currency translation are included in
other comprehensive income.

Long-Lived Assets

The Company reviews its long-lived assets for impairment whenever changes in
circumstances indicate that the carrying amount of an asset may not be
recoverable. For purposes of evaluating the recoverability of long-lived
assets, the recoverability test is performed using undiscounted net cash flows
estimated to be generated by the asset.

Advertising Costs

Advertising and marketing costs are expensed as incurred and totaled $525,822
and $389,558 for the years ended December 31, 2002 and 2001, respectively.

Income Taxes

The Company accounts for income taxes in accordance with Statement of Financial
Accounting Standards No. 109, Accounting for Income Taxes. Under the asset
and liability method of Statement 109, deferred tax assets and liabilities are
recognized for the estimated future tax consequences attributable to
differences between the financial statement carrying amounts of existing assets
and liabilities and their respective tax bases. Deferred tax assets and
liabilities are measured using enacted tax rates in effect for the year in
which those temporary differences are expected to be recovered or settled.

Use of Estimates

The preparation of financial statements in conformity with accounting
principles generally accepted in the United States of America requires
management to make estimates and assumptions that affect the reported amounts
of 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. Management believes that the estimates
utilized in the preparation of the consolidated financial statements are
prudent and reasonable. Actual results could differ from these estimates.

Fair Value of Financial Instruments

Substantially all of the Companys assets and liabilities are carried at fair
value or contracted amounts that approximate fair value. Estimates of fair
value are made at a specific point in time, based on relative market
information and information about the financial instrument, specifically, the
value of the underlying financial instrument. Assets that are recorded at fair
value consist largely of short-term receivables and prepaid expenses, which are
carried at contracted amounts that approximate fair value. Similarly, the
Companys liabilities consist of short term liabilities recorded at contracted
amounts that approximate fair value.

F-9



---



##### 



SPANTEL COMMUNICATIONS, INC.
AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)

NOTE 1 -  ORGANIZATION, OPERATIONS AND SIGNIFICANT ACCOUNTING POLICIES(continued)

Reverse Stock Split

On October 16, 2001, the Company effected a 10 to 1 reverse stock split whereby
each 10 shares were exchanged for one newly issued share. All references to
shares and share prices, including retroactive treatment, reflect the split on
the basis of the effective ratio.

Net Loss Per Share of Common Stock

Net loss per share of common stock is based on the weighted average number of
shares of common stock outstanding, giving effect to the reverse acquisition
and the reverse stock split as discussed above.

Recent Accounting Pronouncements

In April 2002, the Financial Accounting Standards Board (FASB) issued SFAS
No. 145, Rescission of FASB Statements No. 4, 44, and 64, Amendment of FASB
Statement No. 13, and Technical Corrections. Such standard requires any gain
or loss on extinguishments of debt to be presented as a component of continuing
operations (unless specific criteria are met) whereas SFAS No. 4 required that
such gains and losses be classified as an extraordinary item in determining net
income. Upon adoption of SFAS No. 145, the Company will reclassify any
extraordinary gains and losses on the extinguishments of debt recorded in prior
periods to continuing operations. The adoption of SFAS 145 did not have a
material effect on the Companys financial position or results of operations.

In June 2002, the FASB issued SFAS No. 146, Accounting for Costs Associated
with Exit or Disposal Activities. Such standard requires costs associated with
exit or disposal activities (including restructurings) to be recognized when
the costs are incurred, rather than at a date of commitment to an exit or
disposal plan. SFAS No. 146 nullifies EITF Issue No. 94-3, Liability
Recognition for Certain Employee Termination Benefits and Other Costs to Exit
an Activity (including Certain Costs Incurred in a Restructuring). Under SFAS
No. 146, a liability related to an exit or disposal activity is not recognized
until such liability has actually been incurred whereas under EITF Issue No.
94-3 a liability was recognized at the time of a commitment to an exit or
disposal plan. The provisions of this standard are effective for exit or
disposal activities initiated after December 31, 2002. The adoption of SFAS
146 did not have a material effect on the Companys financial position or
results of operations.

On December 31, 2002, the FASB issued SFAS No. 148, Accounting for Stock-Based
Compensation  Transition and Disclosure. This standard amends SFAS No. 123,
Accounting for Stock-Based Compensation, to provide alternative methods of
transition for a voluntary change to the fair value based method of accounting
for stock-based employee compensation. This standard also requires prominent
disclosures in both annual and interim financial statements about the method of
accounting for stock-based employee compensation and the effect of the method
used on reported results. The adoption of SFAS 148 did not have a material
effect on the Companys financial position or results of operations.

