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

                                   FORM 10-KSB

(Mark One)
[ ] ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
    ACT OF 1934.

    For the fiscal year ended ________________

                                       OR

[X] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
    ACT OF 1934.

    For the Transition Period from November 1, 1998 to June 30, 1999.

                           Commission File No. 1-13760

                          THE NETWORK CONNECTION, INC.
                 ----------------------------------------------
                 (Name of Small Business Issuer in Its Charter)

                GEORGIA                                   58-1712432
    -------------------------------            ---------------------------------
    (State or Other Jurisdiction of            (IRS Employer Identification No.)
     Incorporation or Organization)

         222 NORTH 44TH STREET
            PHOENIX, ARIZONA                                85034
----------------------------------------                  ----------
(Address of principal executive offices)                  (Zip Code)

                                 (602) 629-6200
                ------------------------------------------------
                (Issuer's Telephone Number, Including Area Code)

         Securities registered under Section 12(b) of the Exchange Act:

                                                         Name of Each Exchange
         Title of Each Class                              On Which Registered
         -------------------                              -------------------
COMMON STOCK, $.001 PAR VALUE PER SHARE                 THE NASDAQ STOCK MARKET

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

                                      NONE
                                 --------------
                                (Title of Class)

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

Check if there is no disclosure of delinquent  filers in response to Item 405 of
Regulation S-B contained in this form, and no disclosure  will be contained,  to
the  best  of  registrant's   knowledge,  in  definitive  proxy  or  information
statements  incorporated  by  reference  in Part III of this Form  10-KSB or any
amendment to this Form 10-KSB. [ ]

State issuer's revenues for its most recent fiscal year: $958,607

As of October 8, 1999,  the  number of shares of Common  Stock  outstanding  was
6,405,743  and the  aggregate  market  value of such Common  Stock (based on the
closing  price  on that  date)  held by  non-affiliates  of the  registrant  was
approximately $10,829,925.
<PAGE>
                          THE NETWORK CONNECTION, INC.

                          ANNUAL REPORT ON FORM 10-KSB

                                TABLE OF CONTENTS

                                                                            Page
                                                                            ----
PART I......................................................................  1

  ITEM 1  -- DESCRIPTION OF BUSINESS........................................  1

  ITEM 2  -- DESCRIPTION OF PROPERTY........................................ 11

  ITEM 3  -- LEGAL PROCEEDINGS.............................................. 11

  ITEM 4  -- SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS............ 13

PART II..................................................................... 14

  ITEM 5  -- MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS....... 14

  ITEM 6  -- MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
             CONDITION AND RESULTS OF OPERATIONS............................ 15

  ITEM 7  -- FINANCIAL STATEMENTS........................................... 24

  ITEM 8  -- CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
             ACCOUNTING AND FINANCIAL DISCLOSURE............................ 24

PART III.................................................................... 25

  ITEM 9  -- DIRECTORS AND EXECUTIVE OFFICERS............................... 25

  ITEM 10 -- EXECUTIVE COMPENSATION......................................... 27

  ITEM 11 -- SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
             MANAGEMENT..................................................... 31

  ITEM 12 -- CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS................. 33

PART IV..................................................................... 34

  ITEM 13 -- EXHIBITS AND REPORTS ON FORM 8-K............................... 34

SIGNATURES.................................................................. 37

FINANCIAL STATEMENTS....................................................... F-1
<PAGE>
                                     PART I

ITEM 1. DESCRIPTION OF BUSINESS

GENERAL

     The Network  Connection,  Inc. (the  "Company" or "TNCi") is engaged in the
development,  manufacturing  and marketing of  computer-based  entertainment and
data networks,  which provide users access to information,  entertainment  and a
wide array of service options, such as movies,  shopping for goods and services,
computer  games,  access to the World Wide Web, and gambling where  permitted by
applicable law. The Company's primary markets for its products are cruise ships,
passenger  trains,  schools and corporate  training.  Secondary  markets include
business jets and hotel operators, among others.

     These systems can support  live-feed,  closed-circuit  and satellite  based
digital television  programs in addition to personal  interactive  entertainment
and  video/audio  on  demand,  shopping,  multi-player  games,  gambling,  shore
excursion/event  booking,  karaoke  and  internet  access,  all  simultaneously,
independently and with full user control through a keyboard, wireless television
remote  control  or  touch  screen  display.  In  addition,  attendant  or  crew
interactive training can be provided at the same time.

     As part of the turnkey solution sought by the transportation  industry, the
Company  may also  provide and manage  content  for use with these  systems on a
fee-for-service basis or on a revenue sharing basis.

     The Company's products are sold under the names TRIUMPH,  Cheetah(TM),  and
related sub product names. These systems are based upon  non-proprietary or open
system PC  hardware  standards  and  utilize  major  commercial  components  and
subsystems  in order to  provide  flexibility  and  reliability.  The  Company's
products are designed to be compatible with industry  standard network operating
systems and new network  operating  systems as they  become  available.  Product
design  allows  compatibility  with most  applications  running in such  network
environments,  and  enables  the  Company's  systems to operate  efficiently  as
servers and work  stations  for groups of  interconnected  PCs arranged in LANs,
WANs,  intranets  and the  Internet.  The Company has  distributed  its products
worldwide  principally  through  its own  internal  sales  force  and  strategic
resellers.

     On May 18, 1999, Global  Technologies,  Ltd. (formerly known as Interactive
Flight Technologies, Inc.) ("GTL") received from the Company 1,055,745 shares of
its common  stock and  2,495,400  shares of its Series D  Convertible  Preferred
Stock in exchange for  $4,250,000 in cash and  substantially  all the assets and
certain  liabilities of GTL's Interactive  Entertainment  Division  ("IED"),  as
defined in the Asset  Purchase  and Sale  Agreement  dated  April 30,  1999,  as
amended (the "Transaction"). The Transaction has been accounted for as a reverse
merger  whereby,  for  accounting  purposes,  GTL is considered  the  accounting
acquiror  and  the  Company  is  treated  as the  successor  to  the  historical
operations  of IED.  Accordingly,  the  historical  financial  statements of the
Company,  which  previously  have been reported to the  Securities  and Exchange
Commission  ("SEC") on Forms 10-KSB,  10-QSB,  among  others,  as of and for all
periods through March 31, 1999, will be replaced with those of IED.

     The Company  will  continue  to file as a SEC  registrant  and  continue to
report under the name The Network Connection,  Inc. The financial  statements as
of and for the years  ended  October 31,  1998 and 1997  reflect the  historical
results of GTL's IED as  previously  included  in GTL's  consolidated  financial
statements.  Included in the results of  operations  for the eight  months ended
June 30, 1999 are the  historical  results of GTL's IED through  April 30, 1999,
and the results of the combined  company for the two months ended June 30, 1999.
The Transaction date for accounting purposes is May 1, 1999. Contributed capital
reflects the cash consideration paid by GTL to the Company in the Transaction in
addition to funding of IED historical operations. GTL will continue to report as
a separate SEC registrant,  owning the shares of the Company as described above.
As of June 30, 1999,  the Company is a majority  owned  subsidiary  of GTL whose
ownership,  through a combination of the  Transaction  described above and GTL's
<PAGE>
purchase of Series B 8% preferred stock of the Company and 110,000 shares of the
Company's  common  stock from third  party  investors,  approximates  78% of the
Company  on  an  if-converted  common  stock  basis.  The  historical  financial
statements  of the  Company  up to the  date of the  Transaction  as  previously
reported will no longer be included in future filings of the Company.

     The  Company's  principal  offices  are  located at 222 North 44th  Street,
Phoenix, Arizona 85034 and the main telephone number is (602) 629-6200.

     Unless the context  requires  otherwise,  all  references to "we," "our" or
"us"  refer  to  The  Network   Connection,   Inc.,  a  corporation   originally
incorporated in the state of Georgia in 1986.

     THIS REPORT CONTAINS CERTAIN FORWARD-LOOKING  STATEMENTS WITHIN THE MEANING
OF SECTION  27A OF THE  SECURITIES  EXCHANGE  ACT OF 1933 AND SECTION 21E OF THE
SECURITIES  EXCHANGE ACT OF 1934 (THE  "EXCHANGE  ACT") WHICH  INVOLVE RISKS AND
UNCERTAINTIES,  INCLUDING STATEMENTS REGARDING THE COMPANY'S STRATEGY, FINANCIAL
PERFORMANCE,  AND REVENUE  SOURCES.  THE COMPANY'S  ACTUAL  RESULTS COULD DIFFER
MATERIALLY FROM THE RESULTS ANTICIPATED IN THESE FORWARD-LOOKING STATEMENTS AS A
RESULT OF CERTAIN FACTORS INCLUDING THOSE SET FORTH UNDER "ITEM 6 - MANAGEMENT'S
DISCUSSION AND ANALYSIS OF FINANCIAL  CONDITION AND RESULTS OF  OPERATIONS"  AND
ELSEWHERE IN THIS REPORT.

OUR BUSINESS STRATEGY

     The  Company's  strategy  is to  position  itself as a leading  provider of
comprehensive  interactive  information  system  solutions which are scalable to
accommodate small or large user groups and, are based on a high-speed and secure
network.  The  Company  can also offer  customized  video  content  options  and
interfaces with a customer's  existing  applications and network.  Additionally,
the Company  will  continue to position  itself as an  integrated  browser-based
software  developer  and a content  programming,  procurement,  integration  and
management  service  provider.  Content  programming and procurement can include
educational  and training  products,  video  entertainment,  gaming,  e-mail and
internet access, and E-Commerce capabilities.

SALES, MARKETING AND DISTRIBUTION

     The Company  currently  distributes  its products  principally  through the
efforts of its internal direct sales force. The Company also attends trade shows
and hosts end user  seminars or  meetings  to promote  and market its  products.
Additionally, the Company may advertise in trade publications. The Company plans
to continue and accelerate these efforts.

     Also, the Company is developing  relationships  with  strategic  "partners"
capable of providing  customer  solutions  through the  Company's  products,  or
encouraging  their  customers to purchase the Company's  systems in  conjunction
with their own products on the basis that overall system or product  performance
will be enhanced.  The Company will assist these  partner-vendors by determining
the   configuration  of  the  Company's   products  that  will  deliver  optimal
performance along with the partner-vendor's products.

     The purchase price for the Company's  "turn-key"  packaged  systems depends
upon  various  factors,  such as the size  and  type of  train or ship,  and the
requested system  features.  There can be a relatively long sales cycle for some
products, because of the need to evaluate the Company's technology, to conduct a
test installation of each customized  system,  and to negotiate  agreements with
other  providers.  The sales  cycle is also  dependent  upon a number of factors
beyond the Company's control,  such as the financial  condition of the customer,
safety and maintenance  concerns,  regulatory issues and purchasing  patterns of
particular  operators,  and the industry generally.  This can result in long and
unpredictable buying patterns for the Company's transportation-related products.
See "Management's  Discussion and Analysis of Financial Condition and Results of
Operations."

                                        2
<PAGE>
OVERVIEW OF THE MARKETS AND INDUSTRIES WE SERVE

     The Company is focused on four primary markets at this time: (1) multimedia
servers for education and corporate training; (2) interactive  entertainment and
information  systems  for  cruise  ships;  (3)  interactive   entertainment  and
information  systems for trains;  and (4)  interactive  information  systems for
business  aviation.  Corporate  training programs and interactive  education for
high  schools and  universities  constitute  large  markets in excess of several
billion dollars per year. Indeed, high schools and universities are beginning to
seek innovative ways of bringing the internet and interactive  courseware to the
classroom.  Interactive  entertainment and information  systems for cruise ships
and trains represent large,  relatively  untapped  markets.  For example,  there
currently  are more than 70 cruise  ships in  revenue  service  with 500 or more
guest cabins,  and the build  schedule for ships of this size shows more than 30
new ships entering  revenue  service  between now and the end of 2001. Only nine
ships  to date  have  had  interactive  entertainment  and  information  systems
installed.  In the case of commuter  trains,  no interactive  entertainment  and
information   systems  have  been   installed.   Finally,   original   equipment
manufacturers  (OEMs) and operators of business  jets are just  beginning to see
the benefits of installing  interactive  and multimedia  servers  connected to a
high-speed LAN to provide business travelers with an "office-in-the-sky."  While
the  Company  believes  these  markets  are  large,   relatively  untapped,  and
potentially  profitable,  no  assurances  can be given that the Company  will be
successful in any of them.

OUR PRODUCTS AND SERVICES

     INTERACTIVE INFORMATION SYSTEMS FOR BUSINESS AVIATION (AIRVIEW)

     In  April  1998,  the  Boeing  Company  identified  the  Company's  AirView
interactive and video server as a key element of an "office-in-the-sky"  for the
new B737-73Q  Business Jet. In November 1998, the Company received an order from
the Raytheon  Company,  which was  contracted  by Boeing  Company,  to equip the
Boeing  Business Jet (BBJ) B737-73Q  "Demonstrator"  aircraft with the Company's
AirView  interactive  and video server and switches.  Installation  is due to be
completed on the  Demonstrator  aircraft in the quarter  ending  December  1999.
There can be no assurance,  however, that any additional business jet orders for
the Company's AirView system will be received. See "Management's  Discussion and
Analysis of Financial Condition and Results of Operations."

     INTERACTIVE ENTERTAINMENT AND INFORMATION SYSTEMS FOR CRUISE SHIPS
     (CRUISEVIEW)

     CruiseView is an advanced cabin  entertainment  and information  management
system for the  Cruise  industry.  The  CruiseView  system is a high  bandwidth,
high-speed video-enabled intranet, tailored to meet the environmental demands of
cruise  conditions.  With video and data servers connected to cabin set top PCs,
via a Gigabit digital  network  backbone for voice,  video and data,  CruiseView
delivers  to each  cabin,  on demand,  a unique  entertainment  and  information
experience, independent of all other passengers.

     CruiseView offers passengers:

     *    video and music libraries.
     *    e-commerce capabilities.
     *    casino-style and action games.
     *    previews of and the ability to book shore tours.
     *    integration with ship  operations,  including  billing,  room service,
          surveys and customer requests.

     In  September  1998,  the Company  entered  into a Turnkey  Agreement  (the
"Carnival  Agreement")  with  Carnival  Corporation  ("Carnival"),  a Panamanian
registered  corporation,  for the  purchase,  installation  and  maintenance  of
CruiseView on a minimum of one Carnival Cruise Lines ship.  During the four-year
period commencing on the date of the Carnival Agreement,  Carnival has the right
to designate an unspecified  number of additional  ships for the installation of
CruiseView by the Company.  The cost per cabin for the  CruiseView  purchase and

                                        3
<PAGE>
installation on each ship is provided for in the Carnival  Agreement,  as is the
minimum  software  license and  installation  cost per ship, with additional per
ship  costs  charged  based  upon the  number of  actual  cabins  installed  and
operational.  The cost of training  up to ten  Carnival  personnel  per ship for
system operation is included in the contract cost for licensing and installation
of  CruiseView,  with the cost of  additional  training and  maintenance  billed
separately by the Company.  In December 1998,  Carnival ordered the installation
of CruiseView on the Carnival Cruise Lines "M/S Sensation".  CruiseView has been
in  operational  use on  Sensation,  in a test mode,  since August  1999.  It is
expected to begin general  commercial  operation in the quarter ending  December
31, 1999. In August 1999, Carnival ordered the installation of CruiseView on the
Carnival  Cruise  Lines "M/S  Triumph"  which is expected to be completed in the
quarter ending  December 31, 1999.  There can be no assurance that Carnival will
exercise  its  right  under  the  Carnival  Agreement  to order  CruiseView  for
installation on any additional  ships.  See "Cautionary  Factors That May Affect
Future  Results -- Rights to Terminate  Contracts  with the  Company"  regarding
risks related to the Company's relationship with Carnival.

     INTERACTIVE ENTERTAINMENT AND INFORMATION SYSTEMS FOR TRAINS (TRAINVIEW)

     Like CruiseView,  TrainView is a browser-based  information  portal,  which
provides  advertising,  shopping,  route and city  information,  video features,
games and music to the captive train commuter audience.

     In February  1999, the Company  received an  engineering  design order from
Alstom  Transport  Limited  ("Alstom"),  a unit of ALSTOM SA, to incorporate the
design of TrainView into Alstom's high-speed train design concept. The TrainView
all-digital  system  proposed is an adaptation of the Company's  existing system
currently  installed  for cruise  customers.  The system is  expected to deliver
personal  interactive  entertainment,  video/audio  on demand,  shopping,  event
booking,  internet  access,  and  business  services  to the  seat  through  the
Company's TransPORTAL applications.

     In September 1999, the Company  announced the formation of a Passenger Rail
Division and the hiring of a Division President,  based in the U.K. The focus of
the new Division will be to pursue new business  opportunities in the world-wide
passenger rail market.

     There can be no assurance that Alstom or any of its customers will purchase
a TrainView system for installation on any train.

     CORPORATE TRAINING AND ACADEMIC SOLUTIONS

     The Company has drawn upon its years of experience in providing  multimedia
servers for education and training.  Through the Company's servers and networks,
students and faculty are able to access hundreds of hours of multimedia content,
search the internet, and build interactive courses.

     In August  1999,  the Company  received an initial  award,  in excess of $1
million,  for its CHEETAH(TM)  multimedia server to begin the first phase of the
Georgia  Metropolitan  Regional  Education  Services  Agency  ("MRESA") net 2000
project.  The  award  is part of the  first  phase  of a three  year  state-wide
program,  whereby MRESA hopes to bring  advanced  multimedia  learning tools and
technology to all 700 Georgia  schools  K-12,  under the guidance of the Georgia
MRESA. The Company completed this part of the first phase, and recently received
a second order for the first phase in excess of $4 million.

                                        4
<PAGE>
PRODUCT FEATURES AND TECHNOLOGY

     The  interactive  system's open  architecture  and  compatibility  features
permit ease of support for new and  emerging  content  options.  The system is a
proven, all digital, in-room or in-seat interactive system. Dual, fault-tolerant
video and file servers serve as the heart of the system.  A gigabit LAN backbone
provides 100 Megabit connectivity to each client. The scaleable  architecture is
based on Intel processors and Microsoft operating systems. In addition, the core
software  design  allows  simple   customization   of  the  user  interface  and
integration of third-party software.  The system interfaces with both color flat
panel and TV displays.

OPERATIONS AND MANUFACTURING

     The  Company  currently  manufactures  all of its  products  in the  United
States,  either at its Phoenix,  Arizona facility or at its supplier  locations.
Final assembly,  integration,  burn-in,  and functional testing are conducted at
its facilities in Phoenix, Arizona and Atlanta, Georgia.

     The Company obtains electronic  components and finished  sub-assemblies for
its products  "off-the-shelf" from a number of qualified suppliers.  The Company
has established a comprehensive  testing  protocol to ensure that components and
sub-assemblies  meet the Company's  specifications  and  standards  before final
assembly  and  integration.  The Company  has  elected to procure  off-the-shelf
component  parts and  sub-assemblies  from  suppliers to ensure  better  quality
control and pricing.  To date, the Company has not experienced  interruptions in
the  supply  of such  component  parts and  sub-assemblies,  and  believes  that
numerous  qualified  suppliers  are  available.  The  inability  of  most of the
Company's  current suppliers to provide component parts to the Company would not
adversely affect the Company's operations on a long-term basis.

INTELLECTUAL PROPERTY

     The Company relies on a combination of trade secret and other  intellectual
property  law,  nondisclosure  agreements  with all of its  employees  and other
protective  measures to  establish  and protect  its  proprietary  rights in its
products.  The Company  believes that because of the rapid pace of technological
change  in  the  open  systems  networking  industry,  legal  protection  of its
proprietary  information  is  less  significant  to  the  Company's  competitive
position than factors such as the Company's strategy, the knowledge, ability and
experience  of  the  Company's  personnel,   new  product  development,   market
recognition  and  ongoing  product   maintenance  and  support.   Without  legal
protection, however, it may be possible for third parties to copy aspects of the
Company's  products  or  technology  or to obtain and use  information  that the
Company regards as proprietary.  In addition, the laws of some foreign countries
do not protect  proprietary rights in products and technology to the same extent
as do the laws of the United States. Although the Company continues to implement
protective  measures and intends to defend its  proprietary  rights  vigorously,
there can be no assurance that these efforts will be successful.  The failure or
inability  of the Company to  effectively  protect its  proprietary  information
could have an adverse affect on the Company's business.

RESEARCH AND DEVELOPMENT

     The  market  for  the  Company's   products  is   characterized   by  rapid
technological  change  and  evolving  industry  standards,   and  it  is  highly
competitive  with respect to timely  product  innovation.  The  introduction  of
products  embodying new technology  and the emergence of new industry  standards
can render existing  products  obsolete and  unmarketable.  The Company believes
that its future success will depend upon its ability to develop, manufacture and
market new products and  enhancements to existing  products on a  cost-effective
and  timely  basis.  The  system  architecture  for  the  Company's  interactive
entertainment  and  information  products  was  designed to permit  hardware and
software  upgrades over time.  Moreover,  the current  architecture  presents no
known limits on a customer's  ability to offer compelling content to the user in
a rapid and highly reliable  manner.  Therefore,  a major focus of the Company's
research  and  development  efforts is to reduce the cost of network  and client
hardware  and to enhance  the core  software of the system to permit even easier
integration of new content.

                                        5
<PAGE>
     If the Company is unable,  for  technological or other reasons,  to develop
new products in a timely  manner in response to changes in the  industry,  or if
products or product enhancements that the Company develops do not achieve market
acceptance,  the Company's  business will be materially and adversely  affected.
There can be no assurance  that  technical or other  difficulties  in the future
will not delay the introduction of new products or enhancements.

OUR CUSTOMERS

     The Company's products are sold to end users in a wide range of industries.
Customers that have purchased the Company's products are financial institutions,
health  care  companies,   academic  institutions,   communications/broadcasting
companies,   governmental  agencies,  entertainment  providers,   transportation
operators and end-users operating in various other industries.

     The Company's high-end, high performance, multimedia video capable products
currently are targeted to and sold to education and  corporate  skills  training
providers, hotel, train and ship operators and retail facility information kiosk
businesses.  Most sales  efforts in 1998 and 1999 were focused on larger  system
sales  into  niche  markets  of the  Company's  "turn-key"  packaged  solutions,
AirView, CruiseView and TrainView. There can be no assurance,  however, that the
Company will successfully  negotiate  definitive  agreements for the purchase of
these systems.  The markets for these types of products are new and their actual
aggregate size is impossible to measure accurately.  Although management expects
the  video  server  market  to  experience  growth,  with  the  growth  to  come
principally  from the  high-performance  superserver  segment of the market,  no
assurances can be made that the Company's  products will be accepted  within the
market.

COMPETITION

     The market for the products and  services  that the Company  offers is very
competitive.   Factors  for  the  Company's  success  include  product  quality,
technical  capability,   system  reliability,   price,   promptness  of  program
performance,  and warranty protection. There are numerous international and U.S.
firms that  currently  compete,  or are capable of competing,  with the Company.
Many competitors have greater financial and human resources than the Company.

     The Company faces substantial competition from the manufacturers of several
different  types of  products  used as  network  servers.  The  Company  expects
competition  to  intensify as more firms enter the market and compete for market
share.  In addition,  companies  currently in the server market will continue to
change product offerings in order to capture further market share.

     With respect to base configuration, the Company competes with manufacturers
of high-end PCs used as network servers.  Competitors  offering products in this
market include  International  Business  Machines  Corporation  ("IBM"),  Compaq
Computer, Inc., Gateway Corporation,  and Dell Corporation. One of the principal
competitive factors in the market for simple LANs is price, and the economies of
scale  available  to  high-end PC  manufacturers  may permit them to offer their
products at a lower price.  The Company  expects its  competitors to continue to
improve the performance, availability, scalability and upgradability features of
their  products.  The Company  expects all of its  competitors in the simple LAN
market to improve the distribution channels for their products used as servers.

