UNITED STATES SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                   FORM 10-KSB

     (Mark One)

     [ X ] Annual report under Section 13 or 15(d) of the Securities Exchange
           Act of 1934

     For the fiscal year ended June 30, 2004

     [   ] Transition report under Section 13 or 15(d) of the Securities
           Exchange Act of 1934

     For the transition period from _________ to _________

     Commission File No. 0-25703

                                GTC TELECOM CORP.
                 (Name of Small Business Issuer in Its Charter)

             NEVADA                                             88-0318246
(State or Other Jurisdiction of                               (IRS Employer
Incorporation or Organization)                            Identification Number)

    3151 AIRWAY AVE., SUITE P-3
      COSTA MESA, CALIFORNIA                                      92626
(Address of Principal Executive Offices)                        (Zip Code)

                                 (714) 549-7700
                  (Issuer's Telephone Number, Including Area Code)
           SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT:
                                     (None)

           SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT:
                         Common Stock, par value $0.001
                                (Title of Class)

     Check  whether  the  issuer  (1)  filed all reports required to be filed by
Section  13  or 15(d) of the Exchange Act during the past 12 months (or for such
shorter  period  that the registrant was required to file such reports); and (2)
has  been  subject  to  such  filing  requirements  for  the  past  90  days.

Yes  __X__     No  _____

     Check  if  there is no disclosure of delinquent filers pursuant to Item 405
of  Regulation  S-B  is  not  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.  [ X ]

     State  issuer's  revenues  for its most recent fiscal year.  $10,957,588

     State  the  aggregate  market  value of voting and non-voting common equity
held  by  non-affiliates  computed by reference to the price at which the common
equity  was  sold, or the average bid and asked prices of such common equity, as
of  a  specified  date within the past 60 days.  (See definition of affiliate in
rule  12b-2  of  the  Exchange  Act.)  $917,444

     State  the  number of shares outstanding of each of the issuer's classes of
common  equity,  as  of  the  latest  practicable  date.  22,401,622

                       DOCUMENTS INCORPORATED BY REFERENCE

     If  the following documents are incorporated by reference, briefly describe
them  and  identify  the  part of the form 10-KSB (e.g., Part I, Part II, etc. )
into  which  the  document  is  incorporated:  (1) any annual report to security
holders;  (2)  any  proxy or information statement; and (3) any prospectus filed
pursuant to rule 424(b) or (c) of the Securities Act of 1933 ("Securities Act").
The  listed  documents  should  be clearly described for identification purposes
(e.g.,  annual  report  to  security  holders for fiscal year ended December 24,
1990).

None.

     Transitional  Small  Business  Disclosure  Format  (check  one):

Yes  ______  No___X___


                                      -1-
<PAGE>

                                TABLE OF CONTENTS


                                     PART I

Item  1          Description  of  Business.

Item  2          Description  of  Property.

Item  3          Legal Proceedings.

Item  4          Submission of Matters to a Vote of Security Holders.

                                     PART II

Item  5          Market for Common Equity and Related Stockholder Matters.

Item  6          Management's Discussion and Analysis or Plan of Operation.

Item  7          Financial Statements.

Item  8          Changes In and Disagreements With Accountants on Accounting and
                 Financial Disclosure.

Item  8A         Controls and Procedures.

Item  8B         Other Information

                                    PART III

Item  9          Directors and Executive Officers of the Registrant.

Item  10         Executive Compensation.

Item  11         Security Ownership of Certain Beneficial Owners and Management
                 and  Related  Stockholder Matters.

Item  12         Certain Relationships and Related Transactions.

Item  13         Exhibits and Reports on Form 8-K.

Item  14         Principal Accountant Fees and Services.



                                      -2-
<PAGE>

                                INTRODUCTORY NOTE

This  Annual  Report  on  Form  10-KSB  may be deemed to contain forward-looking
statements  within  the meaning of Section 27A of the Securities Act of 1933 and
Section  21E  of  the Securities Exchange Act of 1934.  The Company intends that
such  forward-looking  statements be subject to the safe harbors created by such
statutes.  The  forward-looking  statements included herein are based on current
expectations  that involve a number of risks and uncertainties.  Accordingly, to
the extent that this Annual Report contains forward-looking statements regarding
the  financial  condition,  operating  results,  business prospects or any other
aspect  of  the  Company,  please be advised that the Company's actual financial
condition, operating results and business performance may differ materially from
that  projected  or estimated by the Company in forward-looking statements.  The
differences  may be caused by a variety of factors, including but not limited to
adverse  economic  conditions, intense competition, including intensification of
price  competition  and  entry of new competitors and products, adverse federal,
state  and local government regulation, inadequate capital, unexpected costs and
operating  deficits,  increases in general and administrative costs, lower sales
and revenues than forecast, loss of customers, customer returns of products sold
to  them by the Company, disadvantageous currency exchange rates, termination of
contracts,  loss  of  suppliers,  technological  obsolescence  of  the Company's
products,  technical  problems  with the Company's products, price increases for
supplies  and  components,  inability  to  raise  prices,  failure to obtain new
customers,  litigation and administrative proceedings involving the Company, the
possible  acquisition  of new businesses that result in operating losses or that
do  not  perform as anticipated, resulting in unanticipated losses, the possible
fluctuation  and  volatility  of  the  Company's  operating  results,  financial
condition  and  stock  price,  losses incurred in litigating and settling cases,
dilution  in the Company's ownership of its business, adverse publicity and news
coverage,  inability  to carry out marketing and sales plans, loss or retirement
of  key  executives,  changes in interest rates, inflationary factors, and other
specific  risks that may be alluded to in this Annual Report or in other reports
issued  by the Company.  In addition, the business and operations of the Company
are  subject to substantial risks which increase the uncertainty inherent in the
forward-looking  statements.  In light of the significant uncertainties inherent
in  the  forward-looking  information  included  herein,  the  inclusion of such
information  should  not  be  regarded as a representation by the Company or any
other  person  that  the  objectives  or  plans of the Company will be achieved.

                                     PART I

ITEM  1  -  DESCRIPTION  OF  BUSINESS

GTC  Telecom  Corp.  and  subsidiaries,  (the  "Company"  or "GTC") is a service
provider  whose  services  include  various telecommunication services, Internet
related  services,  and  business process outsourcing ("BPO") services.  GTC was
organized  as  a  Nevada  Corporation  on May 17, 1994 and is currently based in
Costa  Mesa,  California.  The  Company's  common  stock currently trades on the
NASDAQ's  OTC  Bulletin  Board  under  the  symbol  "GTCC."

The  Company's  services  consist  of  the  following:

TELECOMMUNICATIONS  RELATED  SERVICES

GTC  is  licensed in every state (except Alaska) and the District of Columbia to
provide  long  distance  telecommunications  services.  The  Company  primarily
services  small and medium sized businesses and residential customers throughout
the  United  States  and  has positioned itself to be a low-cost provider in the
marketplace.  To  date,  the  Company  has  operated  as  a  switchless(1),
nonfacilities-based  reseller  of  long  distance  services.  By  committing  to
purchase  large usage volumes from national carriers such as Sprint, pursuant to
contract  tariffs(2), the Company has been able to procure substantial discounts
and  offer  low-cost,  high-quality  long  distance services to its customers at
rates  at  or  below  current  standard  industry  levels.

The  Company  provides long distance telephone service under a variety of plans.
These  include  outbound service, inbound toll-free 800 service and calling card
service.  The  Company  is also continuing its efforts in becoming a Competitive
Local  Exchange Carrier ("CLEC").  The Company has recently obtained licenses in
twenty-two  states  including  Florida, Georgia, New York, New Jersey, Ohio, and
Texas  to  operate  as  a  CLEC.  The  Company  recently

________________________
(1)  Switchless  resellers of long distance services do not utilize any of their
own  lines,  or  switching  equipment.
(2)  Contract  tariffs are services and rates based on contracts negotiated with
individual  customers,  but  also  available  to  all  customers.

                                      -3-
<PAGE>

began  offering  service  in  Florida  and is in the process of initiating local
exchange  service  in  several  other states.  Future plans are to provide local
services  in  most  of  the  major  states  throughout the country.  The Company
anticipates  that  by  providing CLEC services, it will be able to offer its own
bundled  services  and  thereby  reverse  the  recent  attrition  of  its
telecommunications  customer  base.  Recently,  however,  the  Federal  Court of
Appeals  for  the  District of Columbia, overturned rules regulating rates which
incumbent  local  exchange  carriers  charge competitive local exchange carriers
such  as  the  Company.  Although  the  FCC  has  recently enacted interim rules
maintaining  the  status  quo  until  new  rules  are  developed,  there remains
significant  uncertainty  in  the competitive local exchange market.  Therefore,
there  can be no assurances that the Company will be successful in expanding its
local  telephone  service  or that the Company will be successful in maintaining
the  profitability  of  such  service.

INTERNET  RELATED  SERVICES

The  Company  also  operates  as  an Internet Service Provider, offering dial-up
access  at  speeds  up to 56kps.  This service is available to both consumer and
business  users.  The  Company's  Internet related services are billed using the
same  methods  as  those  used  for billing its telecommunication services.  The
Company's  Internet  related  services  are  provided pursuant to contracts with
third-party  providers, who remain competitors with the Company.  By contracting
with  third-party  providers  to purchase large quantities of usage volumes, the
Company  is  able to secure significant discounts, which then allows the Company
to  offer  these  services  to  its end-users at rates equal to or less than its
competitors.

BUSINESS  PROCESS  OUTSOURCING  SERVICES

In  its  continuing  efforts  to reduce operating expenses as well as locate new
revenue  opportunities,  the  Company in 2002 began exploring various options to
reduce its labor and overhead costs as well as explore new markets.  The Company
determined  that by developing a call center and IT development center in India,
the  Company  could  take  advantage  of India's highly skilled but vastly lower
labor  and  operating  costs thereby allowing for the reduction of a significant
portion of the Company's operating overhead.  Despite significant start-up costs
associated  with the development of its Perfexa subsidiary, the Company believes
that  its Perfexa operations will result in significant savings for the Company.
Additionally,  the  Company's  Perfexa  operations  were  designed  to  provide
additional  revenue  opportunities  for  the  Company  in  the  Business Process
Outsourcing  Services  market  (see below).  On September 1, 2002, the Company's
Board  of Directors authorized the development of the Perfexa Solutions business
plan.  As  a  result,  on September 13, 2002, GTC's wholly owned subsidiary, GTC
Wireless,  Inc.,  which was then inactive, amended its Articles of Incorporation
changing  its name to Perfexa Solutions, Inc. ("Perfexa-U.S.").  On September 3,
2002,  a  Memorandum  and  Articles  of  Association  was  filed pursuant to the
Companies  Act,  1956  of  India,  creating  Perfexa  Solutions  Pvt.  Ltd
("Perfexa-India").  Perfexa-India  is a subsidiary of Perfexa-U.S.  Perfexa-U.S.
and  Perfexa-India  will  be collectively referred to in this report as Perfexa.
In  April  2003, Perfexa completed the construction of its first call center and
IT  development Center in New Delhi, India. This facility consists of a 100 seat
call  center  and  25 seat information technology development and administrative
center.

The  Company's  Perfexa  operations  provide  inbound,  as well as outbound call
center  management solutions, Information Technology ("IT") management solutions
and  business  operations  management  solutions.  Perfexa's  solution is to: 1)
Capitalize  on  India's  highly educated, English speaking workforce; 2) utilize
the  inherent  cost  and labor availability advantages within India; and 3) take
advantage of the low employee turnover rates in India, which will enable Perfexa
to  capitalize  on  its  significant investment in ongoing employee training and
development programs which will dramatically improve the quality of the customer
care  experience.  Future  plans  are to expand into other low cost countries as
business  develops.

Perfexa  currently  provides  customer  service  for the Company's approximately
86,000  telecommunication  and  Internet  users.  Perfexa's  IT  group currently
develops IT solutions for GTC's customer care needs and the integration of GTC's
customer  care  system  with  those  of Perfexa's New Delhi Center.  Perfexa has
recently  begun  offering  its  services  to third parties and plans to focus on
marketing  its  outsourced  call  center  services  to  U.S.  based  companies.
Perfexa's  IT  group  will work initially to ensure the integration of Perfexa's
systems  with  those  of  Perfexa's  clients.  Subsequently,  the  IT group will
develop  customized  software  solutions  for  third  parties.

                                      -4-
<PAGE>

COMPETITION

Telecommunication  Services

The long distance telecommunications industry is highly competitive and affected
by  the  introduction  of  new  services by, and the market activities of, major
industry  participants,  including  AT&T  Corp., Sprint, local exchange carriers
such  as  Verizon  and  SBC  Communications,  and  other  national  and regional
interexchange carriers.  Competition in the long distance business is based upon
pricing,  customer service, billing services and perceived quality.  The Company
competes  against  various national and regional long distance carriers that are
composed  of  both  facilities-based  providers  (those that carry long distance
traffic on their own equipment) and switchless resellers (those that resale long
distance  carried  by  facilities-based providers) offering essentially the same
services as the Company.  Several of the Company's competitors are substantially
larger  and  have  greater  financial,  technical  and marketing resources.  The
Company  believes that it is able to compete with these competitors by providing
high  quality  service  at  the  lowest  price  possible.

The  Company  believes  that  the  pricing strategies and cost structures of the
major long distance carriers have resulted historically in their charging higher
rates  to  the  small-to-medium sized business customer.  Small-to- medium-sized
business  customers  typically  are  not  able  to  make  the volume commitments
necessary  to  negotiate  reduced  rates  under  individualized  contracts.  By
committing  to  large volumes of traffic, the Company is guaranteeing traffic to
the  major long distance carrier while relieving the major long distance carrier
of  the  administrative  burden  of  qualifying  and  servicing large numbers of
small-to-medium-sized  accounts.  To be successful, the Company believes that it
must  have  lower  overhead  costs  and  be  able to efficiently market the long
distance  product, process orders, verify credit and provide customer service to
a  large  number  of  accounts.  Although  the Company believes it has human and
technical  resources  to  pursue  its  strategy  and compete effectively in this
competitive  environment,  its success will depend upon its continued ability to
profitably  provide  high  quality,  high  value  services  at  prices generally
competitive with, or lower than, those charged by its competitors.  There can be
no  assurances  that  the  Company will be able to compete successfully in these
markets.

The Company currently links its switching equipment with transmission facilities
and  services  purchased  or  leased  from  Sprint  and  will continue to resell
services obtained from Sprint, which will remain a competitor of the Company for
the  provisioning  of  telecommunications  services.  However,  there  can be no
assurances  that  the  Company  will  be  able  to  continue  to  provide  its
telecommunication  services  through  Sprint.

The  Telecommunications Act of 1996 is intended to introduce more competition to
U.S.  telecommunications  markets.  The  legislation  opens  the  local services
market  by  requiring  LECs  to  permit  interconnection  to  their networks and
establishing,  among  other  things,  LEC  obligations  with  respect to access,
resale,  number  portability, dialing parity, access to rights-of-way and mutual
compensation.  The  legislation  also  codifies  the  LECs'  equal  access  and
nondiscrimination  obligations  and preempts most inconsistent state regulation.
The  legislation also contains special provisions that eliminate restrictions on
the  Regional  Bell  Operating  Companies  ("RBOCs")  providing  long  distance
services,  which  means  that  the  Company faces competition for providing long
distance services from well capitalized, well known companies that prior to this
time  could  not  compete  in  long  distance  service.

Internet  Related  Services

The  market  for  Internet-based  online  services  is relatively new, intensely
competitive and rapidly changing. Since the advent of commercial services on the
Internet, the number of Internet Service Providers and online services competing
for  users'  attention  and  spending  has  proliferated because of, among other
reasons,  the  absence of substantial barriers to entry, and the Company expects
that  competition will continue to intensify.  Many of the Company's current and
potential  competitors  such as Earthlink, WorldNet, AOL, Microsoft Network, and
Prodigy  have  longer  operating histories, larger customer bases, greater brand
recognition  and significantly greater financial, marketing and other resources.
These  competitors  may  be  able  to  respond  more  quickly to new or emerging
technologies  and  changes  in  customer  requirements  and  to  devote  greater
resources  to the development, promotion and sale of their products and services
than  the  Company.

                                      -5-
<PAGE>

The  Company  believes  that  its  Internet  Related  Services  are  marketed at
competitive  rates  and  provide  quality  and  services  comparable  to  its
competitors.

Business  Process  Outsourcing  Services

IT  Outsourcing.  Electronic  Data  Systems  Corporation  (EDS) is currently the
largest  IT  outsourcer.  According  to  IDC, EDS captured over 25% of the $25.7
billion  IT  outsourcing  market  in  2000.  Given the strength of the company's
competition,  maintaining  its  sizable market share is not easily accomplished;
EDS's  most  formidable  competitor  in  terms  of  revenue  generation  is  IT
outsourcing  giant  IBM  Global  Services,  which  captured 14% of the segment's
market  share  in 2000. Other competitors include Computer Sciences Corporation,
Unisys,  Affiliated  Computer  Systems  (ACS),  CGI  Group  Inc.  and  Science
Applications  International  Corporation  (SAIC).

Perfexa's  ability  to  obtain  business  is dependent upon its ability to offer
better  strategic  concepts  and  technical  solutions,  better value, a quicker
response,  or  a combination of these factors.  Many of these competitors have a
more  substantial  amount of resources and therefore have the greater ability to
obtain client contracts where large asset purchases or investments are required.
In  order to sustain competitive prices, Perfexa must operate with efficient and
minimal  overhead  while  building  a  stable  client  base.  India provides the
infrastructure  to  leverage  low  cost  IT  solutions.

Call Center Outsourcing.  Convergys is a leading provider of outsourced services
within  the  billing  services  and  software segment as well as the call center
services  segment.  The  company handles more than one million customer contacts
daily  through  its  28,000  workstations and manages customer interactions that
range  from initial product information requests, account activation and product
sales to service renewal, billing inquiries and complaint resolution. Additional
competitors  include  Exult, NCO Group, ProBusiness, SITEL Corporation, Synhrgy,
Teletech  Holdings,  Inc,  West  Corporation,  and  Peopleclick.

Pricing  strategies  and  cost  structures  of these major players are generally
built  on  labor  rates,  technical and operation capabilities, and industry and
process  knowledge.  The  required  competency  is  optimization of the business
process  at hand, and pricing models may be based on cost plus incentives, fixed
fee,  or  per  transaction.  Perfexa's initial revenues will be derived from the
areas  of  call  center  and  administrative  outsourcing  services.  Critical
competitive  factors  include  the  ability  to  measure  the  quality  of  job
performance  and  pricing  and obtain a solid understanding of clients' specific
job  requirements  through  consultative  assessments.

Value-added  services  is one of the key advantages that Perfexa expects to have
over  other players.  By leveraging a highly educated and cost-effective team in
India,  this advantage is expected to reduce customers' business operating costs
by  40%  to  50%  lower  than  onshore outsourcing providers.  To be successful,
Perfexa  will  offer  a  distinct  value proposition to the client---significant
savings  by  converting  fixed  employee costs to flexible, variable costs while
avoiding  large  capital  expenditures  required  to implement and maintain call
center  technologies.  The challenge that Perfexa may face is whether it will be
able to provide high quality service at a cost savings while at the same time be
both  profitable  and  lower-priced  than  its  competitors.  There  can  be  no
assurances  that  Perfexa will be able to compete successfully in these markets.

CUSTOMER  ATTRITION
The Company believes that a high level of customer attrition is a characteristic
of  the  domestic  residential  long  distance  and Internet related industries.
Attrition  is attributable to a variety of factors, including the termination of
customers by the Company for non-payment and the initiatives of existing and new
competitors  as  they  engage  in,  among  other  things,  national  advertising
campaigns,  telemarketing  programs  and  the issuance of cash or other forms of
incentives.  Such  attrition  could  have  a  material  adverse  effect upon the
Company's  future  results  of  operations  and  financial  conditions.

                                      -6-
<PAGE>

DEPENDENCE  ON  KEY  CUSTOMERS
The Company is not dependent on any single customer for a significant portion of
its annual sales.  The Company's customer base changes on a continuous basis, as
new  customers  are  added  or  old  customers  removed.

MAJOR  SUPPLIERS

The  Company  does  not  own its own long distance network and currently depends
upon  third  parties  to  provide  for  the  transmission  of phone calls by its
customers  and  to  provide the call detail records upon which the Company bases
its  customer's  billings.  Previously, the Company contracted with MCI WorldCom
Network  Services,  Inc. ("MCI") as its underlying carrier. On July 1, 2004, the
Company  received  notice  from  MCI  that it was in default of the terms of its
Promissory  Note  with  MCI as well as the Telecommunications Services Agreement
and  Data  Services  Agreement  between MCI and GTC. According to MCI, GTC has a
total  balance due MCI of approximately $5,679,329. The Company is attempting to
resolve  its  outstanding  balance  and  the amounts past due with MCI. However,
there can be no guarantees that the Company will be successful in its efforts to
reach an amicable resolution with MCI regarding the amounts past due. Failure to
successfully restructure the amounts due MCI will have a material adverse effect
on  the  Company's  operations.

In  order to minimize service disruptions to the Company's customers, on July 7,
2004,  the  Company transferred its customer accounts to its alternate supplier,
Sprint  Communications  Company  L.P.  ("Sprint").  Pursuant to the terms of its
agreement with Sprint, as amended, the Company is obligated to a monthly minimum
of $25,000 through July 26, 2006.  For any period during which the Company fails
to  meet  its  monthly  minimum,  the  Company  would  be  liable for 25% of the
difference  between  the  Company's  actual  usage  and  the stated minimum. The
Company  may  terminate  the  agreement  upon  ninety  (90)  days written notice
provided  that  the Company pays a termination fee equal to 50% of the aggregate
minimum  revenue  requirement  for  the  remaining  term  of the contract if the
Company  terminates  for  convenience  or by default of the Company prior to the
expiration  date  which  was $371,000 as of June 30, 2004.  Sprint may terminate
the  agreement  upon  thirty (30) days written notice and then only in the event
that  the  Company is in material breach of the agreement.  However, in cases of
nonpayment,  Sprint  may  elect  to  immediately  terminate  the  Agreement.

The  termination  of  the  Company's  contract  with  Sprint,  the  loss  of
telecommunications services provided by Sprint, or a reduction in the quality of
service the Company receives from Sprint could have a material adverse effect on
the  Company's  results  of  operations.  In  addition,  the accurate and prompt
billing of the Company's customers is dependent upon the timeliness and accuracy
of  call  detail  records  provided  to  the Company by Sprint.  There can be no
assurance  that  accurate  information  will  be  provided by Sprint on a timely
basis,  the  failure  of  which  would  have  a  material  adverse effect on the
Company's  results  of  operations.

In  the  event  that  the  services  provided  by  Sprint  to  the  Company were
discontinued,  the  Company  believes  that  would be able to identify alternate
suppliers  which  would be able to provide it with sufficient levels of services
at  terms  similar  to  those  of Sprint.  Although the Company has the right to
switch  its  current customers to an alternate underlying carrier, the Company's
customers  have  the  right to discontinue their service with the Company at any
time.  Accordingly,  the  termination  or  non-renewal of the Company's contract
tariffs  with  Sprint or the loss of telecommunications services from Sprint may
have  a  material  adverse  effect  on  the  Company's results of operations and
financial  condition.

GTC  does  not  currently have its own Internet Network.  Currently, the Company
provides  its Internet Service Provider Access services pursuant to an agreement
with  a  third  party  company  for  the  provisioning of the Company's Internet
Service  Provider  Access  service.  The Company is not obligated to any monthly
minimums  under  its  agreement  with  its underlying Internet service provider.
Although  the  Company  believes  that  its  relationship  with  its third-party
provider  is strong and should remain so with continued contract compliance, the
termination  of the Company's contract with its underlying provider, the loss of
Internet  services provided by these companies, or a reduction in the quality of
service the Company receives from these companies could have a an adverse effect
on the Company's internet operations.  In the event that its underlying provider
was  to discontinue its service to the Company, the Company believes, based upon
discussions that the Company has had with other Internet service providers, that
it  could  negotiate  and  obtain  contracts  with Internet service providers at
comparable  rates.