F-10



---



##### 



SPANTEL COMMUNICATIONS, INC.
AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)

NOTE 2- PROPERTY AND EQUIPMENT

|                                         |                                |                |         |              |           |   |         |         |         |  |  |  |  | 
|---------------------------------------- | ------------------------------ | -------------- | ------- | ------------ | --------- | - | ------- | ------- | ------- |  |  |  |  | 
|                                         |                                |                |         | December 31, |           |   |         |        
|Cost:                                    |                                | 2002           |         | 2001         |           |   |         |        
|                                         |                                |                |         |              |           |   |         |        
|Construction                             |                                | $              | 44,250  |              |           | $ | 34,727  |        
|Technical installations and machinery    |                                |                | 284,394 |              |           |   | 174,339 |        
|Other installations, tools and furniture |                                |                | 65,112  |              |           |   | 52,602  |        
|Data processing equipment                |                                |                | 362,923 |              |           |   | 334,806 |        
|Software                                 |                                |                | 212,623 |              |           |   | 185,189 |        
|Other assets                             |                                |                | 473,484 |              |           |   | 113,918 |        
|                                         |                                |                |         |              |           |   |         |        
|                                         | Total cost                     |                | $       | 1,442,786    |           |   | $       | 895,581 |        
|                                         |                                |                |         |              |           |   |         |        
|Accumulated depreciation:                |                                |                |         |              |           |   |         |        
|Construction                             |                                | $              | 16,929  |              |           | $ | 7,127   |        
|Technical installations and machinery    |                                |                | 54,849  |              |           |   | 20,072  |        
|Other installations, tools and furniture |                                |                | 14,481  |              |           |   | 7,598   |        
|Data processing equipment                |                                |                | 215,653 |              |           |   | 122,977 |        
|Software                                 |                                |                | 52,623  |              |           |   | 10,001  |        
|Other assets                             |                                |                | 77,458  |              |           |   | 15,139  |        
|                                         |                                |                |         |              |           |   |         |        
|                                         | Total accumulated depreciation |                | $       | 431,993      |           |   | $       | 182,914 |        
|                                         |                                |                |         |              |           |   |         |        
|                                         |                                | Net book value |         | $            | 1,010,793 |   |         | $       | 712,667 | 
|                                         |                                |                |         |              |           |   |         |        

NOTE 3- SHAREHOLDERS EQUITY

The authorized capital stock of the Company consists of 100,000,000 shares of
$.001 par value voting common stock. Each share of common stock is entitled to
one vote. The holders of the capital stock are entitled to receive, when and
as declared by the Board of Directors, dividends payable either in cash, in
property or in shares of the capital stock of the Company. Dividends have no
cumulative rights and dividends will not accumulate if the Directors do not
declare such dividends. Through December 31, 2002, no dividends have been
declared or paid by the Company.

In October 2001, the shareholders approved an exchange of common stock of the
Company for all of the outstanding common stock of Spantel Communications, Inc.
BVI (BVI), a company incorporated in the British Virgin Islands. The stock
exchange between Spantel and BVI has been considered a reverse acquisition.
The reverse acquisition was accomplished through the issuance of 16,500,000
shares of common stock of the Company. At the date of the reverse acquisition,
the Company had 1,193,636 outstanding shares of common stock.

Prior to the reverse acquisition, Spantel issued 2,000,000 shares of common
stock in June 2001 to repay shareholder advances in the amount of $6,312,605
(see Note 6).

During the year ended December 31, 2002, Spantel completed a recapitalization
and according to Spanish corporate law, was required to reduce its share
capital, and accordingly reclassified a deficit in the amount of $5,151,038 to
paid-in capital.

In addition, in June 2002, the Company issued 4,115,110 shares of common stock
for shareholder loans in the amount of $4,115,110.

In July 2002, the Company issued
50,000 shares of common stock as compensation for legal services,
valued at $2.00 per share, or $100,000. This amount has been included
in professional fees in the accompanying statement of operations.

F-11



---



##### 



SPANTEL COMMUNICATIONS, INC.
AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)

NOTE 4- ADVANCES FROM BANK

The Companys bank advances funds based on the amount that the Company bills to
its customers each month. These customers then pay the bank directly. In the
event these customers do not pay the bank, the amount receivable from these
customers is charged back against the restricted cash equivalent held by the
bank (see Note 1). The Company is charged a fee by their bank for this
service.

NOTE 5- NET ASSETS HELD FOR DISPOSAL

During the year ended December 31, 2000, the Company approved the disposition
of its wholly-owned subsidiary, Spansurf, S.L. (Spansurf). The business
purpose of Spansurf was to render internet services. Accordingly, the net
assets of Spansurf at December 31, 2000 have been presented as net assets held
for disposal. These net assets were disposed of in 2001, and the Company
recorded a gain on the disposition of $312,690. Net assets and results of
operations of Spansurf were approximately as follows:

|             |                        |                              |         |              |          |                |       |  |          |              |  |            |  | 
|------------ | ---------------------- | ---------------------------- | ------- | ------------ | -------- | -------------- | ----- |  | -------- | ------------ |  | ---------- |  | 
|             |                        |                              |         |              |          |                |       |  |          |              |  | Year Ended
|             |                        |                              |         | December 31, |          |                |       |  |          | December 31,
|             |                        |                              |         | 2000         |          |                |       |  |          | 2000        
|             |                        |                              |         |              |          |                |       |  |          |             
|Assets:      |                        |                              |         |              |          |                |       |  |          |              |  |           
|             | Current assets         |                              | $       | 82,824       |          |                | Sales |  | $        | 12,168       | 
|             | Fixed and other assets |                              |         | 44,527       |          |                |       |  |          |              |  |            | 
|             |                        |                              |         |              |          |                |       |  |          |              |  |           
|             |                        |                              | 127,351 |              |          | Operating loss |       |  | (311,150 | )           
|             |                        |                              |         |              |          | Net loss       |       |  | (311,150 | )           
|Liabilities: |                        |                              |         |              |          |                |       |  |          |              |  |           
|             | Accounts payable       |                              |         | 440,041      |          |                |       |  |          |              |  |            | 
|             |                        |                              |         |              |          |                |       |  |          |              |  |           
|             |                        | Net assets held for disposal |         | $            | (312,690 | )              |       |  |          |              |  |            |  | 
|             |                        |                              |         |              |          |                |       |  |          |              |  |           

NOTE 6- RELATED PARTY TRANSACTIONS

Balances with related parties at December 31, 2002 and 2001 consisted of the following:

|                                                                                                                                                                                         |       |   |                          |         |                        |   |         |         |      |   |           |           |  |   |           |           | 
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ----- | - | ------------------------ | ------- | ---------------------- | - | ------- | ------- | ---- | - | --------- | --------- |  | - | --------- | --------- | 
|                                                                                                                                                                                         |       |   | Due from Related Parties |         | Due to Related Parties
|                                                                                                                                                                                         |       |   | December 31,             |         | December 31,          
|                                                                                                                                                                                         |       |   | 2002                     |         | 2001                   |   | 2002    |         | 2001
|                                                                                                                                                                                         |       |   |                          |         |                        |   |         |         |     
|Non-interest bearing note
payable, due upon payment by
payee to a creditor of the
Company in the same amount, with
earlier maturity upon certain
events stipulated in the note
agreement |       | $ |                         |         |                        | $ |        |         |      | $ | 292,229   |           |  | $ | 292,229   |          
|                                                                                                                                                                                        
|Non-interest bearing note
payable, due upon payment by
payee to a creditor of the
Company in the same amount, with
earlier maturity upon certain
events stipulated in the note
agreement |       |   |                         |         |                        |   |        |         |      |   | 310,218   |           |  |   | 310,218   |          
|                                                                                                                                                                                        
|Advances from shareholders                                                                                                                                                               |       |   |                         |         |                        |   |        |         |      |   | 1,220,690 |           |  |   | 3,770,576 |          
|                                                                                                                                                                                        
|Advances from/to related parties                                                                                                                                                         |       |   | 250,954                  |         |                        |   | 251,163 |         |      |   | 158,380   |           |  |   | 293,637   |          
|                                                                                                                                                                                        
|Due to related companies for
telemarketing and other services                                                                                                                            |       |   |                         |         |                        |   |        |         |      |   | 1,807,167 |           |  |   | 1,993,157 |          
|                                                                                                                                                                                         |       |   |                          |         |                        |   |         |         |      |   |           |           |  |   |           |          
|                                                                                                                                                                                         | Total |   | $                        | 250,954 |                        |   | $       | 251,163 |      |   | $         | 3,788,684 |  |   | $         | 6,659,817 | 
|                                                                                                                                                                                         |       |   |                          |         |                        |   |         |         |      |   |           |           |  |   |           |          

F-12



---



##### 



SPANTEL COMMUNICATIONS, INC.
AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)

NOTE 6- RELATED PARTY TRANSACTIONS(continued)

Spantel S.A. relies on a related entity, ABC Telemarketing S.L. (ABC), a
Spanish company, for telemarketing services to generate new customers as well
as operating a customer service center for its base of customers. ABC is 50%
owned by the chief executive officer of Spantel S.A. and charges Spantel S.A.
for the services provided. Spantel S.A. incurred $1,902,737 and $1,765,347
during the years ended December 31, 2002 and 2001, respectively related to
these services from ABC. Included in due to related companies for
telemarketing and other services above is $1,785,207 and $1,974,497 as of
December 31, 2002 and 2001, respectively, due to ABC.

During 2002 and 2001, respectively, the Company paid $224,537 and $631,919 to
Credifinance Capital Corp. (Credifinance) for investment banking fees for
services rendered in connection with the reverse acquisition of Spantel
(formerly Receptagen, Ltd.). At December 31, 2001 an additional $208,982 was

owed Credifinance for amounts advanced for operating expenses incurred by
Spantel during 2001 and is included in due to related parties above for 2001.
During 2002, this amount was repaid by an unrelated entity, and accordingly
this amount is now owed to that unrelated entity (see Note 8). Credifinance is
also related to the entity that is the note holder of the two notes payable
listed above totaling $602,447 and in addition, is related to another entity
that is a 5.65% shareholder.