     With respect to more fully configured high-end video servers for larger and
more complex LANs and more sophisticated or business-critical  applications, the
Company competes  indirectly with manufacturers of mainframes and minicomputers.
Manufacturers  that promote their products in this market  include IBM,  Digital
Equipment  Corporation,   Hewlett-Packard   Corporation  and  UNYSIS,  Inc.  The
Company's operating results could, however, be adversely affected if one or more

                                        6
<PAGE>
of these  competitors  elects to compete more aggressively with respect to price
or product features of their mainframes or  minicomputers.  The Company competes
in the  market  for  complex  LANs with  other  manufacturers  of  superservers,
including Sun,  Silicon  Graphics and Ncube.  The Company competes in the market
for "turn-key" systems for travel-related entertainment with other manufacturers
of complete systems, including Rockwell Collins Passenger Systems, BE Aerospace,
Sony Transcom, Matsushita, Allin Interactive, and Trans Digital.

     There  can  be no  assurance  that  alternative  technologies  will  not be
developed in the future that will be capable of providing  certain  services now
performed by network servers.  The development of such technologies could reduce
the need for  network  servers  and  adversely  affect the  Company's  operating
results.

     As many of the Company's  competitors  are more  established,  benefit from
greater market recognition and have greater financial, technological, production
and marketing  resources  than the Company,  establishing  and  maintaining  the
Company's  competitive position will require continued investment by the Company
in research and development  and sales and marketing.  There can be no assurance
that the Company  will have  sufficient  resources to make such  investments  or
survive the sales cycle and support the  receivables  collection  cycle, or that
the Company will be able to make the technological  advances necessary for it to
be  competitive.  In  addition,  if more  manufacturers  of PCs,  mainframes  or
minicomputers  were to  develop  and  market  their  own  superserver  class  of
products, the Company's operating results could be adversely affected.

REGULATION

     The installation and use of the Company's  AirView system on any particular
aircraft may require prior certification and approvals from the Federal Aviation
Administration   ("FAA")  and  certification  and  approvals  from  aeronautical
agencies of foreign governments.  Other regulatory requirements may apply in the
passenger rail,  cruise or other markets in which the Company  operates that may
affect the  Company's  ability to  deliver  it  products  or install on a timely
basis.  See  "Management's  Discussion  and Analysis of Financial  Condition and
Results of Operations."

     United States law, with certain exceptions, currently prohibits the knowing
transportation of gaming devices operated on modes of interstate transportation.
In addition,  states may prohibit the  transportation and use of gaming devices.
Federal law also  prohibits  the  installation,  transportation  or operation of
gaming devices by any U.S. or foreign air carrier or for such carriers to permit
their use on  aircraft  operated  to or from the United  States in  foreign  air
transportation. The laws regarding the transmission of gaming data into, out of,
or within United States territory, even where such data was lawfully obtained in
another  jurisdiction,  are unclear. As a result, there can be no assurance that
the  transmission  of such data will not be  restricted or  prohibited.  Because
gaming may generate greater revenues and profitability than other  entertainment
options  available on the Company's  products,  the inability to offer gaming in
certain markets may have a material adverse impact on the Company's business and
on the market  acceptance  of the  Company's  products.  The Company may also be
subject to the laws of foreign  jurisdictions  which may  similarly  restrict or
prohibit the gaming or other activities offered on the Company's products.

INSURANCE AND BONDS

     The Company  maintains  liability  insurance  for claims  arising  from its
business.  These  policies have limits of up to $10 million in the aggregate and
insures  against  both  property  damage and personal  injury.  The policies are
written on an "occurrence" basis, which provides coverage for insured risks that
occur during the policy  period,  irrespective  of when a claim is made.  Higher
policy limits are sometimes purchased for individual projects when contractually
required.

                                        7
<PAGE>
BACKLOG ORDERS AND WORK-IN-PROGRESS

     As of June 30, 1999, the Company had no backlog. Work-in-progress consisted
of programs with Carnival  Cruise Lines  ("Carnival")  under the Company's  1998
contract  with  Carnival.  In August  1999,  the  Company  received  an order to
manufacture  and install its  Cheetah(TM)  Video  Servers in  approximately  193
schools  in the  State of  Georgia.  The  total  sales  price of this  order was
approximately $5.3 million. All product was successfully  produced and installed
by September 30, 1999,  and the Company has received  progress  payments of $1.2
million through October 8, 1999.

SUPPLIERS

     The  Company  does not  depend  upon any single  supplier.  Because we have
multiple  sources of supply,  we have not experienced  difficulties in obtaining
adequate   sources  of  supply  and   adequate   alternatives   to  satisfy  our
manufacturing  needs. We do not have formal purchase contracts for our supplies,
but instead we generally purchase such items under individual purchase orders.

EMPLOYEES

     As of June 30, 1999 the Company had  approximately 22 full-time  employees,
including  four  executive  officers.  None of the  employees  are  covered by a
collective bargaining agreement.  The Company's success depends to a significant
extent upon the  performance of its executive  officers and other key personnel.
The Company considers its relations with its employees to be good.

WARRANTIES

     The Company provides a warranty  regarding its products for periods ranging
from one to three years,  depending on the  requirements of customers.  To date,
the Company has not experienced  significant  claims under  warranties,  and its
ability to meet the full demands of having a significant number of units sold to
customers who require such service has not been tested.  The Company also passes
through  to end  users the  warranties  that it  receives  from  vendors  on any
separate  hardware,  software or component parts that it sells  independently of
full systems.

CAUTIONARY FACTORS THAT MAY AFFECT FUTURE RESULTS

     RISKS INHERENT IN  DEVELOPMENT  OF NEW PRODUCTS AND MARKETS.  The Company's
strategy includes developing new applications for its interactive  entertainment
and  information  technologies  and  entering  new  markets,  such as the  train
industry.  This  strategy  presents  risks  inherent in  assessing  the value of
development  opportunities,  in  committing  capital in unproven  markets and in
integrating and managing new  technologies  and  applications.  Within these new
markets, the Company will encounter competition from a variety of sources. It is
also possible that the Company will experience  unexpected delays or setbacks in
developing new  applications of its  technology.  There can be no assurance that
the Company's new products and applications will generate additional revenue for
the Company or that the Company will  successfully  penetrate  these  additional
markets.

     RISK OF TECHNOLOGICAL OBSOLESCENCE.  The ability of the Company to maintain
a standard  of  technological  competitiveness  is a  significant  factor in the
Company's  strategy to maintain and expand its customer base,  enter new markets
and generate revenue.  While the Company believes that its systems are currently
technologically competitive, the Company's continued success will depend in part
upon its ability to identify  promising  emerging  technologies  and to develop,
refine and introduce high quality services in a timely manner and on competitive
terms.  There can be no assurance that future  technological  advances by direct
competitors or other  providers  will not result in improved  systems that could
adversely  affect the  Company's  business,  financial  condition and results of
operations.   Additionally,   the  Company   may  fail  to   identify   emerging
technologies.

                                        8
<PAGE>
     MANAGEMENT  OF GROWTH.  The  Company's  growth  strategy  will  require its
management to conduct  operations  and respond to changes in technology  and the
market, while substantially expanding operations and personnel. If the Company's
management  is unable to manage  growth  effectively,  its  business,  financial
condition and results of operations will be materially adversely affected.

     RISK OF SYSTEM FAILURE OR  INADEQUACY.  The failure of one of the Company's
systems at any particular time could occur as a result of component malfunction,
operator error or some other reason. Although system interruptions  historically
have  been  inconsequential,   any  system  failure  could  harm  the  Company's
reputation, cause a loss or delay in market acceptance of the Company's systems,
and  have a  material  adverse  effect  on  the  Company's  business,  financial
condition and results of operations.  To reduce the risk of system failure,  the
Company performs extensive testing of its systems and engages in ongoing quality
assurance  efforts  involving  the use of  redundant  systems and  sophisticated
diagnostic  tools to aid in system  maintenance  and  trouble-shooting.  Despite
these measures,  there can be no assurance that system failures or interruptions
will not occur.

     DEPENDENCE ON KEY PERSONNEL. The Company's success is dependent on a number
of key  management,  research and  operational  personnel for the  management of
operations,  development of new products and timely installation of its systems.
The loss of one or more of these individuals could have an adverse effect on the
Company's  business  and  results  of  operations.  The  Company  depends on its
continued ability to attract and retain highly skilled and qualified  personnel.
There can be no assurance  that the Company will be successful in attracting and
retaining such personnel.

     DEPENDENCE  ON   TRANSPORTATION   INDUSTRY  AND   CONTINUED   OPERATION  OF
TRANSPORTATION  INDUSTRY  CUSTOMERS.  A  substantial  portion  of the  Company's
revenue is expected  to be  generated  in the near term from its  transportation
industry  operations,  thereby making the Company's  business dependent upon the
transportation industry in general and the continued operations of the Company's
transportation  industry customers. A significant reduction in the operations of
any of these customers could,  depending on the extent of the reduction,  have a
material  adverse  effect  on  the  Company.  Additionally,  the  transportation
industry is  dependent on  customers  having  disposable  income.  Therefore,  a
general  economic   downturn  or  a  recession  could   negatively   impact  the
transportation  industry before  affecting  other segments of the economy,  even
though   transportation   providers  typically  offer  promotional  pricing  and
incentives during recessionary periods to ensure a steady occupancy rate.

     RIGHTS TO TERMINATE CONTRACTS WITH THE COMPANY. The Company's contract with
the cruise  line is subject to renewal by mutual  consent of the  parties at the
expiration of the initial term. A decision by the cruise line to discontinue its
agreement  with the  Company  at the  contractual  expiration  date could have a
material  adverse  effect on the Company.  The Company  entered into the Turnkey
Agreement (the "Carnival  Agreement")  with Carnival  Corporation,  a Panamanian
registered  corporation,  for the  purchase,  installation  and  maintenance  of
CruiseView  on a minimum of one Carnival  Cruise Lines Ship.  See  "Management's
Discussion and Analysis of Financial Conditions and Results of Operations" for a
summary of the Carnival Agreement.  The Carnival Agreement that was entered into
by the  Company  contains  certain  terms  which the  Company is  attempting  to
renegotiate with Carnival.  If Carnival is unwilling to renegotiate the terms of
the Carnival  Agreement,  or if these negotiations do not result in an agreement
containing terms more favorable to the Company,  the financial  condition of the
Company could be materially and adversely effected.

     FLUCTUATIONS  IN  OPERATING  RESULTS.  The  Company  expects to  experience
significant  fluctuations in its future quarterly  operating results that may be
caused by many factors,  including the cyclical nature of government  funding to
be  obtained in  connection  with  education  programs.  Accordingly,  quarterly
revenues and  operating  results will be difficult to forecast,  and the Company
believes that  period-to-period  comparisons  of its operating  results will not
necessarily  be  meaningful  and should not be relied upon as an  indication  of
future  performance.  See  "Management's  Discussions  and Analysis of Financial
Condition and Results of Operations."

                                        9
<PAGE>
     COMPETITION.  The market for entertainment networks is rapidly evolving and
highly competitive. Many of the Company's current and potential competitors have
longer  operating  histories and  significantly  greater  financial,  technical,
marketing  and other  resources  than the Company and  therefore  may be able to
respond more quickly to new or changing opportunities, technologies and customer
requirements.  Although the Company's  business strategy targets certain markets
which it believes offer a competitive advantage,  there can be no assurance that
the  Company  will  be  able to  compete  effectively  with  current  or  future
competitors or that the competitive pressures faced by the Company will not have
a material  adverse effect on the Company's  business,  financial  condition and
results of operations.

     GOVERNMENT REGULATION AND LEGAL UNCERTAINTIES. The Company is subject, both
directly or indirectly, to various laws and governmental regulations relating to
its business.  The Company believes that it is currently in compliance with such
laws and that they do not have a material impact on its operations.  However, as
a result  of  rapid  technology  growth  and  other  related  factors,  laws and
regulations may be adopted which significantly impact the Company's business.

     LONG  SALES  CYCLES;  LACK OF  EXISTING  BACKLOG.  The sales  cycle for the
Company's  systems is relatively  long because it involves the evaluation of the
Company's  technology for each project,  a test  installation of each customized
system, and negotiation of related agreements from other providers such as movie
and internet access providers and computer gaming operators.  All of these items
requires a large  investment  on the part of the  Company  and  occurs  before a
contract is signed with an  end-user.  The long sales  cycles for the  Company's
products,  combined  with the fact that the Company had no backlog  orders as of
June 30, 1999, could place a significant  strain on the Company's  financial and
other resources.  The failure by the Company to build a backlog of orders in the
future  would  have  a  material  adverse  effect  on  the  Company's  financial
condition.

     UNPROVEN BUSINESS STRATEGY.  In connection with the acquisition of IED, the
Company has retained a new  management  team.  The Company's new  management has
shifted the  Company's  business  strategy  to position  itself as a provider of
comprehensive  systems  solutions  and as an integrated  browser-based  software
developer  and content  programming,  procurement,  integration  and  management
service  provider.  Moreover,  the Company  focuses its efforts on the  airline,
train and cruise  transportation  industries  and on the  training  and academic
solution  provider  industry.  Since  this new  strategy  has  been  implemented
recently,  the Company has no  operating  history to reflect the results of this
strategy.  Therefore, there can be no assurance that the Company will succeed in
implementing its strategy or that it will obtain financial returns sufficient to
justify its investment in the markets in which it plans to participate.

     POSSIBLE DELISTING BY NASDAQ.  Under the rules of the National  Association
of Securities Dealers (the "NASD"), issuers whose securities are included on The
NASDAQ SmallCap Market, where the Common Stock is listed, are required to obtain
stockholder approval prior to the issuance of listed securities or in connection
with an acquisition  (other than a public  offering for cash) where the issuance
of common stock (or securities  convertible  into common stock) is or will equal
or will be in excess of 20% or more of the common stock or voting power prior to
issuance or where the issuance will cause a change in control (the "Rules").  In
connection with the GTL  Transaction,  the Company made an application to NASDAQ
for an  exception  to the Rules based on the  Company's  determination  that the
delay in securing  stockholder approval would seriously jeopardize the financial
viability of the enterprise.  However, NASDAQ notified the Company that it would
not grant the  exception  to the Rules.  The Company  determined  that it had no
choice but to complete the GTL  Transaction.  The Company  structured and closed
the GTL Transaction  with the objective of complying with the Rules. The Company
advised NASDAQ that it received stockholder  ratification of the GTL Transaction
at a special  stockholders' meeting and that GTL voluntarily voted its Preferred
Stock in the same proportion as the Common Stock voted by the other stockholders
at the  meeting.  The  Company  hopes that NASDAQ will deem its actions to be in
compliance with the Rules, or if NASDAQ deems the Company  violated the Rules by
closing  the GTL  Transaction,  that it will view  such  actions  as  mitigating
factors.  NASDAQ has not made a final  determination  regarding this matter.  If
NASDAQ  ultimately  determines that the Company  violated the Rules, the Company
could be subject to delisting from The NASDAQ SmallCap Market.  If the Company's

                                       10
<PAGE>
Common Stock is delisted,  the Common Stock will become subject to Rule 15g-9 of
the Exchange Act,  which  imposes  additional  sales  practice  requirements  on
broker-dealers that sell low-priced securities to persons other than established
customers and institutional  accredited  investors.  For transactions covered by
this rule, a broker-dealer must make a special suitability determination for the
purchaser and have received the  purchaser's  written consent to the transaction
prior to sale.  Consequently,  the rule may affect the ability of broker-dealers
to sell the Company's Common Stock and may affect the ability of holders to sell
the  Company's  Common Stock in the  secondary  market.  The SEC 's  regulations
define a "penny stock" to be any equity security that has a market price of less
than  $5.00 per share or with an  exercise  price of less than  $5.00 per share,
subject to certain  exceptions.  The penny stock  restrictions will apply to the
Company's Common Stock if it is delisted from The NASDAQ SmallCap Market. If the
Company's  Common Stock  becomes  subject to the penny stock  rules,  the market
liquidity for the Common Stock could be adversely affected.

     DEPENDENCE UPON MAJOR CUSTOMER AND LARGE CONTRACTS.  Swissair accounted for
approximately  91% of the Company's  revenues  during the last year. The Company
does not  expect  future  business  from  Swissair.  The  failure  to  timely or
adequately  replace this contract with one or more new contracts may  materially
adversely affect the Company's business and operations.

     INSURANCE AND POTENTIAL EXCESS LIABILITY.  The Company maintains  liability
insurance to protect against damages to persons or property.  If the Company has
to incur  liability in excess of the Company's  policy  coverage,  the Company's
financial condition could be adversely affected.

     ECONOMIC  AND  GENERAL  RISKS OF  BUSINESS.  Our  success  will depend upon
factors that are beyond our control and that cannot clearly be predicted at this
time.  Such factors  include general  economic  conditions,  both nationally and
internationally, changes in tax laws, fluctuating operating expenses, changes in
governmental regulations, changes in technology, and trade laws.

ITEM 2. DESCRIPTION OF PROPERTY

     The  Company  leases   approximately  17,000  square  feet  of  office  and
production space located at 222 North 44th Street, Phoenix,  Arizona. As of June
30, 1999, the Company also owned two buildings  comprising  approximately 10,000
square feet each,  located on one acre in  Alpharetta,  Georgia.  The Company is
indebted to two  institutional  lenders as of June 30,  1999,  in the  aggregate
amount  of  $220,000  and  $470,000,  respectively,  from the  purchase  of this
facility.  These loans are secured by the purchased  real estate and bear annual
interest at the rate of such lender's prime rate plus 2%, and 16%, respectively.

     As of  September  20,  1999,  the  Company  sold one of the  buildings  for
$412,500,  and used the net  proceeds  to repay  approximately  $390,000  of the
$470,000  loan. The sale of the second  building has been  contracted for and is
expected to close in November  1999.  Net  proceeds of this sale will be used to
retire  the  balance  of the  $470,000  loan  plus  all of  the  $220,000  loan.
Concurrent  with  the sale of the  second  building,  the  Company  will  sign a
six-month lease for use of this facility.  It is anticipated that monthly rental
charges will approximate $4,100 per month.

     Management believes that the properties owned and leased by the Company are
adequate and suitable for current operations.

ITEM 3. LEGAL PROCEEDINGS

     HOLLINGSEAD  INTERNATIONAL,  INC. V. THE NETWORK  CONNECTION,  INC.,  State
Court of Forsyth  County,  State of  Georgia,  Civil  Action  File No.  99S0053.
Hollingsead  International,  Inc. ("Hollingsead") filed suit against the Company
on January 28, 1999,  alleging that the Company failed to pay invoices submitted
for  installation   and  service  of  audio-visual   systems  in  its  aircraft.
Hollingsead sought damages in the amount of $357,850, in addition to interest at

                                       11
<PAGE>
the rate of 18% per annum  from  March 2,  1998,  attorneys'  fees and  punitive
damages.  The parties entered into a settlement  agreement on or about August 5,
1999 that  provided  for the payment of $427,870 by the  Company,  to be paid in
installments,  including  interest accruing at 8.0% per annum from July 28, 1999
until the balance is paid.  The agreement  also provides for  Hollingsead to pay
$5,399 as  reimbursement  for attorneys' fees. The last installment is due on or
before  December  20, 1999.  Under the  settlement  agreement,  the Company will
dismiss its  counterclaims  with  prejudice  and  Hollingsead  will  dismiss its
Complaint with prejudice upon completion of all payments by the Company.

     SIGMA  DESIGNS,  INC.  ("SIGMA") V. THE NETWORK  CONNECTION,  INC.,  United
States District Court, Northern District of California, San Jose Division, Civil
Action File No.  98-21149J(EAI).  Sigma filed a Complaint against the Company on
December  1, 1998,  alleging  breach of contract  and action on  account.  Sigma
claims that the Company  failed to pay for goods that it shipped to the Company.
The matter was settled by written  agreement dated January 22, 1999,  contingent
upon registration of the Company stock and warrants issued to Sigma as a part of
such  settlement  and  payment by the  Company of  $50,000.  The Company did not
complete its obligations under the terms of the original  settlement  agreement.
In or about May 1999, the shares of the Company issued to Sigma as a part of the
settlement of the above-referenced lawsuit were sold by Sigma to GTL, the parent
company of the Company.  The lawsuit was  dismissed  with  prejudice on July 12,
1999 as a condition of GTL's purchase.

     FEDERAL EXPRESS CORPORATION V. THE NETWORK CONNECTION, INC., State Court of
Forsyth County, State of Georgia, Civil Action File No. 99-SC-0053. This lawsuit
was  served  on the  Company  on or  about  July  22,  1999 by  Federal  Express
Corporation.  The suit alleges the Company owes  Federal  Express  approximately
$110,000  for past  services  rendered.  The  Company  intends to defend  itself
vigorously.

     ERIC SCHINDLER  ("SCHINDLER") V. INTERACTIVE FLIGHT  TECHNOLOGIES,  INC. ET
AL., State Court for Fulton County, Georgia Case No. 99-V51560685. On August 18,
1999,  Eric  Schindler  served a lawsuit on GTL,  naming GTL and the  Company as
defendants.  The  Complaint  alleges  that the  Company  and GTL  failed  to pay
severance pay pursuant to a written employment  contract  following  Schindler's
resignation  as an  employee  and vice  president  of the  Company  in May 1999.
Specifically,  the  Complaint  alleges  (1)  breach  of  contract  (against  the
Company),  (2) conspiracy and  interference  with contract  rights  (against the
Company and GTL), and (3)  interference  with contract rights (against GTL). The
Complaint  seeks  $85,000 in severance pay on the contract  claims,  unspecified
damages  for loss of  stock  options,  punitive  damages  of at least  $450,000,
attorneys'  fees and costs.  The Company and GTL deny any  liability,  intend to
defend themselves  vigorously and are considering  counterclaims.  No responsive
pleading has yet been filed.

     On March 29, 1999, the Company filed for arbitration under the rules of the
United  Nations  Commission  on  International   Trade  Law  and  the  Rules  of
Arbitration of the Kuala Lumpur Regional Centre for Arbitration,  to enforce its
rights under the terms of the Star Agreement with CNA and Star for the delivery,
installation and maintenance of a CruiseView  system on the Star cruise ship the
SuperStar  Leo.  In  May  1999,  the  Company  determined  not  to  pursue  this
arbitration action.

     SWISSAIR/MDL-1269,  IN RE AIR CRASH NEAR PEGGY'S  COVE,  NOVA SCOTIA.  This
multi-district  litigation  relates  to the  crash  of  Swissair  Flight  111 on
September  2, 1998 in waters near  Peggy's  Cove,  Nova Scotia  resulting in the
death of all 229 people on board.  The Swissair MD-11  aircraft  involved in the
crash was equipped with an  Entertainment  Network  System that had been sold to
Swissair by GTL. Following the crash, investigations were conducted and continue
to be conducted by Canadian and United States  agencies  concerning the cause of
the crash. No investigative  agency has linked the Entertainment  Network System
to the crash. Estates of the victims of the crash have filed lawsuits throughout
the United States against  Swissair,  Boeing,  Dupont and various other parties,
including GTL. The Company was not a party to the contract for the Entertainment
Network System,  but has been named in some of the lawsuits filed by families of
victims on a claim of successor  liability.  TNCi denies all  liability  for the
crash. The Company is being defended by the aviation insurer for GTL.

                                       12
<PAGE>
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

     A Special  Meeting of  Stockholders  was held on September  17, 1999 to act
upon the following matters:

     1. A proposal to ratify and approve the acquisition of IED, and the related
issuance of 1,055,745  shares of the Company's Common Stock and 2,495,400 shares
of the Company's  Series D  Convertible  Preferred  Stock,  pursuant to an Asset
Purchase  and Sale  Agreement,  dated as of April 30,  1999,  by and between the
Company and GTL, as amended by the First  Amendment  to Asset  Purchase and Sale
Agreement, dated as of May 14, 1999.