                                      -7-
<PAGE>

REGULATION

The  Company's  provisioning of communications services is subject to government
regulation.  Federal  law  regulates  interstate  and  international
telecommunications,  while states have jurisdiction over telecommunications that
originate  and terminate within the same state.  Changes in existing policies or
regulations  in  any  state  or by the FCC could materially adversely affect the
Company's  financial  condition  or results of operations, particularly if those
policies make it more difficult for the Company to obtain service from Sprint or
other  long  distance  companies at competitive rates, or otherwise increase the
cost and regulatory burdens of marketing and providing service.  There can be no
assurance  that the regulatory authorities in one or more states or the FCC will
not  take action having an adverse effect on the business or financial condition
or  results  of  operations  of  the  Company.

Federal

The Company is classified by the FCC as a nondominant carrier.  After the recent
reclassification  of  AT&T  as  nondominant,  only  the  LECs  are classified as
dominant carriers among domestic carriers.  Because AT&T is no longer classified
as  a  dominant  carrier,  certain pricing restrictions that formerly applied to
AT&T  have  been eliminated, which could make it easier for AT&T to compete with
the  Company  for  low volume long distance subscribers.  The FCC generally does
not  exercise direct oversight over charges for service of nondominant carriers,
although it has the statutory power to do so.  Nondominant carriers are required
by  statute to offer interstate services under rates, terms, and conditions that
are  just,  reasonable  and  not  unreasonably  discriminatory.  The FCC has the
jurisdiction  to  act  upon complaints filed by third parties, or brought on the
FCC's  own  motion,  against any common carrier, including nondominant carriers,
for  failure to comply with its statutory obligations.  Nondominant carriers are
required  to  publish and make available service agreements listing their rates,
terms  and conditions of service.  The FCC also has the authority to impose more
stringent  regulatory  requirements  on  the  Company  and change its regulatory
classification  from  nondominant  to  dominant.  In  the  current  regulatory
atmosphere,  the  Company  believes, however, that the FCC is unlikely to do so.

The  FCC  imposes  only minimal reporting requirements on nondominant resellers,
although  the  Company  is  subject  to  certain  reporting,  accounting  and
record-keeping  obligations.

At  present,  the  FCC exercises its regulatory authority to set rates primarily
with  respect to the rates of dominant carriers, and it has increasingly relaxed
its  control  in this area. Even when AT&T was classified as a dominant carrier,
the  FCC most recently employed a "price cap" system, which essentially exempted
most  of  AT&T's  services,  including  virtually  all of its commercial and 800
services,  from  traditional  rate of return regulation because the FCC believes
that  these  services  were  subject  to  adequate  competition.

State

The Company is subject to varying levels of regulation in the states in which it
currently provides intrastate telecommunications services.  The vast majority of
the  states require the Company to apply for certification to provide intrastate
telecommunications  services, or at least to register or to be found exempt from
regulation,  before  commencing intrastate service.  The vast majority of states
also require the Company to file and maintain detailed tariffs listing its rates
for  intrastate service.  Many states also impose various reporting requirements
and/or  require  prior  approval for transfers of control of certified carriers,
corporate  reorganizations,  acquisitions  of  telecommunications  operations,
assignments  of  carrier  assets,  including  subscriber  bases,  carrier  stock
offerings  and  incurrence  by  carriers  of  significant  debt  obligations.
Certificates  of  authority  can  generally  be conditioned, modified, canceled,
terminated or revoked by state regulatory authorities for failure to comply with
state  law  and  the  rules,  regulations  and  policies of the state regulatory
authorities.  Fines  and  other  penalties,  including  the return of all monies
received  for  intrastate  traffic from residents of a state, may be imposed for
such  violations.  In  certain states, prior regulatory approval may be required
for  acquisitions  of  telecommunications  operations.

As the Company expands its efforts to resell long distance services, the Company
will  have  to  remain attentive to relevant federal and state regulations.  FCC
rules  prohibit  switching  (also  commonly known as "Slamming") of a consumer's
long  distance  provider  without  the  consumer's  consent and specify how that
consent can be obtained.  Most states have consumer protection laws that further
define  the  framework  within  which the Company's marketing activities must be
conducted.  The  Company  intends to comply fully with all laws and regulations,
and  the  constraints of federal and state restrictions could impact the success
of  direct  marketing  efforts.

The  Company  is  not  currently subject to any State or Federal regulation with
respect  to  its Internet related services.  However, there can be no assurances
that  the  Company  will  not be subject to such regulations in the future.  The
Company  is  not  aware  of  any  pending legislation that would have a material
adverse  effect  on  the  Company's  operations.

The  Company's domestic BPO operations are not currently subject to any State or
Federal  regulations.  However,  the  Company's  Perfexa-India  operations  are
regulated  by  the policies of the Indian government.  Indian law regulates call
center  activities  requiring  the  registration of call centers with the Indian
Department  of  Telecommunications.  The  Company's Perfexa-India subsidiary has
obtained all required permits and licenses to operate its call center.  Pursuant
to  such  licenses,  however, the Company must notify and obtain permission from
the Indian DOT prior to expansion of its call center.  Additionally, in times of
war,  the  Indian  government  may have the power to appropriate Perfexa-India's
facilities.

                                      -8-
<PAGE>

PATENTS,  TRADEMARKS,  LICENSES
The  Company  has  registered  service marks for its Perfexa Solutions business.
However,  the  Company  does  not depend upon any other patents or trademarks to
conduct its business.  The Company is required to hold licenses with the Federal
Communication  Commission  for  the operation of its telecommunication services.
The Company is also required to hold licenses in the states in which it provides
intrastate  long distance services.  Currently, the Company is licensed in every
state  (except  Alaska)  and  the  District  of  Columbia  to provide intrastate
services.  The  Company's  federal  and  state telecommunication licenses are of
indefinite length and will remain effective so long as the Company complies with
all  Federal  and  State  regulations.

COST  OF  COMPLIANCE  WITH  ENVIRONMENTAL  REGULATIONS
The Company currently has no costs associated with compliance with environmental
regulations.  However,  there  can  be  no  assurances that the Company will not
incur  such  costs  in  the  future.

NUMBER  OF  EMPLOYEES
As  of  August  31, 2004, the Company employed approximately 27 people on a full
time  basis  in  the United States and 116 people on a full time basis in India.










                                      -9-
<PAGE>

RISK  FACTORS

The  success of the Company and its results of operations are subject to several
risks  and  uncertainties.  Such  risks  include  but  are  not  limited to, the
following:

GTC HAS BEEN INFORMED THAT IT IS IN DEFAULT OF IT OBLIGATIONS TO MCI, ITS FORMER
PRIMARY  SUPPLIER.  On July 1, 2004, GTC received notice from MCI that it was in
default  of  the  terms  of  its  Promissory  Note  with  MCI  as  well  as  the
Telecommunications  Services  Agreement  and Data Services Agreement between MCI
and  GTC.  According  to  MCI,  GTC has a total balance due MCI of approximately
$5,679,329. GTC is attempting to resolve its outstanding balance and the amounts
past due with MCI. There can be no guarantees that GTC will be successful in its
efforts to reach an amicable resolution with MCI regarding the amounts past due.
Failure  to  successfully  restructure  the amounts due MCI will have a material
adverse  effect  on  GTC's  operations.

GTC  HAS  LIMITED  OPERATING  HISTORY  AND  LARGE  ACCUMULATED  DEFICIT.  GTC's
executive  officers  commenced  its  major  lines  of  business - providing long
distance  and  Internet  service  -  relatively  recently.  Accordingly,  your
evaluation  of  GTC  will  be  based  on  a limited operating history.  You must
consider  that  GTC's  prospects  are  subject  to  the  risks,  expenses  and
uncertainties  frequently  encountered  by  companies  in  the  early  stage  of
development  in  new and rapidly evolving markets.  As of June 30, 2004, GTC had
an  accumulated deficit of $15,800,852.  GTC's limited operating history and the
uncertain  nature  of  the  markets  it  services makes the prediction of future
results  of operations difficult or impossible.  Period-to-period comparisons of
GTC's results of operations may not be meaningful and you should not rely on the
results  for  any  period  as  an  indication  of  future  performance.

GTC  IS  DEPENDENT  ON  A LIMITED NUMBER OF SUPPLIERS.  GTC does not own its own
long distance network, and pursuant to GTC's contract with Sprint, GTC currently
depends  primarily upon Sprint to provide for the transmission of phone calls by
its  customers  and  to provide the call detail records upon which GTC bases its
customer's  billings.  For additional details, please see Major Suppliers above.

YOU  MAY BE UNABLE TO EFFECTIVELY EVALUATE THE BUSINESS OF THE COMPANY'S PERFEXA
SUBSIDIARY  BECAUSE  PERFEXA'S OUTSOURCED CALL CENTER AND INFORMATION TECHNOLOGY
SERVICE  BUSINESS HAS EXISTED FOR ONLY A SHORT PERIOD OF TIME.  Perfexa-U.S. was
originally  incorporated  on  October  3,  2000  as  GTC  Wireless, Inc. and was
inactive until September 13, 2002 when it changed its name to Perfexa Solutions,
Inc.  Perfexa-U.S.  owns  98%  of  the  issued  and outstanding capital stock of
Perfexa Solutions Pvt. Ltd., a corporation formed under the laws of the Republic
of  India.  Perfexa  develops  and  markets  offshore  outsourced  call  center
solutions and information technology services to small and medium size companies
and  does  not  have  an  established  operating  history.  Accordingly, you can
evaluate  Perfexa's business, and therefore its future prospects, based only its
very  limited  operating  history.  In  addition,  you  must  consider Perfexa's
prospects  in  light  of  the  risks,  expenses,  and  difficulties  frequently
encountered in the establishment of a new business in a rapidly evolving market.

PERFEXA  WILL  BE  SUBJECT  TO  CERTAIN  INHERENT RISKS ASSOCIATED WITH THE
REPUBLIC OF INDIA.  Perfexa's operating subsidiary, Perfexa Solutions Pvt. Ltd.,
is  incorporated  in  the  Republic of India, and substantially all of Perfexa's
assets  and  employees  are located in India.  Consequently, Perfexa's financial
performance  will  be  affected  by  political, social and economic developments
affecting  India,  Government  of India policies, including taxation and foreign
investment policies, government currency exchange control, as well as changes in
exchange  rates  and  interest  rates.

Regional  conflicts  in  South  Asia  could adversely affect the Indian economy,
disrupt  Perfexa's  operations and cause its business to suffer.  South Asia has
from  time  to  time experienced instances of civil unrest and hostilities among
neighboring  countries, including between India and Pakistan.  India's relations
with neighboring Pakistan, each a nuclear power, are tense. In April 1999, India
and  Pakistan each conducted long-range missile tests.  Since May 1999, military
confrontations  between  India  and  Pakistan  have  occurred  in  the  disputed
Himalayan  region  of Kashmir. India's relations with neighboring China are also
tense.  Events  of  this nature in the future could influence the Indian economy
and  have  a  material  adverse  effect  on  Perfexa's  business.

The  potential  for  such  hostilities  has  recently  increased  as a result of
terrorist attacks in the U.S. and the recent attack on the Indian Parliament has
increased  tensions  between  India  and Pakistan.  Events of this nature in the
future  could  influence  the  Indian  economy and could have a material adverse
effect  on  Perfexa's  operations  and  on  the  market  for Perfexa's services.

Political  instability  or  changes  in  the government in India could delay the
liberalization of the Indian economy and adversely affect economic conditions in
India  generally,  which could impact Perfexa's financial results and prospects.

                                      -10-
<PAGE>

Since  1991,  successive  Indian  governments  have pursued policies of economic
liberalization,  including  significantly  relaxing  restrictions on the private
sector.  Nevertheless,  the  role of the Indian central and state governments in
the  Indian  economy  as  producers,  consumers  and  regulators  has  remained
significant.  The  Government  of  India has changed five times since 1996.  The
current  Government of India, formed in October 1999, has announced policies and
taken  initiatives  that  support the continued economic liberalization policies
that have been pursued by previous governments.  There can be no assurances that
that  these  liberalization  policies  will continue in the future.  The rate of
economic  liberalization  could change, and specific laws and policies affecting
technology  companies,  foreign  investment, currency exchange and other matters
affecting  investment  in  its  securities  could change as well.  A significant
change  in  India's  economic  liberalization  and  deregulation  policies could
adversely  affect  business  and  economic  conditions  in  India  generally and
Perfexa's  business  in  particular.

PERFEXA'S  BUSINESS IS SUBJECT TO FLUCTUATIONS IN FOREIGN CURRENCIES.  Perfexa's
business is subject to fluctuations in the value of the Indian Rupee against the
U.S.  dollar  due  to  Perfexa's Indian subsidiary.  Operational costs including
labor,  equipment,  and facilities leases could fluctuate depending on the value
of  the  Rupee  vis-a-vis the U.S. dollar.  In the future, Perfexa may also sell
its products and services in other currencies which would make the management of
currency  fluctuations  more  difficult.

THE  COMPANY'S  SECURITIES MAY BE SUBJECT TO REGULATIONS REGARDING PENNY STOCKS.
The  Company's securities may be subject to a Securities and Exchange Commission
rule  that  imposes  special sales practice requirements upon broker-dealers who
sell  such  securities to persons other than established customers or accredited
investors.  For  purposes  of the rule, the phrase "accredited investors" means,
in  general  terms,  institutions  with  assets  in  excess  of  $5,000,000,  or
individuals  having  a  net  worth  in  excess of $1,000,000 or having an annual
income  that  exceeds  $200,000  (or that, when combined with a spouse's income,
exceeds $300,000).  For transactions covered by the rule, the broker-dealer must
make  a  special  suitability  determination  for  the purchaser and receive the
purchaser's  written  agreement  to  the  transaction  prior  to  the  sale.
Consequently,  the  rule  may  affect  the ability of broker-dealers to sell the
Companies'  securities  and  also may affect the ability of shareholders to sell
their  securities.

In  addition,  the  Securities  and  Exchange Commission has adopted a number of
rules  to  regulate  "penny  stocks."  Such  rules  include Rules 3a51-1, 15g-1,
15g-2,  15g-3,  15g-4, 15g-5, 15g-6, and 15g-7 under the Securities Exchange Act
of  1934,  as  amended.  Because the Companies' securities may constitute "penny
stocks"  within the meaning of the rules, the rules would apply to the Companies
and their securities.  The rules may further affect the ability of owners of the
Companies'  securities  to  sell  these  securities.

Current and potential shareholders should be aware that, according to Securities
and  Exchange  Commission,  the  market  for penny stocks has suffered in recent
years  from  patterns  of fraud and abuse.  Such patterns include (i) control of
the  market  for  the  security  by  one  or a few broker-dealers that are often
related  to  the  promoter  or  issuer of the stock; (ii) manipulation of prices
through  prearranged  matching  of  purchases and sales and false and misleading
press  releases;  (iii)  "boiler  room"  practices involving high-pressure sales
tactics  and  unrealistic price projections by inexperienced sales persons; (iv)
excessive  and  undisclosed  bid-ask  differentials  and  markups  by  selling
broker-dealers;  and  (v)  the  wholesale  dumping  of  the  same  securities by
promoters  and  broker-dealers  after  prices have been manipulated to a desired
level,  along  with  the  resulting inevitable collapse of those prices and with
consequent  investor  losses.  We  are  aware  of  the abuses that have occurred
historically  in  the  penny stock market.  Although we do not expect to be in a
position  to  dictate  the  behavior  of  the  market  or  of broker-dealers who
participate  in  the  market  for  our  stock, management will strive within the
confines  of  practical limitations to prevent the described patterns from being
established  with  respect  to  our  securities.

IN  ADDITION  TO THE FOREGOING RISKS, BUSINESSES ARE OFTEN SUBJECT TO RISKS THAT
ARE  NOT  FORESEEN OR FULLY APPRECIATED BY MANAGEMENT.  SHAREHOLDERS SHOULD KEEP
IN  MIND  THAT  OTHER  IMPORTANT  RISKS  COULD  ARISE.

                                      -11-
<PAGE>

AVAILABLE  INFORMATION

The  Company  files  annual  reports  on  Form 10-KSB, quarterly reports on Form
10-QSB,  current  reports  on  Form 8-K and proxy and information statements and
amendments to reports filed or furnished pursuant to Sections 13(a) and 15(d) of
the  Securities  Exchange Act of 1934, as amended.  The public may read and copy
these  materials  at  the  SEC's  Public Reference Room at 450 Fifth Street, NW,
Washington,  D.C.  20549.  The public may obtain information on the operation of
the  public  reference  room by calling the SEC at 1-800-SEC-0330.  The SEC also
maintains  a  website  (http://www.sec.gov)  that  contains  reports,  proxy and
information  statements  and  other  information regarding the Company and other
companies  that file materials with the SEC electronically.  You may also obtain
copies  of  reports  filed  with  the  SEC,  free  of  charge, on our website at
www.gtctelecom.com.  The Company's headquarters are located at 3151 Airway Ave.,
Suite  P-3, Costa Mesa, CA 92626.  The Company's phone number at that address is
(714)  549-7700  and  the  Company's  e-mail  address  is  info@gtctelecom.com.

ITEM  2.  DESCRIPTION  OF  PROPERTY

The  Company  leases  a  total  of  7,651  square  feet  of office space for its
headquarters  and  customer  service  operations  in Costa Mesa, California at a
monthly  rental  rate  of $14,745 pursuant to a six month lease agreement ending
February  28,  2005.

Effective  October  1,  2002,  Perfexa-India  began leasing approximately 15,422
square  feet  of  office  space  in  Gurgaon, India, a suburb of New Delhi, at a
monthly  rate  of  Rs. 524,348 (approximately $11,400) per month.  This facility
serves as Perfexa-India's call center, IT development center, and administrative
offices.  The  lease is for a term of three years with an option to renew for an
additional  three  year  term  with  an  increase  in  the  rental  rate of 20%.
Effective  October  1,  2002,  Perfexa-India  also  entered  into  a maintenance
agreement  for  its  New Delhi facility. Pursuant to the terms of the agreement,
Perfexa-India  is  obligated  to  pay  a  monthly maintenance fee of Rs. 138,798
(approximately  $3,000)  per month for the first twelve months.  Thereafter, the
monthly  fee  will  be  calculated  based  on  the  actual  costs of maintenance
(including  electricity  and  water)  plus  a  20%  mark-up.

ITEM  3.  LEGAL  PROCEEDINGS

The  Company  may  from  time  to  time be involved in various claims, lawsuits,
disputes with third parties, actions involving allegations of discrimination, or
breach  of  contract  actions  incidental to the operation of its business.  The
Company is not currently involved in any such litigation which it believes could
have  a  materially  adverse  effect  on  its  financial condition or results of
operations.

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

No  matters  were submitted to a vote of security holders during the fiscal year
ended  June  30,  2004.








                                      -12-
<PAGE>
                                     PART II

ITEM  5.  MARKET  FOR  COMMON  EQUITY  AND  RELATED  STOCKHOLDER  MATTERS

MARKET  INFORMATION

The  following  table  sets  forth the high and low bid prices for shares of the
Company  common  stock  for the periods noted, as reported by the National Daily
Quotation  Service  and  the  NASDAQ  Bulletin  Board.  Quotations  reflect
inter-dealer  prices, without retail mark-up, markdown or commission and may not
represent  actual  transactions.  The Company's common stock currently trades on
the  NASD  OTC  Bulletin  Board  under  the  symbol  "GTCC."

            CALENDAR                         BID  PRICES
              YEAR       PERIOD          HIGH          LOW
              ----       ------          ----          ---

              2002    First  Quarter     0.27          0.17
                      Second Quarter     0.30          0.15
                      Third  Quarter     0.25          0.15
                      Fourth Quarter     0.22          0.13

              2003    First  Quarter     0.23          0.13
                      Second Quarter     0.24          0.14
                      Third  Quarter     0.19          0.13
                      Fourth Quarter     0.14          0.09

              2004    First  Quarter     0.13          0.07
                      Second Quarter     0.18          0.07

On  September  15,  2004, the last sales price per share of the Company's common
stock,  as  reported  by  the  OTC  Bulletin  Board,  was  $0.05.

NUMBER  OF  SHAREHOLDERS

The number of beneficial holders of record of the common stock of the Company as
of  the  close of business on September 15, 2004 was approximately 408.  Many of
the  shares  of  the  Company's  common  stock  are  held in a "street name" and
consequently  reflect  numerous  additional  beneficial  owners.

DIVIDEND  POLICY

To  date,  the  Company  has declared no cash dividends on its common stock, and
does  not expect to pay cash dividends in the next term.  The Company intends to
retain  future earnings, if any, to provide funds for operation of its business.

RECENT  SALES  OF  UNREGISTERED  SECURITIES

During  the  fourth  quarter of the fiscal year ended June 30, 2004, the Company
issued  the  following  unregistered  securities:

On  August  18,  2004,  two  (2)  notes, as amended, were combined into one note
totaling  $816,395,  incorporating all principal and interest owed, and extended
to November 30, 2004.  In consideration of the extension, the Company has agreed
to  pay an additional $73,350 in interest and issue an additional 250,000 shares
of  the Company's restricted common stock valued at $17,133 (based on the market
price  on  the  date of grant).  The Company will record the value of the common
stock  to  interest  expense in August 2004 (see Item 6. Management's Discussion
and  Analysis  or  Plan  of  Operation  - Short-term Debt).  The issuance was an
isolated transaction not involving a public offering pursuant to Section 4(2) of
the  Securities  Act  of  1933.

                                      -13-
<PAGE>

On  July  21, 2004, a note payable of $45,000, as amended, was extended to allow
for  payments  of  $20,000 due on July 21, 2004, $15,000 due on August 21, 2004,
and  $10,000  due on September 21, 2004.  In consideration of the extension, the
Company  has  agreed  to  issue  an  additional  45,000  shares of the Company's
restricted  common stock valued at $2,944 (based on the market price on the date
of  grant).  The  Company  will record the value of the common stock to interest
expense  in  July 2004 (see Item 6. Management's Discussion and Analysis or Plan
of  Operation  - Short-term Debt).  The issuance was an isolated transaction not
involving  a  public  offering pursuant to Section 4(2) of the Securities Act of
1933.

On  June  8,  2004,  in  connection with a note payable for $50,000, the Company
issued  50,000  shares  of  the  Company's  restricted  common  stock  valued at
approximately  $4,128  (based  on the market price on the date of issuance) to a
third-party  accredited  investor.  The Company recorded the value of the common
stock  to interest expense in June 2004 (see Item 6. Management's Discussion and
Analysis  or Plan of Operation - Short-term Debt).  The issuance was an isolated
transaction  not  involving  a  public  offering pursuant to Section 4(2) of the
Securities  Act  of  1933.

On  May  17,  2004, a note payable of $200,000, as amended, was extended to July
19,  2004.  In  consideration of the extension, the Company has agreed to pay an
additional  $18,667  in  interest  and issue an additional 200,000 shares of the
Company's  restricted  common stock valued at $22,000 (based on the market price
on  the  date  of grant).  The Company recorded the value of the common stock to
interest  expense  in  May  2004.  As  of  June 30, 2004, the Company has repaid
$100,000.  The  principal balance due at June 30, 2004 is $100,000.  The Company
is  currently  in  discussions to restructure the terms of the note (see Item 6.
Management's  Discussion  and  Analysis or Plan of Operation - Short-term Debt).
The  issuance  was  an  isolated  transaction  not  involving  a public offering
pursuant  to  Section  4(2)  of  the  Securities  Act  of  1933.

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

The  following  discussion  contains certain forward-looking statements that are
subject  to  business  and  economic  risks and uncertainties, and the Company's
actual  results  could  differ materially from those forward-looking statements.
The  following  discussion  regarding  the  financial  statements of the Company
should  be  read in conjunction with the financial statements and notes thereto.

GENERAL  OVERVIEW

The  Company's  principal line of business is to provide long distance telephone
and  value-added  services for small and medium-sized businesses and residential
customers  throughout  the  United  States.  The  Company's strategy has been to
build  a  subscriber  base without committing capital or management resources to
construct  its  own  network  and  transmission  facilities.  This  strategy has
allowed  the  Company  to  add  customers  without  being  limited  by capacity,
geographic coverage, or configuration of any particular network that the Company
might  have  developed.