Included in due from related parties above is $156,113 and $106,241 as of
December 31, 2002 and 2001, respectively due from Spansurf. Also included in
due from related parties above is $94,840 and $144,922 as of December 31, 2002
and 2001, respectively, due from entities owned by certain shareholders and
directors of the Company and $121,201 due to entities owned by certain
shareholders and directors of the Company.

Included in deferred subscriber acquisition costs at December 31, 2002 and 2001
is $229,118 and $155,959 to related parties.

On March 27, 2002, Spantel S.A. entered into an agreement with a related party
to borrow up to $1,500,000 bearing interest at market rates and maturing in not
less than one year. As of December 31, 2002, the Company owed this related
party $1,220,690 pursuant to the agreement.

NOTE 7- INCOME TAXES

At December 31, 2002, the Company had an unused U.S. federal net operating loss
carryforward of approximately $141,800 for income tax purposes, which expires
in 2021. However, the ability to utilize such losses to offset future taxable
income is subject to various limitations imposed by the rules and regulations
of the Internal Revenue Service. In addition, at December 31, 2002, the
Company had an unused Spanish net operating loss carryforward of approximately
$6,996,700 USD, of which $1,302,000 expires in 2015, $4,019,000 expires in 2016
and the remainder in 2017. These net operating loss carryforwards may result
in future income tax benefits of approximately $2,427,000; however, because
realization is uncertain at this time, a valuation reserve in the same amount
has been established. Deferred income taxes reflect the net tax effects of
temporary differences between the carrying amounts of assets and liabilities
for financial reporting purposes and the amounts used for income tax purposes.
Significant components of the Companys deferred tax liabilities and assets as
of December 31, 2002 and 2001 are as follows:

|                         |                                             |   |      |            |      |   |   |            |  
|------------------------ | ------------------------------------------- | - | ---- | ---------- | ---- | - | - | ---------- | -
|                         |                                             |   | 2002 |            | 2001
|                         |                                             |   |      |            |     
|Deferred tax liabilities |                                             | $ |     |            |      | $ |  |           
|                         |                                             |   |      |            |      |   |   |           
|Deferred tax assets:     |                                             |   |      |            |      |   |   |           
|                         | U.S. net operating loss carryforwards       |   | $    | 48,200     |      |   | $ | 2,250      |  
|                         | Spanish net operating loss carryforwards    |   |      | 2,37,8800  |      |   |   | 1,862,350  |  
|                         | Temporary differences                       |   |      |           |      |   |   |           |  
|                         |                                             |   |      |            |      |   |   |           
|                         | Total deferred tax assets                   |   |      | 2,427,000  |      |   |   | 1,864,600  |  
|                         | Valuation allowance for deferred tax assets |   |      | (2,427,000 | )    |   |   | (1,864,600 | )
|                         |                                             |   |      |            |      |   |   |           
|                         |                                             | $ |     |            |      | $ |  |           
|                         |                                             |   |      |            |      |   |   |           

The valuation allowance for deferred tax assets was increased by $562,400 and
$1,408,900 for the years ending 2002 and 2001.

F-13



---



##### 



SPANTEL COMMUNICATIONS, INC.
AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)

NOTE 8- CONVERTIBLE NOTE PAYABLE, COMMITMENTS AND CONTINGENCIES

In June 2002, the Company issued a convertible note payable to an unrelated
company, in payment of advances in the amount of $200,000 owed to a related
entity. The $200,000 note payable bears interest at 8%, is due June 30, 2007
and is convertible into shares of common stock at the market rate at the time
of conversion, but no less than $0.50 per share.

The Company leases office space under month-to-month agreements with related
parties. The annual rents under these leases are approximately $210,600.

The Company purchases all of its telephone services from two suppliers based on
corresponding supply contracts signed by the parties. These contracts are
renewable annually. The Company believes that the contracts subscribed with
these telephone operators will be renewed on related expiration dates given
that all terms of the contracts have been met and that, if they were not to
renew their contracts, the Company would be able to continue rendering its
services to its customers via alternative operators in the communications
industry.

The Companys cash and cash equivalents are not insured by any regulatory
authority in Spain, therefore, should the bank cease doing business, these
amounts are subject to loss.

F-14



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##### 






ITEM 8.     CHANGES AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURES







Effective January 23, 2002, we retained Spicer Jeffries & Co. of Denver,
Colorado as our new certifying accountants, replacing Salberg & Company PA. The
decision to change accountants was solely prompted on the change of our
business and was made by the audit committee of our board of directors. Salberg
& Company PA was notified on January 23, 2002. There were no disagreements with
Salberg & Company PA on any matter of accounting principles or practices,
financial statement disclosure, or auditing scope or procedure during the
period of their engagement, which was June 11, 2001 through January 23, 2002.

The reports of Salberg & Company PA, on our financial statements for the years
ended December 31, 1999 and 2000 contained a modification as to our ability to
continue as a going concern because of our accumulated deficit and working
capital deficiency.

The decision to change auditors was made by the audit committee of our board of
directors and was approved by the full board of directors.

PART III

ITEM 9.     DIRECTORS AND EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS; COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT.