     2. A proposal  to amend the  Company's  Amended  and  Restated  Articles of
Incorporation  to increase the  authorized  number of shares of capital stock of
the  Company  to  42,500,000  of which  40,000,000  shares is  Common  Stock and
2,500,000 shares is Preferred Stock.

     With  respect to proposal 1,  3,506,816  votes were cast for,  63,555 votes
were cast against or withheld,  and there were 17,150 abstentions.  With respect
to proposal 2, 3,472,176 votes were cast for, 102,395 votes were cast against or
withheld, and there were 12,950 abstentions.

                                       13
<PAGE>
                                     PART II

ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

     The Company's  Common Stock is listed on The NASDAQ  SmallCap  Market.  See
"Cautionary  Factors  That May Affect  Future  Results - Possible  Delisting  by
NASDAQ."  The  following  table shows the high and low bid prices in dollars per
share for the last two years as reported by NASDAQ.

YEAR ENDED DECEMBER 31, 1997                                  LOW          HIGH
----------------------------                                -------       ------
First Quarter                                               $12.375       $5.750

Second Quarter                                              $12.000       $6.000

Third Quarter                                               $10.500       $7.000

Fourth Quarter                                              $10.375       $5.750

YEAR ENDED DECEMBER 31, 1998                                  LOW          HIGH
----------------------------                                -------       ------
First Quarter                                               $ 3.625       $7.125

Second Quarter                                              $ 3.188       $5.688

Third Quarter                                               $ 1.813       $4.938

Fourth Quarter                                              $  2.00       $4.125

TRANSITION PERIOD ENDED JUNE 30, 1999                         LOW          HIGH
-------------------------------------                       -------       ------
First Quarter                                               $ 2.125       $3.938

Second Quarter                                              $ 1.375       $3.375

     As of September 30, 1999,  there were  approximately  100 record holders of
the  Company's   Common  Stock,   but  the  Company   believes  that  there  are
approximately  2,200  beneficial  shareholders,  based upon broker  requests for
distribution.

DIVIDEND POLICY

     Holders of the  Company's  Common Stock are  entitled to receive  dividends
only when  declared by the  Company's  Board of  Directors.  Other than prior to
September 22, 1994 when the Company made  distributions  to shareholders as an S
corporation, dividends have never been declared or paid and the Company does not
plan to make any  dividend  payments  in the  foreseeable  future.  Instead  the
Company will reinvest in the expansion and  development of our business.  If the
Board of  Directors  decides to declare a dividend in the future,  the  decision
will be based on our earnings,  financial condition, cash requirements,  and any
other factors they deem relevant.

                                       14
<PAGE>
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
        OF OPERATIONS

     The  following  discussion  should  be read  in  conjunction  with,  and is
qualified  in its entirety by, the Company  Financial  Statements  and the Notes
thereto  appearing  elsewhere  herein.  Historical  results are not  necessarily
indicative of trends in operating results for any future period.

HISTORICAL OVERVIEW

DESCRIPTION OF BUSINESS

     The Company is engaged in the development,  manufacturing  and marketing of
computer-based  entertainment and data networks,  which provides users access to
information, entertainment and a wide array of service options, such as shopping
for goods and  services,  computer  games,  access  to the World  Wide Web,  and
gambling  operations  where permitted by applicable  law. The Company's  primary
markets  for its  products  are cruise  ships,  passenger  trains,  schools  and
corporate  training.  Secondary markets include business jets and hotels,  among
others.

BASIS OF PRESENTATION

     On May 18, 1999, Global  Technologies,  Ltd. (formerly known as Interactive
Flight Technologies, Inc.) ("GTL") received from the Company 1,055,745 shares of
its common  stock and  2,495,400  shares of its Series D  Convertible  Preferred
Stock in exchange for  $4,250,000 in cash and  substantially  all the assets and
certain  liabilities of GTL's Interactive  Entertainment  Division  ("IED"),  as
defined in the Asset  Purchase  and Sale  Agreement  dated  April 30,  1999,  as
amended (the "Transaction"). The Transaction has been accounted for as a reverse
merger  whereby,  for  accounting  purposes,  GTL is considered  the  accounting
acquiror  and  the  Company  is  treated  as the  successor  to  the  historical
operations  of IED.  Accordingly,  the  historical  financial  statements of the
Company,  which  previously  have been reported to the  Securities  and Exchange
Commission  ("SEC") on Forms 10-KSB,  10-QSB,  among  others,  as of and for all
periods through March 31, 1999, will be replaced with those of IED.

     The Company  will  continue  to file as a SEC  registrant  and  continue to
report under the name The Network Connection,  Inc. The financial  statements as
of and for the years  ended  October 31,  1998 and 1997  reflect the  historical
results of GTL's IED as  previously  included  in GTL's  consolidated  financial
statements.  Included in the results of  operations  for the eight  months ended
June 30, 1999 are the  historical  results of GTL's IED through  April 30, 1999,
and the results of the post  Transaction  company for the two months  ended June
30, 1999. The Transaction date for accounting  purposes is May 1, 1999. GTL will
continue  to report as a  separate  SEC  registrant,  owning  the  shares of the
Company as described  above.  As of August 1999, the Company is a majority owned
subsidiary  of GTL whose  ownership,  through a combination  of the  Transaction
described above and GTL's purchase of Series B 8% preferred stock of the Company
and 110,000  shares of the  Company's  common stock from third party  investors,
approximates  78% of the Company on an  if-converted  common  stock  basis.  The
historical financial statements of the Company up to the date of the Transaction
as  previously  reported  will no longer be  included  in future  filings of the
Company.

CHANGE IN FISCAL YEAR-END

     The Company has changed its fiscal  year-end  from  December 31 to June 30.
The Transition  Period  resulting from the change in fiscal year-end is measured
from IED's former fiscal  year-end of October 31.  Accordingly,  the eight-month
period  resulting  from this change,  November 1, 1998 through June 30, 1999, is
referred to as the "Transition Period."

                                       15
<PAGE>
AIRVIEW

     In an  Agreement  dated as of June 19,  1997,  the Company  entered into an
AirView Purchase  Agreement (the "AirView  Agreement") with Fairlines,  a French
corporation engaged in the start-up operation of a commercial  airline,  for the
purchase  of up to  ten  AirView  systems  for  installation  on  ten  Fairlines
aircraft.  Fairlines filed for bankruptcy  under French law in the first quarter
of  calendar  year  1998.  While the  Company  does not  expect to  recover  its
investment  in this program,  the Company is pursuing its remedies,  contractual
and  otherwise,  in respect to  collection  of amounts due and damages  incurred
under the AirView Agreement.

     In April 1998,  the Boeing  Company  specified the  Company's  AirView data
server as part of the airplane  manufacturer's  completion  Request For Proposal
(RFP) for the new B737-73Q  Business Jet. In November 1998, the Company received
an order from Raytheon Systems Company,  a unit of Raytheon  Company,  which was
contracted by Boeing  Company,  to equip the Boeing  Business Jet (BBJ) B737-73Q
"Demonstrator"  aircraft with the Company's  AirView for an Integrated  Business
and Entertainment  System (IBES).  Installation began in late 1998. There can be
no assurance,  however,  that any  additional  orders for the Company's  AirView
system other than the Demonstrator will be received.

     In October,  1997, GTL entered into a revised agreement with Swissair which
required  GTL to install and maintain  the  Entertainment  Network in the first,
business and economy class sections of three aircraft at no cost to Swissair and
in the first and  business  classes of another  sixteen  aircraft  at an average
price of $1.7 million per  aircraft.  As of October 31, 1998,  GTL had completed
all installations  under the initial Swissair  program.  GTL was responsible for
maintenance  costs through September 1998 for all nineteen aircraft and specific
software and  hardware  upgrades to the  Entertainment  Network that are not yet
completed.  The Swissair  agreement also provided for a one-year warranty on the
Entertainment  Network.  GTL  entered  into a contract  dated April 1, 1998 with
Swissair for  $3,975,000  to extend the warranty on the  installed  system for a
second and third year.  Through May 18, 1999,  GTL has been paid $707,500  under
this contract. No subsequent payments have been received from Swissair.

     In April 1998 and October 1998, GTL entered into additional  contracts with
Swissair for a $4.7 million order for first and business class  installations on
four Swissair MD-11 aircraft that are being added to the Swissair  fleet.  As of
February 26, 1999,  Swissair has made payments of $1,450,000 on the $4.7 million
order for the four installations.

     On October 29, 1998, GTL was notified by Swissair of the airline's decision
to deactivate the Entertainment  Network on all Swissair  aircraft.  Until April
1999,  GTL and its system  integrator/installation  contractor  had been working
closely with  Swissair to take the necessary  steps that will allow  Swissair to
reactivate  the  systems  as  quickly  as  possible.  However,  by  April  1999,
discussions  between GTL and Swissair  regarding  outstanding  financial matters
related to current  accounts  receivable,  inventory,  purchase  commitments and
extended warranty  obligations,  as well as planning  discussions for an October
1999 reactivation ceased to be productive.

     On May 6, 1999, GTL filed a lawsuit  against  Swissair in the United States
District  Court for the  District  of Arizona  seeking  damages  for  Swissair's
failure  to  honor  its  obligations  for  payment  and  reactivation  of  GTL's
Entertainment  Network.  Swissair  has  failed  to make  payments  to GTL  under
installation and warranty contracts and has harmed GTL's business and reputation
by failing to honor its commitments to reactivate the  Entertainment  Network on
Swissair aircraft. Even though there has been no evidence that the Entertainment
Network  contributed  in any way to the  crash of  Swissair  Flight  No.  111 on
September 2, 1998,  Swissair has continued to use the unfortunate  circumstances
of the crash as an excuse to avoid its obligations.

     The Swissair agreements are not assignable to third parties under the terms
of such agreements.  However, in connection with the Transaction, GTL has agreed
to pay to the Company any net proceeds received from Swissair as a result of the
above litigation or otherwise.  Further, the Company, as a subcontractor to GTL,
will assume any operational  responsibilities  of the Swissair  agreement in the
event that such requirement  arises. The Company has not assumed any liabilities
or obligations  arising out of the crash of Swissair Flight No. 111. (See Part I
-- Item 3 -- Legal Proceedings.)

                                       16
<PAGE>
     As a result of the above events,  management concluded that its only source
of future payment,  if any, will be through the litigation process. In addition,
with the deactivation of the  entertainment  system and Swissair's breach of its
agreements with GTL, the Company believes it will not be called upon by Swissair
to perform any ongoing warranty, maintenance or development services. Swissair's
actions have rendered the Company's accounts receivable,  inventory and deposits
worthless as of June 30, 1999. Accordingly,  the Company has recognized deferred
revenue on equipment  sales to the extent of cash received of $876,000;  charged
off inventory to cost of equipment sales in the amount of $1,517,000;  wrote off
deposits  of  $655,000  to  special  charges;  and  reversed  all  warranty  and
maintenance accruals totaling $5,164,000.

CRUISEVIEW

     The Company  entered  into a  CruiseView  Purchase  Agreement,  dated as of
February  13, 1998 (the "Star  Agreement"),  with  Continuous  Network  Advisors
("CNA") on behalf of Star Cruises  Management  Limited ("Star"),  an Isle of Man
corporation  engaged in the  operation  of a  commercial  cruise  line,  for the
purchase  of  CruiseView  systems  for  installation  on up to two  Star  cruise
vessels. Certain issues arose during the contract installation period which lead
to a  settlement  agreement  between  Star and CNA dated June 1999  whereby Star
would return the Company's equipment back by December 31, 1999. No cash payments
to the Company  were  identified  in the  settlement  agreement.  The Company is
objecting to the settlement agreement though the Company believes modifying such
settlement and receiving payment at this time is unlikely. (see "PART I - ITEM 3
- Legal Proceedings".)

     In  September  1998,  the Company  entered  into a Turnkey  Agreement  (the
"Carnival  Agreement")  with  Carnival  Corporation  ("Carnival"),  a Panamanian
registered  corporation,  for the  purchase,  installation  and  maintenance  of
CruiseView on a minimum of one Carnival Cruise Lines ship.  During the four-year
period commencing on the date of the Carnival Agreement,  Carnival has the right
to designate an unspecified  number of additional  ships for the installation of
CruiseView  by the  Company.  The cost per cabin  for  CruiseView  purchase  and
installation on each ship is provided for in the Carnival Agreement. In December
1998, Carnival exercised its right and ordered the installation of CruiseView on
the  Carnival  Cruise  Lines  "M/S  Sensation".  Delivery  and  installation  of
CruiseView for the Sensation  began in December 1998 and has been in operational
use, on a test, since August 1999. It is expected to begin commercial  operation
in the quarter ending December 31, 1999. In August 1999,  Carnival exercised its
right and ordered the  installation  of CruiseView on the Carnival  Cruise Lines
"M/S Triumph" which is expected to be completed in the quarter  ending  December
31, 1999.  There can be no assurance,  however,  that Carnival will exercise its
right under the Carnival  Agreement to order  CruiseView for installation on any
additional ships.

     The terms of the Carnival  Agreement  provide that  Carnival may return the
CruiseView  system  within the  Acceptance  Period,  as defined in the  Carnival
Agreement. For the M/S Sensation, the acceptance period is 12 months. As of June
30, 1999, the Company recorded deferred revenue of $365,851,  reflecting amounts
paid by Carnival. The Company would be required to return such funds to Carnival
in the event Carnival does not accept the system.

     Under  the  Carnival  Agreement,  the  Company  is  required  to  provide a
performance  bond or  standby  letter of credit  in favor of  Carnival  ensuring
Carnival's  ability to be repaid amounts  previously  paid to the Company in the
event  Carnival  determines  not to accept  the  system as  permitted  under the
Carnival Agreement.

     The  Company  has not  provided  a bond or  letter of credit as of June 30,
1999.  Should Carnival require the Company to obtain a bond or letter of credit,
the  Company  may  be  required  to  provide  cash  collateral  to  a  financial
institution securing such obligation.

                                       17
<PAGE>
TRAINVIEW

     In February  1999, the Company  received an  engineering  design order from
Alstom Transport Limited ("Alstom"),  a unit of ALSTOM SA, a worldwide leader in
the  manufacturing of high speed passenger  trains, to incorporate the design of
TrainView,  the Company's advance Infoactive Business and Entertainment  System,
into Alstom's concept high speed train design. The TrainView  all-digital system
proposed is an adaption of the Company's existing system currently installed for
in-flight  and cruise  customers.  The system is  expected  to deliver  personal
interactive entertainment, video/audio on demand, E-Commerce for shopping, event
booking,  internet  and  business  services to the seat  through  the  Company's
TransPORTAL applications.  There can be no assurance however, that Alstom or any
of its customers will purchase a TrainView system for installation on any train.

RESULTS OF OPERATIONS

     Revenue  for the  Transition  Period  ended June 30, 1999 was  $958,607,  a
decrease of $17,424,753 (or 95%) compared to revenue of $18,383,360  (unaudited)
for the  corresponding  period ended June 30, 1998.  Revenue for the  Transition
Period ended June 30, 1999 consisted of equipment  sales of $875,957 and service
income of $82,650.  The decline is the result of a lack of new customer  orders.
The equipment sales were generated from payments  received from Swissair for one
of four entertainment  networks billed per the April 1998 contract.  The service
income was principally generated from programming services provided to Swissair,
services  relating to the  initial  entertainment  system  design for Alstom and
system upgrades provided to an educational customer. Revenue for the eight-month
period  ended  June  30,  1998  consisted  of  equipment  sales  of  $17,949,591
(unaudited) and service income of $433,769 (unaudited). The equipment sales were
principally generated from the installation of the entertainment networks on ten
Swissair  aircraft.  The service income was generated from services  provided to
Swissair pursuant to the media  programming  services  agreement,  the Company's
share of gains,  profits  generated by the Swissair  systems and revenue  earned
under the Swissair contract to extend the warranty.

     Revenue for the year ended October 31, 1998 was $18,816,962, an increase of
$7,716,253 (or 70%) over revenue of  $11,100,709  for the year ended October 31,
1997.  Revenues in each year consist of equipment  sales  (principally  from the
installation  of the  Entertainment  Networks on Swissair  aircraft) and service
income.   During  the  year  ended  October  31,  1998,  the  Company  completed
installations  under the initial  Swissair  program in ten business  classes and
eighteen first classes  whereas  installations  completed in fiscal 1997 were in
nine business  classes and one first class.  Revenues from equipment  sales rose
71% from  $10,524,828  in fiscal 1997 to  $18,038,619  in fiscal 1998 due to the
increased  installations in fiscal 1998. Service income of $778,343 for the year
ended  October 31, 1998 was  principally  generated  from  programming  services
provided to Swissair,  the Company's  share of gaming  profits  generated by the
Swissair systems and revenue earned under the Swissair  extended warranty Letter
of Intent.  Service  income of $575,881 for the year ended  October 31, 1997 was
primarily derived from a Product  Identification/Product  Development  Agreement
with an airline and entertainment programming services provided to customers.

     Cost of equipment  sales for the Transition  Period ended June 30, 1999 was
$1,517,323,  a decrease of  $13,722,245  (or 90%)  compared to cost of equipment
sales of $15,239,568  (unaudited)  for the  corresponding  period ended June 30,
1998. Cost of equipment sales includes  materials,  installation and maintenance
costs, as well as estimated warranty costs and costs of upgrades to the Swissair
Entertainment  Network that the Company is contractually  committed to providing
to Swissair.  Fiscal 1998 cost of sales is  attributed  to the  installation  of
equipment on ten Swissair aircraft whereas the decreased cost of sales in fiscal
1999 is attributed to material  costs for only four Swissair  aircraft.  Cost of
service  income  for the  Transition  Period  ended  June 30,  1999 was $480,  a
decrease  of $13,053  (or 97%)  compared  to cost of  service  income of $13,533
(unaudited) for the eight months ended June 30, 1998. Cost of service income for
fiscal  1999 and fiscal  1998 is related to  programming  services  provided  to
Swissair.

                                       18
<PAGE>
     Cost of equipment  sales and service  income for the year ended October 31,
1998 was  $15,537,071,  a decrease of  $9,341,389  (or 38%) over the  comparable
figure of  $24,878,460  for the fiscal  year ended  October  31,  1997.  Cost of
equipment sales includes materials,  installation and maintenance costs, as well
as  estimated  one-year  warranty  costs and costs of upgrades  to the  Swissair
Entertainment Networks that the Company is contractually  committed to providing
to Swissair.  The  decrease in cost of equipment  sales is primarily a result of
the inclusion of provisions for inventory  obsolescence,  unusable inventory and
rework  adjustments of  $11,496,748 in cost of equipment  sales for fiscal 1997.
The 1997  provision  for  inventory  obsolescence  was a result  of the  Company
purchasing  inventory  for  installation  in the  economy  sections  of Swissair
aircraft and actually completing only three economy installations.  The unusable
inventory and rework adjustments  primarily resulted from the Company's redesign
of the tray table utilized in the Entertainment Networks for the economy section
of an aircraft.  The decrease in cost of equipment sales for fiscal 1998 is also
attributable to reductions in maintenance costs and estimated  one-year warranty
costs  as  the   reliability  of  the   Entertainment   Networks  has  improved.
Additionally,  the Company recognized a reduction in installation costs from its
subcontractor during fiscal 1998.

     Provisions for doubtful  accounts for the Transition  Period ended June 30,
1999 were $28,648,  compared to zero  (unaudited) for the  corresponding  period
ended  June  30,  1998.  Fiscal  1999  provisions  resulted  from  entertainment
programming services provided to Swissair.

     Provisions  for doubtful  accounts for the year ended October 31, 1998 were
zero  compared to $216,820  for the year ended  October  31,  1997.  Fiscal 1997
provisions  resulted  from  entertainment  programming  services  provided  to a
previous customer.

     Bad debt  recoveries of  $1,064,284  during the year ended October 31, 1997
resulted  from the recovery of accounts  receivable  under a customer  agreement
which were reserved for during the Company's  fourth  quarter of its fiscal year
ended October 31, 1996.

     There were no research and development  expenses for the Transition  Period
ended June 30, 1999,  compared to $1,092,316  (unaudited) for the  corresponding
period ended June 30,  1998.  The  decrease in expenses  reflects the  Company's
decision not to develop the next generation of the Entertainment Network and the
resulting reduction in staff and professional fees.

     Research and development  expenses for the year ended October 31, 1998 were
$1,092,316,  a decrease of $6,729,324  (or 86%) over expenses of $7,821,640  for
the year ended October 31, 1997. The decrease in expenses reflects the Company's
decision not to develop the next generation of the Entertainment Network and the
resulting reduction in staff and professional fees. The Company does not plan to
continue its research and  development in the in-flight  entertainment  business
beyond those efforts that are required  contractually by the Swissair agreement.
The Swissair  agreement requires the Company to provide specific upgrades to the
Entertainment Network. The Company has ceased development of these upgrades as a
result of  Swissair's  breach of its  agreement and does not plan to develop any
further upgrades to the Entertainment Network.

     General and  administrative  expenses for the Transition  Period ended June
30, 1999 were $3,703,633, a decrease of $264,127 (or 7%) compared to expenses of
$3,967,760  (unaudited)  for the  corresponding  period  ended  June  30,  1998.
Significant  components of general and administrative  expenses include costs of
consulting  agreements,  legal and professional fees,  corporate insurance costs
and  legal  fees  related  to the  merger  of GTL and the  Company.  Significant
components  accounting for the decrease in general and  administrative  expenses
from 1998 to 1999 include  personnel costs and related  severance  for employees
terminated in 1998, and higher operating  expenses,  offset by a 1999 accrual of
approximately   $1.6  million  to  write-off   certain   consulting   agreements
determined, in the current period, to have no future value.

     General and  administrative  expenses  for the year ended  October 31, 1998
were $9,019,872, a decrease of $3,554,351 (28%) over expenses of $12,574,223 for
the year ended October 31, 1997. The decrease in expenses reflects the Company's

                                       19
<PAGE>
reduction in staff in administrative areas, including production,  marketing and
program  management  departments.  As of May 29,  1998,  the Company  terminated
almost all sales and marketing  efforts related to IED. The decrease in expenses
during  fiscal 1998 was partly  offset by the payment of $3,053,642 in severance
to three former executives of GTL.

     For the  Transition  Period  ended  June  30,  1999  the  Company  recorded
warranty,  maintenance,  commission  and support  cost  accrual  adjustments  of
$5,117,704, $504,409, $303,321 and $1,225,959, respectively. Such adjustments to
prior period estimates, which totaled $7,151,393, resulted from an evaluation of
specific  contractual  obligations and discussions between the new management of
the Company and other parties related to such contracts. Based on the results of
the  Company's  findings  during  fiscal  1999,  such  accruals  were no  longer
considered necessary.

     Special charges for the Transition Period ended June 30, 1999 were $521,590
compared to zero (unaudited) for the corresponding period of the previous fiscal
year.

     Special charges for the year ended October 31, 1998 were $400,024  compared
to $19,649,765  for the year ended October 31, 1997.  Special  charges in fiscal
1998 primarily resulted from equipment write-offs of $1,006,532.  The write-offs
were for excess computers, furniture and other equipment that the Company is not
utilizing in its  operations  and is in the process of disposing.  The equipment
write-offs  were  partly  offset by a recovery  of special  charges  expensed in
fiscal 1997.  During  fiscal 1998,  a recovery of $190,000 was  recognized  as a
special charge credit as a result of a reduction in the number of  Entertainment
Networks  requiring  maintenance.  The  Company  also  recognized  a recovery of
$416,508 related to Swissair's  decision to not develop the system for the front
row in the economy  sections  of its  aircraft.  Special  charges in fiscal 1997
primarily  resulted from the installment of the Entertainment  Networks on three
Swissair  aircraft and  installations  required by the Debonair  agreement.  The
Company was responsible for the costs of installing the system on three Swissair
aircraft, including materials,  installation,  upgrades, a one-year warranty and
maintenance  through  September  of 1998.  The costs for these three  systems of
$14,292,404  were recorded as a special  charge  during fiscal 1997.  Due to the
termination  of the  Debonair  agreement,  the  costs  of the  installed  system
($956,447) and all inventory on-hand under the Debonair  agreement  ($2,881,962)
were written off as a special charge in fiscal 1997.  Additionally,  the Company
recorded  a  special  charge  of  $1,518,952  for  the  write-off  of  a  system
integration lab utilized in software  development and testing. The lab equipment
will not be utilized in the Company's future operations.