The  Company  provides  a  number  of Internet related services such as Internet
access  via  Dial-Up.  The  Company's  services are marketed nationwide, through
sales  affiliates,  affinity  groups, independent sales agents and its own sales
force.

As  stated,  the  Company provides a number of telecommunications, Internet, and
BPO services.  The Company's revenues consist of revenues from the sale of these
services.  Telecommunication  revenues  are  generated  when customers make long
distance  telephone  calls  from  their business or residential telephones or by
using  the  Company's  telephone calling cards.  Proceeds from prepaid telephone
calling  cards  are  recorded as deferred revenues when the cash is received and
recognized  as  revenue  as  the telephone service is utilized.  The reserve for
deferred  revenues  is  carried  on  the  balance sheet as an accrued liability.
Internet  related services are typically billed at a flat rate and are billed in
advance.  Revenues  are  recognized in the period earned.  BPO services revenues
are  billed  each  month  based  on a client contract that provides for either a
dedicated  or  per  minute  rate  as  the  services  are  rendered.

Cost  of  sales  consists  of  telecommunications service costs and the costs of
providing  Internet  access, and BPO services.  Telecommunications service costs
paid  by  the Company are based on the Company's customers' long distance usage.
The  Company pays its carriers based on the type of call, time of call, duration
of  call,  the terminating telephone number, and terms of the Company's contract
in  effect at the time of the call.  BPO service cost of sales consists of labor
and  its  related  support  costs  directly  associated with a service contract.
General  and administrative expenses consist of the cost of customer acquisition
(including  costs paid for third-party verification), customer service, billing,
cost  of  information  systems  and  personnel required to support the Company's
operations  and  growth.

The  Company,  depending  on  the  extent  of  its future growth, may experience
significant  strain  on its management, personnel, and information systems.  The
Company  will  need  to  implement  and  improve  operational,  financial,  and
management  information  systems.  In  addition, the Company is implementing new
information  systems  that  will provide better record keeping, customer service
and  billing.  However,  there can be no assurance that the Company's management
resources  or information systems will be sufficient to manage any future growth
in  the  Company's  business,  and  the  failure  to do so could have a material
adverse  effect  on  the Company's business, results of operations and financial
condition.

RESULTS  OF  OPERATIONS  OF  THE  COMPANY

FISCAL  YEAR  ENDED  JUNE  30,  2004 COMPARED TO FISCAL YEAR ENDED JUNE 30, 2003

REVENUES - Revenues decreased by $4,190,070 or 27.7% to $10,957,588 for the year
ended  June  30,  2004  from  $15,147,658 for the year ended June 30, 2003.  The
decrease  was  due  primarily  to  a  decrease in telecommunications revenues of
$4,150,947  and a decrease in Internet revenues of $117,767, offset partially by
the  increase  in BPO revenues of $78,644.  As of June 30, 2004, the Company had
approximately  80,397 long distance customers and 5,666 internet customers, with
usage  of  long  distance  services of approximately 156,772,000 minutes for the
year  ended  June  30, 2004 as compared with approximately 102,041 long distance
customers  and 5,965 internet customers, with usage of long distance services of
approximately  219,237,000  minutes  for  the  year  ended  June  30,  2003.

Management  believes  that  the  reduction  in customer counts and minutes are a
result  of  several  recent competitive pressures including: the increase in the
number  of  low-priced  long  distance  calling  plans  currently available, the
expansion  of  bundled  local/long  distance  services offered by Local Exchange
Carriers  and/or  Competitive  Local  Exchange  Carriers,  and  the migration of
traditional  long  distance  usage to cellular long distance and internet usage.
In  an  effort to increase revenue, the Company has initiated affinity marketing
relationships  with  various  marketing  organizations  and  charitable  groups.

The  Company  is  also  continuing  its  efforts in becoming a Competitive Local
Exchange Carrier ("CLEC").  The Company has recently obtained licenses in twenty
states  including  Florida, Georgia, New York, New Jersey, North Carolina, Ohio,
and  Texas to operate as a CLEC.  The Company recently began offering service in
Florida and is in the process of initiating local exchange service in several of
these states and expects to begin providing service in those areas by the end of
2004.  Future  plans  are  to provide local services in most of the major states
throughout  the  country.  The  Company  anticipates  that  by  providing  CLEC
services,  it will be able to offer its own bundled services and thereby reverse
the  recent  attrition  of  its  telecommunications  customer  base.

Additionally,  the  Company  is  continuing  to  focus on developing third party
revenue  for  its  Perfexa subsidiary.  During the year ended June 30, 2004, the
Company  began widespread marketing of its BPO services to third parties and has
begun securing client contracts for these services.  For the year ended June 30,
2004,  Perfexa  generated  third-party  revenues  of  $78,644.  Perfexa  had  no
revenues  in  prior  years.

COST OF SALES - Cost of sales decreased by $2,574,213 or 34.7% to $4,836,377 for
the  year  ended June 30, 2004 from $7,410,590 for the year ended June 30, 2003.
The  decrease was primarily due to the decrease in carrier costs associated with
decreased  telecommunications  service  revenues  of $1,969,998 and by decreased
costs  associated  with  a  20%  reduction  in the Company's transportation cost
negotiated  in  November  2003 of $572,972 for the year ended June 30, 2004.  In
addition,  the costs associated with Internet services decreased $90,482 for the
year  ended  June  30,  2004 in proportion with the Company's decreased Internet
services  revenue, and the costs associated with BPO services increased $59,239.
As  a  percentage  of  revenue, cost of sales was 44.1% and 48.9% resulting in a
gross  margin  of  55.9%  and  51.1% for the years ended June 30, 2004 and 2003,
respectively.

                                      -14-
<PAGE>

For  the year ended June 30, 2004, Perfexa incurred third-party cost of sales of
$59,239.  Perfexa  had  no  cost  of  sales  in  prior  years.

OPERATING  EXPENSES  -  Operating  expenses  decreased by $2,322,752 or 30.0% to
$5,419,914for  the  year  ended June 30, 2004 from $7,742,666 for the year ended
June  30,  2003.  The Company has continued to streamline operations in the year
ended  June 30, 2004, thereby decreasing operating expenses when compared to the
year  ended  June  30,  2003,  primarily  due to the Company's shift of customer
service  and  information  technology  development  to  its  Perfexa subsidiary.

Operating  expenses,  individually  net  of  Perfexa related costs, for the year
ended  June  30,  2004  were  comprised  primarily  of $1,519,161 in payroll and
related  expenses  paid to employees; billing related costs of $709,824; rent of
$189,505;  penalties  and  interest in connection with past due payroll taxes of
prior  periods of $135,000; bad debt of $159,467; sales commissions of $132,770;
depreciation  expense  of $125,083; amortization of previously issued options to
employees  valued at $110,250; and $7,580 of other operating expenses, primarily
investor  relations,  internal  telephone  usage,  consulting services, costs of
third  party  verification  for newly acquired customers, internet support costs
and  audit and legal costs, offset primarily by corporate expense allocations of
$316,560.

Perfexa  related  operating  expenses  for  the  year  ended  June 30, 2004 were
comprised  primarily  of  $1,338,257  in  payroll  and  related expenses paid to
employees;  rent  of $244,449; depreciation expense of $172,973; and $575,595 of
other  operating  expenses, primarily corporate expense allocations of $316,560,
and  office  maintenance  and  supplies.

Operating  expenses,  individually  net  of  Perfexa related costs, for the year
ended  June  30,  2003  were  comprised  primarily  of $3,433,528 in payroll and
related  expenses  paid to employees; billing related costs of $935,486; rent of
$313,661;  bad  debt  of  $112,770;  sales commissions of $149,814; depreciation
expense  of  $132,257;  amortization  of  previously issued options to employees
valued at $113,925; and $732,346 of other operating expenses, primarily investor
relations,  internal  telephone usage, consulting services, costs of third party
verification  for newly acquired customers, internet support costs and audit and
legal  costs.

Perfexa  related  start-up  operating  expenses for the year ended June 30, 2003
were  comprised  primarily  of  $371,092 in payroll and related expenses paid to
employees;  rent  of $94,404; depreciation expense of $16,991; and $1,336,392 of
other  operating  expenses, primarily corporate expense allocations of $870,302,
and  office  maintenance  and  supplies.

INTEREST  EXPENSE  -  Net interest expense increased  by $891,766  to $1,262,697
for the year ended June 30, 2004 from $370,931 for the year ended June 30, 2003.
The  increase  was  primarily  due to the interest owed and amortization of debt
discount  on notes payable, and the interest owed on outstanding balances due to
WorldCom,  including  accrued interest of approximately $399,000 owed on default
of  WorldCom  note.

NET  LOSS  -  Net loss increased $523,161 to $552,267, or $(0.03) loss per share
for  the  year  ended  June  30,  2004, from a net loss of $29,106, or $0.00 per
share,  for  the  year  ended June 30, 2003, respectively.  The net loss for the
year  ended June 30, 2004, included a one-time charge of $135,000 resulting from
an increased accrual on penalties and interest on the Company's past due payroll
tax  liability.  The  net  loss  for  the  year  ended  June 30, 2003 included a
one-time  credit of $332,018 resulting from waived penalties and interest on the
Company's  past  due payroll tax liability, offset partially by Perfexa start-up
costs  of  $949,509.

ASSETS  AND LIABILITIES - Assets decreased by $234,240 to $1,584,486 at June 30,
2004  from $1,818,726 at June 30, 2003. The decrease was due to net decreases in
accounts  receivables  of  $258,339,  prepaid  expenses  of $19,930, deposits of
$19,218,  and  property  and  equipment  of $10,471; net of increases in cash of
$73,072,  and  other  assets  of  $646.  Liabilities  increased  by  $11,404  to
$8,150,781  at  June 30, 2004 from $8,139,377 at June 30, 2003. The increase was
due to increases in accounts payable and accrued expenses of $468,303, primarily
for  amounts  owed to WorldCom (associated with customer usage), deferred income
of  $1,315,  and  obligations  under  capital  lease of $29,733 primarily due to
purchase  of  equipment,  net  of  decreases  in notes payable of $299,475, and,
accrued payroll and payroll related liabilities of $188,472, associated with the
decrease  in  telecommunications service costs, Internet service provider access
fees  and  customer service operations as a result of the decrease in customers.

                                      -15-
<PAGE>

STOCKHOLDERS'  DEFICIT  -  Stockholders'  deficit  increased  by  $(285,442)  to
$6,678,409  at June 30, 2004 from $6,392,967 at June 30, 2003.  The increase was
attributable  to  a net loss of $552,267 for the year ended June 30, 2004, and a
cumulative  translation  adjustment of $58,146; net of decreases in amortization
of compensation expense related to previously issued options to employees in the
amount  of  $110,251,  the  fair  market value of stock issued pursuant to notes
payable  of  $149,695, the fair market value of warrants granted to a consultant
for  services  rendered  of  $65,000,  and  the  exercise of stock options by an
officer  of  $25.

Change  in  Primary  Supplier

As  previously  reported,  on  July  7, 2004 the Company initiated a system wide
conversion  of  its  underlying  long  distance provider from MCI to Sprint (the
"Conversion").  As  a consequence of the Conversion, a not yet determined number
of  the  Company's  long distance customers have either left the Company or were
not  successfully  converted  due to technical issues.  As a result, the Company
has  experienced  an  approximate  16%  reduction  in  its  call  volumes  and
corresponding  revenues.  The  Company  is attempting to resolve all outstanding
technical  issues  relating  to  the  Conversion and will continue to market its
services  in  order  to  re-acquire  or  add  new  customers.  There  can  be no
assurances that the Company will be able to re-acquire or add sufficient numbers
of  customers  to  compensate  for  the  reduction  incurred  by the Conversion.

Additionally, the cost of Sprint's services to the Company are higher than those
of  MCI's  and  will  affect the Company's future gross margins.  The Company is
attempting  to  renegotiate  more  favorable  pricing  terms  with  Sprint.
Alternatively  the  Company  is re-examining the rates it charges its customers.
There  can  be  no  assurances  that  the Company will be able to negotiate more
favorable  rates  with  Sprint.  Also,  an  increase  in  the Company's rates to
end-users  may  have a detrimental effect in customer acquisition and retention.

LIQUIDITY  AND  CAPITAL  RESOURCES
GENERAL - During fiscal year 2004, the Company generated sufficient cash flow to
support daily operations.  However, the Company does not have sufficient cash to
fund  its outstanding debts and contingent liabilities.  Over the past year, the
Company  has  relied  upon  short-term financings to meet its cash requirements.
Currently,  the  Company  has  short-term debt of approximately $5,868,597.  The
Company  will  need  to  either restructure this debt on more favorable terms or
increase revenues in order to meet these obligations.  Additionally, as a result
of  the Conversion, the Company has experienced a 16% decline in revenues.  As a
result,  the  Company  may  not have sufficient cash flow to fully support daily
operations and will need to increase revenues and customers or acquire alternate
financing.

CASH  FLOWS  FROM  OPERATIONS  ACTIVITIES  -  Net  cash  provided  by  operating
activities  of  $830,412  in fiscal year 2004 was primarily due to a net loss of
$552,267;  offset  partially  by  changes  in  operating assets and liabilities,
principally  increases  in  accounts  payable  and accrued expenses of $472,439,
accounts  receivable  of $98,872, deferred income of $1,315, prepaid expenses of
$27,862,  deposits  and  other  assets  of  $10,580, offset partially by accrued
payroll  and related taxes of $188,472, and minority interest of $33,278; offset
partially  by the amortization of previously issued options vesting to employees
in  the  current  period  of  $110,251; the fair market value of stock issued in
connection  with  a  note  payable  of  $149,695;  depreciation and amortization
expense  of $298,056; amortization of debt discount of $199,500; the increase in
bad  debt  expense  related  to accounts receivable of $159,467, the fair market
value  of warrants granted to a consultant for services rendered of $65,000, and
the  loss  on  the  disposal  of  assets  of  $11,392.

CASH  FLOWS FROM INVESTING ACTIVITIES - Net cash used in investing activities of
$171,425  in  fiscal  year  2004  funded  purchases  of  property and equipment.

CASH  FLOWS FROM FINANCING ACTIVITIES - Net cash used in financing activities of
$527,769  in fiscal year 2004 was primarily due to principal repayments on notes
payable  of $1,893,330, and principal repayments under capital lease obligations
of  $8,805,  offset  primarily by net borrowings on notes payable of $1,305,341,
net  proceeds  from  the  issuance  of stock of subsidiary totaling $69,000, and
proceeds  from  the  exercise  of  stock  options  by  an  officer  of  $25.

FINANCING  -  In October 2003, Perfexa issued 15,000 shares of restricted common
stock,  resulting  in  net  proceeds  to  Perfexa of $15,000, to an "accredited"
investor  at  a  price  of  $1.00  per  share.

On  June 3, 2003, Perfexa-U.S. initiated a private placement ("PPM") offering of
2,000,000  shares  of its restricted common stock at a price of $1.00 per share.
Through  September  30,  2003,  Perfexa  had sold 60,000 shares pursuant to this
offering,  resulting  net  proceeds  of $54,000 which were transferred to GTC as
partial  repayment  of  accrued advances. The PPM closed August 31, 2003 with no
additional  investments.

INTERCOMPANY  ACTIVITIES  -  Since  inception,  Perfexa-U.S.  and  its  Indian
subsidiary  Perfexa-India  have  relied  upon  its parent, GTC Telecom Corp. for
funding  and  for  administrative  services  required  in the development of its
business  plan.  Perfexa is obligated to reimburse GTC for such advances and its
share  of  such  expenses.  As  of  June  30,  2004,  the  Company  has advanced
Perfexa-U.S.  $3,314,957  in  cash  and equipment, of which $661,504 was for the
purchase  of  equipment and $2,653,453 for operating expenses.  In addition, the
Company  has  allocated  $2,080,503  of  shared  administrative  expenses  to
Perfexa-U.S.  Cash  and  equipment advances accrue interest of 10% per annum and
are  due upon demand.  Shared administrative expenses accrue no interest and are
also  due  upon  demand.

                                      -16-
<PAGE>

Pursuant  to  a  Master  Services  Agreement between Perfexa-US and GTC, Perfexa
provides call center and IT development services to GTC on a cost plus 5% basis.
As  of  June 30, 2004, Perfexa-U.S. has billed GTC $1,279,343 for such services.

As of June 30, 2004, Perfexa-U.S. owes GTC $3,954,217, net of $161,900 repaid by
Perfexa-U.S.  from  funds  raised  and $1,279,343 in amounts billed for services
rendered.

SHORT-TERM  DEBT  -  On  February  12,  2004,  the Company borrowed $450,000 for
working  capital  purposes  from  an  unrelated  third party.  The note is to be
repaid plus interest of $48,000 upon maturity at June 11, 2004.  In the event of
default,  the  investor  shall  be  entitled  to 100,000 shares of the Company's
restricted  common  stock.  In  addition,  the Company issued to the third party
150,000 shares of the Company's restricted common stock valued at $11,688 (based
on  the  market price on the date of grant and the related pro-rata value of the
common  stock).  The  Company recorded the value of the common stock to interest
expense in February 2004.  On May 5, 2004, the note, as amended, was extended to
July 15, 2004.  In consideration of the extension, the Company has agreed to pay
an  additional $13,280 in interest and issue an additional 300,000 shares of the
Company's  restricted  common stock valued at $45,000 (based on the market price
on  the  date  of grant).  The Company recorded the value of the common stock to
interest  expense  in  May  2004.

On  November 5, 2003, the Company borrowed $350,000 for working capital purposes
from  an  unrelated  third  party.  The  note  was to be repaid plus interest of
$37,333  upon  maturity at March 5, 2004.  In the event of default, the investor
shall  be  entitled  to 100,000 shares of the Company's restricted common stock.
In  addition,  the  Company  issued  to  the  third  party  20,000 shares of the
Company's restricted common stock valued at $2,581 (based on the market price on
the  date  of  grant  and  the related pro-rata value of the common stock).  The
Company  recorded  the value of the common stock to interest expense in November
2003.  On  March  5,  2004, the Company defaulted on the note and issued 100,000
shares  of  the Company's restricted common stock valued at $8,000 (based on the
market  price  on  the date of issuance) in accordance with the default terms of
the  note.  The  note  was renegotiated and $75,000 of the note plus interest of
$37,333  were repaid.  The new note of $275,000 is to be repaid plus interest of
$14,667  upon  maturity  at  May 5, 2004.  In the event of default, the investor
shall  be  entitled  to 100,000 shares of the Company's restricted common stock.
In  addition,  the  Company  issued  to  the  third  party 275,000 shares of the
Company's  restricted  common stock valued at $20,370 (based on the market price
on  the  date of grant and the related pro-rata value of the common stock).  The
Company  recorded  the  value  of  the common stock to interest expense in March
2004.  On  May 5, 2004, the note, as amended, was extended to July 15, 2004.  In
consideration  of  the  extension,  the  Company has agreed to pay an additional
$15,448  in  interest  and  issue  an additional 100,000 shares of the Company's
restricted common stock valued at $15,000 (based on the market price on the date
of  grant).  The  Company  recorded  the  value  of the common stock to interest
expense  in  May  2004.

On August 18, 2004, these two (2) notes, as amended, were combined into one note
totaling  $816,395,  incorporating all principal and interest owed, and extended
to November 30, 2004.  In consideration of the extension, the Company has agreed
to  pay an additional $73,350 in interest and issue an additional 250,000 shares
of  the Company's restricted common stock valued at $17,133 (based on the market
price  on  the  date of grant).  The Company will record the value of the common
stock  to  interest  expense  in  August  2004.

On  June 8, 2004, the Company borrowed $50,000 for working capital purposes from
an unrelated third party.  The note is to be repaid plus interest of $7,500 upon
maturity  at  September 7, 2004.  In the event of default, the investor shall be
entitled  to  accelerate  the  repayment  of the note.  In addition, the Company
issued to the third party 50,000 shares of the Company's restricted common stock
valued at $4,128 (based on the market price on the date of grant and the related
pro-rata  value  of  the  common  stock).  The Company recorded the value of the
common  stock  to  interest expense in June 2004.  The Company is currently past
due  on  this  note  and is in discussions to restructure the terms of the note.

                                      -17-
<PAGE>

On  December 9, 2003, the Company borrowed $200,000 for working capital purposes
from  an  unrelated  third  party.  The  note  is  to be repaid plus interest of
$21,333  upon  maturity at April 8, 2004.  In the event of default, the investor
shall  be  entitled  to 100,000 shares of the Company's restricted common stock.
In  addition,  the  Company  issued  to  the  third  party  40,000 shares of the
Company's restricted common stock valued at $4,305 (based on the market price on
the  date  of  grant  and  the related pro-rata value of the common stock).  The
Company  recorded  the value of the common stock to interest expense in December
2003.  On  May 17, 2004, the note, as amended, was extended to July 19, 2004. In
consideration  of  the  extension,  the  Company has agreed to pay an additional
$18,667  in  interest  and  issue  an additional 200,000 shares of the Company's
restricted common stock valued at $22,000 (based on the market price on the date
of  grant).  The  Company  recorded  the  value  of the common stock to interest
expense in May 2004.  As of June 30, 2004, the Company has repaid $100,000.  The
principal  balance due at June 30, 2004 is $100,000.  The note is in default and
the  Company  is  currently in discussions to restructure the terms of the note.

On  October  9, 2003, the Company borrowed $300,000 for working capital purposes
from  an  unrelated  third  party.  The note was repaid plus interest of $32,000
upon maturity at February 17, 2004.  In the event of default, the investor shall
be  entitled  to  100,000  shares  of the Company's restricted common stock.  In
addition,  the  Company issued to the third party 60,000 shares of the Company's
restricted  common stock valued at $6,458 (based on the market price on the date
of  grant  and  the  related  pro-rata  value of the common stock).  The Company
recorded  the  value  of  the  common stock to interest expense in October 2003.

In  connection  with  the  notes  payable  discussed above, the Company incurred
finder's  fees  in  the  amount of approximately $202,000.  As a result, for the
year  ended June 30, 2004, the Company recorded a debt discount of approximately
$202,000  to  interest  expense  in  the accompanying consolidated statements of
operations  and  comprehensive  loss.

On  October  2,  2002,  and amended on April 1, 2004, the Company renegotiated a
previous note payable (the "Previous Note") due to an unrelated third party into
a  new  note  payable  (the  "New  Note").  The Previous Note had an outstanding
balance of $45,000 on the date of renegotiation.  The New Note, as amended, pays
simple  interest  of 12% per annum with principal and interest due upon maturity
at  May  21,  2004.  In  addition,  the Company issued to the third party 45,000
shares  of  the Company's restricted common stock valued at $4,821 (based on the
market  price  on the date of grant and the related pro-rata value of the common
stock).  The  Company recorded the value of the common stock to interest expense
in  April  2004.  On  July 21, 2004, the note, as amended, calls for payments of
$20,000 due on July 21, 2004, $15,000 due on August 21, 2004, and $10,000 due on
September  21,  2004.  In consideration of the extension, the Company has agreed
to  issue  an  additional 45,000 shares of the Company's restricted common stock
valued  at $2,944 (based on the market price on the date of grant).  The Company
will  record the value of the common stock to interest expense in July 2004.  As
of the date of this filing, the Company has not made the August 21 and September
21  payments pursuant to the extension.  The Company is currently in discussions
to  restructure  the  terms  of  the  note.

On  April  15,  2004, the Company borrowed $25,000, bearing no interest, from an
employee  of the Company for working capital purposes.  The borrowing was repaid
on  April  26,  2004.  In  addition,  the  Company issued to the employee 25,000
shares  of  its  restricted  common  stock valued at $2,273 (based on the market
price  on the date of grant and the related pro-rata value of the common stock).
The  Company amortized the value of the related common stock to interest expense
in  April  2004.