The Company has established a two (2) member board of directors. On December
31, 2002, members of the board of directors were as follows:

|                                         |  |     |       |        |  |                                
|---------------------------------------- |  | --- | ----- | ------ |  | -------------------------------
|Name                                     |  | Age |       | Office
|                                         |  |     |       |       
|Mohamed A. Khashoggi
Jose Ramon Basterra |  |     | 39
46 |        |  | Director
President and Director

MOHAMED A. KHASHOGGI. Mr. Khashoggi has been a Director since our inception and
served as President until September 20, 2002. From 1997 until joining us, Mr.
Khashoggi provided consulting services on behalf of Ibadesa S.L., a business
consulting firm in Madrid, Spain. He holds a Masters degree in International
Studies from the University of Utah.

JOSE RAMON BASTERRA. Mr. Basterra acted as the Management Director since our
inception, until succeeding Mr. Khashoggi as President. He has been a
vice-president with Abogados & Economistas in Bilbao, Spain since 1990 and was
a Managing Director of Salumar, S.A. in Marbella, Spain in 1997 and 1998. He
holds a law degree from Universidad del Pais Vasco and an MBA from Instituto de
Empresa, both in Bilbao, Spain.

We pay Mr. Khashoggi approximately 2,400 Euros/Month (USD $2,501/Month) for his
contribution to the Company as a Director. Mr. Basterras compensation is
inclusive of his service to the Company as President and Director. In addition
to their compensation, we reimburse directors for any reasonable expenses
pertaining to attending meetings, including travel, lodging and meals.

Our Articles of Incorporation provide that the board of directors shall consist
of not less than one director, each of which shall be elected annually, and
serve for a term of one year. Currently our board of directors consists of Mr.
Khashoggi and Mr. Basterra, who were initially elected in June 1999,
subsequently re-elected in 2001 and 2002, and shall serve until the next annual
meeting of stockholders and until the election and qualification of their respective successors.





---



##### 






Officers
are elected annually by our board of directors and, subject to existing
employment agreements, if any, serve at their discretion.

There are no material proceedings to which any of our directors, officers or
affiliates, any beneficial owner of more than five percent of our common stock,
or any associate of any such director, officer, affiliate or security holder is
a party adverse to us or any of our subsidiaries or has a material interest
adverse to us or any of our subsidiaries. To date, the directors, officers, and
beneficial shareholders have not complied with the requirements of Section
16(a) of the Securities Exchange Act.

ITEM 10.      EXECUTIVE COMPENSATION

The following table sets forth the aggregate cash compensation paid for
services rendered to us during the last three years by the following executive
officers serving at the end of the year ended December 31, 2002

|                            |  |      |      |              |  |                    |           |  |  |      |  | 
|--------------------------- |  | ---- | ---- | ------------ |  | ------------------ | --------- |  |  | ---- |  | 
|Name and Principal Position |  | Year |      | Salary (USD) |  | Other Compensation
|                            |  |      |      |              |  |                   
|Mohamed A. Khashoggi,       |  |      | 2002 |              |  | $                  | 30,335.70 |  |  |      |  | 
|Director (1) (2)            |  |      | 2001 |              |  | $                  | 46,828.80 |  |  | None
|                            |  |      | 2000 |              |  | $                  | 13,855.10 |  |  |      |  | 
|Jose Ramon Basterra,        |  |      | 2002 |              |  | $                  | 73,614.90 |  |  |      |  | 
|President and Director (1)  |  |      | 2001 |              |  | $                  | 26,060.20 |  |  | None
|(2) (5)                     |  |      | 2000 |              |  | $                  | 12,237.10 |  |  |      |  | 
|Cesar Martinez, Financial   |  |      | 2002 |              |  | $                  | 70,644.90 |  |  |      |  | 
|Manager (2) (3)             |  |      | 2001 |              |  | $                  | 31,699.20 |  |  | None
|                            |  |      | 2000 |              |  | $                  | -0-       |  |  |      |  | 
|Gabriel DeLacaux,           |  |      | 2000 |              |  | $                  | 73,590.70 |  |  |      |  | 
|Operations Director (2) (4) |  |      | 2001 |              |  | $                  | 57,322.20 |  |  | None
|                            |  |      | 2000 |              |  | $                  | 4,875.75  |  |  |      |  | 

(1)  KHASHOGGI AND BASTERRA BECAME ASSOCIATED WITH THE COMPANY AT INCEPTION. IN
AN ATTEMPT TO CONSERVE WORKING CAPITAL, KHASHOGGI AND BASTERRA, AGREED TO
REDUCED SALARIES UNTIL SUCH TIME AS THE COMPANY WAS MORE SOLVENT.

(2)  IN THE YEARS 2001 AND 2002, SALARIES AND INVOICES WERE PAID IN SPANISH
PESETAS AND EUROS, RESPECTIVELY. THE RATE SHOWN HERE IS BASED ON THE EXCHANGE
RATE FOR THE LAST BUSINESS DAY OF EACH YEAR.