     Interest expense was $83,029 for the Transition  Period ended June 30, 1999
compared to $8,873 (unaudited) for the corresponding period ended June 30, 1998.
The  fiscal  1999  expense  can be  attributed  principally  to  long-term  debt
obligations,  whereas the fiscal 1998 expense is  attributable  to the Company's
capital leases for furniture that expire in September 1999.

     Interest  expense was $11,954 for the year ended  October 31, 1998 compared
to $13,423 for the year ended October 31, 1997. The expense is  attributable  to
the Company's capital leases for furniture that expire in September of 1999.

     Interest  income for the Transition  Period ended June 30, 1999 was $77,682
compared to $15,750  (unaudited)  for the  corresponding  period  ended June 30,
1998.  Fiscal 1999 and fiscal 1998 interest income is principally  attributed to
Swissair extended warranty billings.

                                       20
<PAGE>
     Interest  income  for the year  ended  October  31,  1998 was  $53,465,  an
increase of 100% compared to zero interest income for the year ended October 31,
1997.  Interest  income in fiscal  1998 is  principally  attributed  to Swissair
extended warranty billings.

     Other  income for the  Transition  Period  ended June 30,  1999 was $11,226
compared to $10,679  (unaudited)  for the  corresponding  period  ended June 30,
1998.  Other income in fiscal 1999  represents  proceeds from the sale of office
furniture and equipment.  Other income in fiscal 1998  represents  proceeds from
the sale of equipment and scrapped inventory.

     Other  income of $10,179 for the year ended  October  31,  1998  represents
proceeds from the sale of scrapped inventory.  Other expense of $203,649 for the
year ended  October 31, 1997  represents  the loss on  disposals of property and
equipment.

     The  unaudited  results of  operations  for the eight months ended June 30,
1998 are presented for comparative purposes only.

                                                              EIGHT MONTHS ENDED
                                                                 JUNE 30, 1998
                                                                  (UNAUDITED)
                                                              ------------------
     Revenues                                                     $18,383,360
     Cost of equipment sales                                      $15,239,568
     Research and development                                     $ 1,092,316
     General and administrative expenses                          $ 3,967,760
     Interest expense                                             $     8,873
     Interest income                                              $    15,750
     Other income                                                 $    10,679
     Net loss to common shareholders                              $ 1,912,261
     Cost of service income                                       $    13,533

LIQUIDITY AND CAPITAL RESOURCES

     At June 30, 1999,  the Company had working  capital of  approximately  $1.9
million.  The Company's  primary source of funding has been through  contributed
capital from GTL.  Subsequent  to June 30,  1999,  the Company  obtained  orders
consisting of a $5.3 million  purchase order for the  manufacture,  delivery and
installation  of 193  Cheetah(TM)  Multimedia  Video Servers to certain  Georgia
schools;  and a service order under the Carnival Agreement for installation of a
second  CruiseView  system.  As of October 8, 1999,  all 193  servers  have been
delivered  and accepted by the customer and the Company has received  payment of
approximately  $1.2 million towards the total amount due of  approximately  $5.3
million.  The balance is expected to be received by November  1999.  The Company
received an  installment  payment from  Carnival in August 1999.  Excluding  the
benefit of the Georgia program,  working capital may continue to decrease as the
Company  continues to invest in inventory  for the  Carnival  service  order and
invest in business development,  and complete transactions which are longer term
by nature.

     During the  Transition  Period,  the Company  used $3.1 million of cash for
operating activities,  a decrease of $829,000 from the $3.9 million of cash used
by operating  activities  for the  corresponding  period of the previous  fiscal
year.  The cash utilized in operations  during the  Transition  Period  resulted
primarily from general and administrative  expenses. The cash used in operations
during the year ended  October 31, 1998 is  primarily a result of  increases  in
accounts  receivable  and  increases in  inventories  and an increase in accrued
product  warranties,  offset by  decreases  in  accounts  payable  and  deferred
revenue.

     Purchases of investment  securities for the Transition Period were $302,589
compared to none for the eight months ended June 30, 1998. At June 30, 1999, the
Company had no material capital commitments.

     The note  payable due  September  5, 1999 was in default at June 30,  1999.
Subsequent  to  year-end,  the note was  converted  into  200,000  shares of the
Company's  common  stock.  Therefore,  the note payable has been  classified  as
long-term at June 30, 1999.

                                       21
<PAGE>
     Prior to the  Transaction,  the Company  entered into a Secured  Promissory
Note with GTL in the principal amount of $750,000, bearing interest at a rate of
9.5% per  annum,  and a  related  security  agreement  granting  GTL a  security
interest  in  its  assets  (the  "Promissory  Note").  The  Promissory  Note  is
convertible  into shares of the  Company's  Series C 8%  preferred  stock at the
discretion of GTL.

     GTL has also advanced  approximately $898,000 to the Company in the form of
intercompany  advances.  Both the  Promissory  Note and the  advances  have been
classified as due to affiliate in the balance sheet as of June 30, 1999.

     On October 12, 1999, the Company entered into $5 million secured  revolving
credit  facility  (the  "Facility")  with GTL.  The Facility  provides  that the
Company may borrow up to $5 million for  working  capital and general  corporate
purposes  at the  prime  rate of  interest  plus 3%.  The  Facility  matures  in
September  2001. The Company paid an origination  fee of $50,000 to GTL and will
pay an unused line fee of 0.5% per annum.  The Facility is secured by all of the
assets of the  Company  and is  convertible  at GTL's  option into shares of the
Company's Series C 8% Preferred Stock.

     The Company is  currently  using its working  capital to finance  inventory
purchases and other expenses  associated  with the delivery and  installation of
Company  products,  and general and  administrative  costs. The Company believes
that its current cash balances plus interest received on such balances,  profits
from the Georgia school program,  and the $5 million  revolving  credit facility
with  GTL are  sufficient  to meet  the  Company's  currently  anticipated  cash
requirements for at least the next twelve months.

INFLATION AND SEASONALITY

     We do not believe  that we are  significantly  impacted by  inflation.  Our
operations  are not  seasonal  in  nature,  except  to  extent  fluctuations  in
quarterly  operating  results  occur due to the  cyclical  nature of  government
funding to be obtained in connection with education programs.

RISKS ASSOCIATED WITH YEAR 2000

     The commonly  referred to Year 2000 ("Y2K")  problem  results from the fact
that many existing computer programs and systems use only two digits to identify
the year in the date field.  These programs were designed and developed  without
considering the impact of a change in the century designation. If not corrected,
computer applications that use a two-digit format could fail or create erroneous
results in any computer  calculation or other processing involving the Year 2000
or a later date. The Company has identified two main areas of Y2K risk:

     1. Internal  computer systems or embedded chips could be disrupted or fail,
causing an interruption or decrease in productivity in the Company's  operations
and

     2. Computer systems or embedded chips of third parties  including  (without
limitation) financial institutions, suppliers, vendors, landlords, customers and
service  providers and others  ("Material  Third Parties") could be disrupted or
fail,  causing an interruption or decrease in the Company's  ability to continue
operations.

     The Company has developed,  or is in the process of  developing,  plans for
implementation  and testing of any necessary  modifications  to its key computer
systems and equipment  with embedded  chips to ensure that it is Y2K  compliant.
The Company  believes that its internal  systems are Y2K compliant.  The Company
believes that the Y2K issue will not pose significant  operational  problems for
it. However,  if the modifications and conversions made are not sufficient,  the
Y2K could have a material impact on its operations. The Company has performed an
assessment of its Triumph  products for Y2K issues.  The Triumph  products use a
four-digit  identifier and therefore,  the Company believes the Triumph products
are Y2K compliant.

                                       22
<PAGE>
     The Company's  cost of addressing Y2K has been  insignificant  to date. The
financial impact of making any additional systems changes,  or other remediation
efforts,  if any, cannot be known precisely at this time, but it is not expected
to be material to the Company's  financial position,  results of operations,  or
cash flows.

     In  addition,   the  Company  has   identified  and   prioritized   and  is
communicating  with material third parties to determine their Y2K status and any
probable  impact on them.  The Company  will  continue to track and evaluate its
long-term  relationships  with material  third parties based on the responses it
receives from such persons and on information learned from other sources. If any
of  the   Company's   material   third  parties  are  not  Y2K  ready  and  such
non-compliance   causes  a  material  disruption  to  any  of  their  respective
businesses,  the  Company's  business  could be materially  adversely  affected.
Disruptions could include,  among other things:  the failure of a material third
party's  business;  a financial  institution's  inability  to take and  transfer
funds; an interruption in delivery of supplies from vendors; a loss of voice and
data  connections;  a loss of  power  to the  Company's  facilities;  and  other
interruptions in the normal course of the Company's  operations,  the nature and
extent of which the  Company  cannot  foresee.  The  Company  will  continue  to
evaluate  the nature of these  risks,  but at this time the Company is unable to
determine the  probability  that any such risk will occur,  or if it does occur,
what the  nature,  length  or  other  effects,  if any,  that it may have on the
Company.  If a significant number of material third parties experience  failures
in their  computer  systems or operations  due to Y2K  non-compliance,  it could
affect the  Company's  ability to process  transactions  or otherwise  engage in
similar normal business activities.  For example,  while the Company expects its
internal  systems  to be Y2K  ready,  the  Company  and  its  customers  will be
dependant  upon the Y2K readiness of many providers of  communications  services
and in turn,  those  providers'  vendors and  suppliers.  If, for example,  such
providers and others are not Y2K ready, the Company and its customers may not be
able to send and receive data and electronic  transmissions,  which would have a
material  adverse  effect on the  business  and  revenues of the Company and its
customers.  While many of these  risks are outside the  Company's  control,  the
Company has  instituted  a process to  identify  material  third  parties and to
address any non-compliance issues.

     While the Company believes that it is adequately  addressing the Y2K issue,
there can be no assurance  that its Y2K  analysis  will be completed on a timely
basis, or that the cost and  liabilities  associated with the Y2K issue will not
materially  adversely  impact its  business,  prospects,  revenues or  financial
position.  The Company is uncertain as to its most reasonably  likely worst case
Y2K scenario,  and it has not yet developed a contingency plan to handle a worst
case scenario.

FORWARD-LOOKING INFORMATION

     This Report  contains  certain  forward-looking  statements and information
within the meaning of Section 27A of the  Securities Act of 1933 and Section 21E
of the Securities  Exchange Act of 1934. The cautionary  statements made in this
Report  should  be read  as  being  applicable  to all  related  forward-looking
statements wherever they appear in this Report.  Forward-looking  statements, by
their very nature, include risks and uncertainties.  Accordingly,  the Company's
actual  results could differ  materially  from those  discussed  herein.  A wide
variety of factors  could  cause or  contribute  to such  differences  and could
adversely impact  revenues,  profitability,  cash flows and capital needs.  Such
factors,  many of which are  beyond  the  control of the  Company,  include  the
following: the Company's success in obtaining new contracts; the volume and type
of work orders that are received under such contracts;  the accuracy of the cost
estimates  for the projects;  the Company's  ability to complete its projects on
time and within budget;  levels of, and ability to, collect accounts receivable;
availability of trained  personnel and utilization of the Company's  capacity to
complete work;  competition and competitive  pressures on pricing;  and economic
conditions in the United States and in other regions served by the Company.

                                       23
<PAGE>
NEW ACCOUNTING PRONOUNCEMENTS

     On  January  1,  1998,  the  Company  adopted  SFAS  No.  130,   "Reporting
Comprehensive  Income."  SFAS No. 130  establishes  standards  for reporting and
presentation  of  comprehensive  income  and  its  components  in a full  set of
financial statements. Comprehensive income consists of net income and unrealized
gains and losses on investment  securities  net of taxes and is presented in the
consolidated  statements of stockholders'  equity (deficiency) and comprehensive
income;  it does not  affect  the  Company's  financial  position  or results of
operations.

     On January 1, 1998, the Company  adopted SFAS No. 131,  "Disclosures  about
Segments of an Enterprise and Related Information." SFAS No. 131 supersedes SFAS
No. 14, "Financial  Reporting for Segments of a Business  Enterprise"  replacing
the "industry segment" approach with the "management"  approach.  The management
approach  designates  the internal  organization  that is used by management for
making  operating  decisions  and  assessing  performance  as the  source of the
Company's  reportable  segments.  SFAS No. 131 also  requires  disclosure  about
products and services,  geographical areas, and major customers. The adoption of
SFAS No. 131 does not affect  results of  operations  or financial  position but
does affect the disclosure of segment information.

     In June 1998, the Financial  Accounting  Standards  Board  ("FASB")  issued
Statement of Financial  Accounting  Standards ("SFAS") No. 133,  "Accounting for
Derivative  Instruments and Hedging Activities," which establishes standards for
the  accounting  and reporting for  derivative  instruments,  including  certain
derivative instruments embedded in other contracts, and hedging activities. This
statement  generally  requires  recognition  of  gains  and  losses  on  hedging
instruments, based on changes in fair value or the earnings effect of forecasted
transactions.  As issued,  SFAS No. 133 is effective for all fiscal  quarters of
all fiscal years  beginning  after June 15, 1999. In June 1999,  the FASB issued
SFAS   No.   137,   "Accounting   for   Derivative   Instruments   and   Hedging
Activities--Deferral  of the  Effective  Date  of  FASB  Statement  No.  133--An
Amendment of FASB  Statement No. 133," which deferred the effective date of SFAS
No. 133 until June 15, 2000. We are currently  evaluating the impact of SFAS No.
133.

ITEM 7. FINANCIAL STATEMENTS

     The financial  statements and schedules are included herewith commencing on
page F-1.

ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
        FINANCIAL DISCLOSURE

     There are no items or circumstances to be disclosed under this Item 8.

                                       24
<PAGE>
                                    PART III

ITEM 9. DIRECTORS AND EXECUTIVE OFFICERS

     This section provides biographical  information about each of the Company's
directors and executive officers.

IRWIN L. GROSS      Irwin  L.  Gross  has  been  the  Chairman  of the  Board of
(Age 55)            Directors and Chief  Executive  Officer of the Company since
                    May 18,  1999 and  Chairman  of the Board of  Directors  and
                    Chief Executive Officer of GTL since September 1998. He is a
                    founder of ICC  Technologies,  Inc., a publicly held company
                    listed on the NASDAQ  National  Market,  which is  currently
                    engaged in Internet  related  technology,  and  Chairman and
                    Director of ICC from May 1984 to July 1998. In addition, Mr.
                    Gross   served   as   the   Chief   Executive   Officer   of
                    Engelhard/ICC, a joint venture between ICC and Engelhard. Mr
                    Gross  became a director  of  ORBIT/FR  in December of 1998,
                    which is a publicly held company  specializing in the design
                    and manufacture of  sophisticated  automated  microwave test
                    measurement   systems   for  the   wireless   communication,
                    satellite  and  aerospace  industries.  Mr. Gross was also a
                    founder  of  Interdigital  Company  (AMEX)  and  served as a
                    Director and Executive Vice President  until April 1984. Mr.
                    Gross  has  served  as a  consultant  to,  investor  in  and
                    director of, numerous  publicly held and private  companies.
                    Mr.  Gross also serves on the board of  directors of several
                    charitable  organizations.  Mr.  Gross  has  a  Bachelor  of
                    Science  degree in Accounting  from Temple  University and a
                    Juris Doctor degree from Villanova University.

STEPHEN SCHACHMAN   Stephen  Schachman  became a Director  of the Company on May
(Age 55)            18,  1999  and  presently  is a  private  consultant  to the
                    Company. Since 1995, Mr. Schachman has been the owner of his
                    own consulting  firm,  Public Affairs  Management,  which is
                    located  in the  suburban  Philadelphia  area.  From 1992 to
                    1995, Mr. Schachman was an executive  officer and consultant
                    to  Penn  Fuel  Gas  Company,  a  supplier  of  natural  gas
                    products.  Prior  thereto,  he  was  an  attorney  with  the
                    Philadelphia  law firm Dilworth,  Paxson,  Kalish & Kaufman.
                    Mr.  Schachman was also an Executive  Vice President of Bell
                    Atlantic  Mobile System and prior  thereto  President of the
                    Philadelphia  Gas Works, the largest  municipally  owned gas
                    company in the United States.  Mr.  Schachman has a Bachelor
                    of Arts degree from the University of Pennsylvania and Juris
                    Doctor degree from the Georgetown University Law School. Mr.
                    Schachman has been a Director of GTL since September 1998.

MOSHE M. PORAT      M. Moshe  Porat  became a Director of the Company on May 18,
(Age 52)            1999 and since  September 1996 has served as the Dean of the
                    School of Business and Management at Temple  University.  He
                    is the  Chairholder of the Joseph E. Boettner  Professorship
                    in Risk  Management and Insurance.  From 1988 to 1996 he was
                    Chairman of the Risk  Management,  Insurance  and  Actuarial
                    Science  Department  at Temple  University.  He received his
                    undergraduate  degree  in  economics  and  statistics  (with
                    distinction)  from Tel Aviv  University.  His MBA (Magna Cum
                    Laude) is from the Recanati Graduate School of Management at
                    Tel Aviv  University.  He  completed  his  doctoral  work at
                    Temple  University.  Prior to his academic  work,  Dr. Porat
                    served as deputy  general  manager of a large  international
                    insurance   brokerage  firm  and  insurance  company  as  an
                    economic and  financial  consultant.  Dr. Porat has authored
                    several monographs on captive insurance  companies and their
                    use in risk management,  has published  numerous articles on
                    captive  insurance  companies,   self  insurance  and  other
                    financial and risk topics,  has served as an expert  witness
                    and has  won  several  awards.  Dr.  Porat  holds  the  CPCU
                    professional  designation  and is a member of ARIA (American

                                       25
<PAGE>
                    Risk  and   Insurance   Association),   IIS   (International
                    Insurance  Society),  RIMS  (Risk and  Insurance  Management
                    Society) and Society of CPCU.  Dr. Porat has been a Director
                    of GTL since September 1998.

MORRIS C. AARON     Morris C. Aaron has served as the Executive  Vice  President
(Age 35)            and Chief Financial Officer of the Company and as a Director
                    of the Company since May 18, 1999. Since September 25, 1998,
                    he has served as the Chief  Financial  Officer of GTL. Prior
                    to his  involvement  in GTL,  from January 1996 to September
                    1998,  Mr.  Aaron  was  the  Chief  Financial   Officer  and
                    Treasurer  of  Employee  Solutions,  Inc.,  a  publicly-held
                    company listed on the NASDAQ National  Market.  From 1986 to
                    1996, Mr. Aaron was with the firm of Arthur Andersen, LLC in
                    the corporate finance and corporate restructuring group. Mr.
                    Aaron  holds  a   Bachelors   Degree  in   Accounting   from
                    Pennsylvania   State   University,   a  MBA  from   Columbia
                    University and is a Certified Public Accountant in the State
                    of New York.

FRANK E. GOMER      Dr.  Frank  Gomer  has  served  as the  President  and Chief
(Age 51)            Operating  Officer of the  Company  and as a Director of the
                    Company since May 18, 1999.  From October 1, 1998 to May 18,
                    1999, Dr. Gomer served as President of IED and from February
                    10, 1997 to October 1, 1998 he served as Vice  President  of
                    Engineering  and  Operations of GTL. Prior to joining GTL in
                    1997, Dr. Gomer was responsible  for all electronic  display
                    systems   developed  and   manufactured   by  Honeywell  Air
                    Transport  Systems  Division.  From 1986 to 1997,  he held a
                    series  of  senior   engineering   and  program   management
                    positions  with  Honeywell.  Dr.  Gomer  has a  Bachelor  of
                    Science  degree  from  Colgate  University  and a Doctor  of
                    Philosophy degree from Washington University in St. Louis.

WILBUR RINER, SR.   Mr. Riner has served as an Executive  Vice  President of the
(Age 72)            Company since May 18, 1999. Mr. Riner co-founded the Company
                    with his son,  James Riner,  in 1986.  From 1986 to 1999, he
                    served as Chief Executive  Officer and Chairman of the Board
                    of  Directors  of the  Company,  and from  1997 to 1999,  he
                    served as  President  of the  Company.  Prior to forming the
                    Company,  from  1984  to  1986,  Mr.  Riner  was  the  Chief
                    Executive Officer of Asher  Technologies,  a manufacturer of
                    telecommunications products. Prior to 1984, Mr. Riner served
                    as Executive Vice President for OKI Telecom's  operations in
                    the United States and Vice President/United States Sales and
                    Marketing for Mitel Corp.  and General  Manager of ITT North
                    Microsystems for ITT Telecommunication.

     The  Company's  directors  hold  office  until the next  annual  meeting of
stockholders  following their election or appointment and until their successors
are  elected and  qualified  or until their  prior  resignation.  The  Company's
executive  officers  hold office  subject only to the  authority of the Board of
Directors.

     Each non-employee  director of the Company is paid $1,000 for attendance at
each  meeting  of the  Board of  Directors  and $500 for  participating  in each
telephonic  Board meeting.  In addition,  the Company  reimburses  directors for
their  out-of-pocket  expenses  incurred in connection with their service on the
Board of  Directors.  On June 11, 1999,  Mr.  Schachman  and Dr. Porat were each
granted a  non-qualified  option  under the 1995 Stock  Option for  Non-Employee
Directors  Plan to acquire  30,000  shares of the  Company's  Common Stock at an
exercise price of $2.25 per share. All options granted to non-employee directors
vest in equal annual  installments  beginning  June 11, 2000 and ending June 11,
2002.

                                       26
<PAGE>
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE

     During the eight-month  Transition  Period, all reports on Forms 3, 4 and 5
were filed in a timely fashion,  except for Mr. Wilbur Riner's Annual  Statement
of Beneficial Ownership of Securities on Form 5 for the Transition Period, which
will be filed late.