In  September  2003,  the  Company borrowed $25,000 for working capital purposes
from  a  third  party.  The  note  pays  simple  interest  of  8% per annum with
principal  and  interest due upon maturity at December 3, 2003.  In the event of
default, the investor shall be entitled to accelerate the repayment of the note.
In  addition,  the  Company  issued  to  the  third  party  25,000 shares of the
Company's restricted common stock valued at $3,070 (based on the market price on
the  date  of  grant  and  the related pro-rata value of the common stock).  The
Company  recorded the value of the common stock to interest expense in September
2003.  On  December  3,  2003,  the  note  plus  interest  of  $504 were repaid.

In  April  2003,  Perfexa-U.S.  issued  a  short-term  convertible  note  with a
principal  amount  of  $125,000  to an unrelated third party investor.  The note
provides  for  simple  interest of 10% per annum with principal and interest due
upon maturity at July 31, 2003.  Pursuant to the terms of the note, the note may
be  converted,  at  the  election of the noteholder prior to the maturity of the
note, into shares of common stock of Perfexa-U.S. at the rate of $0.50 per share
(estimated to be the fair market value on the date of issuance, based on current
third  party  transaction).  In  August 2003, the Company repaid $100,000 of the
principal  balance  and  issued  8,152  shares of Perfexa-U.S. restricted common
stock valued at $4,076 (based on the terms of the note) in lieu of an equivalent
amount  of  interest  due on the note.  In the three month period ended December
31,  2003,  the  Company  repaid the remaining $25,000 of the principal balance.

                                      -18-
<PAGE>

The  Company  from time to time borrows funds from the Company's Chief Executive
Officer  ("CEO")  for  working capital purposes.  On April 15, 2004, the Company
borrowed  $12,000  from its CEO.  As of the date of this filing, the Company has
repaid  the  amount  borrowed.  The remaining amounts accrue no interest and are
payable  on  demand.

On  September  30, 2002, and amended on May 30, 2003, the Company renegotiated a
previous note payable due to MCI into a new note payable (the "New Note"). As of
June 30, 2004, the New Note has an outstanding balance of $4,925,437. On July 1,
2004,  the  Company received notice from MCI that it was in default of the terms
of  the above note as well as the Telecommunications Services Agreement and Data
Services  Agreement  between  MCI  and  GTC.  According  to MCI, GTC has a total
balance  due  MCI  of  approximately  $5,679,329.  The  Company is attempting to
resolve  its  outstanding  balance  and  the amounts past due with MCI. However,
there can be no guarantees that the Company will be successful in its efforts to
reach an amicable resolution with MCI regarding the amounts past due. Failure to
successfully restructure the amounts due MCI will have a material adverse effect
on  the  Company's  operations.

The  Company  maintains  a  revolving  line  of credit of $20,000 to finance the
purchase  of  computer equipment.  The revolving line of credit provides for the
Company  to  make  monthly  payments  of  $451,  including interest at a rate of
12.99%.  The  total  outstanding  balance  on  the  revolving line of credit was
$14,139  and  is  included  in  notes  payable  in the accompanying consolidated
balance  sheet at June 30, 2004.  As of the date of this report, the Company has
made  all  payments  as  required  in  the  revolving  line  of  credit.

CONTINGENT LIABILITIES - At June 30, 2004, the Company has accrued approximately
$28,000  related  to  penalties and interest in connection with past due payroll
taxes  of prior periods.  This accrual was repaid in July 2004.  The Company has
verbal  confirmation  from  the  IRS  that  this matter has been settled with no
additional  amounts  owed  to  the  IRS.

In  September  2001,  the Company entered into a common stock purchase agreement
("Agreement")  with  Bluefire Capital, Inc. ("Bluefire"). The Agreement entitles
the  Company to issue and sell common stock to Bluefire in the form of draws for
up  to  an  aggregate  of $20,000,000, as defined in the Agreement, from time to
time  during  a  three  year  period  beginning  on the date of the filing of an
effective  registration  statement.  On  November  20, 2001, the Company filed a
registration statement under the Securities Act with the Securities and Exchange
Commission  ("SEC")  for  15,000,000  shares  available to be issued to Bluefire
under  the  Agreement should the Company choose to draw down on these shares and
on January 23, 2002, the registration statement was declared effective. Pursuant
to  the  Agreement,  the  Company must draw a minimum of $500,000 by January 23,
2005,  or  the Company shall be required to pay liquidated damages, in an amount
up  to $250,000, as defined in the Agreement. As of the date of this filing, the
Company  has  not  drawn  under  this  Agreement.

PERFEXA  SOLUTIONS

In  its  continuing  efforts  to reduce operating expenses as well as locate new
revenue  opportunities,  the  Company in 2002 began exploring various options to
reduce its labor and overhead costs as well as explore new markets.  The Company
determined  that by developing a call center and IT development center in India,
the  Company  could  take  advantage  of India's highly skilled but vastly lower
labor  and  operating  costs thereby allowing for the reduction of a significant
portion of the Company's operating overhead.  Despite significant start-up costs
associated  with the development of its Perfexa subsidiary, the Company believes
that  its Perfexa operations will result in significant savings for the Company.
Additionally,  the  Company's  Perfexa  operations  were  designed  to  provide
additional  revenue  opportunities  for  the  Company  in  the  Business Process
Outsourcing  Services  market  (see below).  On September 1, 2002, the Company's
Board  of Directors authorized the development of the Perfexa Solutions business
plan.  As  a  result,  on September 13, 2002, GTC's wholly owned subsidiary, GTC
Wireless,  Inc.,  which was then inactive, amended its Articles of Incorporation
changing  its name to Perfexa Solutions, Inc. ("Perfexa-U.S.").  On September 3,
2002,  a  Memorandum  and  Articles  of  Association  was  filed pursuant to the
Companies  Act,  1956  of  India,  creating  Perfexa  Solutions  Pvt.  Ltd
("Perfexa-India").  Perfexa-India  is a subsidiary of Perfexa-U.S.  Perfexa-U.S.
and  Perfexa-India  will  be collectively referred to in this report as Perfexa.
In  April  2003, Perfexa completed the construction of its first call center and
IT  development Center in New Delhi, India. This facility consists of a 100 seat
call  center  and  25 seat information technology development and administrative
center.

                                      -19-
<PAGE>

The  Company's  Perfexa  operations  provide  inbound  call  center  management
solutions  with  future  plans  for  outbound  call center management solutions,
Information  Technology  ("IT")  management  solutions  and  business operations
management  solutions.  Perfexa's  initial  solution  is  to:  1)  Capitalize on
India's  highly  educated,  English  speaking workforce; 2) utilize the inherent
cost  and  labor  availability advantages within India; and 3) take advantage of
the  low  employee  turnover  rates  in  India,  which  will  enable  Perfexa to
capitalize  on  its  significant  investment  in  ongoing  employee training and
development programs which will dramatically improve the quality of the customer
care  experience.  Future  plans  are to expand into other low cost countries as
business  develops.

Perfexa  currently  provides  customer  service  for the Company's approximately
86,000  telecommunication  and  Internet  users.  Perfexa's  IT  group currently
develops IT solutions for GTC's customer care needs and the integration of GTC's
customer  care  system  with  those  of Perfexa's New Delhi Center.  Perfexa has
begun offering its services to third parties and plans to focus on marketing its
outsourced  call  center  services  to U.S. based companies.  Perfexa's IT group
will work initially to ensure the integration of Perfexa's systems with those of
Perfexa's  clients.  Subsequently, the IT group will develop customized software
solutions  for  third  parties.

ACQUISITION

On  April 23, 2004, the Company entered into an agreement for the acquisition of
Telspan,  Inc.,  a  California  corporation  ("Telspan").  Pursuant  to  the
Reorganization  and  Stock  Purchase  Agreement  (the  "Acquisition  Agreement")
entered  into  between  the  Company,  Telspan,  Inc.  and its shareholders, the
Company  agreed  to  acquire 100% of the outstanding capital stock of Telspan in
exchange  for  that  number  of shares of the Company's common stock which would
equate to 84% of the outstanding capital stock of the Company on a fully diluted
basis following the acquisition.  Closing of the acquisition is conditioned upon
various  events,  including  the approval of the Company's stockholders and upon
Telspan's  successful  acquisition  of certain telecommunications assets.  As of
the  date  of  this  filing,  Telspan  has  not completed the acquisition of the
telecommunications  assets.  There can be no assurances that Telspan Acquisition
will  be  successfully  completed.

In  a  related  agreement,  the  Company  on  April  23,  2004  agreed to sell a
controlling  interest in its Perfexa subsidiary to the shareholders of Infospan,
Inc.,  a  California  company commonly controlled by some of the shareholders of
TelSpan.  Closing  of  the  sale  of the controlling interest is conditioned, in
part,  upon the approval of the Company's stockholders as well as the generation
of  certain  amounts  of  business  for Perfexa.  As of the date of this filing,
these  conditions  have  not  been  completed  and  therefore,  there  can be no
assurances  that  the  Infospan  transaction  will  be  successfully  completed.

CAPITAL  EXPENDITURES

The  Company  expects to purchase approximately $200,000 of additional equipment
on  top  of  the  purchases already made in connection with the expansion of its
business.  In  addition,  as  previously  discussed,  the  Company  expanded its
operations  into  the  Republic  of  India  through its Perfexa subsidiary.  The
Company  expects  to continue funding this expansion with an additional $200,000
to  Perfexa  primarily  for  leasehold  improvements,  equipment  (computer  and
telephone), furniture and fixtures, and deposits.  Because the Company presently
does  not  have  the  capital for such expenditures, it will have to raise these
funds.  (See  Financing  in  this  section).

2001  STOCK  INCENTIVE  PLAN

During  the  fiscal  year  ended  June  30,  2004, the Company issued options to
certain employees to purchase an aggregate of 56,000 shares of common stock at a
weighted  average  exercise  price  of  $0.12 per share pursuant to the SIP Plan
(each issuance priced at the estimated fair market value of the Company's common
stock  on  the  date  of  grant).  As  of  the date of this filing, 50,000 these
options  have  been  forfeited.  The remaining options vest over five years from
the  date  of  grant  and  are  exercisable  through  December  2013.

During  the year ended June 30, 2004, the Company issued options pursuant to the
SIP Plan to certain board of directors to purchase an aggregate of 30,000 shares
of  common  stock, at a weighted average exercise price of $0.12 per share (each
issuance priced at the estimated fair market value of the Company's common stock
on  the  date of grant).  As of the date of this filing, these options have been
forfeited.

                                      -20-
<PAGE>

OFF-BALANCE  SHEET  ARRANGEMENTS

The  Company  does  not  currently  have  any  off-balance  sheet  arrangements.

SUBSIDIARIES

The  Company has formed four subsidiaries, of which three of which are currently
inactive  (see  below),  that  offer  different products and services.  They are
managed  separately  because  each business requires different technology and/or
marketing  strategies.

The  four  subsidiaries  are:  CallingPlanet.com, Inc., ecallingcards.com, Inc.,
Curbside  Communications,  Inc.,  and  Perfexa  Solutions,  Inc.

CallingPlanet.com,  Inc. was set up to offer international calling using a PC to
phone  connection.  It  is  currently  inactive.  ecallingcards.com, Inc. offers
prepaid  calling  cards  purchased  over  the  internet, currently inactive, and
Curbside  Communications,  Inc.,  currently inactive, has been set up for future
strategic  purposes  which  the  Company  is currently in the planning process..
Perfexa  Solutions,  Inc.  offers  business  process  outsourcing  services.

GOING  CONCERN

The  Company's  independent  certified  public  accountants have stated in their
report  included  in  this  Form 10-KSB, that the Company has incurred operating
losses  in  the  last two years, has a working capital deficit and a significant
stockholders'  deficit.  These  conditions  raise  substantial  doubt  about the
Company's  ability  to  continue  as  a  going  concern.

INFLATION
Management  believes  that  inflation  has  not  had  a  material  effect on the
Company's  results  of  operations.

CRITICAL  ACCOUNTING  POLICIES

The  preparation  of  financial statements and related disclosures in conformity
with  accounting  principles  generally accepted in the United States of America
requires management to make judgments, assumptions and estimates that affect the
amounts  reported  in  the  Company's  consolidated financial statements and the
accompanying  notes.  The  amounts  of  assets  and  liabilities reported on our
balance  sheet and the amounts of revenues and expenses reported for each of our
fiscal  periods  are  affected by estimates and assumptions, which are used for,
but  not  limited  to,  the  accounting  for  revenue recognition, allowance for
doubtful  accounts,  deferred  tax  asset valuation allowances, and valuation of
securities,  options,  and  warrants  issued.  Actual  results could differ from
these  estimates.  The  following critical accounting policies are significantly
affected  by judgments, assumptions and estimates used in the preparation of the
financial  statements:

USE  OF  ESTIMATES  - The preparation of financial statements in conformity with
accounting  principles  generally  accepted  in  the  United  States  of America
requires  management  to make estimates and assumptions that affect the reported
amounts  of  assets  and  liabilities  and  disclosures of contingent assets and
liabilities  at  the  date  of the financial statements, as well as the reported
amounts  of  revenues and expenses during the reporting periods.  Actual results
could  differ  from  those  estimates.  Significant estimates made by management
are,  among  others, provisions for losses on accounts receivable, realizability
of  long-lived  assets,  estimates for deferred income tax asset valuations, and
valuation  estimates  for  securities,  options,  and  warrants  issued.

REVENUE AND RELATED COST RECOGNITION - The Company recognizes revenue during the
month  in  which  services  or  products  are  delivered,  as  follows:

                                      -21-
<PAGE>

TELECOMMUNICATIONS  RELATED  SERVICES

The  Company's  long  distance telecommunications service revenues are generated
when  customers  make  long  distance  telephone  calls  from  their business or
residential telephones or by using any of the Company's telephone calling cards.

Telecommunication  services  cost of sales consists of the cost of long distance
service  provided  by  Sprint  and  other  carriers.

INTERNET  RELATED  SERVICES

Internet  service  revenues  consist  of monthly fees charged to subscribers for
Internet  access  and  are  recognized in the period service access is provided.
Internet  service  cost  of  sales  consists  of  the cost of providing Internet
access.

BPO  SERVICES

BPO  service  revenues  consist  of  amounts billed each month based on a client
contract that provides for either a dedicated or per minute rate as the services
are  rendered.  BPO  service  cost  of  sales  consists of labor and its related
support  costs  directly  associated  with  a  service  contract.

In December 1999, the Securities and Exchange Commission issued Staff Accounting
Bulletin  101  ("SAB  101"),  "Revenue  Recognition,"  which  outlines the basic
criteria  that  must  be  met  to  recognize  revenue  and  provide guidance for
presentation  of  revenue  and  for  disclosure  related  to revenue recognition
policies  in  financial  statements  filed  with  the  Securities  and  Exchange
Commission.  Management  believes  the  Company's  revenue  recognition policies
conform  to  SAB  101.

STOCK-BASED  COMPENSATION  -  The  Company accounts for stock-based compensation
issued  to  employees  using  the  intrinsic value based method as prescribed by
Accounting  Principles  Board  Opinion  No. 25 ("APB 25"), "Accounting for Stock
Issued  to  Employees."  Under the intrinsic value based method, compensation is
the  excess,  if  any, of the fair value of the stock at the grant date or other
measurement  date  over  the  amount  an employee must pay to acquire the stock.
Compensation, if any, is recognized over the applicable service period, which is
usually  the  vesting  period.

SFAS  No.  123  ("SFAS 123"), "Accounting for Stock-Based Compensation" if fully
adopted,  changes the method of accounting for employee stock-based compensation
plans  to  the  fair  value  based method.  For stock options and warrants, fair
value  is  determined  using an option pricing model that takes into account the
stock  price  at  the  grant  date, the exercise price, the expected life of the
option  or  warrant  and  the  annual rate of quarterly dividends.  Compensation
expense,  if  any,  is  recognized  over the applicable service period, which is
usually  the  vesting  period.

SFAS No. 148 ("SFAS 148"), "Accounting for Stock-Based Compensation - Transition
and  Disclosure, an amendment of FASB Statement No. 123," was issued in December
2002  and is effective for fiscal years ending after December 15, 2002. SFAS 148
provides  alternative  methods  of transition for a voluntary change to the fair
value  method  of accounting for stock-based employee compensation. In addition,
this  Statement  amends  the  disclosure  requirements  of  SFAS  123 to require
prominent  disclosures in both annual and interim financial statements about the
method of accounting for stock-based employee compensation and the effect of the
method  used  on  reported  results.

The  adoption  of  the  accounting  methodology  of SFAS 123 is optional and the
Company  has  elected to continue accounting for stock-based compensation issued
to  employees  using  APB  25; however, pro forma disclosures, as if the Company
adopted  the  cost  recognition  requirements under SFAS 123, are required to be
presented.

TRANSLATION  OF  FOREIGN  CURRENCIES - GTC uses the U.S. dollar as it functional
currency  while  the  Company's  foreign subsidiary uses the Indian Rupee as its
functional  currency.  Assets  and  liabilities  of  foreign  subsidiaries  are
translated  into  U.S.  dollars  at  year-end  exchange  rates, and revenues and
expenses  are  translated  at  average rates prevailing during the year or other
period  presented.  In  accordance  with  SFAS  No.  52,  "Foreign  Currency
Translation",  net  exchange gains or losses resulting from such translation are
excluded  from  net loss, but are included in comprehensive loss and accumulated
in  a  separate  component  of  stockholders'  deficit.

                                      -22-
<PAGE>

ITEM  7.   FINANCIAL  STATEMENTS

The  consolidated  financial  statements and supplementary financial information
which  are  required  to  be  filed under this item are presented under Item 13.
Exhibits,  Financial  Statement  Schedules  and  Reports  on Form 10-KSB in this
document,  and  are  incorporated  herein  by  reference.

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

There  have been no disagreements between Squar, Milner, Reehl & Williamson, LLP
and  Management  of the type required to be reported under this Item 8 since the
date  of  their  engagement.

ITEM  8A.  CONTROLS  AND  PROCEDURES

Under  the  supervision  and  the participation of our management, including our
Chief  Executive  Officer  ("CEO")  and  the Chief Financial Officer ("CFO"), we
evaluated  the  effectiveness  of  the  design  and  operation of our disclosure
controls  and  procedures  (as  defined  in  Rule 13a-15(e) and 15d-15(e) of the
Exchange Act as of a date (the "Evaluation Date") within 90 days prior to filing
the Company's June 30, 2004 Form 10-KSB.  Based upon on that evaluation, our CEO
and  CFO  concluded  that,  as  of  June  30,  2004, our disclosure controls and
procedures  were  effective  in  timely  alerting  management  to  the  material
information  relating  to  us  (or our consolidated subsidiaries) required to be
included  in  our  periodic  filings  with  the SEC.  Based on their most recent
evaluation  as  of  the Evaluation Date, our CEO and the CFO have also concluded
that  there  are  no  significant  deficiencies  in  the  design or operation of
internal  controls  over financial reporting, at the reasonable assurance level,
which  are reasonably likely to adversely affect our ability to record, process,
summarize and report financial information, and such officers have identified no
material  weaknesses  in  our  internal  controls  over  financial  reporting.

CHANGES  IN  CONTROLS  AND  PROCEDURES

There  were  no significant changes made in our internal controls over financial
reporting  during  the quarter ended June 30, 2004 that have materially affected
or  are  reasonably  likely  to  materially  affect  these  controls.  Thus,  no
corrective  actions  with  regard  to  significant  deficiencies  or  material
weaknesses  were  necessary.

LIMITATIONS  ON  THE  EFFECTIVENESS  OF  INTERNAL  CONTROL

Our  Management, including the CEO, does not expect that our disclosure controls
and procedures or our internal control over financial reporting will necessarily
prevent  all  fraud  and material errors.  An internal control system, no matter
how  well  conceived  and  operated,  can provide only reasonable, not absolute,
assurance  that  the  objectives  of  the  control system are met.  Further, the
design  of  a  control  system  must  reflect  the  fact that there are resource
constraints,  and  the benefits of controls must be considered relative to their
costs.  Because  of the inherent limitations on all internal control systems, no
evaluation  of  controls  can provide absolute assurance that all control issues
and  instances  of  fraud, if any, within the Company have been detected.  These
inherent  limitations  include  the realities that judgements in decision-making
can be faulty, and that breakdowns can occur because of simple error or mistake.
Additionally,  controls  can  be  circumvented  by  the  individual acts of some
persons,  by  collusion  of two or more people, and/or by management override of
the control.  The design of any system of internal control is also based in part
upon certain assumptions about the likelihood of future events, and there can be
no  assurance  that  any design will succeed in achieving its stated goals under
all  potential  future  conditions.  Over  time,  controls may become inadequate
because  of  changes  in circumstances, and/or the degree of compliance with the
policies and procedures may deteriorate.  Because of the inherent limitations in
a  cost effective internal control system, financial reporting misstatements due
to  error  or  fraud  may  occur  and  not  be  detected  on  a  timely  basis.

ITEM  8B.  OTHER  INFORMATION

None












                                      -23-
<PAGE>
                                    PART III

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

The  following  table sets forth the names and ages of the current directors and
executive  officers of the Company, the principal offices and positions with the
Company  held  by  each  person  and  the  date such person became a director or
executive  officer  of  the  Company.  The executive officers of the Company are
appointed  annually  by  the  Board  of Directors.  The directors serve one-year
terms until their successors are elected.  The executive officers serve terms of
one year or until their death, resignation or removal by the Board of Directors.
There  are  no  family  relationships between any of the directors and executive
officers.  In  addition,  there  was no arrangement or understanding between any
executive officer and any other person pursuant to which any person was selected
as  an  executive  officer.

The  directors  and  executive  officers  of  the  Company  are  as  follows:

Name               Age     Position(s)
----               ---     -----------
Paul Sandhu        43      Chief Executive Officer and Chairman of the Board

Eric Clemons       33      Director, President, Secretary and Treasurer

Gerald DeCiccio    46      Director and Chief Financial Officer

PAUL  SANDHU  is currently the Company's Chief Executive Officer and Chairman of
the  Board  of  the  Company.  Mr.  Sandhu  has  been with the Company since its
inception.  Mr. Sandhu has over fourteen (14) years experience with start-up and
emerging growth companies.  Mr. Sandhu was Co-Founder, President and Co-Owner of
Maximum  Security ("Maximum"), a Security and surveillance company he started in
1992.  While  at  Maximum,  Mr.  Sandhu  actively  managed  a  staff of over 200
employees.  In  1997  Mr.  Sandhu  sold the business to his partner.  Mr. Sandhu
graduated  from  the University of Punjab in India with a degree in Engineering.

ERIC  CLEMONS  is currently the Company's President and a member of the Board of
Directors  of  the  Company.  Mr. Clemons has been with GTC since its inception.
Mr.  Clemons  has  over  twelve  (12)  years experience with sales and marketing
organizations.  Mr.  Clemons  most  recently was Vice President of Marketing for
Intelligent  Electronic  Communications  managing  a  staff  of  50  employees.

GERALD  DECICCIO  joined  the Company in January 1999 as Chief Financial Officer
and  a  member  of the Board of Directors of the Company.  Mr. DeCiccio has over
twenty years experience in the financial and accounting field.  Prior to joining
GTC,  Mr.  DeCiccio  was  the  Vice  President of Finance and Administration for
National  Telephone  &  Communications,  Inc.,  ("NT&C")  a  $150  million
inter-exchange  carrier  and  provider  of communications products and services.
While  at NT&C, Mr. DeCiccio managed NT&C's finance, accounting, human resources
and  legal  departments.  Between  1995 and 1997, Mr. DeCiccio was the Corporate
Controller for Newport Corporation, a $140 million multi-national manufacturer /
distributor  of  laser and optics products.  Prior to that, Mr. DeCiccio was the
Director  of Audit and Quality Systems for Sunrise Medical, Inc., a $750 million
multi-national manufacturer / distributor of health care products.  From 1980 to
1984, Mr. DeCiccio was a Supervising Senior Accountant for Ernst and Young.  Mr.
DeCiccio  received  his  Bachelor  of  Science  in  Accounting  from  Loma Linda
University,  and  his  Masters of Science in Finance and Systems Technology from
the  University  of  Southern  California.  Mr.  DeCiccio  is a Certified Public
Accountant  in  the  State  of  California.