(3)  MR. MARTINEZ WAS PAID FROM JANUARY THROUGH DECEMBER OF 2002 AND JUNE TO
DECEMBER 2001 FOR HIS SERVICES AS THE COMPANYS FINANCIAL DIRECTOR.

(4)  MR. DELACLAUX PROVIDED CONSULTING SERVICES ON A NON-AFFILIATED BASIS IN
2000 AND UP UNTIL MAY 2001. HE CONTINUED TO RECEIVE COMPENSATION AGAINST
INVOICE THROUGH DECEMBER 2002 AS OPERATIONS DIRECTOR.

(5)  MR. BASTERRA WAS PAID ADDITIONAL COMPENSATION OF $12,108.00 THROUGH DDT,
INC. A COMPANY OWNED 100% BY MR. BASTERRA.





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##### 






OPTION/SAR GRANTS IN LAST FISCAL YEAR

There were no options to purchase shares of our common stock and SARs granted
by us to our named executive officers in the fiscal year ended December 31,
2002.

AGGREGATE OPTION/SAR EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END
OPTION/SAR VALUES

There were no options to purchase shares of our common stock or SARs exercised
in the last fiscal year ended December 31, 2002.

ITEM 11.     SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The following table sets forth information as of December 31, 2002 with respect
to the beneficial ownership of the outstanding shares of our common stock by
(1) each person known by us to be the beneficial owner of more than 5% of our
common stock; (2) each of our directors; (3) each Named Executive Officer; and
(4) all directors and executive officers as a group. As of December 31, 2002
there were 21,858,746 shares of our common stock issued and outstanding.

|                                                                                                   |  |                |  |                    |           |                    |  |      |  
|-------------------------------------------------------------------------------------------------- |  | -------------- |  | ------------------ | --------- | ------------------ |  | ---- | -
|Name and Address of                                                                                |  |                |  | Number of Shares   |           | % of Stock        
|Beneficial Owner                                                                                   |  | Title of Class |  | Beneficially Owned |           | Beneficially Owned
|                                                                                                   |  |                |  |                    |           |                   
|Mohamed Khashoggi
200-A Benabola
Puerta Banus,
29660, Malaga
Spain                                 |  | Common Stock   |  |                    | 2,800,000 |                    |  | 12.8 | %
|Jose RamonBasterra
Jardines del
Puerto, Local 21
Avda. Jose BanusS/N
Marbella, 29660,
Malaga
Spain |  | Common Stock   |  |                    | 1,070,900 |                    |  | 4.9  | %
|Cesar Martinez,
Jardines del
Puerto, Local 21
Avda. Jose BanusS/N
Marbella, 29660,
Malaga
Spain    |  | Common Stock   |  |                    | 10,000    |                    |  | *    |  
|Gabriel DeLacaux
Jardines del
Puerto, Local 21
Avda. Jose BanusS/N
Marbella, 29660,                |  | Common Stock   |  |                    | 60,000    |                    |  | *    |  





---



##### 



|                                                                              |  |                |  |                    |           |                    |  |      |  
|----------------------------------------------------------------------------- |  | -------------- |  | ------------------ | --------- | ------------------ |  | ---- | -
|Name and Address of                                                           |  |                |  | Number of Shares   |           | % of Stock        
|Beneficial Owner                                                              |  | Title of Class |  | Beneficially Owned |           | Beneficially Owned
|                                                                              |  |                |  |                    |           |                   
|Malaga
Spain                                                                  |  |                |  |                    |           |                    |  |      |  
|Financiere
Hispoano-Suiza
SA(1)
10 Rue Pierre Fation
Geneva, 1206
Switzerland |  | Common Stock   |  |                    | 1,000,000 |                    |  | 4.6  | %
|All directors
officers and as a
group
(5 persons)                             |  | Common Stock   |  |                    | 4,940,900 |                    |  | 22.6 | %

*  Indicates less than 1% ownership.

(1)  Financiere Hispoano-Suiza SA is an affiliated company of Credifinance, Ltd.
The shares owned by Financiere Hispoana-Suiza SA were issued to Credifinance
for investment banking services rendered to Spantel.




ITEM 12.      CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

Spantel 2001 S.A. relies on a related entity, ABC Telemarketing S.L. (ABC), a
Spanish company, for telemarketing services to generate new customers as well
as operating a customer service center for its base of customers. ABC is 50%
owned by the chief executive officer of Spantel 2001 S.A. and charges Spantel
2001 S.A. for the services provided. Spantel 2001 S.A. incurred $1,902,737 and
$1,765,347 during the years ended December 31, 2002 and 2001, respectively
related to these services from ABC.

During 2002 and 2001, we paid $224,537 and $631,919, respectively, to
Credifinance Capital Corp. (Credifinance) for investment banking fees for
services rendered in connection with the reverse acquisition of Spantel
(formerly Receptagen, Ltd.). At December 31, 2001, $208,982 was owed
Credifinance for amounts advanced for operating expenses incurred by us during
2001, which was paid by Almond, Inc. a non-affiliated company on a convertible
note to Spantel during 2002. Credifinance is also related to Interunion
Financial Corp., which is the note holder of two notes payable totaling
$602,447. Credifinance is also related to Financiere Hispoana-Suiza SA who is a
4.6 % shareholder of Spantel.