ITEM 10. EXECUTIVE COMPENSATION

SUMMARY COMPENSATION TABLE

     The  following  table sets forth  certain  information  for the  Transition
Period  ended  June 30,  1999 and the  Company's  last two  fiscal  years  ended
December 31, 1998 and 1997, with respect to compensation  paid or accrued by the
Company to the Company's Chief Executive  Officer and to each of the most highly
compensated   other   executive   officers  whose  combined   salary  and  bonus
compensation for 1999 exceeded $100,000.
<TABLE>
<CAPTION>
                                                                                      LONG TERM
                                                  ANNUAL COMPENSATION               COMPENSATION
                                                  -------------------               ------------
                                                                                       AWARDS
                                                                          OTHER        ------
                                                                          ANNUAL     SECURITIES
                                                                       COMPENSATION  UNDERLYING
     NAME AND PRINCIPAL POSITION            YEAR  SALARY($)  BONUS($)       ($)      OPTIONS (#)
     ---------------------------            ----  ---------  --------  ------------  -----------
<S>                                         <C>   <C>        <C>       <C>           <C>
Irwin L. Gross, Chairman of the Board (1)   1999        --      --           --             --

Frank E. Gomer, President and               1999    21,348      --           --         50,000
  Chief Operating Officer (1)

Morris C. Aaron, Executive Vice             1999    14,884      --           --         50,000
  President and Chief Financial Officer (1)

Wilbur L. Riner, Sr., Executive Vice        1999   104,000      --        3,600(5)      25,000
  President, Business Development (2)       1998   156,000      --       22,900(5)     100,000
                                            1997   104,322      --       23,400(5)     100,000

James E. Riner, Vice President,             1999    94,031(3)   --        2,400(5)      10,000
  Engineering                               1998    91,790      --        3,600(5)      25,000
                                            1997    86,790      --        3,600(5)      25,000

Bryan Carr, Vice President,                 1999    70,000      --        2,800(5)          --
  Finance and Chief Financial Officer (4)   1998   120,000      --       15,301(5)      50,000
                                            1997   101,667      --       30,171(5)      80,000
</TABLE>

(1)  Pursuant  to the GTL  Transaction,  on May 18,  1999 Mr.  Gross  became the
     Chairman of the Board of Directors,  Mr. Aaron was appointed Executive Vice
     President and Chief Financial Officer and Dr. Gomer was appointed President
     and Chief Operating  Officer of the Company.  Mr. Aaron is also employed by
     GTL, the parent company of TNCi, and devotes  approximately 40% of his time
     to GTL and receives a comparable portion of his compensation from GTL.
(2)  Served as Chairman,  President and Chief  Executive  Officer of the Company
     until May 18, 1999.
(3)  Includes approximately $14,000 for moving expenses.
(4)  Bryan Carr's employment was terminated on May 31, 1999.
(5)  Consists of the following:

                                       27
<PAGE>
                                           AUTOMOBILE     COMMISSIONS
      NAME                         YEAR    ALLOWANCE($)       ($)       TOTAL($)
      ----                         ----    ------------   -----------   --------
Wilbur L. Riner, Sr.               1999       3,600             --        3,600
                                   1998       5,400         17,500       22,900
                                   1997       5,400         18,000       23,400

James E. Riner                     1999       2,400             --        2,400
                                   1998       3,600             --        3,600
                                   1997       3,600             --        3,600

Bryan Carr                         1999       2,800             --        2,800
                                   1998       4,800         10,501       15,301
                                   1997       5,000         25,171       30,171

     Mr. Wilbur Riner and Mr. Carr, from time to time, have provided significant
assistance to the Company's  sales and marketing staff in effecting sales of the
Company's products, for which sales they received commission compensation.

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

     The  following  table sets forth  certain  information  with respect to the
exercise of stock  options by each of the named  executive  officers  during the
Transition Period, and the fiscal year-end value of unexercised  options for the
same period.

                                  NO. OF SECURITIES         VALUE OF UNEXERCISED
                                UNDERLYING UNEXERCISED          IN-THE-MONEY
                                     OPTIONS/SARS               OPTIONS/SARS
                                 AT TRANSITION PERIOD       AT TRANSITION PERIOD
                                 ENDED JUNE 30, 1999        ENDED JUNE 30, 1999
                                     EXERCISABLE/               EXERCISABLE/
      NAME                          UNEXERCISABLE              UNEXERCISABLE
      ----                      ----------------------      --------------------
Frank E. Gomer                      10,000/40,000                    -- (1)
Morris C. Aaron                     10,000/40,000                    -- (1)
Wilbur L. Riner, Sr.                    --/40,000                    -- (1)
James E. Riner                      12,500/54,348             $3,125/-- (1)

(1)  If no value is indicated, these options did not have an exercise price less
     than the  closing  bid price per share of the  Common  Stock on the  NASDAQ
     SmallCap Market at June 30, 1999.

                                       28
<PAGE>
OPTION GRANTS IN 1999

     The  following  table  sets  forth  certain  information  with  respect  to
individual  grants of stock options made to the named executive  officers during
the Transition Period.

                          NO. OF SHARES   PERCENT OF TOTAL
                            UNDERLYING    OPTIONS GRANTED   EXERCISE  EXPIRATION
       NAME              OPTIONS GRANTED  TO EMPLOYEES (1)    PRICE      DATE
       ----              ---------------  ----------------  --------  ----------
Frank E. Gomer (2)            50,000           14.50%         $2.25    6/11/09
Morris C. Aaron (2)           50,000           14.50%          2.25    6/11/09
Wilbur L. Riner, Sr. (3)      25,000            7.25%          2.25    6/11/09
James E. Riner (4)            10,000            2.90%          2.25    6/11/09

(1)  Represents  the closing bid price of the Common  Stock on the grant date of
     June 11, 1999.
(2)  The qualified  options vest as follows 10,000 on the grant date of June 11,
     1999 and thereafter  10,000 vest on June 11, 2000,  June 11, 2001, June 11,
     2002, and June 11, 2003.
(3)  The  qualified  options vest 12,500 on June 11, 2000 and 12,500 on June 11,
     2001.
(4)  The qualified  options vest 2,500 on June 11, 2000, June 11, 2001, June 11,
     2002 and June 11, 2003.

EMPLOYMENT ARRANGEMENTS

     Wilbur L. Riner serves as Executive  Vice  President  Business  Development
pursuant to the terms of an  employment  agreement  that  terminates  on May 18,
2001.  Mr. Riner receives a minimum annual base salary of $156,000 per year. The
employment  agreement  provides for a severance payment in the event Mr. Riner's
employment is terminated by the Company other than for "cause" as defined in the
agreement. The severance payment amount would be equal to the lesser of his base
annual  salary  or Mr.  Riner's  base  salary  for  the  remaining  term  of the
Agreement. The employment agreement also provides that the Company may pay other
incentive compensation as may be set by the Board of Directors from time to time
and for such other fringe  benefits as are paid to other  executive  officers of
the Company.

     James E. Riner serves as Vice President  Engineering and Programs  pursuant
to the terms of an employment agreement that terminates on October 31, 2001. Mr.
Riner receives a minimum annual base salary of $140,000 per year. The employment
agreement  provides  for a  severance  payment  in the  event  that the  Company
terminates  Mr.  Riner's  employment  other  than for  "cause" as defined in the
agreement. The severance payment amount would be equal to the lesser of his base
annual salary or his base salary for the remaining  term of the  Agreement.  The
employment  agreement  also  provides  that the Company may pay other  incentive
compensation  as may be set by the Board of Directors  from time to time and for
such  other  fringe  benefits  as are paid to other  executive  officers  of the
Company.

     Bryan Carr served as Vice President  Finance,  Treasurer,  Chief  Financial
Officer and Chief  Operating  Officer of the Company until May, 1999 pursuant to
the terms of an employment  agreement providing for a minimum annual base salary
of  $120,000  per year and for  commissions  of .5% for net  sales  that  exceed
$500,000 in any calendar  month.  The  employment  agreement also provides for a
severance payment in the event of termination due to certain events; including a
change-in-control or the disposition of substantially all of the business and/or
assets of the  Company  and any  event  which  has the  effect of  significantly
reducing the duties or authority of Mr. Carr. The severance payment amount would
equal the greater of, the present  value of his base annual  salary for one year
or the remainder of his term.  The  employment  agreement also provides that the
Company  may pay  other  incentive  compensation  as may be set by the  Board of
Directors  from time to time and for such other  fringe  benefits as are paid to
other  executive  officers  of the  Company.  The  Company  does not believe any
additional amounts are due to Mr. Carr under the agreement.

                                       29
<PAGE>
     Dr.  Frank Gomer  serves as President  and Chief  Operating  Officer of the
Company pursuant to the terms of an employment agreement that terminates on June
10, 2001. Dr. Gomer receives a minimum annual base salary of $215,000. Beginning
June 11, 1999 and ending June 11, 2003,  Dr. Gomer also receives  50,000 10-year
options  under the  Company's  Stock Option Plan,  which vest in  increments  of
10,000  options per year pursuant to the terms and  conditions of the employment
agreement. The employment agreement also provides for a severance payment in the
event that the Company terminates Dr. Gomer other than for "cause" as defined in
the employment agreement.  The severance payment would be equal to two times the
remaining balance of his base salary for the remainder of the then current term.
The  employment  agreement  also  provides  a payment  in the event the  Company
terminates Dr. Gomer due to a termination  of the Company's  business as defined
in the employment agreement or upon termination without cause following a change
in control. In either such event, Dr. Gomer would receive an amount equal to two
times his remaining base salary for the then current term, but not less than his
annual base salary for one year. The employment agreement also provides that the
company  may pay  other  incentive  compensation  as may be set by the  Board of
Directors from time to time,  and for such other fringe  benefits as are paid to
other executive  officers of the Company.  Such fringe benefits take the form of
medical and dental coverage and an automobile allowance of $500 per month.

     Morris C. Aaron  serves as Executive  Vice  President  and Chief  Financial
Officer pursuant to the terms of an employment agreement that terminates on June
10, 2001. Mr. Aaron receives a minimum annual base salary of $215,000. Beginning
June 11, 1999 and ending June 11, 2003,  Mr. Aaron also receives  50,000 10-year
options  under the  Company's  Stock Option Plan,  which vest in  increments  of
10,000 options per year pursuant to the terms of the employment  agreement.  The
employment  agreement  provides  for a  severance  payment in the event that the
Company terminates Mr. Aaron other than for "cause" as defined in the employment
agreement.  The  severance  payment  would be equal to two times  the  remaining
balance of his base  salary for the  remainder  of the then  current  term.  The
employment agreement also provides a payment in the event the Company terminates
Mr.  Aaron due to a  termination  of the  Company's  business  as defined in the
employment agreement. In the event of the termination of the Company's business,
Mr. Aaron would receive an amount equal to two times his  remaining  base salary
for the then  current  term,  but not less than his annual  base  salary for one
year.  The  employment  agreement  also  provides that the company may pay other
incentive  compensation  as may be set by the  Board of  Directors  from time to
time, and for such other fringe benefits as are paid to other executive officers
of the  Company.  Such  fringe  benefits  take the form of  medical  and  dental
coverage and an automobile  allowance of $500 per month.

REPORT ON REPRICING OF OPTIONS

     On June 11, 1999, the Company cancelled existing options to purchase 20,000
shares of Common Stock  previously  granted to Wilbur Riner,  Sr. at an exercise
price of $8.75 per share.  The Company  repriced  these  options and granted Mr.
Riner incentive stock options to purchase 20,000 shares of the Company's  Common
Stock at an exercise  price of $2.50 per share,  half of which vest on the first
anniversary  of the  date  of  grant  and  half  of  which  vest  on the  second
anniversary  of the  date of  grant.  The  Company  repriced  these  options  in
connection  with the GTL  Transaction  to provide  additional  incentive  to Mr.
Riner.

                                       30
<PAGE>
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

     The following  table sets forth  information,  as of October 8, 1999,  with
respect  to the number of shares of the  Company's  Common  Stock and  Preferred
Stock  beneficially  owned  by  individual  directors,  by all of the  Company's
directors  and officers as a group,  and by persons  known by the Company to own
more than 5% of the Company's  Common Stock and Preferred Stock. The Company has
no other class of voting stock outstanding.

     All information with respect to beneficial  ownership has been furnished by
the respective director,  executive officer or five percent beneficial owner, as
the case may be.  Beneficial  ownership of the Common Stock and Preferred  Stock
has been determined for this purpose in accordance with the applicable rules and
regulations  promulgated  under the Exchange Act. Except as otherwise  described
below, all shares of Common Stock and Preferred Stock are owned directly and the
indicated person has sole voting and investment power.
<TABLE>
<CAPTION>
                                       SHARES OF                    SHARES OF
                                        COMMON                      PREFERRED
                                         STOCK       PERCENT OF       STOCK       PERCENT OF
    NAME AND ADDRESS OF               BENEFICIALLY     COMMON      BENEFICIALLY   PREFERRED
     BENEFICIAL OWNER                   OWNED (1)      STOCK        OWNED (1)       STOCK
     ----------------                 ------------   ----------    ------------   ----------
<S>                                   <C>            <C>           <C>            <C>
Irwin L. Gross                          66,667           1%            -0-           -0-
1811 Chestnut Street, Suite 120
Philadelphia, Pennsylvania 19103
Chairman of the Board of Directors

Morris C. Aaron (1)                     10,000           *             -0-           -0-
222 North 44th Street
Phoenix, Arizona 85034
Director, Executive Vice President
and Chief Financial Officer

Frank E. Gomer (2)                      10,000           *             -0-           -0-
222 North 44th Street
Phoenix, Arizona 85034
Director, President
and Chief Operating Officer

Wilbur Riner, Sr. (3)                   11,100           *             -0-           -0-
1324 Union Hill Road
Alpharetta, Georgia  30201
Director, Executive Vice President
Business Development

Dr. Moshe M. Porat                        -0-           -0-            -0-           -0-
1811 Chestnut Street, Suite 120
Philadelphia, Pennsylvania 19103
Director

Stephen Schachman                         -0-           -0-            -0-           -0-
1811 Chestnut Street, Suite 120
Philadelphia, Pennsylvania 19103
Director

Global Technologies, Ltd.(4)          3,011,764        47.0      2,497,700           100(5)
222 North 44th Street
Phoenix, Arizona  85034

Barbara Riner (6)                       514,543         8.0            -0-           -0-
1324 Union Hill Road
Alpharetta, Georgia  30201

All directors and executive officers
as a group (6 persons)                   31,100          *             -0-           -0-
</TABLE>

                                       31
<PAGE>
----------
* Less than 1%

(1)  Includes  options  currently  exercisable  to acquire  10,000 shares of the
     Company's Common Stock.

(2)  Includes  options  currently  exercisable  to acquire  10,000 shares of the
     Company's Common Stock.

(3)  Does not include  490,120 shares held by Barbara Riner,  the wife of Wilbur
     Riner.  Also does not include options  exercisable to purchase an aggregate
     of 24,423  shares  held by Barbara  Riner.  Mr.  Riner has  disclaimed  all
     beneficial  interest  in the  shares  held by his  wife.  Includes  options
     currently  exercisable  to acquire  11,100 shares of the  Company's  Common
     Stock.

(4)  Includes  1,155,899  shares of Common Stock  issuable  upon  conversion  of
     certain  shares of Series B Stock held by GTL and 310,000  shares of Common
     Stock  issuable  upon  exercise of  warrants.  Does not include  18,317,571
     shares of Common Stock issuable as of July 23, 1999 upon  conversion of (i)
     the  balance  of the  Series B Stock,  (ii) the  Series C Stock,  (iii) the
     Series D Stock  and (iv)  certain  secured  debt for  which  there is not a
     sufficient  number of authorized  Common Stock available.  On September 17,
     1999, the stockholders of the Company approved an increase in the amount of
     authorized shares contained in the Company's Articles of Incorporation. The
     Company is in the process of amending  its  Articles  of  Incorporation  to
     permit it to issue the shares of Common Stock  issuable upon  conversion of
     the Series B Stock,  the Series C Stock, the Series D Stock and for certain
     secured  debt.  Includes  490,120  shares  held by Barbara  Riner which are
     subject to a proxy in favor of two officers of GTL.

(5)  Does not  include  the shares of Series C  Preferred  Stock  issuable  upon
     conversion of certain convertible debt.

(6)  Includes  options  currently  exercisable  to acquire  24,423 shares of the
     Company's Common Stock. Barbara Riner is the wife of Wilbur Riner. Does not
     include options to acquire 11,100 shares of the Company's Common Stock held
     by Wilbur Riner. Ms. Riner has disclaimed beneficial interest in the shares
     held by her husband.

                                       32
<PAGE>
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

     The  Company's  Chief  Executive  Officer is a  principal  of Ocean  Castle
Investments, LLC ("Ocean Castle") which maintains administrative offices for the
Company's Chief Executive Officer and certain other employees of GTL. During the
year ended October 31, 1998,  Ocean Castle executed  consulting  agreements with
two principal  stockholders  of GTL. The rights and  obligations of Ocean Castle
under  the  agreements  were  assumed  by the  Company  in  connection  with the
Transaction.  The consulting agreements require payments aggregating  $1,000,000
to each of the  consultants  through  December  2003 in  exchange  for  advisory
services. Each of the consultants also received stock options to purchase 33,333
shares of Class A common stock of GTL at an exercise price of $4.50.  As of June
30, 1999, the Company  determined  that the consulting  agreements had no future
value  due to  the  Company's  shift  away  from  in-flight  entertainment  into
alternative  markets such as leisure cruise and passenger rail  transport.  Only
limited  services were provided in 1999 and no future services will be utilized.
Accordingly,  the  Company  recorded  a charge  to  general  and  administrative
expenses in the Transition  Period of $1.6 million  representing the balance due
under such contracts.

     In August 1999,  the Company  executed a separation  and release  agreement
with a  shareholder  and former  officer of the  Company,  pursuant to which the
Company paid  approximately  $85,000 in the form of  unregistered  shares of the
Company's common stock.

     In June 1999,  the  Company  loaned to a vice  president,  $75,000  for the
purpose of assisting in a corporate relocation to the Company's  headquarters in
Phoenix,  Arizona.  Such loan is  secured  by assets of the  employee.  The note
matures in August 2009 and bears an interest rate of approximately 5%.

     GTL had an Intellectual  Property  License and Support  Services  Agreement
(the  "License   Agreement")  for  certain   technology   with  FortuNet,   Inc.
("FortuNet"). FortuNet is owned by a principal stockholder and previous director
of GTL. The License  Agreement  provides  for an annual  license fee of $100,000
commencing  in  October  1994 and  continuing  through  November  2002.  GTL was
required to pay FortuNet  $100,000  commencing  in October  1994 and  continuing
through  November  2002. The Company paid FortuNet  $100,000  during each of the
years ended  October 31, 1998 and 1997.  As of October 31, 1998,  the  remaining
commitment of $400,000 is included in accrued  liabilities on the balance sheet.
The  Company  assumed  this  liability  in  connection  with  the   Transaction.
Subsequent  to June 30,  1999,  the  Company  agreed  to a  termination  of this
agreement and paid  FortuNet  $100,000  plus legal fees.  During the  Transition
Period ended June 30,  1999,  the Company had revised its  estimated  accrual to
$200,000 which is included in accrued liabilities at June 30, 1999.

     During  the  year  ended  October  31,  1998,  GTL  extended  by one year a
consulting agreement with a former officer of GTL pursuant to which GTL will pay
$55,000 for services  received  during the period  November 1999 through October
2000.  The Company has assumed the  liability  for the  consulting  agreement in
connection  with the  Transaction  in the amount of $73,000 which is included in
accrued liabilities at June 30, 1999.

     During  the year  ended  October  31,  1998,  GTL  executed  severance  and
consulting agreements with three former officers, pursuant to which GTL paid the
former officers and set aside  restricted funds in the amounts of $3,053,642 and
$735,000,  respectively. The consulting agreements all expire by September 1999.
Payments  totaling  $735,000  have been and continue to be made from  restricted
cash of GTL through  September 1999.  Expenses  associated with these agreements
were charged to general and  administrative  expenses in the year ended  October
31, 1998.

     During the year ended October 31, 1996, GTL executed  severance  agreements
with three former  officers  pursuant to which the Company will pay severance of
$752,500  over a  three-year  period.  As of June 30, 1999 and October 31, 1998,
$18,000 and $55,000 remained to be paid under these agreements. Such liabilities
were assumed by the Company in connection with the Transaction.

                                       33
<PAGE>
                                     PART IV

ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K.

     (a)  EXHIBITS

     The  following  Exhibits  are  filed  herewith  pursuant  to  Rule  601  of
Regulation S-B.

EXHIBIT
NUMBER                             DESCRIPTION                         REFERENCE
-------                            -----------                         ---------
   2.1        Asset Purchase and Sale Agreement with Interactive Flight
              Technologies, Inc., dated April 29, 1999                    (1)

   2.2        First Amendment to Asset Purchase and Sale Agreement,
              dated as of May 14, 1999                                    (1)

   3.1        Articles of Amendment to the Articles of Incorporation
              regarding Series D Preferred Stock May 17, 1999              *

   3.2        Amended and Restated Bylaws of Registrant                   (2)

  10.1        Employment Agreement, dated October 31, 1998, by and
              between the Registrant and Wilbur L. Riner                  (3)

  10.2        Addendum and Modification to Employment Agreement, dated
              May 14, 1999, by and between Registrant and Wilbur L. Riner  *

  10.3        Employment Agreement, dated October 31, 1998, by and
              between the Registrant and James E. Riner                   (3)

  10.4        Addendum and Modification to Employment Agreement, dated
              May 14, 1999, by and between Registrant and James E. Riner   *

  10.5        Employment Agreement, dated October 31, 1998, by and
              between the Registrant and Bryan R. Carr                    (3)

  10.6        Employment Agreement, effective June 11, 1999, by and
              between Registrant and Frank Gomer                           *

  10.7        Employment Agreement, effective June 11, 1999, by and
              between Registrant and Morris C. Aaron                       *

  10.8        Promissory Note, dated September 1, 1994, make by the
              Company to the order of Wilbur Riner.                       (4)

  10.9        Promissory Note, dated September 1, 1994, made by the
              Company to the order of James Riner                         (4)

 10.10        1994 Employee Stock Option Plan, including form of Stock
              Option Agreement                                            (4)

 10.11        1995 Stock Option Plan for Non-Employee Directors           (5)

                                       34
<PAGE>
 10.12        Securities Purchase Agreement dated as of October 23,
              1998, between the Shaar Fund Ltd. (the "Shaar") and the
              Registrant                                                  (6)

 10.13        Registration Rights Agreement dated as of October 23,
              1998, between the Shaar and the Registrant                  (6)

 10.14        Warrant Agreement dated October 23, 1998, between Shaar
              and the Registrant                                          (6)

 10.15        Securities Purchase Agreement dated as of December 28,
              1998, between Cache Capital and the Registrant              (3)

 10.16        Registration Rights Agreement dated as of December 28,
              1998, between Cache Capital and the Registrant              (3)

 10.17        Letter of Intent, dated as of February 4, 1999, among
              The Network Connection, Inc. and Interactive Flight
              Technologies, Inc.                                          (3)

 10.18        Securities Purchase Agreement, dated as of May 10, 1999,
              between the Company and IFT                                 (7)

 10.19        Secured Promissory Note, dated January 25, 19999, made
              in favor of IFT                                             (7)

 10.20        First Allonge to Secured Promissory Note, dated May 10,
              1999, made in favor of IFT                                  (7)

 10.21        Second Allonge to Secured Promissory Note, dated May 10,
              1999, made in favor of IFT                                  (7)

 10.22        Third Allonge to Secured Promissory Note, dated May 10,
              1999, made in favor of IFT                                  (7)

 10.23        Fourth Allonge to Secured Promissory Note, dated May 10,
              1999, made in favor of IFT                                  (7)

 10.24        Amendment No. 1 to Registration Rights Agreement, dated
              May 10, 1999, between the Company and IFT                   (7)

 10.25        Fifth Allonge to Secured Promissory Note, dated July 16,
              1999, made in favor of IFT                                   *

 10.26        Sixth Allonge to Secured Promissory Note, dated August
              9, 1999, made in favor of IFT                                *

 10.27        Seventh Allonge to Secured Promissory Note, dated August
              24, 1999, made in favor of IFT                               *

 10.28        Revolving Credit Note in the aggregate amount of Five
              Million Dollars ($5,000,000) in favor of IFT                 *

 16.          Letter on Change in Certifying Accountant                   (8)

 23.          Consent of KPMG LLP                                          *

 27.          Financial Data Schedule                                      *

                                       35
<PAGE>
----------
*    Filed herewith

(1)  Incorporated by reference,  filed with the Company's Current Report on Form
     8-K dated May 18, 1999.

(2)  Incorporated by reference,  filed as an exhibit with the Company's  Current
     Report on Form 8-K on June 21, 1996.

(3)  Incorporated  by reference,  filed as an exhibit with the Company's  Annual
     Report on Form 10-KSB for the fiscal year ended December 31, 1998.

(4)  Incorporated  by  reference,   filed  as  an  exhibit  with  the  Company's
     Registration  Statement  on Form SB-2 on  October  26,  1994.  SEC File No.
     33-85654.