                                      -24-
<PAGE>

COMPLIANCE  WITH  SECTION  16(A)  OF  THE  SECURITIES  EXCHANGE  ACT  OF  1934

Section  16(a)  of  the  Securities  Exchange Act of 1934 requires the Company's
directors  and executive officers and persons who own more than ten percent of a
registered class of the Company's equity securities to file with the SEC initial
reports  of  ownership  and  reports of changes in ownership of common stock and
other  equity  securities  of the Company.  Officers, directors and greater than
ten  percent shareholders are required by SEC regulations to furnish the Company
with  copies  of  all Section 16(a) forms they file. To the Company's knowledge,
based  solely  on  the review of copies of such reports furnished to the Company
during  the  year  ended  June  30,  2004, all Section 16(a) filing requirements
applicable  to  the  Company's  officers, directors and greater than ten percent
shareholders  were  complied.

Family  Relationships

There  are  no  family  relationships  between or among the directors, executive
officers  or  persons nominated or charged by the Company to become directors or
executive  officers.

Involvement  in  Legal  Proceedings

To  the best of the Company's knowledge, during the past five years, none of the
following  occurred  with  respect  to a present or former director or executive
officer  of  the  Company:  (1)  any bankruptcy petition filed by or against any
business  of which such person was a general partner or executive officer either
at  the  time  of the bankruptcy or within two years prior to that time; (2) any
conviction  in  a  criminal  proceeding  or  being subject to a pending criminal
proceeding  (excluding  traffic  violations and other minor offenses); (3) being
subject  to  any order, judgment or decree, not subsequently reversed, suspended
or  vacated,  of  any  court  of  any  competent  jurisdiction,  permanently  or
temporarily enjoining, barring, suspending or otherwise limiting his involvement
in  any  type of business, securities or banking activities; and (4) being found
by  a  court  of  competent  jurisdiction  (in  a  civil action), the SEC or the
Commodities  Futures  Trading  Commission  to  have  violated a federal or state
securities or commodities law, and the judgment has not been reversed, suspended
or  vacated.

Audit  Committee  Financial  Expert

During  the  first half of the fiscal year covered by this report, the Company's
Audit Committee comprised of two independent board members.  During that period,
Marilyn  Creson Brown served as the Committee's independent financial expert. On
March  3,  2004,  Ms.  Brown  resigned  as  a  member  of the Company's Board of
Directors.  Consequently,  the  Company  has  temporary  disbanded  the  Audit
Committee  and  the  full  Board  of Directors serves in lieu of such committee.
Currently,  Mr.  DeCiccio  qualifies  as  a financial expert.  Mr. DeCiccio also
serves  as the Company's Chief Financial Officer and is therefore not considered
an  independent  director.

Code  of  Ethics

On  January  4,  2004,  the  Company  adopted a Code of Ethics for its principal
executive  offers  and  senior  management.  The  Code  is  designed  to  deter
wrongdoing  and  promote honest and ethical conduct; full and fair disclosure in
reports  and  documents  submitted  to  the  SEC;  compliance  with  applicable
governmental  laws,  rules and regulations; and the prompt internal reporting of
violations  of  the  code  to  appropriate  persons  by  the  Company's  senior
management.  A  copy  of the Company's Code of Ethics is attached to this report
as  Exhibit 14.  Additionally, a copy is posted on the Company's website located
at  www.gtctelecom.com.  Any  person  may obtain a copy of the Company's Code of
Ethics, without charge, by writing to Legal Department, GTC Telecom, 3151 Airway
Ave.,  Suite  P-3,  Costa  Mesa,  CA  92627;  Attn  Code  of  Ethics  Request.





                                      -25-
<PAGE>
ITEM  10.  EXECUTIVE  COMPENSATION

On  December 1, 1998, the Company entered into an Employment Agreement with Paul
Sandhu,  the  Company's  Chief Executive Officer.  The Agreement was approved by
the  Board  of Directors of the Company.  On September 6, 2001, the Compensation
Committee  of  the  Board agreed to revise the Agreement increasing Mr. Sandhu's
salary  to  $184,800.  The Agreement continues for an indefinite term but may be
canceled  at  any  time  by  either  the Company or Mr. Sandhu.  However, if the
Company terminates the Agreement without cause, as defined in the Agreement, the
Company  shall  be  obligated to pay Mr. Sandhu 25% of his then annual salary as
severance.

On  December 1, 1998, the Company entered into an Employment Agreement with Eric
Clemons,  the  Company's  President.  The Agreement was approved by the Board of
Directors  of  the Company.  On September 6, 2001, the Compensation Committee of
the  Board  agreed  to  revise  the  Agreement increasing Mr. Clemon's salary to
$167,200.  The Agreement continues for an indefinite term but may be canceled at
any  time  by  either  the  Company  or  Mr.  Clemons.  However,  if the Company
terminates the Agreement without cause, as defined in the Agreement, the Company
shall  be  obligated  to  pay  Mr.  Clemons  25%  of  his  then annual salary as
severance.

On  December  1,  1998,  the  Company  entered into an Employment Agreement with
Gerald  DeCiccio,  the  Company's  Chief  Financial  Officer.  The Agreement was
approved  by  the  Board of Directors of the Company.  On September 6, 2001, the
Compensation  Committee  of  the Board agreed to revise the Agreement increasing
Mr.  DeCiccio's  salary  to $158,400.  The Agreement continues for an indefinite
term  but  may  be  canceled  at any time by either the Company or Mr. DeCiccio.
However,  if  the  Company terminates the Agreement without cause, as defined in
the  Agreement,  the  Company  shall be obligated to pay Mr. DeCiccio 25% of his
annual  salary  as  severance.

SUMMARY  COMPENSATION  TABLE
The  Summary  Compensation  Table  shows  certain  compensation  information for
services  rendered  in  all capacities for the fiscal years ended June 30, 2004,
2003,  and  2002.  Other than as set forth herein, no executive officer's salary
and  bonus  exceeded  $100,000  in  any  of the applicable years.  The following
information includes the dollar value of base salaries, bonus awards, the number
of stock options granted and certain other compensation, if any, whether paid or
deferred.






                                      -26-
<PAGE>

<TABLE>
<CAPTION>


                                                             SUMMARY COMPENSATION TABLE

                                          ANNUAL  COMPENSATION                          LONG  TERM  COMPENSATION
                                         ----------------------                         AWARDS           PAYOUTS
                                                                                    -------------------------------
                                                                OTHER        RESTRICTED  SECURITIES                 ALL
NAME AND                                                        ANNUAL         STOCK     UNDERLYING    LTIP        OTHER
PRINCIPAL                          SALARY        BONUS       COMPENSATION      AWARDS     OPTIONS     PAYOUTS   COMPESATION
POSITION               YEAR         ($)           ($)            ($)            ($)       SARS (#)      ($)         ($)
---------------------------------------------------------------------------------------------------------------------------
<S>                   <C>       <C>             <C>          <C>               <C>       <C>          <C>       <C>
Paul Sandhu           2004
(CEO)                (6/30)     $  184,800        -0-            5,000(1)       -0-          -0-        -0-        7,108(3)

                      2003
                     (6/30)        184,800        -0-           40,000(1)       -0-          -0-        -0-         -0-

                      2002
                     (6/30)        186,450       16,800         12,000(2)       -0-        280,000      -0-       27,139(3)

---------------------------------------------------------------------------------------------------------------------------
Eric Clemons          2004
(President)          (6/30)        167,200        -0-              -0-          -0-          -0-        -0-         -0-

                      2003
                     (6/30)        160,233        -0-              -0-          -0-          -0-        -0-         -0-

                      2002
                     (6/30)        198,550(4)     1,520         12,000(2)       -0-        270,000      -0-       24,554(3)
---------------------------------------------------------------------------------------------------------------------------
Gerald DeCiccio       2004
(CFO)                (6/30)        158,400        -0-              -0-          -0-          -0-        -0-         -0-

                      2003
                     (6/30)        158,400        -0-              -0-          -0-          -0-        -0-        6,092(3)

                      2002
                     (6/30)        155,100       14,400         12,000(2)       -0-        260,000      -0-       17,169(3)
---------------------------------------------------------------------------------------------------------------------------
Vi Bui(5)             2004
(General Counsel)    (6/30)        105,000        -0-              -0-          -0-           -0-       -0-         -0-

                      2003
                     (6/30)         94,298        -0-              -0-          -0-           -0-       -0-         -0-

                      2002
                     (6/30)          -0-          -0-              -0-          -0-           -0-       -0-         -0-
---------------------------------------------------------------------------------------------------------------------------
</TABLE>

(1)     Amounts  paid  on  deferred  salary  from  prior  years
(2)     Amounts  paid for director's fees earned in fiscal year 2001 and paid in
        fiscal  year  2002
(3)     Amounts  paid  for  vacation
(4)     Includes  $24,383  of  salary  advances
(5)     Mr.  Bui  joined  the  Company  on  July  15,  2002.  Mr.  Bui is not an
        executive  officer  of  the  Company.

                                      -27-
<PAGE>

<TABLE>
<CAPTION>


                                   OPTION/SAR GRANTS IN LAST FISCAL YEAR
                                            (INDIVIDUAL GRANTS)


                  NUMBER OF SECURITIES      PERCENT OF TOTAL
                       UNDERLYING         OPTIONS/SAR'S GRANTED
                 OPTIONS/SAR'S GRANTED   TO EMPLOYEES IN FISCAL    EXERCISE OF BASE PRICE
NAME                      (#)                     YEAR                     ($/SH)           EXPIRATION DATE
                 ----------------------  -----------------------  ------------------------  ---------------
<S>              <C>                     <C>                      <C>                       <C>
Paul Sandhu                          0                         0  $                      0             n/a
                 ----------------------  -----------------------  ------------------------  ---------------
Eric Clemons                         0                         0  $                      0             n/a
                 ----------------------  -----------------------  ------------------------  ---------------
Gerald DeCiccio                      0                         0  $                      0             n/a
                 ----------------------  -----------------------  ------------------------  ---------------
</TABLE>
<TABLE>
<CAPTION>



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


                                                                   NUMBER OF UNEXERCISED      VALUE OF UNEXERCISED IN
                                                                   SECURITIES UNDERLYING       THE-MONEY OPTION/SARS
                   SHARES ACQUIRED ON             VALUE            OPTIONS/SARS AT FY-END (#)        AT FY-END ($)
NAME                  EXERCISE (#)             REALIZED ($)        EXERCISABLE/UNEXERCISABLE   EXERCISABLE/UNEXERCISABLE
                 ----------------------  ------------------------  --------------------------  --------------------------
<S>              <C>                     <C>                       <C>                         <C>

Paul Sandhu                           0                       n/a           207,000 / 198,000                       0 / 0
Eric Clemons                          0                       n/a           263,000 / 182,000                       0 / 0
Gerald DeCiccio                   2,500                       n/a           295,666 / 131,000                       0 / 0

</TABLE>

COMPENSATION  OF  DIRECTORS

The  Company's  current directors do not receive compensation for their services
as  directors  of  the  Company.





                                      -28-
<PAGE>

ITEM  11.  SECURITY  OWNERSHIP  OF  CERTAIN  BENEFICIAL  OWNERS  AND  MANAGEMENT

The  following  table  sets forth, as of September 15, 2004, certain information
with  respect to the Company's equity securities owned of record or beneficially
by  (i)  each  Officer  and  Director  of the Company; (ii) each person who owns
beneficially  more  than  5%  of  each class of the Company's outstanding equity
securities;  and  (iii)  all  Directors  and  Executive  Officers  as  a  group.

<TABLE>
<CAPTION>
                                                            COMMON STOCK  PERCENT OF
TITLE OF CLASS         NAME AND ADDRESS OF BENEFICIAL OWNER  OUTSTANDING  OUTSTANDING
----------------------- -----------------------------        ----------   ------------
<S>                     <C>                                  <C>             <C>
                        Paul Sandhu(1)
                        3151 Airway Avenue, Suite P-3
Common Stock            Costa Mesa, CA 92626.                3,956,715      17.66%


                        Eric Clemons(2)
                        3151 Airway Avenue, Suite P-3
Common Stock            Costa Mesa, CA 92626.                  643,522       2.87%

                        Gerald A. DeCiccio(3)
                        3151 Airway Avenue, Suite P-3
Common Stock            Costa Mesa, CA 92626.                  338,166       1.51%

                        Reet Trust(8)
                        21520 Yorba Linda, Suite 6227
Common Stock            Yorba Linda, CA 92887                2,000,000       8.93%


All Directors and
Officers as a
Group (3
Persons in total)                                            4,938,403       22.04%

</TABLE>

(1)     Includes  262,000  options  to acquire shares of Company common stock in
accordance  with  Mr. Sandhu's director compensation agreement and the Company's
employee  benefit  plan.  Does  not  include  an  aggregate  of 143,000 unvested
options to acquire shares of Company common stock granted in accordance with the
Company's  employee  benefit  plan.
(2)     Includes  308,000  options  to acquire shares of Company common stock in
accordance  with  Mr. Clemons' director compensation agreement and the Company's
employee  benefit  plan.  Does  not  include  an  aggregate  of 137,000 unvested
options  to  acquire  shares  of  Company  common  stock  in accordance with the
Company's  employee  benefit  plan.
(3)     Includes  an  aggregate  of 315,666 options to acquire shares of Company
common  stock  in  accordance  with  Mr.  DeCiccio's  employment  and  director
compensation  agreements  and  the  Company's  employee  benefit plan.  Does not
include  an  aggregate  of 111,000 unvested options to acquire shares of Company
common  stock  in  accordance  with  the  Company's  employee  benefit  plan.
(4)     The  trustee  of  the  Reet  Trust is Teg Sandhu, father of Paul Sandhu.
However,  Paul  Sandhu  disclaims any beneficial ownership to the shares held by
the  Reet  Trust.

The  Company  believes  that  the  beneficial owners of securities listed above,
based  on  information furnished by such owners, have sole investment and voting
power  with  respect  to  such  shares, subject to community property laws where
applicable.  Beneficial  ownership is determined in accordance with the rules of
the Commission and generally includes voting or investment power with respect to
securities.  Shares  of  stock  subject  to  options  or  warrants  currently
exercisable,  or exercisable within 60 days, are deemed outstanding for purposes
of  computing the percentage of the person holding such options or warrants, but
are not deemed outstanding for purposes of computing the percentage of any other
person.




                                      -29-
<PAGE>

<TABLE>
<CAPTION>

SECURITIES AUTHORIZED FOR ISSUANCE UNDER EQUITY COMPENSATION PLANS

                                     EQUITY COMPENSATION PLANS AS OF JUNE 30, 2003


<S>                        <C>                          <C>                     <C>
                                     (A)                         (B)                              (C)
                           ---------------------------  ----------------------  --------------------------------------
                           NUMBER OF SECURITIES
                           NUMBER OF SECURITIES         WEIGHTED-AVERAGE        REMAINING AVAILABLE FOR FUTURE
                           TO BE ISSUED UPON EXERCISE   EXERCISE PRICE OF       ISSUANCE UNDER EQUITY COMPENSATION
                           OF OUTSTANDING OPTIONS,      OUTSTANDING OPTIONS,    PLANS (EXCLUDING SECURITIES REFLECTED
                           WARRANTS AND RIGHTS          WARRANTS AND RIGHTS     IN COLUMN (A))
PLAN CATEGORY                        (#)                         ($)                              (#)
-------------------------  ---------------------------  ----------------------  --------------------------------------
Equity compensation plans
approved by security
holders                            1,931,600(1)                $ 0.47                           3,792,000(2)
-------------------------  ---------------------------  ----------------------  --------------------------------------
Equity compensation plans
not approved by security
holders                            1,362,400                   $ 0.53                                   0
-------------------------  ---------------------------  ----------------------  --------------------------------------
Total                              3,004,000                   $ 0.49                           3,792,000
</TABLE>

(1)  consists  of  723,600  options  issued under the 1999 Stock Option Plan and
1,208,000  options  issued  under  the  2001  Stock  Incentive  Plan
(2)  does  not include any ungranted options under the 1999 Omnibus Stock Option
Plan  as  this  plan  was  terminated.

1999  STOCK  OPTION  PLAN

On  September  20, 1999, the Company's Board of Directors ("Board") approved the
GTC Telecom Corp. Omnibus Stock Option Plan (the "1999 Plan"), effective October
1,  1999.  The  1999  Plan  was  approved  and  ratified  by the shareholders on
December 13, 1999 at the Company's 1999 annual shareholder's meeting.  Under the
terms  of  the 1999 Plan, the Board has the sole authority to determine which of
the  eligible  persons  shall receive options, the number of shares which may be
issued upon exercise of an option, and other terms and conditions of the options
granted  under the 1999 Plan to the extent they don't conflict with the terms of
the  1999  Plan.

Upon  implementation  of  the  Company's 2001 Stock Incentive Plan (as described
below),  the  Company  closed  the  1999 Plan.  As of the date of this report, a
total  of  723,600  options,  previously  issued  to employees, exercisable at a
weighted  average  of  $0.94  per  share  remain  outstanding.

2001  STOCK  INCENTIVE  PLAN

On  October  17,  2001,  the Company's Board approved the GTC Telecom Corp. 2001
Stock  Incentive Plan (the "SIP Plan"), effective January 1, 2002.  The SIP Plan
was  approved  and  ratified  by  the  shareholders  on December 13, 2001 at the
Company's  2001  annual  shareholder's  meeting.  The  SIP Plan provides for the
grant of various types of equity-based incentives including stock options, stock
appreciation rights ("SARs"), restricted stock, and cash and stock bonuses, on a
current or deferred basis, collectively "Awards."  The Company may settle Awards
in  cash  or  shares  of  the  Company's  Common  Stock  ("Shares").

The  maximum number of Shares that may be issued under the SIP Plan is 5,000,000
shares  of  the  Company's  Common  Stock.  The Internal Revenue Code requires a
fixed  limit  on  the  number  of Shares that may be covered by options and SARs
granted  to any one individual in any one calendar year and a fixed limit on the
number of Shares that may be covered by all Awards granted to any one individual
in  any  one  calendar  year.  These  limits  are  each  1,000,000  shares.

The SIP Plan may be administered by the Board or by a committee appointed by the
Board.  Currently  the  SIP Plan is administered by the full Board of Directors.
Subject  to  the  express terms of the SIP Plan, the SIP Plan administrator will
have  broad  power  to  administer,  construe,  and  interpret  the  SIP  Plan.

                                      -30-
<PAGE>

Awards  may  be issued for services rendered or to be rendered.  Shares also may
be  issued  for  any  lawful  consideration, including cash, other securities or
rights.  The  administrator may authorize loans from the Company to participants
(except  executive  officers  of  the  Company)  in  the  amount  necessary  for
participants to pay the withholding taxes due in connection with the exercise or
vesting  of  Awards.  All directors, officers, consultants, and employees of the
Company  and  its  subsidiaries  are  eligible  for  Award  grants. Only persons
actually  selected  by  the  administrator  will  be  granted  Awards.

During  the  fiscal  year  ended  June  30,  2004, the Company issued options to
certain employees to purchase an aggregate of 56,000 shares of common stock at a
weighted  average  exercise  price  of  $0.12 per share pursuant to the SIP Plan
(each issuance priced at the estimated fair market value of the Company's common
stock  on  the  date  of  grant).  As  of  the date of this filing, 50,000 these
options  have  been  forfeited.  The remaining options vest over five years from
the  date  of  grant  and  are  exercisable  through  December  2013.

During  the year ended June 30, 2004, the Company issued options pursuant to the
SIP Plan to certain board of directors to purchase an aggregate of 30,000 shares
of  common  stock, at a weighted average exercise price of $0.12 per share (each
issuance priced at the estimated fair market value of the Company's common stock
on  the  date of grant).  As of the date of this filing, these options have been
forfeited.

NON-PLAN  ISSUANCES

On  April  12,  2004,  the  Company  entered  into  an agreement with an outside
consultant  for  investor  relations  services.  Pursuant  to the agreement, the
Company  agreed,  in  addition  to  certain  cash consideration, to issue to the
investor  relations  company,  warrants  to purchase up to 500,000 shares of the
Company's common stock.  The warrants have an exercise price of $0.13 per share.
The  warrants  are  valued  at approximately $65,000 (based on the Black Scholes
pricing  model)  which the Company recorded to consulting expense in April 2004.
The  warrants  vest  immediately and are exercisable for a period of three years
from  the  date  of  issuance.

ITEM  12.  CERTAIN  RELATIONSHIPS  AND  RELATED  TRANSACTIONS

In  February  2004,  the  Company's  Chief  Financial  Officer exercised options
(previously granted pursuant to his director compensation agreement) to purchase
a  total  of  2,500  shares  of  the  Company's  common  stock  for  $25.

As  of June 30, 2004, the Company has net advances to Eric Clemons, President of
the  Company,  of  $60,306.  The  advances  accrue  interest at 10% (no interest
income  has  been  recorded  as  of  June  30, 2003) and are due on demand.  The
Company  has  reclassified  the  note receivable as an increase to stockholders'
deficit  in the accompanying consolidated balance sheet at June 30, 2004.  There
have  been  no  additional  advances  since  June  2001.

In  February,  2003,  Perfexa-U.S. entered into a Master Services Agreement with
its parent, GTC Telecom Corp. whereby Perfexa-U.S. agreed to provide call center
outsourcing and Information Technology systems development for GTC.  Pursuant to
the  terms  of  the  Agreement, GTC has agreed to reimburse the Company for such
services  on a cost plus 5% basis.  Work on this agreement commenced May 1, 2003
upon  completion  of  the  Company's  call  center.

Since inception, Perfexa-U.S. and its Indian subsidiary Perfexa-India has relied
upon  its  parent, GTC Telecom Corp. for funding and for administrative services
required  in  the  development  of  its  business plan.  Perfexa is obligated to
reimburse  GTC for such advances and its share of such expenses.  As of June 30,
2004, the Company has advanced Perfexa-U.S. $3,314,957 in cash and equipment, of
which  $661,504  was  for the purchase of equipment and $2,653,453 for operating
expenses.  In  addition,  the  Company  has  allocated  $2,080,503  of  shared
administrative  expenses  to  Perfexa-U.S.  Cash  and  equipment advances accrue
interest  of  10%  per  annum  and  are  due upon demand.  Shared administrative
expenses  accrue  no interest and are also due upon demand.  See Part II, Item 6
Management's  Discussion  and  Analysis,  Financing  further  details.

Pursuant  to  a  Master  Services  Agreement between Perfexa-US and GTC, Perfexa
provides call center and IT development services to GTC on a cost plus 5% basis.
As  of  June 30, 2004, Perfexa-U.S. has billed GTC $1,279,343 for such services.

                                      -31-
<PAGE>

As  of June 30, 2004, Perfexa-U.S. owes GTC $3,954,217 net of $161,900 repaid by
Perfexa-U.S.  from  funds  raised  and $1,279,343 in amounts billed for services
rendered.

See  Item  11.  Executive Compensation for transactions relating to issuances of
options  to  Officers  and  Directors  from  the  Company's  stock option plans.











                                      -32-
<PAGE>
ITEM  13.     EXHIBITS  AND  REPORTS  ON  FORM  8-K

INDEX  TO  FINANCIAL  STATEMENTS

                                                                       Page

Report of Independent Registered Public Accounting Firm                F-1

Consolidated balance sheet at June 30, 2004                            F-2

Consolidated statements of operations and comprehensive
Loss for the years ended June 30, 2004 and 2003                        F-3

Consolidated statements of stockholders' deficit for the years ended
June  30,  2004  and  2003                                             F-4

Consolidated statements of cash flows for the years ended
June  30,  2004  and  2003                                             F-5

Notes to consolidated financial statements                             F-7

All other schedules are omitted as the required information is not present or is
not  present  in  amounts  sufficient  to require submission of the schedule, or
because  the  information  required  is  included in the financial statements or
notes  thereto.

INDEX  TO  EXHIBITS

The Company undertakes to furnish to any shareholder so requesting a copy of any
of  the  following  exhibits upon payment to the Company of the reasonable costs
incurred  by  the  Company  in  furnishing  any  such  exhibit.