Additionally, In November 2002, the Company entered into an agreement with DDT,
Inc. to pay Mr. Basterra for his services as President and Director. This
companys sole shareholder is Mr. Basterra.




ITEM 13.      EXHIBITS AND REPORTS ON FORM 8-K

(A) INDEX TO EXHIBITS

|            |     |             |  |                                                                                                                                                                  
|----------- | --- | ----------- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------
|EXHIBIT NO. |     | DESCRIPTION
|            | 2.1 |             |  | Share Exchange Agreement dated October 23, 2001 by and
between Receptagen LTD. and Spantel Communications, Inc. BVI and Spantel 2000, S.A. and Mohamed Khashoggi.





---



##### 



|            |      |             |  |                                                                                                                                                              
|----------- | ---- | ----------- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------
|EXHIBIT NO. |      | DESCRIPTION
|            |      |             |  | (Incorporated by
reference to Exhibit 2.1 of Form 10KSB filed June 10, 2002).                                                                                
|            |      |             |  |                                                                                                                                                              
|            | 3.1  |             |  | Certificate and Articles of Incorporation. (Incorporated by
reference to Exhibit 99 of Registrants current report filed on Form
8-K filed February 8, 2002).
|            |      |             |  |                                                                                                                                                              
|            | 3.2  |             |  | By-laws (Incorporated by reference to Exhibit 3.12 of Form 10
filed November 14, 1994).                                                                      
|            |      |             |  |                                                                                                                                                              
|            | 99.1 |             |  | Certification by Chief Executive Officer (Filed herewith).                                                                                                   
|            |      |             |  |                                                                                                                                                              
|            | 99.2 |             |  | Certification by Chief Financial Officer (Filed herewith).                                                                                                   

(B)  REPORTS ON FORM 8-K

We filed a Form 8-K on November 26, 2002 reporting the following items:

Item 5:     Other Events (Change in Officers)

We filed a Form 8-K on March 6, 2002 reporting the following items:

Item 4:     Changes in Registrants Certifying Accountant

We filed a Form 8-K on February 8, 2002 reporting the following items:

Item 1.     Changes in Control of Registrant

Item 2.     Acquisition or Disposition of Assets

Item 4.     Changes in Registrants Certifying Accountant

Item 5.     Other Events (Share Consolidation, Domestication in the State of
Florida, Name Change

Item 6.     Resignations of Registrants Directors

Item 7.     Financial Statements and Exhibits




ITEM 14.      CONTROLS AND PROCEDURES

The Companys President (who is also our Chief Executive Officer) and Chief
Financial Officer evaluated the Companys disclosure and internal controls as
of the end of the quarter and year ended December 31, 2002. This evaluation
determined that the disclosure controls and procedures in place at the Company
ensure that material information relating to the registrant, including
consolidated subsidiaries, is made known to the President and Chief Financial
Officer by others within the entities for the period ended December 31, 2002 to
ensure disclosure on a timely basis in conformance with applicable rules and
regulations.

It should be noted that the design of any system of controls is based in part
upon certain assumptions about the likelihood of future events,





---



##### 



and there can
be no assurance that any design will succeed in achieving its stated goals
under all potential future conditions, regardless of how remote. Further there
were no significant deficiencies in the design or operation of the Companys
internal controls, which would have adversely affected the Companys ability to
record, process, summarize or report financial data. No material weaknesses in
internal controls were identified or reported to the registrants auditors nor
was there any fraud that involved management or other employees who have a
significant role in the Companys internal controls.

SIGNATURES

In accordance with Section 13 of 15(d) of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto
duly authorized.

SPANTEL COMMUNICATIONS, INC.
(Registrant)

|    |  |                                                                     |  |                     
|--- |  | ------------------------------------------------------------------- |  | --------------------
|By: |  | /s/ JOSE RAMON BASTERRA
Jose Ramon Basterra,
President and Director |  | Date: April 15, 2003

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

|    |  |                                                                          |  |                     
|--- |  | ------------------------------------------------------------------------ |  | --------------------
|By: |  | /s/ JOSE RAMON BASTERRA
Jose Ramon Basterra,
President and Director      |  | Date: April 15, 2003
|    |  |                                                                          |  |                     
|By: |  | /s/ MOHAMED A. KHASHOGGI
Mohamed A. Khashoggi,
Director                  |  | Date: April 15, 2003
|    |  |                                                                          |  |                     
|By: |  | /s/ CESAR MARTINEZ
Cesar Martinez,
Treasurer and Chief
Financial Officer |  | Date: April 15, 2003

ITEM 14  CONTROLS AND PROCEDURES

CERTIFICATION

I, Jose Ramon Basterra, certify that:

1.     I have reviewed this annual report on Form 10-KSB of Spantel Communications,
Inc.;

2.     Based on my knowledge, this annual report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances
under which such statements were made, not misleading with respect to the
period covered by this annual report;