(5)  Incorporated  by reference,  filed as an exhibit with the Company's  Annual
     Report on Form 10-KSB for the fiscal year ended December 31, 1995.

(6)  Incorporated by reference, filed as an exhibit with the Company's Quarterly
     Report on Form 10-QSB for the fiscal  quarter  ended  September 30, 1998 on
     November 16, 1998.

(7)  Incorporated by reference, filed as an exhibit with the company's Quarterly
     Report on Form 10-QSB for the fiscal quarter ended March 31, 1999.

(8)  Incorporated by reference,  filed as an exhibit with the Company's  Current
     Report on Form 8-K dated July 30, 1999.

     (b)  CURRENT REPORTS ON FORM 8-K

     We filed two reports on Form 8-K during the last quarter of the fiscal year
ended June 30, 1999. The following  table contains  information  with respect to
that filing:

                                                   FINANCIAL
                                                   STATEMENTS        DATE OF
         ITEM(S) REPORTED                            FILED        EVENT REPORTED
         ----------------                          ----------     --------------
Acquisition of Assets of Interactive
Flight Technologies, Inc.                             Yes*         May 18, 1999
Change in Fiscal Year                                  No          June 11, 1999
Change in Certifying Accountants                       No         August 2, 1999

----------
*    Required financial  statements were filed with an amendment to the Form 8-K
     on July 30, 1999.

                                       36
<PAGE>
                                   SIGNATURES

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

                                        THE NETWORK CONNECTION, INC.


Dated: October 13, 1999                 By /s/ Irwin L. Gross
                                           ---------------------------
                                           Irwin L. Gross
                                           Chairman of the Board

     Pursuant to the  requirements of the Securities  Exchange Act of 1934, this
report  has  been  signed  below  by the  following  persons  on  behalf  of the
Registrant and in the capacities and on the dates indicated.

         Signature                      Title                        Date
         ---------                      -----                        ----

/s/ Irwin L. Gross             Chairman of the Board            October 13, 1999
---------------------------
Irwin L. Gross


/s/ Morris C. Aaron            Executive Vice President,        October 13, 1999
---------------------------    Chief Financial Officer and
Morris C. Aaron                Director


/s/ Frank E. Gomer             President, Chief Operating       October 13, 1999
---------------------------    Officer and Director
Frank E. Gomer


/s/ Wilbur L. Riner, Sr.       Executive Vice President         October 13, 1999
---------------------------    and Director
Wilbur L. Riner, Sr.


/s/ Stephen M. Schachman       Director                         October 13, 1999
---------------------------
Stephen M. Schachman


/s/ M. Moshe Porat             Director                         October 13, 1999
---------------------------
M. Moshe Porat

                                       37
<PAGE>
                          THE NETWORK CONNECTION, INC.

                          Index to Financial Statements

                                                                            Page
                                                                            ----
Independent Auditors' Report .............................................   F-2

Balance Sheets as of June 30, 1999 and October 31, 1998 ..................   F-3

Statements of Operations for the Transition Period Ended June 30, 1999
  and the Years Ended October 31, 1998 and 1997 ..........................   F-4

Statements of Cash Flows for the Transition Period Ended June 30, 1999
  and the Years Ended October 31, 1998 and 1997 ..........................   F-5

Statements of Stockholders' Equity (Deficiency) and Comprehensive Income
  for the Transition  Period Ended June 30, 1999 and the Years Ended
  October 31, 1998  and 1997 .............................................   F-6

Notes to Financial Statements ............................................   F-7

                                       F-1
<PAGE>
                          INDEPENDENT AUDITORS' REPORT

The Stockholders and Board of Directors
The Network Connection, Inc.:

We have audited the accompanying balance sheets of The Network Connection,  Inc.
as of June  30,  1999  and  October  31,  1998  and the  related  statements  of
operations,  changes in  stockholders'  equity  (deficiency)  and  comprehensive
income and cash flows for the Transition  Period ended June 30, 1999 and each of
the  years in the two year  period  ended  October  31,  1998.  These  financial
statements   are  the   responsibility   of  the   Company's   management.   Our
responsibility  is to express an opinion on these financial  statements based on
our audits.

We  conducted  our  audits  in  accordance  with  generally   accepted  auditing
standards.  Those standards require that we plan and perform the audit 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 audit provides a reasonable basis for our opinion.

In our opinion,  the financial  statements referred to above, present fairly, in
all material respects, the financial position of The Network Connection, Inc. at
June 30, 1999 and  October  31, 1998 and 1997 and the results of its  operations
and its cash flows for the Transition Period ended June 30, 1999 and each of the
years  in the two year  period  ended  October  31,  1998,  in  conformity  with
generally accepted accounting principles.


                                               /s/ KPMG LLP

Phoenix, Arizona
October 12, 1999

                                       F-2
<PAGE>
                          THE NETWORK CONNECTION, INC.

                                 BALANCE SHEETS
<TABLE>
<CAPTION>
                                                                   JUNE 30,       OCTOBER 31,
                             ASSETS                                  1999           1998
                                                                 ------------    ------------
<S>                                                              <C>             <C>
Current assets:
  Cash and cash equivalents                                      $  2,751,506    $     14,348
  Restricted cash                                                     446,679         437,502
  Investment securities                                               302,589              --
  Accounts receivable, net                                             75,792       1,130,648
  Notes receivable from related parties                                98,932              --
  Inventories, net                                                  1,400,000       1,005,427
  Prepaid expenses                                                    169,429          44,695
  Assets held for sale                                                800,000              --
  Other current assets                                                173,999         270,225
                                                                 ------------    ------------
       Total current assets                                         6,218,926       2,902,845
Note receivable from related party                                     75,000              --
Property and equipment, net                                         1,338,580         780,035
Intangibles, net                                                    7,119,806              --
Other assets                                                              150         555,150
                                                                 ------------    ------------

       Total assets                                              $ 14,752,462    $  4,238,030
                                                                 ============    ============

               LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIENCY)
Current liabilities:
  Accounts payable                                               $  1,681,771    $    891,242
  Accrued liabilities                                               2,209,682       3,280,378
  Deferred revenue                                                    365,851         453,022
  Accrued product warranties                                               --       5,369,008
  Current maturities of long-term debt                                 24,391              --
  Notes payable to related parties                                     68,836              --
                                                                 ------------    ------------
       Total current liabilities                                    4,350,531       9,993,650
Notes payable                                                       3,467,045              --
Due to affiliate                                                    1,647,692              --
                                                                 ------------    ------------
                    Total liabilities                               9,465,268       9,993,650
                                                                 ------------    ------------
Commitments and contingencies

Stockholders' equity (deficiency):
  Series B preferred stock par value $0.01 per share,
   1,500 shares authorized, issued and outstanding                         15              --
  Series C preferred stock par value $0.01 per share,
   1,600 shares authorized; 800 shares issued and outstanding               8              --
  Series D preferred stock par value $0.01 per share,
   2,495,400 authorized, issued and outstanding                        24,954              --
  Common stock par value $0.001 per share, 10,000,000 shares
     authorized; 6,339,076 issued and outstanding                       6,339              --
  Additional paid-in capital                                       88,316,945              --
  Contributed capital in excess of par value                               --      79,618,459
  Accumulated other comprehensive income:
     Net unrealized loss on investment securities                        (526)             --
  Accumulated deficit                                             (83,060,541)    (85,374,079)
                                                                 ------------    ------------
       Total stockholders' equity (deficiency)                      5,287,194      (5,755,620)
                                                                 ------------    ------------

       Total liabilities and stockholders' equity (deficiency)   $ 14,752,462    $  4,238,030
                                                                 ============    ============
</TABLE>
See accompanying notes to financial statements.

                                       F-3
<PAGE>
                          THE NETWORK CONNECTION, INC.

                            STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
                                                         TRANSITION
                                                        PERIOD ENDED
                                                          JUNE 30,         YEAR ENDED OCTOBER 31,
                                                            1999            1998            1997
                                                        ------------    ------------    ------------
<S>                                                     <C>             <C>             <C>
Revenue:
  Equipment sales                                       $    875,957    $ 18,038,619    $ 10,524,828
  Service income                                              82,650         778,343         575,881
                                                        ------------    ------------    ------------
                                                             958,607      18,816,962      11,100,709
                                                        ------------    ------------    ------------
Costs and expenses:
  Cost of equipment sales                                  1,517,323      15,523,282      24,646,334
  Cost of service income                                         480          13,789         232,126
  Provision for doubtful accounts                             28,648              --         216,820
  Research and development expenses                               --       1,092,316       7,821,640
  General and administrative expenses                      3,703,633       9,019,872      12,574,223
  Special charges                                            521,590         400,024      19,649,765
  Reversal of warranty, maintenance and
    commission accruals                                   (7,151,393)             --              --
  Bad debt recoveries                                             --              --      (1,064,284)
                                                        ------------    ------------    ------------
                                                          (1,379,719)     26,049,283      64,076,624
                                                        ------------    ------------    ------------

       Operating income (loss)                             2,338,326      (7,232,321)    (52,975,915)

Other:
  Interest expense                                           (83,029)        (11,954)        (13,423)
  Interest income                                             77,682          53,465              --
  Other income (expense)                                      11,226          10,179        (203,649)
                                                        ------------    ------------    ------------

       Net income (loss)                                   2,344,205      (7,180,631)    (53,192,987)

Cumulative dividend on preferred stock                       (30,667)             --              --
                                                        ------------    ------------    ------------

Net income (loss) attributable to common stockholders   $  2,313,538    $ (7,180,631)   $(53,192,987)
                                                        ============    ============    ============

Basic net income (loss)  per common share               $       0.97    $      (6.80)   $     (50.38)
                                                        ============    ============    ============

Weighted average number of shares outstanding              2,387,223       1,055,745       1,055,745
                                                        ============    ============    ============

Diluted net income (loss) per common share              $       0.13    $      (6.80)   $     (50.38)
                                                        ============    ============    ============
Weighted average number of common and
 dilutive shares outstanding                              18,543,707       1,055,745       1,055,745
                                                        ============    ============    ============
</TABLE>

See accompanying notes to financial statements.

                                       F-4
<PAGE>
                          THE NETWORK CONNECTION, INC.

                            STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
                                                              TRANSITION
                                                             PERIOD ENDED
                                                               JUNE 30,         YEAR ENDED OCTOBER 31,
                                                                 1999            1998           1997
                                                             ------------    ------------    ------------
<S>                                                          <C>             <C>             <C>
Cash flows from operating activities:
 Net income (loss)                                           $  2,313,538    $ (7,180,631)   $(53,192,987)
 Adjustments to reconcile net income (loss) to net cash:
  Depreciation and amortization                                   342,544       1,205,361       1,815,779
  Change in inventory valuation allowance                        (892,010)             --       8,297,933
  Special charges                                                 521,590         400,024      19,649,765
  Reversal of warranty, maintenance and commission accurals    (7,151,393)             --              --
  Loss on disposal of equipment                                        --              --         203,649
  Non cash compensation expense                                        --              --         480,749
  Changes in net assets and liabilities, net of effect
   of Transaction:
   Decrease (increase) in accounts receivable                    (482,344)      4,523,470      (5,754,771)
   Decrease (increase) in inventories                           1,897,437       5,105,334     (12,563,721)
   Decrease (increase) in prepaid expenses                       (116,717)         47,428         183,394
   Decrease in other current assets                                78,134         247,549              --
   Increase in other assets                                            --        (411,042)             --
   (Decrease) increase in accounts payable                     (1,449,333)     (4,933,431)      1,673,893
   (Decrease) increase in accrued liabilities                     702,559      (1,758,210)       (584,655)
   (Decrease) increase in deferred revenue                      1,138,048      (1,930,882)      2,383,904
   Increase in accrued product warranties                              --         758,321         836,667
                                                             ------------    ------------    ------------
       Net cash used in operating activities                 $ (3,097,947)   $ (3,926,709)   $(36,570,401)

Cash flows from investing activities:
 Purchases of investment securities                              (302,589)             --              --
 Purchases of property and equipment                              (18,243)        (36,008)    (10,341,561)
 Proceeds from sale of equipment                                       --           3,620              --
 Cash acquired in Transaction                                      23,997              --              --
 Increase in restricted cash                                       (9,177)       (437,502)             --
                                                             ------------    ------------    ------------
       Net cash used in investing activities                 $   (306,012)   $   (469,890)   $(10,341,561)

Cash flows from financing activities:
 Payments on notes payable                                        (58,450)        (80,753)        (53,085)
 Advances from parent                                             805,616              --              --
 Contributed capital                                            5,391,951       4,427,544      47,029,203
 Proceeds from issuance of stock                                    2,000              --              --
                                                             ------------    ------------    ------------
       Net cash provided by financing activities             $  6,141,117    $  4,346,791    $ 46,976,118

Net increase (decrease) in cash and cash equivalents            2,737,158         (49,808)         64,156

Cash and cash equivalents at beginning of year                     14,348          64,156              --
                                                             ------------    ------------    ------------
Cash and cash equivalents at end of year                     $  2,751,506    $     14,348    $     64,156
                                                             ============    ============    ============
</TABLE>

See accompanying notes to financial statements.

                                       F-5
<PAGE>
                          THE NETWORK CONNECTION, INC.
     STATEMENT OF STOCKHOLDERS' EQUITY (DEFICIENCY) AND COMPREHENSIVE INCOME
   TRANSITION PERIOD ENDED JUNE 30, 1999 YEARS ENDED OCTOBER 31, 1998 AND 1997

<TABLE>
<CAPTION>
                                                                                   ADDITIONAL
                                      SERIES B    SERIES C   SERIES D    COMMON     PAID-IN
                                      PREFERRED  PREFERRED   PREFERRED   STOCK      CAPITAL
                                      ---------  ---------  ----------   ------   ------------
<S>                                   <C>        <C>        <C>          <C>      <C>
Balance as of October 31, 1996         $   --     $   --    $       --   $   --   $         --
  Contributed capital                      --         --            --       --             --
  Net loss                                 --         --            --       --             --
                                       ------     ------    ----------   ------   ------------
Balance as of October 31, 1997         $   --     $   --    $       --   $   --   $         --
  Contributed capital                      --         --            --       --             --
  Net loss                                 --         --            --       --             --
                                       ------     ------    ----------   ------   ------------
Balance as of October 31, 1998         $   --     $   --    $       --   $   --   $         --
  Contributed capital                      --         --            --       --             --
  Contribution of advances to capital      --         --            --       --     85,010,410
  Issuance of stock                        15          8        24,954    6,338      3,304,536
  Exercise of stock options                --         --            --        1          1,999
  Comprehensive income (loss):
     Unrealized loss on available for
       sale securities                     --         --            --       --             --
     Net income                            --         --            --       --             --
  Total comprehensive income               --         --            --       --             --
                                       ------     ------    ----------   ------   ------------
Balance as of June 30, 1999            $   15     $    8    $   24,954   $6,339   $ 88,316,945
                                       ======     ======    ==========   ======   ============

<CAPTION>
                                                       ACCUMULATED
                                                          OTHER       ACCUMULATED       TOTAL
                                         CONTRIBUTED  COMPREHENSIVE    (DEFICIT)     STOCKHOLDERS'
                                           CAPITAL        INCOME        EARNINGS        EQUITY
                                         -----------   ------------   ------------    -----------
<S>                                     <C>           <C>             <C>            <C>
Balance as of October 31, 1996          $ 28,161,712   $         --   $(25,000,461)   $ 3,161,251
  Contributed capital                     47,029,203             --             --     47,029,203
  Net loss                                        --             --    (53,192,987)   (53,192,987)
                                         -----------   ------------   ------------    -----------
Balance as of October 31, 1997          $ 75,190,915   $         --   $(78,193,448)   $(3,002,533)
  Contributed capital                      4,427,544             --             --      4,427,544
  Net loss                                        --             --     (7,180,631)    (7,180,631)
                                         -----------   ------------   ------------    -----------
Balance as of October 31, 1998          $ 79,618,459   $         --   $(85,374,079)   $(5,755,620)
  Contributed capital                      5,391,951             --             --      5,391,951
  Contribution of advances to capital    (85,010,410)            --             --             --
  Issuance of stock                               --             --             --      3,335,851
  Exercise of stock options                       --             --             --          2,000
  Comprehensive income (loss):
     Unrealized loss on available for
       sale securities                            --           (526)            --             --
     Net income                                   --             --      2,313,538             --
  Total comprehensive income                      --             --             --      2,313,012
                                         -----------   ------------   ------------    -----------
Balance as of June 30, 1999              $        --   $       (526)  $(83,060,541)   $ 5,287,194
                                         ===========   ============   ============    ===========
</TABLE>

See accompanying notes to financial statements.

                                       F-6
<PAGE>
                          THE NETWORK CONNECTION, INC.

                          NOTES TO FINANCIAL STATEMENTS

(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND PRACTICES

     (a)  DESCRIPTION OF BUSINESS

          The Network  Connection,  Inc. (the "Company" or "TNCi") is engaged in
          the  development,   manufacturing   and  marketing  of  computer-based
          entertainment  and data  networks,  which  provides  users  access  to
          information,  entertainment and a wide array of service options,  such
          as movies, shopping for goods and services, computer games, access the
          World Wide Web and gambling,  where  permitted by applicable  law. The
          Company's primary markets for its products are cruise ships, passenger
          trains,  schools and corporate  training.  Secondary  markets  include
          business jets and hotel operators, among others.

     (b)  BASIS OF PRESENTATION

          On  May  18,  1999,  Global  Technologies,  Ltd.  (formerly  known  as
          Interactive  Flight  Technologies,  Inc.)  ("GTL")  received  from the
          Company  1,055,745  shares of its common stock and 2,495,400 shares of
          its Series D Convertible Preferred Stock in exchange for $4,250,000 in
          cash and substantially all the assets and certain liabilities of GTL's
          Interactive  Entertainment  Division ("IED"),  as defined in the Asset
          Purchase  and Sale  Agreement  dated April 30,  1999,  as amended (the
          "Transaction").  The  Transaction  has been accounted for as a reverse
          merger  whereby,  for  accounting  purposes,  GTL  is  considered  the
          accounting acquiror,  and although the legal capital structure carries
          forward, and the Company is treated as the successor to the historical
          operations of IED. Accordingly, the historical financial statements of
          the Company, which previously have been reported to the Securities and
          Exchange Commission ("SEC") on Forms 10-KSB,  10-QSB, among others, as
          of and for all periods  through March 31, 1999,  will be replaced with
          those of IED.

          The Company will continue to file as a SEC  registrant and continue to
          report  under the name The  Network  Connection,  Inc.  The  financial
          statements  as of and for the years  ended  October  31, 1998 and 1997
          reflect the historical results of GTL's IED as previously  included in
          GTL's consolidated  financial  statements.  Included in the results of
          operations for the eight months ended June 30, 1999 are the historical
          results of GTL's IED through  April 30,  1999,  and the results of the
          post  Transaction  company for the two months ended June 30, 1999. The
          Transaction date for accounting  purposes is May 1, 1999.  Contributed
          capital reflects the cash  consideration paid by GTL to the Company in
          the  Transaction in addition to funding of IED historical  operations.
          GTL will continue to report as a separate SEC  registrant,  owning the
          shares of the Company as described  above.  As of June 30,  1999,  the
          Company is a majority owned subsidiary of GTL whose ownership, through
          a combination of the Transaction described above and GTL's purchase of
          Series B 8 % preferred  stock of the Company and 110,000 shares of the
          Company's common stock from third party investors, approximates 78% of
          the Company on an  if-converted  common stock basis (See note 15.) The
          historical  financial  statements of the Company up to the date of the
          Transaction  as  previously  reported  will no longer be  included  in
          future filings of the Company.

     (c)  CHANGE IN FISCAL YEAR-END

          The Company has changed its fiscal  year-end  from December 31 to June
          30. The Transition Period resulting from the change in fiscal year-end
          is  measured  from  IED's  former  fiscal   year-end  of  October  31.
          Accordingly,  the  eight-month  period  resulting  from  this  change,
          November  1,  1998  through  June  30,  1999,  is  referred  to as the
          "Transition Period."

                                       F-7
<PAGE>
     (d)  USE OF ESTIMATES

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

     (e)  CASH AND CASH EQUIVALENTS

          The Company  considers  all highly  liquid  investments  with original
          maturities  at the date of purchase of three months or less to be cash
          and cash equivalents.

     (f)  RESTRICTED CASH

          At June 30, 1999 and October 31,  1998,  the Company  held  restricted
          cash of  $446,679  and  $437,502,  respectively,  in a trust  fund for
          payments which may be required  under  severance  agreements  with one
          former executive of GTL. (See note 15.)

     (g)  INVESTMENT SECURITIES

          Investment  securities  consist  of debt  securities  with a  maturity
          greater than three months at the time of purchase.  In accordance with
          Statement of Financial  Accounting  Standards No. 115, "Accounting for
          Certain  Investments in Debt and Equity  Securities"  ("SFAS No. 115")
          the debt securities are classified as  available-for-sale  and carried
          at fair value, based on quoted market prices. The net unrealized gains
          or losses on these  investments are reported in stockholders'  equity,
          net of tax. The specific  identification method is used to compute the
          realized gains and losses on the debt securities.

     (h)  INVENTORIES

          Inventories consisting principally of entertainment network components
          are  stated  at the  lower of cost  (first-in,  first-out  method)  or
          market.

     (i)  GOODWILL

          The Company  classifies  as goodwill the excess of the purchase  price
          over the fair value of the net assets  acquired and is amortized  over
          ten years using the straight line method.

     (j)  PROPERTY AND EQUIPMENT

          Property  and  equipment  are  stated  at the  lower  of  cost  or net
          realizable value. Depreciation and amortization are provided using the
          straight-line  method over the  estimated  useful  lives of the assets
          ranging  from  three  to  seven  years.   Leasehold  improvements  are
          depreciated  using the  straight-line  method  over the shorter of the
          underlying lease term or asset life.

     (k)  REVENUE RECOGNITION

          The Company's revenue derived from sales and installation of equipment
          is recognized upon  installation and acceptance by the customer.  Fees
          derived from servicing  installed  systems is recognized  when earned,
          according to the terms of the service  contract.  Revenue  pursuant to
          contracts  that  provide for revenue  sharing  with  customers  and/or

                                       F-8
<PAGE>
          others  is  recognized  as  cash  is  received  in the  amount  of the
          Company's retained portion of the cash pursuant to the revenue sharing
          agreement.  Revenue earned pursuant to extended warranty agreements is
          recognized ratably over the warranty period.

     (l)  DEFERRED REVENUE

          Deferred  revenue  represents  cash  received  on advance  billings of
          equipment sales as allowed under  installation  and extended  warranty
          contracts.

     (m)  RESEARCH AND DEVELOPMENT

          Research and  development  costs are  expensed as incurred  except for
          development costs required by a customer  contract.  Development costs
          incurred   pursuant  to  contractual   obligations  are  allocated  to
          deliverable  units.  These  development  costs are expensed as cost of
          goods sold upon installation of the complete product and acceptance by
          the customer.

     (n)  WARRANTY COSTS

          The  Company  provides,  by a current  charge to income,  an amount it
          estimates  will be needed to cover  future  warranty  obligations  for
          products sold with an initial  warranty  period.  Revenue and expenses
          under extended  warranty  agreements  are recognized  ratably over the
          term of the extended warranty.

     (o)  IMPAIRMENT OF LONG-LIVED ASSETS

          The Company  records  impairment  losses on long-lived  assets used in
          operations   when   indicators  of  impairment  are  present  and  the
          undiscounted  cash flows estimated to be generated by those assets are
          less than the assets' carrying amount.