EXHIBIT  NO.         DESCRIPTION
------------         -----------

*(3.1)               Restated  Articles  of  Incorporation filed with the Nevada
                     Secretary of State on January 4, 2001 (incorporated by
                     reference to Exhibit 3.1 in the Company's 2000 Proxy
                     Statement).

*(3.2)               Restated  Bylaws  of GTC Telecom Corp. adopted on September
                     20, 1999 (incorporated  by  reference  to  Exhibit 3.5 in
                     the Company's Annual Report on  Form 10-KSB for the year
                     ended  June  30,  1999).

*(4.1)               GTC  Telecom  Corp.  1999  Omnibus  Stock  Incentive  Plan
                     (incorporated by reference to Exhibit in the Company's
                     1999 Proxy Statement).

*(4.2)               GTC  Telecom  Corp. 2001 Stock Incentive Plan (incorporated
                     by reference to Exhibit in the Company's 2001 Proxy
                     Statement).

*(10.1)               Telecommunication  Resale  Contracts  (incorporated  by
                      reference  to Exhibit 10.2 in the Company's Form 10 QSB
                      for  the  quarter  ended  September  30,  1999).

                                      -33-
<PAGE>

*(10.2)              Employment  Agreement  by and between GTC Telecom Corp., a
                     Nevada  corporation  and  Eric  Clemons, dated December 1,
                     1998 (incorporated by reference to Exhibit 10.6 in the
                     Company's Form 10 SB/A filed April 2, 1999).

*(10.3)              Employment Agreement by and between GTC Telecom Corp., a
                     Nevada corporation and Jerry DeCiccio, dated December 1,
                     1998(incorporated by reference to Exhibit 10.7 in the
                     Company's Form 10 SB/A filed April 2, 1999).

*(10.4)              Employment  Agreement  by and between GTC Telecom Corp., a
                     Nevada  corporation  and  Paul  Sandhu,  dated December 1,
                     1998 (incorporated by reference  to  Exhibit  10.8 in the
                     Company's Form 10 SB/A filed April 2, 1999).

*(10.5)              Addendum  to  Lease  dated  May  21, 1998 between Southern
                     California  Sunbelt  Developers,  Inc.,  and  GTC  Telecom
                     Corp.,  a  Nevada corporation;  Eric  Clemons;  and  Paul
                     Sandhu  Jointly and Severally as Tenant ("Tenant") relating
                     to premises at Suites K-103, K-104, and K-108 The John
                     Wayne Executive Guild  Center,  3151  Airway  Avenue, Costa
                     Mesa,  California 92626 (incorporated by reference to
                     Exhibit 10.7 in the Company's Annual Report on Form  10-KSB
                     for  the  year  ended  June  30,  2001).

*(10.6)              Addendum  to  Lease  dated  May  21, 1998 between Southern
                     California  Sunbelt  Developers,  Inc.,  and  GTC  Telecom
                     Corp.,  a  Nevada corporation;  Eric  Clemons;  and  Paul
                     Sandhu  Jointly and Severally as Tenant
                     ("Tenant") relating  to  premises  at  Suites  P-1, P-3 and
                     L-2 The John Wayne Executive  Guild  Center, 3151 Airway
                     Avenue, Costa Mesa, CA 92626 (incorporated by  reference
                     to Exhibit 10.7 in the Company's Annual Report on Form
                     10-KSB for the  year  ended  June  30,  2001).

*(10.7)              Lease  dated  October  1,  2002 between Unitech Limited and
                     Perfexa Solutions Pvt. Ltd. relating to the lease of 1st
                     Floor, Tower A, Unitech Business  Park,  South  City  I,
                     Gurgaon,  Haryana  122001  India.  (incorporated by
                     reference  to Exhibit 10.7 in the Company's Form 10-KSB
                     filed  on  September  29,  2003.

*(10.8)              UUNET  Internet  Services  Agreement  dated  May  15, 2002
                     (incorporated by reference to Exhibit 10.9 in the Company's
                     Form 10 KSB for the year  ended  June  30,  2002).

10.9                 Wholesale  Solutions Switched Services Agreement dated July
                     26,  2002

14                   Code of Ethics

21                   Subsidiaries  of  the  Registrant

23                   Consent  of  Squar,  Milner,  Reehl  &  Williamson,  LLP

31.1                 Rule  13a-14(a) Certification of Chief Executive Officer

31.2                 Rule  13a-14(a) Certification of Chief Financial Officer

32.1                 Section 1350 Certification of Chief Executive Officer

32.2                 Section 1350 Certification of Chief Financial Officer


------------------------------
*  Previously  filed

REPORTS  ON  FORM  8-K

On  May  14,  2004, the Company filed a Current Report on Form 8-K regarding the
resignation  of  John  Eger  from  the  Company's  Board  of  Directors.

On  July  12,  2004,  the Company filed a Current Report on Form 8-K regarding a
notice  of  default  received from  MCI.

                                      -34-
<PAGE>

ITEM  14.  PRINCIPAL  ACCOUNTANT  FEES  AND  SERVICES

For  the  fiscal  year  ended June 30, 2004, the Company's fees for professional
services  rendered  by its Independent Registered Public Accounting Firm were as
follows:

(a) Audit Fees: Aggregate fees billed for professional services rendered for the
audit of the Company's fiscal year 2004 annual consolidated financial statements
and  review of the consolidated financial statements in the Company's reports on
Form  10-QSB:  $75,000.

(b)  Audit  Related  Fees:  $20,000.

(c)  Tax  Fees:  $36,378.

(c)  All  Other  Fees:  The  aggregate  fees  billed  for all other professional
services  provided to the Company (other than the services described above under
(a),  (b),  and  (c))  for  the  fiscal  year  ended  June  30,  2004:  None.

The  Company's  Board  of Directors serving as the Company's Audit Committee has
considered  and  determined  that  the  services  rendered  by  the  Independent
Registered  Public  Accounting  Firm  with  respect  to  the  foregoing fees are
compatible with  maintaining its independence and all services were pre-approved
by  the  Board.


                                      -35-
<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.


Dated  September  28,  2004

                                GTC TELECOM CORP.
                                  (Registrant)


By:  /s/  PAUL  SANDHU
     -----------------
     PAUL  SANDHU
     Chief Executive Officer and Director

By:  /s/  ERIC  CLEMONS
     ------------------
     ERIC  CLEMONS
     President  and  Director

By:  /s/  GERALD  DECICCIO
     ---------------------
     GERALD  DECICCIO
     Chief  Financial  Officer  and  Director  and
     Principal  Accounting  Officer





                                      -36-
<PAGE>

REPORT  OF  INDEPENDENT  REGISTERED  PUBLIC  ACCOUNTING  FIRM

To  the  Board  of  Directors  and  Shareholders  of
GTC  Telecom  Corp.

We have audited the accompanying consolidated balance sheet of GTC Telecom Corp.
(the  "Company")  and  subsidiaries  as  of  June  30,  2004  and  the  related
consolidated statements of operations, comprehensive loss, stockholders' deficit
and cash flows for each of the years in the two-year period ended June 30, 2004.
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 the standards of the Public Company
Accounting  Oversight  Board  (United  States).  Those standards require that we
plan  and  perform  the  audits to obtain reasonable assurance about whether the
financial  statements  are  free  of  material  misstatement.  An audit includes
examining,  on  a test basis, evidence supporting the amounts and disclosures in
the  financial  statements.  An  audit  also  includes  assessing the accounting
principles  used  and  significant  estimates  made  by  management,  as well as
evaluating  the  overall  financial statement presentation.  We believe that our
audits  provide  a  reasonable  basis  for  our  opinion.

In  our  opinion,  the financial statements referred to above present fairly, in
all  material respects, the consolidated financial position of GTC Telecom Corp.
and  subsidiaries  at  June  30,  2004  and  the  consolidated  results of their
operations  and  their  cash  flows for each of the years in the two-year period
ended June 30, 2004, in conformity with accounting principles generally accepted
in  the  United  States  of  America.

The  accompanying  financial  statements  have  been  prepared assuming that the
Company  will  continue as a going concern.  As disclosed in Note 1, the Company
has  incurred  operating  losses  in  the  last two years, has a working capital
deficit  of  approximately  $7,200,000,  liabilities  from  the  underpayment of
payroll  taxes,  an  accumulated  deficit  of  approximately  $15,800,000, and a
stockholders'  deficit  of  approximately  $6,680,000  at  June  30,  2004.
Additionally  as  discussed in Note 10, the Company terminated its contract with
MCI  WorldCom  Network Services, Inc. ("MCI") as its underlying carrier and owes
MCI  approximately  $5,600,000  at  June 30, 2004.  These factors, among others,
raise  substantial  doubt  about  the  Company's  ability to continue as a going
concern.  Management's plans in regard to these matters are described in Note 1.
The  consolidated  financial  statements do not include any adjustments that may
result  from  the  outcome  of  this  uncertainty.


/s/  SQUAR,  MILNER,  REEHL  &  WILLIAMSON,  LLP


Newport  Beach,  California
August  29,  2004,  except  for  Note  14,  as  to  which  the
date  is  September  19,  2004

                                      F-1
<PAGE>

<TABLE>
<CAPTION>


                        GTC TELECOM CORP. AND SUBSIDIARIES
                            CONSOLIDATED BALANCE SHEET



<S>                                                                 <C>
                                                                      June 30,
                                                                        2004
                                                                    -------------

ASSETS
  Cash                                                              $     73,572
  Accounts receivable, net of allowance for doubtful accounts of
   approximately $49,000                                                 691,749
  Deposits                                                                57,587
  Prepaid expenses                                                        64,899
                                                                    -------------
    Total current assets                                                 887,807

Property and equipment, net                                              620,471
Other assets                                                              76,208

    Total assets                                                    $  1,584,486
                                                                    =============

LIABILITIES AND STOCKHOLDERS' DEFICIT
Current liabilities:
  Accounts payable and accrued expenses                             $  1,998,130
  Accrued payroll and related taxes                                      210,997
  Obligation under capital leases                                         13,394
  Notes payable                                                        5,868,597
  Deferred income                                                          4,560
                                                                    -------------
    Total current liabilities                                          8,095,678
                                                                    -------------

Long-term liabilities:
  Obligation under capital leases, net of current portion                 31,538
  Notes payable, net of current portion                                   23,565
                                                                    -------------

    Total liabilities                                                  8,150,781
                                                                    -------------

Commitments and contingencies

Minority interest in consolidated subsidiary                             112,114

Stockholders' deficit:
  Preferred stock, $0.001 par value; 10,000,000 shares authorized;
    none issued and outstanding                                               --
  Common stock, $0.001 par value; 50,000,000 shares authorized;
    22,106,622 shares issued and outstanding                              22,107
  Additional paid-in-capital                                           9,208,778
  Note receivable officer                                                (60,306)
  Accumulated deficit                                                (15,800,852)
  Accumulated other comprehensive income (loss)                          (48,136)
                                                                    -------------
    Total stockholders' deficit                                       (6,678,409)
                                                                    -------------

    Total liabilities and stockholders' deficit                     $  1,584,486
                                                                    =============
</TABLE>

           See accompanying notes to consolidated financial statements

                                      F-2
<PAGE>

<TABLE>
<CAPTION>

                        GTC  TELECOM  CORP.  AND  SUBSIDIARIES
                      CONSOLIDATED  STATEMENTS  OF  OPERATIONS
                               AND COMPREHENSIVE LOSS

                                                                   Year Ended June 30,
                                                                    2004        2003
                                                               ------------  ------------
<S>                                                            <C>           <C>
Revenues:
  Telecommunications                                           $10,103,082   $14,254,029
  Internet services                                                775,862       893,629
  BPO services                                                      78,644            --
                                                               ------------  ------------
    Total revenues                                              10,957,588    15,147,658
                                                               ------------  ------------

Cost of sales:
  Telecommunications                                             4,221,809     6,764,779
  Internet services                                                555,329       645,811
  BPO services                                                      59,239            --
                                                               ------------  ------------
    Total cost of sales                                          4,836,377     7,410,590
                                                               ------------  ------------

Gross profit                                                     6,121,211     7,737,068

Operating expenses
  Payroll and related                                            2,857,419     3,804,620
  Selling, general, and administrative                           2,562,495     3,938,046
                                                               ------------  ------------
    Total operating expenses                                     5,419,914     7,742,666
                                                               ------------  ------------

Operating income (loss)                                            701,297        (5,598)

Interest expense, net                                           (1,262,697)     (370,931)
Gain on waiver of payroll tax penalties and interest                    --       332,018
Loss on sale of equipment                                          (10,392)       (2,419)
                                                               ------------  ------------

Loss before provision for income taxes and minority interest      (571,792)      (46,930)

Provision for income taxes                                          13,753         2,760
                                                               ------------  ------------

Loss before minority interest                                     (585,545)      (49,690)

Minority interest in loss of consolidated subsidiaries              33,278        20,584
                                                               ------------  ------------

Net loss available to common shareholders                         (552,267)      (29,106)

Foreign currency translation adjustment                            (58,146)       10,010
                                                               ------------  ------------

Comprehensive loss                                             $  (610,413)  $   (19,096)
                                                               ============  ============

Basic and diluted net loss available to common
shareholders per common share:                                 $      0.03   $      0.00
                                                               ============  ============

Basic and diluted weighted average common shares
outstanding:                                                    21,096,423    20,634,314
                                                               ============  ============

</TABLE>

           See accompanying notes to consolidated financial statements

                                      F-3
<PAGE>

<TABLE>
<CAPTION>


                                     GTC  TELECOM  CORP.  AND  SUBSIDIARIES
                                 CONSOLIDATED STATEMENTS OF STOCKHOLDERS' DEFICIT
                                    FOR THE TWO-YEAR PERIOD ENDED JUNE 30, 2004



                                                                                          Accumulated
                                                      Additional     Note                     Other       Total
                                      Common Stock       Paid-in  Receivable Accumulated Comprehensive  Stockholders'
                                   Shares     Amount     Capital     Officer     Deficit   Income (Loss) Deficit
                               -----------------------------------------------------------------------------------
<S>                             <C>         <C>      <C>         <C>        <C>            <C>        <C>
BALANCE AT JUNE 30, 2002        20,556,622   20,557   8,723,530   (60,306)   (15,219,479)        --    (6,535,698)

Estimated fair market value of
stock issued for services
 rendered                           50,000       50       8,200        --             --         --         8,250
Estimated fair market value of
 stock and warrants issued in
 connection with notes payable      65,000       65      12,262        --             --         --        12,327
Estimated fair market value of
 warrants granted to
 consultants for services
 rendered                               --       --      26,900        --             --         --        26,900
Estimated fair market value of
 vested options granted to
 employees for compensation             --       --     113,925        --             --         --       113,925
Exercise of stock options by
 officers                           42,500       42         383        --             --         --           425
Net loss                                --       --          --        --        (29,106)        --       (29,106)
Cumulative foreign currency
 Translation adjustment                 --       --          --        --             --     10,010        10,010
                               -----------------------------------------------------------------------------------

BALANCE AT JUNE 30, 2003        20,714,122   20,714   8,885,200   (60,306)   (15,248,585)    10,010    (6,392,967)
                               -----------------------------------------------------------------------------------



Estimated fair market value of
 stock and warrants issued in
 connection with notes payable   1,390,000    1,390     148,305        --             --         --       149,695
Estimated fair market value of
 warrants granted to
 consultant for services
 rendered                               --       --      65,000        --             --         --        65,000
Estimated fair market value of
 vested options granted to
 employees for compensation             --       --     110,251        --             --         --       110,251
Exercise of stock options by
 officers                            2,500        3          22        --             --         --            25
Net loss                                --       --          --        --       (552,267)        --      (552,267)
Cumulative foreign currency
 Translation adjustment                 --       --          --        --             --    (58,146)      (58,146)
                               -----------------------------------------------------------------------------------

BALANCE AT JUNE 30, 2004        22,106,622  $22,107  $9,208,778  $(60,306)  $(15,800,852)  $(48,136)  $(6,678,409)
                               ===================================================================================
</TABLE>

           See accompanying notes to consolidated financial statements

                                      F-4
<PAGE>

<TABLE>
<CAPTION>

                        GTC  TELECOM  CORP.  AND  SUBSIDIARIES
                       CONSOLIDATED  STATEMENTS  OF  CASH  FLOWS

                                                                Years Ended June 30,
                                                                 2004          2003
                                                            ------------  ------------
<S>                                                         <C>           <C>           <C>
Cash Flows From Operating Activities:
Net loss                                                    $  (552,267)  $   (29,106)
Adjustments to reconcile net loss to net cash provided by
operating activities:
  Estimated fair market value of options granted
    to employees for compensation                               110,251       113,925
  Estimated fair market value of options and warrants
    granted to consultants for services rendered                 65,000        26,900
  Estimated fair market value of stock
    issued in connection with notes payable                     149,695        12,327
  Bad debt expense                                              159,467       112,770
  Depreciation and amortization                                 298,056       149,248
  Amortization of debt discount                                 199,500            --
  Minority interest in loss of consolidated subsidiaries        (33,278)      (20,584)
  Loss on sale of equipment                                      11,392         2,419
  Gain on waiver of payroll tax penalties and interest               --      (332,018)
  Estimated fair market value of stock issued for services           --         8,250
  Changes in operating assets and liabilities:
    Accounts receivable and other current assets                137,314       178,425
    Accounts payable and accrued expenses                       472,439     1,336,958
    Accrued payroll and related taxes                          (188,472)     (530,208)
    Deferred income                                               1,315       (44,169)
                                                            ------------  ------------

Net cash provided by operating activities                       830,412       985,137
                                                            ------------  ------------

Cash Flows From Investing Activities:
Purchases of property and equipment                            (171,425)     (490,413)
Proceeds from sale of equipment                                      --        15,138
                                                            ------------  ------------

Net cash used in investing activities                          (171,425)     (475,275)
                                                            ------------  ------------

Cash Flows From Financing Activities:
Principal repayments on notes payable                        (1,893,330)   (1,405,571)
Principal borrowings on notes payable, net of fees of
 $202,000                                                     1,305,341       575,000
Proceeds from issuance of stock of subsidiary, net of
  offering costs of $6,000                                       69,000        92,900
Principal payments under capital lease obligations               (8,805)       (8,192)
Proceeds from exercise of stock options                              25           425
                                                            ------------  ------------

Net cash used in financing activities                          (527,769)     (745,438)

Effect of exchange rate on cash                                 (58,146)       10,010

Net increase/(decrease) in cash                                  73,072      (225,566)

Cash at beginning of year                                           500       226,066
                                                            ------------  ------------

Cash at end of year                                         $    73,572   $       500
                                                            ============  ============
</TABLE>


           See accompanying notes to consolidated financial statements

                                      F-5
<PAGE>

<TABLE>
<CAPTION>


                       GTC  TELECOM  CORP.  AND  SUBSIDIARIES
                     CONSOLIDATED  STATEMENTS  OF  CASH  FLOWS
                                  (CONTINUED)


Supplemental  disclosure  of  cash  flow  information:

                                                            Years Ended June 30,
                                                              2004        2003
                                                            ---------    ---------
<S>                                                         <C>          <C>
Cash paid during the year for:
  Interest                                                  $577,986     $358,686

</TABLE>
See  accompanying  notes  to  consolidated  financial  statements for additional
non-cash  investing  and  financing  activities.

During the fiscal year ended June 30, 2004, the Company financed the purchase of
equipment totaling $146,404, including $39,538 of capital leases and $107,866 of
notes  payable.

During  the  fiscal  year  ended  June  30, 2004, Perfexa issued 8,152 shares of
restricted  common  stock  pursuant to the conversion of interest payable in the
amount  of  $4,076.


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










           See accompanying notes to consolidated financial statements

                                       F-6
<PAGE>
                       GTC TELECOM CORP. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                  FOR THE YEARS ENDED JUNE 30, 2004 AND 2003


NOTE  1  ORGANIZATION  AND  SUMMARY  OF  SIGNIFICANT  ACCOUNTING  POLICIES

GTC  -  GTC  Telecom  Corp.  and  subsidiaries  (the "Company" or "GTC") provide
various  services  including,  telecommunication  services,  which includes long
distance  telephone  and  calling  card  services,  Internet  related  services
including  Internet  service  provider  access, and business process outsourcing
("BPO")  services.  GTC  Telecom  Corp. was organized as a Nevada Corporation on
May  17,  1994  and  is  currently based in Costa Mesa, California.  The Company
trades  on  the  Over-The-Counter  Bulletin  Board  under  the  symbol  "GTCC".

PERFEXA  -  Perfexa  Solutions,  Inc.  ("Perfexa" or "Perfexa-U.S."), a majority
owned  subsidiary  of  the  Company, currently provides customer service for the
Company's  telecommunication  and  Internet  users.  Perfexa's  Information
Technology  ("IT") group currently develops IT solutions for GTC's customer care
needs  and the integration of GTC's customer care system with those of Perfexa's
New  Delhi  Center.  Perfexa  has  recently begun offering its services to third
parties  and  plans to focus on marketing its outsourced call center services to
U.S.  based  companies.  Perfexa's  IT  group  will work initially to ensure the
integration of Perfexa's systems with those of Perfexa's clients.  Subsequently,
the  IT  group  will  develop  customized  software solutions for third parties.

GOING  CONCERN  -  The  accompanying condensed consolidated financial statements
have  been prepared assuming the Company will continue as a going concern, which
contemplates,  among other things, the realization of assets and satisfaction of
liabilities in the normal course of business.  At June 30, 2004, the Company has
negative  working  capital  of  $7,207,871, liabilities from the underpayment of
payroll  taxes  (see  Note  10),  an  accumulated  deficit of $15,800,852, and a
stockholders'  deficit  of  $6,678,409;  in addition, through June 30, 2004, the
Company  historically  had  losses  from  operations  and  a  lack of profitable
operational history, among other matters, that raise substantial doubt about its
ability  to  continue  as  a  going  concern.  The  Company hopes to continue to
increase revenues from additional revenue sources and/or increase profit margins
through  continued negotiations with Sprint (see Note 10) and other cost cutting
measures.  In  the absence of significant increases in revenues and margins, the
Company  intends to fund operations through additional debt and equity financing
arrangements.  The  successful outcome of future activities cannot be determined
at this time and there are no assurances that if achieved, the Company will have
sufficient  funds  to  execute  its  intended business plan or generate positive
operating  results.

These  circumstances  raise  substantial  doubt  about  the Company's ability to
continue as a going concern.  The accompanying consolidated financial statements
do  not  include  any  adjustments  that  might  result from the outcome of this
uncertainty.

PRINCIPLES OF CONSOLIDATION - The accompanying consolidated financial statements
include  the  accounts  of  GTC  Telecom  Corp.  and  its subsidiaries which are
CallingPlanet.com, Inc., ecallingcards.com, Inc., Curbside Communications, Inc.,
and  Perfexa  Solutions,  Inc.  All  significant  intercompany  balances  and
transactions  have  been  eliminated  in  consolidation.

MINORITY  INTEREST  -  Minority  interest  represents the minority stockholders'
proportionate  share  of the equity of Perfexa Solutions, Inc.  At June 30, 2004
and  2003, the Company owned approximately 97% and 98%, respectively, of Perfexa
Solutions,  Inc.'s  common  stock.  The  Company's controlling interest requires
that  Perfexa  Solutions,  Inc.'s  operations  be  included  in the consolidated
financial  statements.  The 3% and 2% equity interest of Perfexa Solutions, Inc.
that  is  not  owned  by the Company at June 30, 2004 and 2003, respectively, is
shown  as  minority  interest  in  consolidated  subsidiary  in the accompanying
consolidated  financial  statements.

USE  OF  ESTIMATES  - The preparation of financial statements in conformity with
accounting  principles  generally  accepted  in  the  United  States  of America
requires  management  to make estimates and assumptions that affect the reported
amounts  of  assets  and  liabilities  and  disclosures of contingent assets and
liabilities  at  the  date  of the financial statements, as well as the reported
amounts  of  revenues and expenses during the reporting periods.  Actual results
could  differ  from  those  estimates.  Significant estimates made by management
are,  among  others, the allowance for doubtful accounts on accounts receivable,
realizability  of  long-lived  assets,  estimates for income tax valuations, and
valuation  of  securities  options,  and  warrants  issued.