---



##### 



3.     Based on my knowledge, the financial statements, and other financial
information included in this annual report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this annual report;

4.     The registrants other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and have:



| |                                                                                                                                                                                                                                                                                                
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | a) designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within
those entities, particularly during the period in which this
annual report is being prepared;



| |                                                                                                                                                                                              
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | b) evaluated the effectiveness of the registrants disclosure
controls and procedures as of a date within 90 days prior to the
filing date of this annual report (the Evaluation Date); and



| |                                                                                                                                                                        
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | c) presented in this annual report our conclusions about the
effectiveness of the disclosure controls and procedures based on
our evaluation as of the Evaluation Date;

5.     The registrants other certifying officers and I have disclosed, based on
our most recent evaluation, to the registrants auditors and the audit
committee of registrants board of directors (or persons performing the
equivalent functions):



| |                                                                                                                                                                                                                                                                                                  
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | a) all significant deficiencies in the design or operation of
internal controls which could adversely affect the registrants
ability to record, process, summarize and report financial data
and have identified for the registrants auditors any material
weaknesses in internal controls; and



| |                                                                                                                                                          
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------
| | b) any fraud, whether or not material, that involves management or
other employees who have a significant role in the registrants
internal controls; and

6.     The registrants other certifying officers and I have indicated in this
annual report whether there were significant changes in internal controls or in
other factors that could significantly affect internal controls subsequent to
the date of our most recent evaluation, including any corrective actions with
regard to significant deficiencies and material weaknesses.

|                      |  |                                                                                 
|--------------------- |  | --------------------------------------------------------------------------------
|Dated: April 15, 2003 |  | /s/ Jose Ramon Basterra
Jose Ramon Basterra, President
(Chief Executive Officer)





---



##### 



I, Cesar Martinez, certify that:

1.     I have reviewed this annual report on Form 10-KSB of Spantel Communications,
Inc.;

2.     Based on my knowledge, this annual report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this annual
report;

3.     Based on my knowledge, the financial statements, and other financial
information included in this annual report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this annual report;

4.     The registrants other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and have:



| |                                                                                                                                                                                                                                                                                                
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | a) designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within
those entities, particularly during the period in which this
annual report is being prepared;



| |                                                                                                                                                                                              
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | b) evaluated the effectiveness of the registrants disclosure
controls and procedures as of a date within 90 days prior to the
filing date of this annual report (the Evaluation Date); and



| |                                                                                                                                                                        
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | c) presented in this annual report our conclusions about the
effectiveness of the disclosure controls and procedures based on
our evaluation as of the Evaluation Date;

5.     The registrants other certifying officers and I have disclosed, based on
our most recent evaluation, to the registrants auditors and the audit
committee of registrants board of directors (or persons performing the
equivalent functions):



| |                                                                                                                                                                                                                                                                                                  
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | a) all significant deficiencies in the design or operation of
internal controls which could adversely affect the registrants
ability to record, process, summarize and report financial data
and have identified for the registrants auditors any material
weaknesses in internal controls; and
|
| | b) any fraud, whether or not material, that involves management or
other employees who have a significant role in the registrants
internal controls; and                                                                                                                                        





---



##### 



6.     The registrants other certifying officers and I have indicated in this
annual report whether there were significant changes in internal controls or in
other factors that could significantly affect internal controls subsequent to
the date of our most recent evaluation, including any corrective actions with
regard to significant deficiencies and material weaknesses.

|                      |  |                                                                       
|--------------------- |  | ----------------------------------------------------------------------
|Dated: April 15, 2003 |  | /s/ Cesar Martinez
Cesar Martinez, Treasurer
(chief financial officer)





---



##### 



EXHIBIT INDEX

|            |      |             |  |                                                                                                                                                                                                                                                
|----------- | ---- | ----------- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|EXHIBIT NO. |      | DESCRIPTION
|            | 2.1  |             |  | Share Exchange Agreement dated October 23, 2001 by and
between Receptagen LTD. and Spantel Communications, Inc. BVI and
Spantel 2000, S.A. and Mohamed Khashoggi. (Incorporated by reference
to Exhibit 2.1 of Form 10KSB filed June 10, 2002).
|            |      |             |  |                                                                                                                                                                                                                                                
|            | 3.1  |             |  | Certificate and Articles of Incorporation. (Incorporated by
reference to Exhibit 99 of Registrants current report filed on Form
8-K filed February 8, 2002).                                                                                  
|            |      |             |  |                                                                                                                                                                                                                                                
|            | 3.2  |             |  | By-laws (Incorporated by reference to Exhibit 3.12 of Form 10
filed November 14, 1994).                                                                                                                                                        
|            |      |             |  |                                                                                                                                                                                                                                                
|            | 99.1 |             |  | Certification by Chief Executive Officer (Filed herewith)                                                                                                                                                                                      
|            |      |             |  |                                                                                                                                                                                                                                                
|            | 99.2 |             |  | Certification by Chief Financial Officer (Filed herewith)