     (p)  INCOME TAXES

          Income taxes are accounted  for under the asset and liability  method.
          Deferred tax assets and  liabilities are recognized for the future tax
          consequences   attributable  to  differences   between  the  financial
          statement  carrying  amounts of existing  assets and  liabilities  and
          their   respective  tax  bases  and  operating  loss  and  tax  credit
          carryforwards.  Deferred tax assets and liabilities are measured using
          enacted tax rates  expected to apply to taxable income in the years in
          which those  temporary  differences  are  expected to be  recovered or
          settled. The effect on deferred tax assets and liabilities of a change
          in tax rates is  recognized  in income in the period that includes the
          enactment date.

     (q)  INCOME (LOSS) PER SHARE

          During fiscal 1998, the Company adopted Financial Accounting Standards
          Board (FASB) SFAS No. 128, "Earnings per Share" (SFAS No. 128). Income
          (loss) per share for all prior  periods have been  restated to conform
          to the  provisions  of SFAS  128.  Basic  income  (loss)  per share is
          computed   by   dividing   income   (loss)   attributable   to  common
          stockholders,   by  the  weighted  average  number  of  common  shares
          outstanding  for the period.  Diluted income (loss) per share reflects
          the  potential  dilution  that  could  occur  if  securities  or other
          contracts  to issue common  stock were  exercised  or  converted  into
          common  stock or  resulted in the  issuance of common  stock that then
          shared in the income (loss) of the Company.  In  calculating  net loss
          per common share for 1998 and 1997,  $15.1 million and $15.1  million,
          respectively, common stock equivalent shares consisting of convertible

                                       F-9
<PAGE>
          preferred stock issued to GTL in connection with the Transaction  have
          been excluded because their inclusion would have been anti-dilutive.

     (r)  STOCK-BASED COMPENSATION

          In  accordance  with the  provisions of  Accounting  Principals  Board
          Opinion No. 25, "Accounting for Stock Issued to Employees" ("APB 25"),
          the Company measures stock-based compensation expense as the excess of
          the market price at the grant date over the amount the  employee  must
          pay for the stock.  The Company's  policy is to generally  grant stock
          options at fair  market  value at the date of grant;  accordingly,  no
          compensation  expense is  recognized.  As  permitted,  the Company has
          elected to adopt the pro forma disclosure  provisions only of SFAS No.
          123, "Accounting for Stock-Based Compensation".  (See note 11.)

     (s)  In June 1998, the Financial Accounting Standards Board ("FASB") issued
          Statement  of  Financial   Accounting   Standards  ("SFAS")  No.  133,
          "Accounting for Derivative  Instruments and Hedging Activities," which
          establishes  standards for the accounting and reporting for derivative
          instruments,  including  certain  derivative  instruments  embedded in
          other  contracts,  and hedging  activities.  This statement  generally
          requires recognition of gains and losses on hedging instruments, based
          on  changes  in  fair  value  or the  earnings  effect  of  forecasted
          transactions.  As  issued,  SFAS No. 133 is  effective  for all fiscal
          quarters of all fiscal years  beginning  after June 15, 1999.  In June
          1999,  the  FASB  issued  SFAS No.  137,  "Accounting  for  Derivative
          Instruments and Hedging  Activities--Deferral of the Effective Date of
          FASB Statement No. 133--An Amendment of FASB Statement No. 133," which
          deferred the  effective  date of SFAS No. 133 until June 15, 2000.  We
          are currently evaluating the impact of SFAS No. 133.

          On January 1, 1998,  the  Company  adopted  SFAS No.  130,  "Reporting
          Comprehensive   Income."  SFAS  No.  130  establishes   standards  for
          reporting and presentation of comprehensive  income and its components
          in a full set of financial  statements.  Comprehensive income consists
          of net income and unrealized gains and losses on investment securities
          net of  taxes  and is  presented  in the  consolidated  statements  of
          stockholders'  equity  (deficiency) and comprehensive  income; it does
          not affect the Company's financial position or results of operations.

          On January 1, 1998,  the Company  adopted  SFAS No. 131,  "Disclosures
          about Segments of an Enterprise and Related Information." SFAS No. 131
          supersedes  SFAS  No.  14,  "Financial  Reporting  for  Segments  of a
          Business  Enterprise"  replacing the "industry  segment" approach with
          the  "management"  approach.  The management  approach  designates the
          internal  organization that is used by management for making operating
          decisions  and  assessing  performance  as the source of the Company's
          reportable  segments.  SFAS No.  131 also  requires  disclosure  about
          products and services,  geographical  areas, and major customers.  The
          adoption  of SFAS No. 131 does not affect  results  of  operations  or
          financial   position  but  does  affect  the   disclosure  of  segment
          information.

                                      F-10
<PAGE>
(2) ACQUISITION

     The Transaction has been accounted for by the purchase method of accounting
     and,  accordingly,  the  purchase  price has been  allocated  to the assets
     acquired and the  liabilities  assumed based upon  estimated fair values at
     the date of acquisition as follows:

     Purchase price:
       Cash                                                     $ 4,250,000
       Net liabilities of IED contributed                        (4,012,430)
                                                                -----------
         Total                                                  $   237,570
                                                                ===========
     Assets acquired and liabilities assumed:
       Historical book value of net liabilities                 $(2,457,723)
     Fair value adjustments:
       Inventory                                                 (1,280,847)
       Property and equipment                                      (806,873)
       Other assets                                                (368,255)
       Liabilities                                                 (681,390)
                                                                -----------
         Total fair value of liabilities assumed                $(5,597,086)

     Excess of fair value of TNCi Series B Preferred Stock
       and Series C Preferred Stock over its recorded value     $(1,501,000)
     Purchase of Common Stock of TNCi                              (254,658)
                                                                ===========
       Excess of purchase price over fair value of net
       liabilities assumed (goodwill)                           $ 7,115,174
                                                                ===========

     The  excess of fair  value of TNC  Series B  Preferred  Stock and  Series C
     Preferred Stock is the result of GTL's  acquisition of such shares based on
     the fair value of the GTL Series A Preferred Stock amounting to $4,080,000,
     less $1,030,000 cash received and the historical value of $1,549,000 of the
     Series B Preferred Stock.

     Purchase of 110,000  shares of Common  Stock of TNCi from a third party was
     valued based on the cash consideration paid by GTL for the shares.

(3) INVESTMENT SECURITIES

     A summary of investment  securities by major security type at June 30, 1999
is as follows:

                                                  GROSS       GROSS
                                                UNREALIZED  UNREALIZED
                                     AMORTIZED   HOLDING     HOLDING      FAIR
                                       COST       GAINS       LOSSES      VALUE
                                     ---------  ----------  ----------    -----
     JUNE 30, 1999
     Available-for-sale:
       Corporate debt securities     $303,115      $167       $(693)    $302,589
                                     ========      ====       =====     ========

     As of June 30, 1999 all maturities are less than one year.

(4) INVENTORIES

     Inventories consist of the following:

                                                     JUNE 30,     OCTOBER 31,
                                                      1999           1998
                                                   -----------    -----------
     Raw materials                                 $ 2,398,973    $ 2,192,442
     Work in process                                 1,405,372      3,439,888
     Finished goods                                  5,433,250      4,102,702
                                                   -----------    -----------
                                                     9,237,595      9,735,032
     Less:  inventory valuation allowance           (7,837,595)    (8,729,605)
                                                   -----------    -----------

                                                   $ 1,400,000    $ 1,005,427
                                                   ===========    ===========

                                      F-11
<PAGE>
(5) ASSETS HELD FOR SALE

     In connection  with the  Transaction,  the Company  relocated its corporate
     offices  and  production  capabilities  to its  Phoenix,  Arizona  offices.
     Accordingly,  as of June 30, 1999 the decision to sell the Georgia property
     was made and the assets  were  recorded at their net  realizable  value and
     classified as assets held for sale.

(6) PROPERTY AND EQUIPMENT

     Property and equipment consist of the following:

                                                     JUNE 30,     OCTOBER 31,
                                                      1999           1998
                                                   -----------    -----------

         Leasehold improvements                    $    24,117    $   237,551
         Purchased software                            149,703        149,703
         Furniture                                     163,609        138,609
         Equipment                                   1,684,180        903,873
                                                   -----------    -----------
                                                     2,021,609      1,429,736
         Less:  accumulated depreciation              (683,029)      (649,701)
                                                   -----------    -----------

                                                   $ 1,338,580    $   780,035
                                                   ===========    ===========

     During the year ended  October 31,  1998,  the Company  recorded  equipment
     write-offs  of  $1,006,531  which are  included  in special  charges on the
     statement of operations.  The write-offs are principally  related to excess
     computers, furniture and other equipment that the Company is not utilizing.

(7) INTANGIBLES

     Intangibles consist of the following:

                                                                    JUNE 30,
                                                                     1999
                                                                  -----------
     Goodwill                                                     $ 7,115,174
     Other intangibles                                                 79,613
                                                                  -----------
                                                                    7,194,787
     Accumulated amortization                                         (74,981)
                                                                  -----------

                                                                  $ 7,119,806
                                                                  ===========

(8) ACCRUED LIABILITIES

     Accrued liabilities consist of the following:

                                                    JUNE 30,      OCTOBER 31,
                                                      1999           1998
                                                   ----------     ----------
     Accrued development and support costs         $       --     $1,845,915
     Accrued maintenance costs                             --        402,418
     Due to related parties (see note 15)           1,891,123        455,000
     Other accrued expenses                           318,559        577,045
                                                   ----------     ----------

            Accrued liabilities                    $2,209,682     $3,280,378
                                                   ==========     ==========

                                      F-12
<PAGE>
(9) NOTES PAYABLE AND DUE TO AFFILATE

     Notes Payable consists of the following:

                                                                  JUNE 30,
                                                                    1999
                                                                 ----------
     Series A, D and E Notes (see below)                         $2,386,048
     Note payable due September 5, 1999, interest at 7%,
       convertible to preferred stock at the option of the
       Company                                                      400,000
     Note payable due in varying installments through 2009,
       interest at prime (8.25% at June 30, 1999) plus 2%,
       collateralized by certain commercial property and
       personally guaranteed by two shareholders                    220,508
     Note payable due in varying installments through 2000,
       interest at 6.9%, collateralized by a vehicle                 10,308
     Note payable due and payable April 19, 2001, interest at
       16% payable monthly, collateralized by certain
       commercial property                                          470,000
     Note payable due in varying installments through 2000,
       interest at 11%, collateralized by a vehicle                   4,572
                                                                 ----------
                                                                  3,491,436
     Less current portion                                            24,391
                                                                 ----------

                                                                 $3,467,045
                                                                 ==========

     Aggregate maturities of notes payable as of June 30, 1999 are as follows:

      2000                                                       $   24,391
      2001                                                          890,491
      2002                                                        2,403,402
      2003                                                           19,126
      2004                                                           21,078
      Thereafter                                                    132,948
                                                                 ----------
                                                                 $3,491,436
                                                                 ==========

     The Series A, D and E Notes ("Series  Notes") were issued by the Company in
     1998 prior to the Transaction. The Series Notes all had original maturities
     of  approximately  135 days with  interest  at  approximately  7% to 8% per
     annum.  The Company  could  choose to repay such Notes in cash subject to a
     payment charge equal to  approximately 7% of the face amount of the Note or
     the Company could elect to convert the Series Notes into preferred stock of
     the Company which is convertible into common stock at various  discounts to
     market  ranging  from 15% to 25%.  The Company was in default on the Series
     Notes on June 30, 1999. (See note 20.)

                                      F-13
<PAGE>
     The note  payable due  September  5, 1999 was in default at June 30,  1999.
     Subsequent to year-end,  the note was converted  into 200,000 shares of the
     Company's common stock. Therefore,  the note payable has been classified as
     long-term at June 30, 1999.

     Prior to the  Transaction,  the Company  entered into a Secured  Promissory
     Note with GTL in the principal  amount of $750,000,  bearing  interest at a
     rate of 9.5% per annum,  and a related  security  agreement  granting GTL a
     security  interest in its assets (the  "Promissory  Note").  The Promissory
     Note is  convertible  into shares of the  Company's  Series C 8%  preferred
     stock at the discretion of GTL.

     GTL has also advanced  approximately $898,000 to the Company in the form of
     intercompany advances.  Both the Promissory Note and the advances have been
     classified  as due to affiliate  in the balance  sheet as of June 30, 1999.
     (See note 20.)

     Notes  payable in the amount of $68,836 to related  parties  with  interest
     payable  at  approximately  5%  per  annum  become  due  and  payable  upon
     achievement of certain operational goals.

(10) INCOME (LOSS) PER SHARE

     Basic and diluted weighted average number of shares outstanding for the two
     years ended  October 31, 1998 and 1997,  included  1,055,745  shares of the
     Company's common stock,  representing  100% of the Company's  capital stock
     which was all owned by GTL. No effect was given to common stock equivalents
     in the  computation  of diluted  loss per share as their  effect would have
     been anti-dilutive.

     For  the  Transition  Period,  basic  weighted  average  number  of  shares
     outstanding  includes  1,055,745  common  shares  held by GTL for the  full
     period  and  approximately  5.3  million  shares  (the  shares  issued  and
     outstanding  prior to the  Transaction)  for two months.  Diluted  weighted
     average  number of shares  outstanding  for the  Transition  Period include
     1,055,745  common  shares  and  15,097,170  potential  dilutive  securities
     resulting  from the  Series D  Convertible  Preferred  Stock for the entire
     Transition  Period (both issued to GTL in connection with the Transaction);
     plus 5,278,737 common shares outstanding prior to the merger, and 1,133,120
     common stock equivalents related to the Convertible Promissory Note, Series
     A, D and E Convertible  Notes,  Series B 8%  Convertible  Preferred  Stock,
     Series C 8% Convertible  Preferred  Stock and options each weighted for the
     two months ended June 30, 1999.

                                      F-14
<PAGE>
<TABLE>
<CAPTION>
                                                TRANSITION
                                               PERIOD ENDED
                                                 JUNE 30,        YEAR ENDED OCTOBER 31,
                                                   1999           1998            1997
                                               ------------    -----------    ------------
<S>                                            <C>             <C>            <C>
     Net income (loss)                         $  2,344,205    $(7,180,631)   $(53,192,987)
     Less:  preferred stock dividends               (30,667)            --              --
                                               ------------    -----------    ------------
     Income (loss) available to common
       stockholders                            $  2,313,538    $(7,180,631)   $(53,192,987)
                                               ============    ===========    ============
     Basic EPS - weighted average shares
       outstanding                                2,387,223      1,055,745       1,055,745
                                               ============    ===========    ============
     Basic income (loss) per share             $       0.97    $     (6.80)   $     (50.38)
                                               ============    ===========    ============
     Basic EPS - weighted average shares
       outstanding                                2,387,223      1,055,745       1,055,745
     Effect of dilutive securities:

       Stock Purchase Options - common stock         82,033             --              --
       Convertible preferred stock               15,570,814             --              --
       Convertible debt                             503,638             --              --
                                               ------------    -----------    ------------
     Dilutive EPS - weighted average shares
       outstanding                               18,543,708      1,055,745       1,055,745
     Net income (loss)                         $  2,344,205    $(7,180,631)   $(53,192,987)
                                               ------------    -----------    ------------
     Diluted income (loss) per share           $       0.13    $     (6.80)   $     (50.38)
                                               ============    ===========    ============
</TABLE>

(11) STOCK OPTION PLANS

     Under the  Company's  1994  Employee  Stock  Option Plan (the  "Plan"),  as
     amended,  the Company has  reserved an  aggregate  of  1,200,000  shares of
     Common Stock for issuance  under the Plan.  Options  granted under the Plan
     are for  periods  not to exceed ten years.  Under the Plan,  incentive  and
     non-qualified  stock  options may be granted.  All option  grants under the
     Plan are subject to the terms and  conditions  established  by the Plan and
     the Stock  Option  Committee  of the Board of  Directors.  Options  must be
     granted at not less than 100% of fair value for  incentive  options and not
     less than 85% of fair value of non-qualified options of the stock as of the
     date of grant and generally are exerciseable in increments of 25% each year
     subject to continued employment with the Company.  Options generally expire
     five to ten years from the date of grant.  Options  canceled  represent the
     unexercised  options of former  employees,  returned  to the option pool in
     accordance with the terms of the Plan upon departure from the Company.  The
     Board of Directors may terminate the Plan at any time at their  discretion.
     During fiscal 1999,  285,348  stock options with up to a four-year  vesting
     period were granted at exercise prices ranging from $2.25 to $3.125.

     On August 16,  1995,  the Company  adopted  the 1995 Stock  Option Plan For
     Non-Employee  Directors (the "Directors  Plan") and reserved 100,000 shares
     of unissued common stock for issuance to all non-employee  directors of the
     Company. The Directors Plan is administered by a committee appointed by the
     Board  of  Directors  consisting  of  directors  who  are not  eligible  to

                                      F-15
<PAGE>
     participate  in  the  Directors  Plan.  Pursuant  to  the  Directors  Plan,
     directors who are not employees of the Company  receive for their services,
     on the date first elected as a member of the Board and on each  anniversary
     thereafter,  if they  continue  to serve  on the  Board  of  Directors,  an
     automatically  granted  option to  acquire  5,000  shares of the  Company's
     common  stock at its fair market  value on the date of grant;  such options
     become  exercisable  in two equal  annual  installments  if the  individual
     continues at that time to serve as a director,  and once exercisable remain
     so until the fifth  anniversary  of the date of grant.  During fiscal 1999,
     60,000 options were granted.

     In  accordance  with  the  provisions  of  APB  25,  the  Company  measures
     stock-based  compensation  expense as the excess of the market price at the
     grant  date  over the  amount  the  employee  must pay for the  stock.  The
     Company's  policy is to generally  grant stock options at fair market value
     at the  date  of  grant,  so no  compensation  expense  is  recognized.  As
     permitted,  the Company has elected to adopt the disclosure provisions only
     of SFAS No. 123.

     Had compensation cost for the Company's stock-based compensation plans been
     determined consistent with SFAS No. 123, the Company's net earnings and net
     earnings per share on a pro forma basis would be as indicated below:

                                                  TRANSITION PERIOD
                                                        ENDED
                                                    JUNE 30, 1999
                                                  -----------------
     Net earnings:
       As reported                                    $2,313,538
                                                      ==========
       Pro forma                                      $2,018,009
                                                      ==========
     Basic net earnings per share:
       As reported                                    $     0.97
                                                      ==========
       Pro forma                                      $     0.85
                                                      ==========
     Diluted net earnings per share:
       As reported                                    $     0.13
                                                      ==========
       Pro forma                                      $     0.11
                                                      ==========

     Pro forma net earnings  reflect only options  granted during the Transition
     Period and in each of the fiscal  years  ended 1998,  1997 and 1996.  There
     were no options granted related to IED for the years ended October 31, 1998
     and 1997. Therefore,  the full impact of calculating  compensation cost for
     stock  options  under  SFAS No. 123 is not  reflected  in the pro forma net
     earnings amount presented above because compensation cost is reflected over
     the options' vesting period and compensation cost for options granted prior
     to November 1995 are not considered under SFAS No. 123.

                                      F-16
<PAGE>
     For  purposes of the SFAS No. 123 pro forma net  earnings  and net earnings
     per share calculations, the fair value of each option grant is estimated on
     the date of grant  using the  Black-Scholes  option-pricing  model with the
     following weighted-average assumptions used for grants in fiscal 1999:

                                                        TRANSITION PERIOD
                                                              ENDED
                                                          JUNE 30, 1999
                                                        -----------------

     Dividend yield                                              0%
     Expected volatility                                     58.76%
     Risk free interest rate                                  5.67%
     Expected lives (years)                                  10.0

     Activity related to the stock option plans is summarized below:

                                                       TRANSITION PERIOD ENDED
                                                             JUNE 30, 1999
                                                         --------------------
                                                                     WEIGHTED
                                                                     AVERAGE
                                                         NUMBER OF   EXERCISE
                                                           SHARES     PRICE
                                                         ---------   --------

     Balance at the beginning of year                     676,478    $5.00
     Granted                                              345,348     2.25
     Exercised                                            (20,000)    3.84
     Forfeited                                           (281,848)    4.75
                                                         --------
     Balance at the end of year                           719,978     3.09
                                                         ========
     Exercisable at the end of year                       331,731     4.29
                                                         ========
     Weighted-average fair value of options
       granted during the year                           $   1.66
                                                         ========

     The following table  summarizes the status of outstanding  stock options as
of June 30, 1999:

                              OPTIONS OUTSTANDING           OPTIONS EXERCISABLE
                      -----------------------------------  ---------------------
                                     WEIGHTED
                                     AVERAGE     WEIGHTED               WEIGHTED
                       NUMBER OF    REMAINING    AVERAGE    NUMBER OF   AVERAGE
         RANGE OF       OPTIONS    CONTRACTUAL   EXERCISE    OPTIONS    EXERCISE
     EXERCISE PRICES  OUTSTANDING  LIFE (YEARS)   PRICE    EXERCISABLE   PRICE
     ---------------  -----------  ------------  --------  -----------  --------
       $2.00 - $2.25    528,096        7.68        $2.16     159,848     $2.04
       $2.50 - $4.17     51,383        7.04         3.41      31,383      3.60
       $6.48 - $7.25     85,750        4.02         6.59      85,750      6.59
       $7.50 - $9.82     54,750        8.07         7.63      54,750      7.63
                        =======                              =======
                        719,978                              331,731
                        =======                              =======

                                      F-17
<PAGE>
(12) BENEFIT PLAN

     On June 1,  1999 a formal  termination  of the  Company's  401(k)  plan was
     initiated.  The 401(K) plan of parent  company GTL was amended June 1, 1999
     to include employees of the Company.

     GTL has adopted a defined  contribution  benefit  plan that  complies  with
     section 401(k) of the Internal Revenue Code and provides for  discretionary
     company  contribution.  Employees who complete  three months of service are
     eligible to participate in the Plan.

(13) STOCKHOLDERS' EQUITY

     PREFERRED STOCK

     Series B 8% Convertible  Preferred  Stock ("Series B Stock");  stated value
     $1,000 per share and liquidation  value of 120% of stated value. The Holder
     of Series B Stock is entitled to an annual  cumulative  dividend of $80 per
     share  payable  quarterly  in  cash  or  Common  Stock.  Cumulative  unpaid
     dividends at June 30, 1999 total  $20,000.  Each share of Series B Stock is
     convertible  into Common Stock at a price equal to the lowest of: a) 75% of
     the Average  Price of Common  Stock,  as defined,  or b) 75% of the Average
     Price of Common Stock, as defined  calculated as if April 29, 1999 were the
     conversion date. The Series B Stock has no voting rights.  GTL owns 100% of
     the issued and outstanding Series B Stock.

     Series C 8% Convertible  Preferred  Stock ("Series C Stock");  stated value
     $1,000 per share and liquidation  value of 120% of stated value. The Holder
     of Series C Stock is entitled to an annual  cumulative  dividend of $80 per
     share  payable  quarterly  in  cash  or  Common  Stock.  Cumulative  unpaid
     dividends at June 30, 1999 total  $10,667.  Each share of Series C Stock is
     convertible into Common Stock at a price equal to the lowest of: a) $2.6875
     per share,  or b) 66.67% of the Average  Price,  as  defined,  or c) at the
     lowest rate the Company issues equity securities,  as defined. The Series C
     Stock generally has no voting rights.  On August 24, 1999, GTL notified the
     Company of its intent to convert such shares into Common  Stock.  (See note
     20.) GTL owns 100% of the issued and  outstanding  and  accumulated  unpaid
     dividends Series C Stock.

     Series D Convertible  Preferred Stock ("Series D Stock");  stated value $10
     per share and  liquidation  value of 120% of stated  value.  The  Holder of
     Series D Stock is  entitled to an annual  dividend as and when  declared by
     the Board of  Directors  of the  Company.  Each  share of Series D Stock is
     convertible  into 6.05 shares of the Company's  Common Stock.  The Series D
     Stock generally has no voting rights.