                                      F-7
<PAGE>
                       GTC TELECOM CORP. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                   FOR THE YEARS ENDED JUNE 30, 2004 AND 2003

RISKS  AND UNCERTAINTIES - The Company operates in a highly competitive industry
that  is  subject  to  intense  competition,  government  regulation  and  rapid
technological changes.  The Company has limited operating history and is subject
to  the substantial business risks and uncertainties inherent to such an entity,
including  financial,  operational,  technological,  regulatory  and other risks
including  the  potential risk of business failure.  Additionally, the Company's
operations  in India are subject to various political, economic, and other risks
and  uncertainties  inherent  in  such  country.

CONCENTRATION OF CREDIT RISK - The Company currently maintains substantially all
of  its  cash with one major financial institution.  At times, cash balances may
be in excess of the amounts insured by the Federal Deposit Insurance Corporation
("FDIC").

The  Company  sells  its telephone and network services to individuals and small
businesses  throughout  the  United States and does not require collateral.  The
Company  performs  periodic  credit  evaluations  of its customers.  The Company
maintains  reserves  for  potential  credit  losses  based  upon  the  Company's
historical  experience  related  to  credit losses which management believes are
sufficient.  Although  the  Company  expects  to  collect  amounts  due,  actual
collections  may  differ  from  the  estimated  amounts.

ALLOWANCE  FOR  DOUBTFUL  ACCOUNTS  -  The  Company establishes an allowance for
doubtful  accounts  based  on  a  qualitative  and quantitative review of credit
profiles of customers, contractual terms and conditions, current economic trends
and  historical  payments.  The  Company  assesses  the  allowance  for doubtful
accounts  each  period.  If  the  Company  made  different judgments or utilized
different  estimates  for  any  period,  material  differences in the amount and
timing  of  revenue  recognized  could  result.

DEPENDENT ON KEY CUSTOMERS - The Company is not dependent on any single customer
or groups of affiliated customers for a significant portion of its annual sales.
The Company's customer base changes on a continuous basis as customers are added
or  removed.

MAJOR  SUPPLIERS  -  The  Company does not own its own long distance network and
currently depends primarily upon Sprint to provide for the transmission of phone
calls  by  its  customers  and to provide the call detail records upon which the
Company bases its customer's billings.  See Note 10 for details of the Company's
agreement  with  Sprint.

In  the  event  that  the  services  provided  by  Sprint  to  the  Company were
discontinued,  the  Company believes that it would be able to identify alternate
suppliers  which  would be able to provide it with sufficient levels of services
at  terms  similar  to  those  of Sprint.  Although the Company has the right to
switch  its  current customers to an alternate underlying carrier, the Company's
customers  have  the  right to discontinue their service with the Company at any
time.  Accordingly,  the  termination  or  non-renewal of the Company's contract
tariffs  with  Sprint or the loss of telecommunications services from Sprint may
have  a  material  adverse  effect  on  the  Company's results of operations and
financial  condition.

The  Company  provides its Internet Service Provider Access services pursuant to
an  agreement  with  an  outside  company  for the provisioning of the Company's
Internet  Service  Provider  Access  service.  See  Note  10  for details of the
Company's  agreement  with  its  Internet  service  provider.

PROPERTY AND EQUIPMENT - Property and equipment is stated at cost.  Depreciation
is  computed using the straight-line method over the estimated useful lives of 3
to 5 years.  Leasehold improvements are amortized using the straight-line method
over  the  shorter of the lease term or the estimated useful life of the related
asset.  During  the  years  ended  June  30,  2004  and 2003, total depreciation
expense  was  $298,056  and  $149,248,  respectively.

Betterments,  renewals,  and  extraordinary repairs that extend the lives of the
assets  are  capitalized;  other repairs and maintenance charges are expensed as
incurred.  The  cost  and  related accumulated depreciation applicable to assets
retired  are  removed  from the accounts, and the gain or loss on disposition is
recognized  in  current  operations.

                                      F-8
<PAGE>

                       GTC TELECOM CORP. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                   FOR THE YEARS ENDED JUNE 30, 2004 AND 2003

LONG-LIVED  ASSETS  -  In  July  2001, the Financial Accounting Statements Board
("FASB")  issued  Statement  of  Financial Accounting Standards ("SFAS") No. 144
("SFAS  144"),  "Accounting  for  the  Impairment  of  Long-Lived Assets and for
Long-Lived  Assets  to be Disposed Of."  SFAS 144 addresses financial accounting
and  reporting  for  the  impairment of disposal of long-lived assets.  SFAS 144
requires  that  long-lived  assets be reviewed for impairment whenever events or
changes  in  circumstances  indicate  that  their  carrying  amounts  may not be
recoverable.  If  the  cost  basis  of  a  long-lived  asset is greater than the
projected  future  undiscounted  net  cash  flows  from  such  asset  (excluding
interest),  an  impairment loss is recognized.  Impairment losses are calculated
as  the  difference  between  the  cost basis of an asset and its estimated fair
value.

SFAS  144  also  requires companies to separately report discontinued operations
and  extends  that reporting requirement to a component of an entity that either
has  been  disposed  of (by sale, abandonment or a distribution to owners) or is
classified as held for sale.  Assets to be disposed of are reported at the lower
of  the  carrying  amount  or  the estimated fair value less costs to sell.  The
Company  adopted SFAS 144 on July 1, 2002.  The provisions of this statement for
assets  held  for  sale  or  other disposal generally are required to be applied
prospectively  after the adoption date to newly initiated commitments to plan to
sell  or  dispose of such assets by management.  As a result, the Company cannot
determine  the  potential  effects  that  adoption  of SFAS 144 will have on the
financial  statements  with respect to future disposal decisions, if any.  As of
June  30,  2004,  management  has  determined that no such impairment exists and
therefore,  no  adjustments  have been made to the carrying values of long-lived
assets.  There  can  be  no assurance, however, that market conditions or demand
for  the  Company's  products  or  services  will continue which could result in
impairment  of  long-lived  assets  in  the  future.

REVENUE AND RELATED COST RECOGNITION - The Company recognizes revenue during the
month  in  which  services  or  products  are  delivered,  as  follows:

TELECOMMUNICATIONS  RELATED  SERVICES

The  Company's  long  distance telecommunications service revenues are generated
when  customers  make  long  distance  telephone  calls  from  their business or
residential telephones or by using any of the Company's telephone calling cards.

Telecommunication  services  cost of sales consists of the cost of long distance
service  provided  by  Sprint  and  other  carriers.

INTERNET  RELATED  SERVICES

Internet  service  revenues  consist  of monthly fees charged to subscribers for
Internet  access  and  are  recognized in the period service access is provided.
Internet  service  cost  of  sales  consists  of  the cost of providing Internet
access.

BPO  SERVICES

BPO  service  revenues  consist  of  amounts billed each month based on a client
contract that provides for either a dedicated or per minute rate as the services
are  rendered.  BPO  service  cost  of  sales  consists of labor and its related
support  costs  directly  associated  with  a  service  contract.

In December 1999, the Securities and Exchange Commission issued Staff Accounting
Bulletin  101  ("SAB  101"),  "Revenue  Recognition,"  which  outlines the basic
criteria  that  must  be  met  to  recognize  revenue  and  provide guidance for
presentation  of  revenue  and  for  disclosure  related  to revenue recognition
policies  in  financial  statements  filed  with  the  Securities  and  Exchange
Commission.  SAB 101 was amended and superceded by SAB 104.  Management believes
the  Company's  revenue  recognition  policies  conform  to  SAB  104.

                                      F-9
<PAGE>


                       GTC TELECOM CORP. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                   FOR THE YEARS ENDED JUNE 30, 2004 AND 2003

DEFERRED  INCOME  -  Deferred  income represents proceeds from prepaid telephone
calling  cards  which are recorded as deferred income when the cash is received.
The  Company  recognizes  the  revenue  in  the  statement  of operations as the
telephone  service  is  utilized  or  when  the  calling  card  expires.

ADVERTISING  COSTS  -  Advertising  costs are expensed as incurred.  Advertising
expense  was  approximately  $30,000  and  $44,000  for  fiscal  2004  and 2003,
respectively.

INCOME  TAXES  - The Company accounts for income taxes under SFAS No. 109 ("SFAS
109"),  "Accounting  for Income Taxes."  Under SFAS 109, 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.  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.  A  valuation  allowance  is  provided  for  significant
deferred tax assets when it is more likely than not that such assets will not be
recovered.

STOCK-BASED  COMPENSATION  -  The  Company accounts for stock-based compensation
issued  to  employees  using  the  intrinsic value based method as prescribed by
Accounting  Principles  Board  Opinion  No. 25 ("APB 25"), "Accounting for Stock
Issued  to  Employees."  Under the intrinsic value based method, compensation is
the  excess,  if  any, of the fair value of the stock at the grant date or other
measurement  date  over  the  amount  an employee must pay to acquire the stock.
Compensation, if any, is recognized over the applicable service period, which is
usually  the  vesting  period.

SFAS  No.  123 ("SFAS 123"), "Accounting for Stock-Based Compensation," if fully
adopted,  changes the method of accounting for employee stock-based compensation
plans  to  the  fair  value  based method.  For stock options and warrants, fair
value  is  determined  using an option pricing model that takes into account the
stock  price  at  the  grant  date, the exercise price, the expected life of the
option  or  warrant  and  the  annual rate of quarterly dividends.  Compensation
expense,  if  any,  is  recognized  over the applicable service period, which is
usually  the  vesting  period.

SFAS No. 148 ("SFAS 148"), "Accounting for Stock-Based Compensation - Transition
and  Disclosure, an amendment of FASB Statement No. 123," was issued in December
2002  and is effective for fiscal years ending after December 15, 2002. SFAS 148
provides  alternative  methods  of transition for a voluntary change to the fair
value  method  of accounting for stock-based employee compensation. In addition,
this  Statement  amends  the  disclosure  requirements  of  SFAS  123 to require
prominent  disclosures in both annual and interim financial statements about the
method of accounting for stock-based employee compensation and the effect of the
method  used  on  reported  results.

The  adoption  of  the  accounting  methodology  of SFAS 123 is optional and the
Company  has  elected to continue accounting for stock-based compensation issued
to  employees  using  APB  25; however, pro forma disclosures, as if the Company
adopted  the  cost  recognition  requirements under SFAS 123, are required to be
presented.

At  June  30,  2004, the Company has two stock-based employee compensation plans
(see  Note  6).  For  fixed awards with pro-rata vesting, the Company recognizes
compensation  cost  ratably  over  the  vesting  period.  Stock-based  employee
compensation  cost  totaling  $110,251 and $113,925 is reflected in net loss for
the years ended June 30, 2004 and 2003, respectively, as certain options granted
under  those  plans  had  an  exercise  price  less than the market value of the
underlying  common  stock  on the date of grant. The following table illustrates
the  effect  on net income and earnings per share if the Company had applied the
fair  value  recognition  provisions  of  SFAS  123  to  stock-based  employee
compensation.

<TABLE>
<CAPTION>


                                                                   Years Ended June 30
                                                                     2004         2003
                                                                  ----------  ----------
<S>                                                               <C>         <C>
Net loss                                                          $(552,267)  $ (29,106)
    As reported
    Deduct: total stock-based employee compensation expense
         Determined under fair value based method for all awards   (237,507)   (251,600)
                                                                  ----------  ----------

    Pro-forma                                                     $(789,774)  $(280,706)
                                                                  ==========  ==========

Basic and diluted net loss per share:
    As reported                                                   $   (0.03)  $   (0.00)
                                                                  ==========  ==========
    Pro-forma                                                     $   (0.04)  $   (0.01)
                                                                  ==========  ==========
</TABLE>

                                      F-10
<PAGE>

                       GTC TELECOM CORP. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                   FOR THE YEARS ENDED JUNE 30, 2004 AND 2003


LOSS  PER  SHARE  - Statement of Financial Accounting Standards ("SFAS") No. 128
("SFAS  128"),  "Earnings  Per  Share,"  requires basic earnings per share to be
computed  by  dividing  income  available  to  common  shareholders  by  the
weighted-average  number  of  common  shares  outstanding  during  the period of
computation.  Diluted  earnings  per share is computed similar to basic earnings
per  share  except  that  the  denominator is increased to include the number of
additional  common  shares  that  would  have  been outstanding if the potential
common  shares had been issued and if the additional common shares were dilutive
(using  the  treasury  stock  method,  zero  and  51,806  shares  were potential
additional common shares as of June 30, 2004 and 2003, respectively).  Pro forma
per  share  data  has  been computed using the weighted average number of common
shares  outstanding  during  the periods.  For the years ended June 30, 2004 and
2003,  because  the  Company had incurred net losses, basic and diluted loss per
share  are the same as additional potential common shares would be anti-dilutive
(see  Note  11).

FAIR  VALUES  OF FINANCIAL INSTRUMENTS - SFAS 107, "Disclosures About Fair Value
of  Financial  Instruments," requires disclosure of fair value information about
financial  instruments  when  it  is  practicable  to  estimate that value.  The
carrying  amount  of  the  Company's cash, accounts receivables, trade payables,
accrued  expenses,  and  notes payables approximates their estimated fair values
due to the short-term maturities of those financial instruments.  The fair value
of  long  term  debts  approximates  its  carrying  value because their rates of
interest  approximate  current  market rates.  In the opinion of management, the
fair  value  of  the  note  receivable  from officer cannot be estimated without
incurring  excessive  costs;  for that reason, the Company has not provided such
disclosure.  Other  information about such related-party receivable (such as the
carrying amount, the interest rate, and maturity) is provided elsewhere in these
notes  to  consolidated  financial  statements.

COMPREHENSIVE  INCOME  - SFAS 130, "Reporting Comprehensive Income," establishes
standards  for  reporting and display of comprehensive income and its components
in a full set of general-purpose financial statements.  Total comprehensive loss
represents  the  net change in stockholders' equity during a period from sources
other  than  transactions  with stockholders and as such, includes net earnings.
For  the  Company, the components of other comprehensive loss are the changes in
the  cumulative  foreign  currency  translation  adjustments and are recorded as
components  of  stockholders'  deficit.

SEGMENTS  OF  AN ENTERPRISE AND RELATED INFORMATION - SFAS No. 131, "Disclosures
about Segments of an Enterprise and Related Information," changes the way public
companies  report  information  about segments of their business in their annual
financial statements and requires them to report selected segment information in
their  quarterly  reports  issued to shareholders.  It also requires entity-wide
disclosures  about  the  products  and services an entity provides, the material
countries  in which it holds assets and reports revenues and its major customers
(see  Note  13).

TRANSLATION  OF  FOREIGN CURRENCIES - GTC uses the U.S. dollar as its functional
currency  while  the  Company's  foreign subsidiary uses the Indian Rupee as its
functional  currency.  Assets  and  liabilities  of  foreign  subsidiary  are
translated  into  U.S.  dollars  at  year-end  exchange  rates, and revenues and
expenses  are  translated  at  average rates prevailing during the year or other
period  presented.  In  accordance  with  SFAS  No.  52,  "Foreign  Currency
Translation",  net  exchange gains or losses resulting from such translation are
excluded  from  net loss, but are included in comprehensive loss and accumulated
in  a  separate  component  of  stockholders'  deficit.  The  Company recorded a
foreign  translation  loss  of  $58,146  for  the year ended June 30, 2004 and a
foreign  translation  gain  of  $10,010  for  the  year  ended  June  30,  2003.

CASH  AND  CASH  EQUIVALENTS - The Company considers all highly liquid financial
instruments  with  an  original  maturity  of  three  months  or less to be cash
equivalents.  The  Company  had  no  cash  equivalents  at  June  30,  2004.

RECLASSIFICATIONS  -  Certain  reclassifications  have  been  made to prior year
financial  statements  to  conform  to  current  year  presentation.

                                      F-11
<PAGE>

                       GTC TELECOM CORP. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                    FOR THE YEARS ENDED JUNE 30, 2004 AND 2003

SIGNIFICANT  RECENT  ACCOUNTING  PRONOUNCEMENTS

In  November  2002,  the  FASB  issued  FIN  No. 45, "Guarantor's Accounting and
Disclosure  Requirements  for  Guarantees,  Including  Indirect  Guarantees  of
Indebtedness  of  Others."  FIN No. 45 clarifies that a guarantor is required to
recognize,  at  the  inception of a guarantee, a liability for the fair value of
the obligation undertaken in issuing the guarantee.  The initial recognition and
measurement  provisions  of  FIN No. 45 are applicable on a prospective basis to
guarantees  issued  or  modified  after  December 31, 2002, while the disclosure
requirements  became  applicable  in  2002.  The  Company  is complying with the
disclosure  requirements  of  FIN  No.  45.  The  other  requirements  of  this
pronouncement  did  not  materially  affect  the Company's financial statements.

SFAS  No.  148,  "Accounting  for  Stock-Based  Compensation  -  Transition  and
Disclosure, an amendment of FASB Statement No. 123," was issued in December 2002
and  is effective for fiscal years ending after December 15, 2002.  SFAS No. 148
provides  alternative  methods  of transition for a voluntary change to the fair
value  method of accounting for stock-based employee compensation.  In addition,
this pronouncement amends the disclosure requirements of SFAS No. 123 to require
more  prominent disclosure in both annual and interim financial statements about
the method of accounting for stock-based employee compensation and the effect of
the  method  used  on  reported  results.  The  Company  is  complying  with the
disclosure  requirements  of  SFAS  No.  148.

In January 2003, the FASB issued FIN No. 46, "Consolidation of Variable Interest
Entities,  an  Interpretation of ARB No. 51."  The primary objectives of FIN No.
46  are  to provide guidance on the identification of entities for which control
is  achieved through means other than voting rights (variable interest entities,
or  "VIEs"),  and  not  to  determine  when and which business enterprise should
consolidate  the  VIE.  Management has determined that the Company does not have
any  VIEs.

In  April  2003,  the  FASB issued SFAS No. 149, "Amendments of Statement 133 on
Derivative  Instruments  and  Hedging  Activities,"  which  amends and clarifies
financial accounting and reporting for derivative instruments, including certain
derivative  instruments  embedded  in other contracts and for hedging activities
under  SFAS No. 133.  This pronouncement is effective for contracts entered into
or  modified  after  June  30,  2003  (with certain exceptions), and for hedging
relationships  designated after June 30, 2003.  The adoption of SFAS No. 149 did
not  have  a  material  impact  on  the  Company's  financial  statements.

In  May  2003,  the  FASB issued SFAS No. 150, "Accounting for Certain Financial
Instruments  with Characteristics of both Liabilities and Equity."  SFAS No. 150
establishes  standards  for  how  an  issuer  classifies  and  measures  certain
financial instruments with characteristics of both liabilities and equity and is
effective  (except  for certain mandatorily redeemable noncontrolling interests)
for  financial  instruments  entered  into  or modified after May 31, 2003.  The
Company  adopted  SFAS  No.  150  on  June  1,  2003.  The  adoption  of  this
pronouncement  did  not  have  a  material  impact  on  the Company's results of
operations  or  financial  condition.

Other  recent  accounting  pronouncements  issued  by  the  FASB  (including its
Emerging  Issues  Task  Force),  the  American  Institute  of  Certified  Public
Accountants,  and  the  Securities  and  Exchange  Commission did not or are not
believed  by  Management  to  have a material impact on the Company's present or
future  financial  statements.

NOTE  2  PROPERTY  AND  EQUIPMENT

Property  and  equipment  consist  of  the  following  at  June  30,  2004:

Computer equipment              $  641,736
Furniture and office equipment     198,833
Telephone equipment                346,742
Leasehold Improvements             235,656
Automobiles                         51,382
                                ----------
                                 1,474,349
Less accumulated depreciation     (853,878)
                                ----------
                                $  620,471
                                ==========


                                      F-12
<PAGE>

                       GTC TELECOM CORP. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                   FOR THE YEARS ENDED JUNE 30, 2004 AND 2003

NOTE  3  OBLIGATION  UNDER  CAPITAL  LEASES

The  Company  is  a lessee of certain property and equipment under capital lease
obligations  that expire on various dates through August 2008.  The terms of the
capital  lease  obligations  provide  for  monthly  lease  payments ranging from
approximately $200 to $865.  The assets and liabilities under capital leases are
recorded  at the lower of the present value of the minimum lease payments or the
fair  market  value  of  the related asset.  The assets are depreciated over the
shorter  period  of  the  lease  term  or  the  estimate  useful  life.

Future  minimum  annual  commitments  under  lease  arrangements are as follows:

                Years  Ending
                  June  30,

                    2005                    $ 18,088
                    2006                      13,647
                    2007                      11,859
                    2008                      10,380
                    2009                       1,730
                                             -------


Total minimum future lease payments           55,704

Less:  Amounts representing interest         (10,772)
                                             -------

Present value of net minimum lease payments  $44,932
                                             =======

The  following is an analysis of the leased equipment under capital leases as of
June  30,  2004,  which  is  included  in  property  and  equipment  (Note  2).

          Computer equipment                      $24,536
          Telephone equipment                 48,180
                                             -------
                                              72,716
          Less: Accumulated depreciation     (34,120)
                                             -------
                                             $38,596
                                             =======

Interest  incurred  pursuant  to  the  capital  lease obligations was $3,600 and
$3,039  for  fiscal  years  2004  and  2003,  respectively.

NOTE  4  RELATED  PARTY  TRANSACTIONS

NOTE RECEIVABLE OFFICER

As  of  June  30,  2004,  the Company has net advances to an officer of $60,306.
Advances  were  made  prior  to enactment of the Sarbanes-Oxley Act of 2002. The
advances accrue interest at 10% (no interest income has been recorded as of June
30,  2004)  and  are  due  on  demand.  The  Company  has  reclassified the note
receivable  as  an  increase  to  stockholders'  deficit  in  the  accompanying
consolidated  balance  sheet  at  June  30,  2004.

                                      F-13
<PAGE>

                       GTC TELECOM CORP. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                    FOR THE YEARS ENDED JUNE 30, 2004 AND 2003


NOTE  5  NOTES  PAYABLE

On February 12, 2004, the Company borrowed $450,000 for working capital purposes
from  an  unrelated  third  party.  The  note  was to be repaid plus interest of
$48,000  upon  maturity at June 11, 2004.  In the event of default, the investor
shall  be  entitled  to 100,000 shares of the Company's restricted common stock.
In  addition,  the  Company  issued  to  the  third  party 150,000 shares of the
Company's  restricted  common stock valued at $11,688 (based on the market price
on  the  date of grant and the related pro-rata value of the common stock).  The
Company  recorded  the value of the common stock to interest expense in February
2004.  On  May 5, 2004, the note, as amended, was extended to July 15, 2004.  In
consideration  of the extension, the Company agreed to pay an additional $13,280
in  interest  and issue an additional 300,000 shares of the Company's restricted
common stock valued at $45,000 (based on the market price on the date of grant).
The  Company  recorded  the value of the common stock to interest expense in May
2004.

On  November 5, 2003, the Company borrowed $350,000 for working capital purposes
from  an  unrelated  third  party.  The  note  was to be repaid plus interest of
$37,333  upon  maturity at March 5, 2004.  In the event of default, the investor
shall  be  entitled  to 100,000 shares of the Company's restricted common stock.
In  addition,  the  Company  issued  to  the  third  party  20,000 shares of the
Company's restricted common stock valued at $2,581 (based on the market price on
the  date  of  grant  and  the related pro-rata value of the common stock).  The
Company  recorded  the value of the common stock to interest expense in November
2003.  On  March  5,  2004, the Company defaulted on the note and issued 100,000
shares  of  the Company's restricted common stock valued at $8,000 (based on the
market  price  on  the date of issuance) in accordance with the default terms of
the  note.  The  note  was renegotiated and $75,000 of the note plus interest of
$37,333 were repaid.  The new note of $275,000 was to be repaid plus interest of
$14,667  upon  maturity  at  May 5, 2004.  In the event of default, the investor
shall  be  entitled  to 100,000 shares of the Company's restricted common stock.
In  addition,  the  Company  issued  to  the  third  party 275,000 shares of the
Company's  restricted  common stock valued at $20,370 (based on the market price
on  the  date of grant and the related pro-rata value of the common stock).  The
Company  recorded  the  value  of  the common stock to interest expense in March
2004.  On  May 5, 2004, the note, as amended, was extended to July 15, 2004.  In
consideration  of  the  extension,  the  Company has agreed to pay an additional
$15,448  in  interest  and  issue the additional 100,000 shares of the Company's
restricted common stock valued at $15,000 (based on the market price on the date
of  grant).  The  Company  recorded  the  value  of the common stock to interest
expense  in  May  2004.