     COMMON STOCK

     Each share of Common Stock is entitled to one vote per share.

     WARRANTS

     During  the  Transition   Period,  the  Company  issued  489,429  warrants,
     resulting in 1,206,025 warrants  outstanding at June 30, 1999. Each warrant
     represents the right to purchase one share of the Company's Common Stock at
     exercise prices ranging from $2.34 to $4.13 per share,  until such warrants
     expire  beginning  November 1, 2001 through April 1, 2004. All  outstanding
     warrants are exercisable as of June 30, 1999.

                                      F-18
<PAGE>
(14) INCOME TAXES

     Income tax  (benefit)  differed  from the amounts  computed by applying the
     U.S.  Federal  corporate  income tax rate of 34% to net income  (loss) as a
     result of the following:

<TABLE>
<CAPTION>
                                              TRANSITION
                                             PERIOD ENDED         YEAR ENDED OCTOBER 31,
                                             JUNE 30, 1999        1998            1997
                                             -------------        ----            ----
<S>                                           <C>              <C>             <C>

     Computed expected tax (benefit)          $ 786,603        $(2,441,415)    $(18,085,616)
     Change in valuation allowance             (983,188)         2,100,322       18,066,284
     Nondeductible expense                       16,320            416,498               --
     Other                                      180,265            (75,405)          19,332
                                              ---------        -----------     ------------
                                              $      --        $        --     $         --
                                              =========        ===========     ============
</TABLE>

     The tax  effects of  temporary  differences  that give rise to  significant
     portions of the net deferred tax asset are presented below:

<TABLE>
<CAPTION>
                                               TRANSITION
                                              PERIOD ENDED
                                              JUNE 30, 1999
                                              -------------
<S>                                           <C>
     Deferred tax assets:
       Net operating loss carryforward        $  5,443,825
       Property and equipment                      972,785
       Allowance for bad debts                   1,517,277
       Provision for inventory valuation         3,142,092
       Accrued liabilities                         770,859
       Deferred revenue                            146,699
       Other                                       262,589
                                              ------------
                                              $ 12,256,126
     Less valuation allowance                  (12,256,126)
                                              ------------

         Net deferred tax asset               $         --
                                              ============
</TABLE>

     In assessing the realizability of deferred tax assets, management considers
     whether it is more likely than not that some portion or all of the deferred
     tax assets will not be realized.  The ultimate  realization of deferred tax
     assets is dependent upon the generation of future taxable income during the
     periods in which those temporary differences become deductible.  Management
     has provided a valuation  allowance  for 100% of the deferred tax assets as
     the  likelihood of realization  cannot be determined.  As of June 30, 1999,
     the Company has a net operating loss (NOL)  carryforward for federal income
     tax purposes of approximately $13,977,000,  which begins to expire in 2009.
     The Company  likely  underwent a change in  ownership  in  accordance  with
     Internal  Revenue  Code  Section  382, the effect of which has not yet been

                                      F-19
<PAGE>
     determined  by the  Company.  This  change  would  effect the timing of the
     utilization  of the  NOL,  as  well as the  amount  of the  NOL  which  may
     ultimately be utilized,  though it is not expected to materially effect the
     amount of the NOL carryforward.

(15) RELATED PARTY TRANSACTIONS

     The  Company's  Chief  Executive  Officer is a  principal  of Ocean  Castle
     Investments,  LLC (Ocean Castle) which maintains administrative offices for
     the Company's Chief  Executive  Officer and certain other employees of GTL.
     During the year ended October 31, 1998,  Ocean Castle  executed  consulting
     agreements  with  two  principal   stockholders  of  GTL.  The  rights  and
     obligations  of Ocean  Castle  under the  agreements  were  assumed  by the
     Company in  connection  with the  Transaction.  The  consulting  agreements
     require payments aggregating  $1,000,000 to each of the consultants through
     December 2003 in exchange for advisory  services.  Each of the  consultants
     also  received  stock  options to purchase  33,333 shares of Class A common
     stock of GTL at an  exercise  price of  $4.50.  As of June  30,  1999,  the
     Company  determined that the consulting  agreements had no future value due
     to the Company's shift away from in-flight  entertainment  into alternative
     markets such as leisure cruise and passenger rail  transport.  Only limited
     services  were  provided in 1999 and no future  services  will be utilized.
     Accordingly,  the Company  recorded a charge to general and  administrative
     expenses in the Transition Period of $1.6 million  representing the balance
     due under such contracts.

     In August 1999,  the Company  executed a separation  and release  agreement
     with a shareholder and former officer of the Company, pursuant to which the
     Company paid  approximately  $85,000 in the form of unregistered  shares of
     the Company's common stock.

     In June 1999,  the  Company  loaned to a vice  president,  $75,000  for the
     purpose  of  assisting  in  a  corporate   relocation   to  the   Company's
     headquarters  in  Phoenix,  Arizona.  Such loan is secured by assets of the
     employee.  The note  matures in August 2009 and bears an  interest  rate of
     approximately 5%.

     GTL had an Intellectual  Property  License and Support  Services  Agreement
     (the  "License  Agreement")  for certain  technology  with  FortuNet,  Inc.
     ("FortuNet").  FortuNet is owned by a principal  stockholder  and  previous
     director of GTL. The License  Agreement  provides for an annual license fee
     of $100,000  commencing  in October 1994 and  continuing  through  November
     2002. GTL was required to pay FortuNet $100,000  commencing in October 1994
     and continuing  through  November 2002. The Company paid FortuNet  $100,000
     during each of the years ended October 31, 1998 and 1997. As of October 31,
     1998,  the  remaining   commitment  of  $400,000  is  included  in  accrued
     liabilities  on the balance  sheet.  The Company  assumed this liability in
     connection with the  Transaction.  Subsequent to June 30, 1999, the Company
     agreed to a termination of this  agreement and paid FortuNet  $100,000 plus
     legal fees.  During the Transition  Period ended June 30, 1999, the Company
     had revised its estimated  accrual to $200,000 which is included in accrued
     liabilities at June 30, 1999.

     During  the  year  ended  October  31,  1998,  GTL  extended  by one year a
     consulting  agreement  with a former  officer of GTL  pursuant to which GTL
     will pay $55,000 for  services  received  during the period  November  1999
     through  October  2000.  The  Company has  assumed  the  liability  for the
     consulting  agreement in connection  with the  Transaction in the amount of
     $73,000 which is included in accrued liabilities at June 30, 1999.

     During  the year  ended  October  31,  1998,  GTL  executed  severance  and
     consulting  agreements  with three former  officers,  pursuant to which GTL
     paid the former officers and set aside  restricted  funds in the amounts of
     $3,053,642 and $735,000, respectively. The consulting agreements all expire
     by September 1999.  Payments totaling $735,000 have been and continue to be
     made  from  restricted  cash  of  GTL  through  September  1999.   Expenses
     associated with these agreements were charged to general and administrative
     expenses in the year ended October 31, 1998.

                                      F-20
<PAGE>
     During the year ended October 31, 1996, GTL executed  severance  agreements
     with three former officers pursuant to which the Company will pay severance
     of $752,500 over a three-year  period.  As of June 30, 1999 and October 31,
     1998, $18,000 and $55,000 remained to be paid under these agreements.  Such
     liabilities were assumed by the Company in connection with the Transaction.

(16) COMMITMENTS AND CONTINGENCIES

     (a)  LAWSUIT

     Hollingsead  International,  Inc. v. The Network  Connection,  Inc.,  State
     Court of Forsyth County,  State of Georgia,  Civil Action File No. 99S0053.
     Hollingsead  International,  Inc.  ("Hollingsead")  filed suit  against the
     Company  on January  28,  1999,  alleging  that the  Company  failed to pay
     invoices submitted for installation and service of audio-visual  systems in
     its  aircraft.  Hollingsead  sought  damages in the amount of $357,850,  in
     addition  to  interest  at the rate of 18% per annum  from  March 2,  1998,
     attorneys' fees and punitive damages.  On March 29, 1999, the Company filed
     a timely answer and asserted counterclaims against Hollingsead. The parties
     entered  into a  settlement  agreement  on or about  August  5,  1999  that
     provided  for  the  payment  of  $427,870  by the  Company,  to be  paid in
     installments,  including  interest accruing at 8.0% per annum from July 28,
     1999 until the balance is paid. The Company has provided for such amount as
     of May 1, 1999. The agreement  also provides for  Hollingsead to pay $5,399
     as  reimbursement  for attorneys'  fees. The last  installment is due on or
     before December 20, 1999. Under the settlement agreement,  the Company will
     dismiss its  counterclaims  with prejudice and Hollingsead will dismiss its
     Complaint with prejudice upon completion of all payments by the Company.

     Sigma  Designs,  Inc.  ("Sigma") v. the Network  Connection,  Inc.,  United
     States District Court, Northern District of California,  San Jose Division,
     Civil Action File No.  98-21149J(EAI).  Sigma filed a Complaint against the
     Company on December  1, 1998,  alleging  breach of  contract  and action on
     account.  Sigma  claims  that the  Company  failed to pay for goods that it
     shipped to the Company.  The matter was settled by written  agreement dated
     January 22, 1999,  contingent  upon  registration  of the Company stock and
     warrants  issued to Sigma as part of such  settlement  and  payment  by the
     Company of $50,000.  The Company did not complete its obligations under the
     terms of the  original  settlement  agreement.  On or about May  1999,  the
     shares of the Company  issued to Sigma as a part of the  settlement  of the
     above-referenced  lawsuit were sold by Sigma to GTL, the parent  company of
     the Company. The lawsuit was dismissed with prejudice on July 12, 1999.

     Swissair/MDL-1269,  In re Air Crash near Peggy's  Cove,  Nova Scotia.  This
     multi-district  litigation  relates to the crash of Swissair  Flight 111 on
     September 2, 1998 in waters near Peggy's Cove, Nova Scotia resulting in the
     death of all 229 people on board.  The Swissair MD-11 aircraft  involved in
     the crash was equipped with an  Entertainment  Network System that had been
     sold to Swissair by Interactive  Flight  Technologies,  Inc.  Following the
     crash,  investigations  were  conducted  and  continue to be  conducted  by
     Canadian  and United  States  agencies  concerning  the cause of the crash.
     Estates of the  victims of the crash have  filed  lawsuits  throughout  the
     United States against Swissair,  Boeing,  Dupont and various other parties,
     including Interactive Flight Technologies, Inc. TNCi was not a party to the
     contract for the Entertainment  Network System,  but has been named in some
     of the lawsuits filed by families of victims on a claim sucessor liability.
     TNCi  denies all  liability  for the crash.  TNCi is being  defended by the
     aviation insurer for Interactive Flight Technologies, Inc.

     Federal Express Corporation v. The Network Connection, Inc., State Court of
     Forsyth County, State of Georgia, Civil Action File No. 99-V51560685.  This
     lawsuit was served on  the  Company  on or about  July 22,  1999 by Federal
     Express  Corporation.  The suit alleges the Company  owes  Federal  Express
     approximately  $110,000 for past services rendered.  The Company intends to
     defend itself vigorously.

     The Company is subject to other lawsuits and claims arising in the ordinary
     course of its business.  In the Company's opinion, as of June 30, 1999, the
     effect  of such  matters  will not have a  material  adverse  effect on the
     Company's results of operations and financial position.

                                      F-21
<PAGE>
     (b)  LEASE OBLIGATIONS

     The Company leases office space and equipment under operating  leases which
     expire at various  dates  through  June  2002.  The  future  minimum  lease
     commitments under these leases are as follows:


          YEAR ENDING JUNE 30, 1999              OPERATING LEASES
          -------------------------              ----------------
                   2000                              $120,000
                   2001                               120,000
                   2002                               120,000
                                                     --------
          Total minimum lease payments               $360,000
                                                     ========

     Rental  expense  under  operating  leases  totaled  $292,042,  $944,932 and
     $920,412  for the  Transition  Period  ended June 30, 1999 and fiscal years
     ended October 31, 1998 and October 31, 1997, respectively.

     (c)  CARNIVAL AGREEMENT

     In  September  1998,  the Company  entered  into a Turnkey  Agreement  (the
     "Carnival  Agreement")  with  Carnival  Corporation  ("Carnival"),  for the
     purchase,  installation and maintenance of its advanced cabin entertainment
     and management  system for the cruise industry  ("CruiseView") on a minimum
     of one Carnival Cruise Lines ship.  During the four-year period  commencing
     on the date of the Carnival Agreement,  Carnival has the right to designate

     an  unspecified   number  of  additional  ships  for  the  installation  of
     CruiseView by the Company.  The cost per cabin for CruiseView  purchase and
     installation  on each ship is provided  for in the Carnival  Agreement.  In
     December  1998,  Carnival  ordered the  installation  of  CruiseView on the
     Carnival Cruise Lines "M/S  Sensation,"  which has been in operational use,
     on a test basis,  since August 1999. In August 1999,  Carnival  ordered the
     installation of CruiseView on the Carnival Cruise Lines "M/S Triumph."

     The terms of the Carnival  Agreement  provide that  Carnival may return the
     CruiseView system within the Acceptance  Period, as defined in the Carnival
     Agreement. For the M/S Sensation, the acceptance period is 12 months. As of
     June  30,  1999,  the  Company  recorded   deferred  revenue  of  $365,851,
     reflecting  amounts paid by Carnival. As of June 30,  1999, the Company has
     not recognized any revenue in association with the Carnival Agreement.  The
     Company  would be  required  to return  such funds to Carnival in the event
     Carnival  does not accept the system.  Under the  Carnival  Agreement,  the
     Company is  required  to provide a  performance  bond or standby  letter of
     credit  in favor of  Carnival  ensuring  Carnival's  ability  to be  repaid
     amounts previously paid to the Company in the event Carnival determines not
     to accept the system as permitted under the Carnival Agreement.

     The  Company  has not  provided  a bond or  letter of credit as of June 30,
     1999.  Should  Carnival  require  the Company to obtain a bond or letter of
     credit,  the  Company  may be  required  to provide  cash  collateral  to a
     financial institution securing such obligation.

(17) SPECIAL CHARGES AND REVERSAL OF WARRANTY, MAINTENANCE AND COMMISSION
     ACCRUALS

     GTL had  previously  entered  into sales  contracts  with  three  airlines,
     Schweizerische Luftverkehr AG (Swissair), Debonair Airways, Ltd. (Debonair)
     and  Alitalia   Airlines,   S.p.A.   (Alitalia)  for  the  manufacture  and
     installation  of  its  in-flight  entertainment  network,  and  to  provide
     hardware and software upgrades, as defined in the agreements. In connection
     with the Transaction, the Company assumed all rights and obligations of the
     above contracts.

                                      F-22
<PAGE>
     Pursuant to the October 1997 agreement with  Swissair,  Swissair  purchased
     shipsets for the first and business class sections of sixteen  aircraft for
     an average of $1.7 million per aircraft. Included in the purchase price was
     material,  installation,   maintenance  through  September  1998,  one-year
     warranty  and  upgrade  costs for the sixteen  aircraft.  As of October 31,
     1998, the Company had completed  installations of the entertainment network
     on all of these  aircraft.  The  agreement  also  required  the  Company to
     install the entertainment  network in the first, business and economy class
     sections  of three  additional  aircraft,  at no  charge to  Swissair.  The
     Company  was  responsible  for all costs  including  entertainment  network
     components,  installation  and maintenance  through  September 1998 for the
     three  aircraft.  As  of  October  31,  1998,  the  Company  had  completed
     installations  of the  entertainment  network on all of these  aircraft and
     title to each of these three shipsets had been transferred to Swissair. The
     estimated  material,  installation,  maintenance and one-year  warranty and
     upgrade costs for these three  shipsets of  $14,292,404  is included in the
     accompanying statement of operations as a special charge for the year ended
     October 31,  1997.  During the fiscal  year ended  October  31,  1998,  the
     Company recognized a recovery of special charges of $606,508.  The recovery
     of special charges resulted from a reduction in the number of entertainment
     networks  requiring  maintenance  in  the  economy  class  sections  of the
     Swissair aircraft and a reduction in development expenses.

     In April  1998 and  October  1998,  the  Company  entered  into  additional
     contracts  with  Swissair.  The first  letter of intent  relates  to a $4.7
     million order for first and business class  installations  on four Swissair
     MD-11  aircraft  that are being added to the Swissair  fleet.  Swissair had
     made payments of  $1,450,000  on the $4.7 million  order  through  February
     1999. No payments have been received since  February.  The second  contract
     was to extend the warranty on all installed  systems for a second and third
     year at a price of $3,975,000.  Through February 1999, the Company had been
     paid  $707,500  under  this  contract.  No  subsequent  payments  have been
     received from Swissair.

     On October 29,  1998,  the Company was notified by Swissair of its decision
     to deactivate the entertainment networks on all Swissair aircraft. However,
     by April 1999,  discussions  between the  Company  and  Swissair  regarding
     outstanding  financial  matters  related  to current  accounts  receivable,
     inventory,  purchase commitments and extended warranty obligations, as well
     as  planning  discussions  for an October  1999  reactivation  ceased to be
     productive.  On May 6, 1999,  GTL filed a lawsuit  against  Swissair in the
     United States  District Court for the District of Arizona  seeking  damages
     for  Swissair's   failure  to  honor  its   obligations   for  payment  and
     reactivation of the Company's Entertainment Network.

     The Swissair agreements are not assignable to third parties under the terms
     of such agreements.  However,  in connection with the Transaction,  GTL has
     agreed  to pay to the  Company  any net  proceeds,  if any,  received  from
     Swissair as a result of the above  litigation  or otherwise.  Further,  the
     Company,   as  a   subcontractor   to  GTL,  will  assume  any  operational
     responsibilities   of  the  Swissair  agreement  in  the  event  that  such
     requirement  arises.  The  Company  has  not  assumed  any  liabilities  or
     obligations arising out of the crash of Swissair Flight No. 111.

     As a result of the above events,  management concluded that its only source
     of future  payment,  if any,  will be through the  litigation  process.  In
     addition,  with the deactivation of the entertainment system and Swissair's
     breach of its  agreements  with GTL,  the  Company  believes it will not be
     called upon by Swissair to perform  any ongoing  warranty,  maintenance  or
     development  services.  Swissair's  actions  have  rendered  the  Company's
     accounts receivable,  inventory and deposits worthless as of June 30, 1999.
     Accordingly, the Company has recognized deferred revenue on equipment sales
     to the extent of cash  received of $876,000;  charged off inventory to cost
     of  equipment  sales in the amount of  $1,517,000;  wrote off  deposits  of
     $655,000 to special  charges;  and reversed  all  warranty and  maintenance
     accruals totaling $5,164,000.

                                      F-23
<PAGE>
     Pursuant to an agreement  with  Debonair,  the Company was to  manufacture,
     install,  operate,  and maintain the entertainment  network on six Debonair
     aircraft for a period of eight years from  installation.  In February 1998,
     the Company and Debonair  signed a Termination  Agreement.  Pursuant to the
     Termination Agreement,  Debonair removed the entertainment network from its
     aircraft  and  the  Company  paid  Debonair  $134,235  as  full  and  final
     settlement  of  all of  its  obligations  with  Debonair.  Included  in the
     accompanying  statement of  operations  for the year ended October 31, 1997
     are special charges of $956,447 for the cost of the first completed shipset
     and $2,881,962 to write-down all inventory related to the Debonair program.

     In  connection  with these  agreements  with  Swissair and Debonair and the
     absence of any new entertainment  network orders for the Company,  property
     and equipment  write-downs of $1,006,532  and  $1,518,952  were recorded as
     special charges during fiscal 1998 and 1997, respectively.

     Pursuant to an agreement  with Alitalia,  the Company  delivered five first
     generation  shipsets for  installation  on Alitalia  aircraft during fiscal
     1996. Alitalia has notified the Company that it does not intend to continue
     operation of the shipsets,  and the Company has indicated  that it will not
     support the shipsets.

     For the  Transition  Period  ended  June 30,  1999,  the  Company  recorded
     warranty,  maintenance  and commission  accrual  adjustments of $5,117,704,
     $1,730,368 and $303,321, respectively, related to the Swissair and Alitalia
     matters.  Such  adjustments  to  prior  period  estimates,   which  totaled
     $7,151,393 resulted from an evaluation of specific contractual  obligations
     and discussions between the new management of the Company and other parties
     related to such contracts.  Based on the results of the Company's  findings
     during this period, such accruals were no longer considered necessary.

(18) SEGMENT INFORMATION

     The Company  operates  principally  in one industry  segment;  development,
     manufacturing  and  marketing  of  computer-based  entertainment  and  data
     networks.  Historically, the Company's principal revenues have been derived
     from European customers.

     For the Transition Period and fiscal years ended October 31, 1998 and 1997,
     one customer  accounted for approximately 91%, 98% and 95% of the Company's
     sales.  Outstanding  receivables  from  this  customer  were  zero and $1.1
     million respectively at June 30, 1999 and October 31, 1998. (See note 15.)

(19) SUPPLEMENTAL FINANCIAL INFORMATION

     Supplemental disclosure of cash flow information is as follows:

                                            TRANSITION
                                           PERIOD ENDED   YEAR ENDED OCTOBER 31,
                                           JUNE 30, 1999     1998       1997
                                           -------------    -------   --------
     Cash paid for interest                 $      --       $11,954   $ 13,423
                                            =========       =======   ========
     Noncash investing and financing
       activities:
       Capital lease obligations incurred   $      --       $    --   $210,678
                                            =========       =======   ========

                                      F-24
<PAGE>
(20) SUBSEQUENT EVENTS

     In July and August 1999,  GTL purchased all of the Series A and E notes and
     the  Series  D  notes,  respectively,  from  the  holders  of  such  notes.
     Concurrent  with such  purchase by GTL, the Company  executed the fifth and
     sixth allonges to the Promissory Note which cancelled such Series Notes and
     rolled the principal balance,  plus accrued but unpaid interest,  penalties
     and redemption  premiums on the Series Notes into the principal  balance of
     the Promissory Note.

     On August 24, 1999,  the Board of Directors of GTL approved the  conversion
     of the Promissory Note and outstanding  advances to the Company into Series
     C Stock of the Company and,  the  simultaneous  conversion  of the Series C
     Stock into the Company's common stock in accordance with the designation of
     the  Series  C  Stock.   Such   conversion,   to  the  extent  it  exceeded
     approximately  one million  shares of the Company's  common stock on August
     24, 1999, was contingent  upon receiving  shareholder  approval to increase
     the authorized share capital of the Company which was subsequently approved
     on  September  17,  1999.  Accordingly,  the  Company  will  issue  to  GTL
     approximately 5.6 million shares of its common stock in October 1999, based
     on an anticipated  conversion date of August 24, 1999. Had this transaction
     occurred on June 30, 1999, pro forma stockholders'  equity and tangible net
     worth would have been $9,320,934  (unaudited)  and $2,201,128  (unaudited),
     respectively.

     In September 1999, the Company sold one of its two buildings in Alpharetta,
     Georgia. The net proceeds from the sale, plus cash of approximately $80,000
     was used by the Company to repay the Note payable due April 19,  2001.  The
     sale of the second  building is expected to occur in November  1999 and net
     proceeds are expected to be used to retire the Note payable due 2009.

     On August  24,  1999,  the GTL Board of  Directors  approved  a $5  million
     secured  revolving  credit  facility by and among GTL and the Company  (the
     "Facility").  The  Facility  provides  that the Company may borrow up to $5
     million for working  capital  and general  corporate  purposes at the prime
     rate of interest  plus 3%. The  Facility  matures in  September  2001.  The
     Company  paid an  origination  fee of $50,000 to GTL and will pay an unused
     line fee of 0.5% per annum. The Facility is secured by all of the assets of
     the  Company  and is  convertible,  at GTL's  option,  into  shares  of the
     Company's  Series C stock. The Company executed the Facility on October 12,
     1999.

                                      F-25