On  August  18,  2004,  these  2  notes, as amended, were combined into one note
totaling  $816,395,  incorporating all principal and interest owed, and extended
to November 30, 2004.  In consideration of the extension, the Company has agreed
to  pay an additional $73,350 in interest and issue an additional 250,000 shares
of  the Company's restricted common stock valued at $17,133 (based on the market
price  on  the  date of grant).  The Company will record the value of the common
stock  to  interest  expense  in  August  2004.

On  June 8, 2004, the Company borrowed $50,000 for working capital purposes from
an unrelated third party.  The note is to be repaid plus interest of $7,500 upon
maturity  at  September 7, 2004.  In the event of default, the investor shall be
entitled  to  accelerate  the  repayment  of the note.  In addition, the Company
issued to the third party 50,000 shares of the Company's restricted common stock
valued at $4,128 (based on the market price on the date of grant and the related
pro-rata  value  of  the  common  stock).  The Company recorded the value of the
common  stock  to  interest expense in June 2004.  The Company is currently past
due  on  this  note  and is in discussions to restructure the terms of the note.

On  December 9, 2003, the Company borrowed $200,000 for working capital purposes
from  an  unrelated  third  party.  The  note  was to be repaid plus interest of
$21,333  upon  maturity at April 8, 2004.  In the event of default, the investor
shall  be  entitled  to 100,000 shares of the Company's restricted common stock.
In  addition,  the  Company  issued  to  the  third  party  40,000 shares of the
Company's restricted common stock valued at $4,305 (based on the market price on
the  date  of  grant  and  the related pro-rata value of the common stock).  The
Company  recorded  the value of the common stock to interest expense in December
2003.  On  May 17, 2004, the note, as amended, was extended to July 19, 2004. In
consideration  of  the  extension,  the  Company has agreed to pay an additional
$18,667  in  interest  and  issue  an additional 200,000 shares of the Company's
restricted common stock valued at $22,000 (based on the market price on the date
of  grant).  The  Company  recorded  the  value  of the common stock to interest
expense in May 2004.  As of June 30, 2004, the Company has repaid $100,000.  The
principal  balance due at June 30, 2004 is $100,000.  The note is in default and
the  Company  is  currently in discussions to restructure the terms of the note.

On  October  9, 2003, the Company borrowed $300,000 for working capital purposes
from  an  unrelated  third  party.  The note was repaid plus interest of $32,000
upon  maturity  at February 17, 2004.  In the event of default, the investor was
entitled  to  100,000  shares  of  the  Company's  restricted  common stock.  In
addition,  the  Company issued to the third party 60,000 shares of the Company's
restricted  common stock valued at $6,458 (based on the market price on the date
of  grant  and  the  related  pro-rata  value of the common stock).  The Company
recorded  the  value  of  the  common stock to interest expense in October 2003.
There  were  no  defaults  under  this  note.

In  connection  with  the  notes  payable  discussed above, the Company incurred
finder's  fees  in  the  amount of approximately $202,000.  As a result, for the
year  ended June 30, 2004, the Company recorded a debt discount of approximately
$202,000  to  interest  expense  in  the accompanying consolidated statements of
operations  and  comprehensive  loss.

                                      F-14
<PAGE>

                       GTC TELECOM CORP. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                   FOR THE YEARS ENDED JUNE 30, 2004 AND 2003

On  October  2,  2002,  and amended on April 1, 2004, the Company renegotiated a
previous note payable (the "Previous Note") due to an unrelated third party into
a  new  note  payable  (the  "New  Note").  The Previous Note had an outstanding
balance  of $45,000 on the date of renegotiation. The New Note, as amended, pays
simple  interest  of 12% per annum with principal and interest due upon maturity
at  May  21,  2004.  In  addition,  the Company issued to the third party 45,000
shares  of  the Company's restricted common stock valued at $4,821 (based on the
market  price  on the date of grant and the related pro-rata value of the common
stock).  The  Company recorded the value of the common stock to interest expense
in  April  2004.  On July 21, 2004, the note, as amended and extended, calls for
payments  of  $20,000  due on July 21, 2004, $15,000 due on August 21, 2004, and
$10,000  due  on  September  21,  2004.  In  consideration of the extension, the
Company  has  agreed  to  issue  an  additional  45,000  shares of the Company's
restricted  common stock valued at $2,944 (based on the market price on the date
of  grant).  The  Company  will record the value of the common stock to interest
expense in July 2004. As of August 29, 2004, the Company has not made the August
21 and September 21 payments pursuant to the extension. The Company is currently
in  discussions  to  restructure  the  terms  of  the  note.

On  April  15,  2004, the Company borrowed $25,000, bearing no interest, from an
employee  of the Company for working capital purposes.  The borrowing was repaid
on  April  26,  2004.  In  addition,  the  Company issued to the employee 25,000
shares  of  its  restricted  common  stock valued at $2,273 (based on the market
price  on the date of grant and the related pro-rata value of the common stock).
The  Company amortized the value of the related common stock to interest expense
in  April  2004.

In  September  2003,  the  Company borrowed $25,000 for working capital purposes
from  a  third  party.  The  note  pays  simple  interest  of  8% per annum with
principal  and  interest due upon maturity at December 3, 2003.  In the event of
default, the investor shall be entitled to accelerate the repayment of the note.
In  addition,  the  Company  issued  to  the  third  party  25,000 shares of the
Company's restricted common stock valued at $3,070 (based on the market price on
the  date  of  grant  and  the related pro-rata value of the common stock).  The
Company  recorded the value of the common stock to interest expense in September
2003.  On  December  3,  2003,  the  note  plus  interest  of  $504 were repaid.

In  April  2003,  Perfexa-U.S.  issued  a  short-term  convertible  note  with a
principal  amount  of  $125,000  to an unrelated third party investor.  The note
provides  for  simple  interest of 10% per annum with principal and interest due
upon maturity at July 31, 2003.  Pursuant to the terms of the note, the note may
be  converted,  at  the  election of the noteholder prior to the maturity of the
note, into shares of common stock of Perfexa-U.S. at the rate of $0.50 per share
(estimated to be the fair market value on the date of issuance, based on current
third  party  transaction).  In  August 2003, the Company repaid $100,000 of the
principal  balance  and  issued  8,152  shares of Perfexa-U.S. restricted common
stock valued at $4,076 (based on the terms of the note) in lieu of an equivalent
amount  of  interest  due on the note.  In the three month period ended December
31,  2003,  the  Company  repaid the remaining $25,000 of the principal balance.

The  Company  maintains  a  revolving  line  of credit of $20,000 to finance the
purchase  of  computer equipment.  The revolving line of credit provides for the
Company  to  make  monthly  payments  of  $451,  including interest at a rate of
12.99%.  The  total  outstanding  balance  on  the  revolving line of credit was
$14,139  and  is  included  in  notes  payable  in the accompanying consolidated
balance  sheet at June 30, 2004.  As of the date of this report, the Company has
made  all  payments  as  required  in  the  revolving  line  of  credit.

The  Company  from time to time borrows funds from the Company's Chief Executive
Officer  ("CEO")  for  working capital purposes.  Amounts accrue no interest and
are  payable on demand. On April 15, 2004, the Company borrowed $12,000 from its
CEO.  As  of  August  29,  2004,  the  Company  has  repaid $8,000 of the amount
borrowed.

                                      F-15
<PAGE>

                       GTC TELECOM CORP. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                   FOR THE YEARS ENDED JUNE 30, 2004 AND 2003

On  September  30, 2002, and amended on May 30, 2003, the Company renegotiated a
previous note payable due to MCI into a new note payable (the "New Note"). As of
June 30, 2004, the New Note has an outstanding balance of $4,925,437. On July 1,
2004,  the  Company received notice from MCI that it was in default of the terms
of  the above note as well as the Telecommunications Services Agreement and Data
Services  Agreement  between  MCI  and  GTC.  According  to MCI, GTC has a total
balance  due  MCI  of  approximately  $5,679,329.  The  Company is attempting to
resolve  its  outstanding  balance  and  the amounts past due with MCI. However,
there can be no guarantees that the Company will be successful in its efforts to
reach an amicable resolution with MCI regarding the amounts past due. Failure to
successfully restructure the amounts due MCI will have a material adverse effect
on  the  Company's  operations.

Future minimum principal payments on notes payable approximate the following for
the  years  ending  June  30:

       2005     $  5,868,597
       2006           21,826
       2007            1,739
                ------------
                $  5,892,162
                ============

NOTE  6  STOCK  OPTIONS

From  time  to  time,  the  Company  issues  stock  options  pursuant to various
agreements  and  other compensatory arrangements to employees and third parties.

2001  Stock  Incentive  Plan

On  October  17,  2001, the Company's Board approved the GTC Telecom Corp. Stock
Incentive  Plan  (the  "SIP Plan"), effective January 1, 2002.  The SIP Plan was
approved  and ratified by the shareholders on December 13, 2001 at the Company's
2001  annual  shareholder's  meeting.  The  SIP  Plan  provides for the grant of
various  types of equity based incentives, including qualified and non-qualified
stock  options,  stock appreciation rights, restricted stock, bonuses, and other
awards.  A  maximum  of  5,000,000  shares  of the Company's common stock may be
issued  pursuant  to the SIP Plan.  The SIP plan is administered by the Board of
Directors.

During  the  year  ended  June  30,  2004, the Company issued options to certain
employees  to  purchase  an  aggregate  of  56,000  shares  of common stock at a
weighted  average  exercise  price  of  $0.12 per share pursuant to the SIP Plan
(each  issuance  exercise  priced  at  the  estimated  fair  market value of the
Company's  common stock on the date of grant).  As of August 29, 2004, 50,000 of
these  options  have been forfeited.  The remaining options vest over five years
from  the  date  of  grant  and  are  exercisable  through  December  2013.

During  the year ended June 30, 2004, the Company issued options pursuant to the
SIP Plan to certain board of directors to purchase an aggregate of 30,000 shares
of  common  stock, at a weighted average exercise price of $0.12 per share (each
issuance  exercise  priced  at  the estimated fair market value of the Company's
common  stock  on the date of grant).  As of August 29, 2004, these options have
been  forfeited.

No  employee compensation expense was recognized under APB 25 for options issued
to  employees  under  the  SIP  Plan  during  the  year  ended  June  30,  2004.

1999  Stock  Option  Plan

On  September  20, 1999, the Company's Board approved the GTC Telecom Corp. 1999
Omnibus  Stock  Option  Plan, effective October 1, 1999.  The exercise price for
each option shall be equal to 25% to 100% of the fair market value of the common
stock  on the date of grant, as defined, and shall vest over a five-year period.
Upon  the  approval  and  ratification  of the SIP Plan , the Company elected to
terminate  the  1999  Omnibus  Stock  Option  Plan.

                                      F-16
<PAGE>

                       GTC TELECOM CORP. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                   FOR THE YEARS ENDED JUNE 30, 2004 AND 2003

Non-Plan  Issuances

In  February  2004,  the  Company's  Chief  Financial  Officer exercised options
(previously  granted  pursuant  to his director compensation plan) to purchase a
total  of  2,500  shares  of  the  Company's  common  stock  for  $25.

The  Company  recorded compensation expense for the vesting of previously issued
"in the money" options to employees of $110,251 and $113,925 in the fiscal years
ended  June  30,  2004  and  2003,  respectively.

A  following  is  a status of the stock options outstanding at June 30, 2004 and
2003  and  the  changes  during  the  years  then  ended:

<TABLE>
<CAPTION>
                                                  2004                  2003
                                        --------------------------------------------
                                                       Weighted        Weighted
                                                       Average         Average
                                                       Exercise        Exercise
                                          Options       Price      Options    Price
                                        ------------  ---------  -----------  ------
<S>                                     <C>           <C>        <C>          <C>
Outstanding, beginning of year            3,356,900   $    0.80   4,592,600   $ 0.75
       Granted                               86,000        0.12     475,000     0.18
       Exercised (see Note 8)                (2,500)       0.01     (42,500)    0.01
       Expired/Forfeited                 (1,176,400)       0.57  (1,668,200)    0.86
                                        ------------  ---------  -----------  ------
Outstanding, end of year                  2,264,000   $    0.62   3,356,900   $ 0.62
                                        ============  =========  ===========  ======
Exercisable at end of year                1,477,560   $    0.75   1,819,580   $ 0.80
                                        ============  =========  ===========  ======
Wtd avg fair value of options granted                 $    0.10               $ 0.17
                                                      ---------               ------
</TABLE>

The following table summarizes information concerning currently outstanding and
exercisable  options at June 30, 2004:
<TABLE>
<CAPTION>


                                 WEIGHTED       WEIGHTED                  WEIGHTED
                NUMBER OF        AVERAGE        AVERAGE     NUMBER OF     AVERAGE
  EXERCISE       OPTIONS        REMAINING       EXERCISE     OPTIONS      EXERCISE
PRICE RANGE    OUTSTANDING  CONTRACTUAL LIFE     PRICE     EXERCISABLE     PRICE
-------------  -----------  -----------------  ----------  ------------  ---------
<S>            <C>          <C>                <C>         <C>           <C>

0.01 - $1.00    1,540,600         6.21 years  $     0.29       842,360  $    0.28
1.01 - $2.00      671,400         3.89 years  $     1.15       585,000  $    1.14
2.94 - $5.00       52,000         0.89 years  $     3.93        50,200  $    3.97
               -----------                                  -----------

                2,264,000         4.22 years  $     0.66     1,477,560  $    0.86
               ===========                                  ===========
</TABLE>

Other  Information:

The fair market value of each option granted in 2004 and 2003 is estimated using
the  Black-Scholes  option  pricing  model  per  SFAS  123.  The  Black-Scholes
option-pricing  model  used  the  following weighted average assumptions for the
years ended June 30, 2004 and 2003, respectively: (i) no dividend yield for each
year,  (ii)  volatility  of  287  percent  and  173 percent, respectively, (iii)
risk-free interest rate of 3.00 percent and 3.13 percent, respectively, and (iv)
expected  life  of  5.0  years  and  4.8  years,  respectively.

                                      F-17
<PAGE>

                       GTC TELECOM CORP. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                   FOR THE YEARS ENDED JUNE 30, 2004 AND 2003

NOTE  7  WARRANTS

From  time  to  time, the Company issues warrants pursuant to various consulting
agreements.

In  April 2004, the Company entered into an agreement with an outside consultant
for  investor relations services.  Pursuant to the agreement, the Company agreed
to  pay  $10,000  per month for services and following an initial term of twelve
(12)  months,  the  agreement  shall  automatically terminate.  In addition, the
Company  agreed to issue to the investor relations company, warrants to purchase
up  to  500,000  shares  of  the  Company's  common stock.  The warrants have an
exercise price of $0.13 per share and are valued at approximately $65,000 (based
on  the  Black  Scholes  pricing model) which the Company recorded to consulting
expense in April 2004, since management believes the services were substantially
provided  in the Company's fourth quarter. The warrants vest immediately and are
exercisable  for  a  period  of  three  years  from  the  date  of  issuance.

In  March 2003, pursuant to an agreement with an outside consultant for investor
services,  the  Company  issued  warrants to purchase up to 40,000 shares of the
Company's restricted common stock at an exercise price of $0.25 per share valued
at  approximately  $6,400  (based  on the Black-Scholes pricing model) which the
Company  recorded  to  consulting expense in April 2003.  The warrants vested in
April  2003  and  are  exercisable  for  a  period of two years from the date of
issuance.

In October 2002, pursuant to a note with a third party (see Note 5), the Company
granted  warrants  to  purchase 25,000 shares of the Company's restricted common
stock  at  an  exercise  price of $0.25 per share valued at approximately $2,595
(based  on the Black-Scholes pricing model and the related pro-rata value of the
warrants).  The  warrants  vest  immediately and are exercisable for a period of
two  years  from  the  date  of  issuance.  The amount was amortized to interest
expense in the accompanying consolidated statements of operations for the fiscal
year  ended  June  30,  2003.

In  September  2002,  pursuant  to  an  agreement with an outside consultant for
investor  and public relations services, the Company issued warrants to purchase
up  to  25,000  shares  of  the Company's restricted common stock at an exercise
price  of  $0.20  per  share  valued  at  approximately  $4,500  (based  on  the
Black-Scholes  pricing  model),  which was recorded to consulting expense in the
accompanying consolidated statement of operations for the fiscal year ended June
30,  2003.  The  warrants  vest  immediately and are exercisable for a period of
three years from the date of issuance and contain piggyback registration rights.

In August 2002, pursuant to an agreement with an outside consultant for investor
and  public  relations  services,  the Company issued warrants to purchase up to
100,000  shares of the Company's restricted common stock at an exercise price of
$0.17  per  share  valued  at  approximately $16,000 (based on the Black-Scholes
pricing  model).  The  warrants  vest 25,000 upon execution of the agreement and
25,000 every three months thereafter, so long as the Company retains the outside
consultant.  The  warrants  are exercisable for a period of three years from the
date of issuance and contain piggyback registration rights.  During fiscal 2003,
all  100,000 warrants vested, in which the Company recorded the related value of
$16,000  as investor relations expense under selling, general and administrative
expenses  in  the  accompanying  consolidated  statements  of  operations.

The  following represents a summary of the warrants outstanding at June 30, 2004
and  2003  and  changes  during  the  years  then  ended:

<TABLE>
<CAPTION>


                                              2004                       2003
                                    -------------------------------------------------------
                                                   Weighted                     Weighted
                                                   Average                      Average
                                     Warrants   Exercise Price   Warrants   Exercise Price
                                    ----------  ---------------  ---------  ---------------
<S>                                 <C>         <C>              <C>        <C>
Outstanding, beginning of year        640,000   $          0.45   490,000   $          0.51
       Granted                        500,000              0.13   190,000              0.20
       Exercised                           --                --        --                --
       Expired/Forfeited             (100,000)             1.02   (40,000)             0.50
                                    ----------  ---------------  ---------  ---------------
Outstanding, end of year            1,040,000   $          0.22   640,000   $          0.45
                                    ==========  ===============  =========  ===============
Exercisable at the end of the year  1,040,000   $          0.22   640,000   $          0.45
                                    ==========  ===============  =========  ===============
</TABLE>

                                      F-18
<PAGE>

                       GTC TELECOM CORP. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                   FOR THE YEARS ENDED JUNE 30, 2004 AND 2003

The outstanding and exercisable warrants above have prices ranging between $0.13
and  $0.50,  with  a  weighted  average remaining contractual life of 3.2 years.

The  fair  value of each warrant granted during 2004 and 2003 is estimated using
the  Black-Scholes option-pricing model on the date of grant.  The Black-Scholes
option-pricing  model  used  the  following weighted average assumptions for the
years ended June 30, 2004 and 2003, respectively: (i) no dividend yield for each
year,  (ii)  volatility  of  306  percent  and  212 percent, respectively, (iii)
risk-free interest rate of 1.5  percent and 3.02 percent, respectively, and (iv)
expected  life  of  3.0  years  and  2.8  years,  respectively.

NOTE  8  COMMON  STOCK  ISSUANCES

In  February  2004,  the  Company's  Chief  Financial  Officer exercised options
(previously  granted  pursuant  to his director compensation plan) to purchase a
total  of  2,500  shares  of  the  Company's  common  stock  for  $25.

During  the year ended June 30, 2004, the Company issued 1,390,000 shares of the
Company's restricted common stock in connection with notes payable (see Note 5).

During  the fourth quarter of the fiscal year ended June 30, 2003, in connection
with  a  note  payable,  the  Company  issued  30,000  shares  of  the Company's
restricted  common  stock  valued  at  approximately $5,181 (based on the market
price  on  the  dates  of  issuance).

In  May  2003, the Company's Chief Executive Officer and the Company's President
exercised  options  (previously  granted pursuant to their director compensation
agreement) to purchase a total of 17,500 and 25,000 shares, respectively, of the
Company's  common  stock  for  $175  and  $250,  respectively.

In  December  2002,  pursuant  to  a note with a third party, the Company issued
10,000  shares  of the Company's restricted common stock valued at $1,485 (based
on  the  market price on the date of grant and the related pro-rata value of the
common  stock).

In  October  2002,  pursuant  to  a  note with a third party, the Company issued
25,000  shares  of the Company's restricted common stock valued at $3,066 (based
on  the  market price on the date of grant and the related pro-rata value of the
common  stock).

NOTE  9  INCOME  TAXES

The tax effects of temporary differences that give rise to deferred taxes are as
of  June  30,  2004:

Deferred tax asset:
      Net  operating  loss  carryforward         $9,250,000
      Allowance  for  doubtful  accounts             20,000
                                                 ----------

      Total gross deferred tax asset              9,270,000

      Less valuation allowance                   (9,270,000)
                                                 ----------

      Net deferred tax asset                     $       --
                                                 ==========

No current provision for income taxes for the years ended June 30, 2004 and 2003
is  significant  since  the  Company  incurred taxable losses during such years.

                                      F-19
<PAGE>

                       GTC TELECOM CORP. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                   FOR THE YEARS ENDED JUNE 30, 2004 AND 2003

The  provision  for  income  taxes for fiscal 2004 and 2003 was $800 and differs
from the amount computed by applying the U.S.  Federal income tax rate of 34% to
loss  before  income  taxes  as  a  result  of  the  following  as  of:

                                                              June  30,

                                                            2004     2003

Computed tax benefit at federal statutory rate         $(190,000)     $(23,000)
     State income tax benefit, net of federal effect     (30,000)       (4,000)
     Change in valuation allowance                       173,000        27,000
     Other                                                60,753         2,760
                                                       _________     _________
                                                       $  13,753      $  2,760

As  of  June  30,  2004, the Company had tax net operating loss carryforwards of
approximately  $23,000,000  and  $11,500,000  for  federal  and state income tax
reporting  purposes,  respectively,  which  begin  expiring  in  2014  and 2005,
respectively.  Effective  September 11, 2002, pursuant to California revenue and
tax  code  section 24416.3, no net operating loss deduction would be allowed for
any  taxable  year  beginning on or after January 1, 2002, and before January 1,
2004.  For  any  suspended losses, the carryover period would be extended by one
year for losses incurred in tax years beginning on or after January 1, 2002, and
before  January  1,  2003; and by two years for losses incurred in taxable years
beginning  before  January  1,  2002.

In  the  event  the  Company  were  to  experience  a greater than 50% change in
ownership  as  defined  in  Section  382  of  the  Internal  Revenue  Code,  the
utilization  of the Company's net operating loss carryforwards could be severely
restricted.

NOTE  10  COMMITMENTS  AND  CONTINGENCIES

PAYROLL  TAXES  -At June 30, 2004, the Company has accrued approximately $28,000
related  to  penalties and interest in connection with past due payroll taxes of
prior  periods.  This  accrual  was repaid in July 2004.  The Company has verbal
confirmation  from  the IRS that this matter has been settled with no additional
amounts  owed  to  the  IRS.

STOCK  PURCHASE  AGREEMENT  -  Pursuant  to  a  common  stock purchase agreement
("Agreement")  with Bluefire Capital, Inc. ("Bluefire"), the Company is entitled
to  issue  and  sell  common stock to Bluefire in the form of draws for up to an
aggregate  of $20,000,000, as defined in the Agreement, from time to time during
a  three  year  period  beginning  on  the  date  of  the filing of an effective
registration  statement.  On November 20, 2001, the Company filed a registration
statement  under  the Securities Act with the Securities and Exchange Commission
("SEC")  for  15,000,000  shares  available  to  be issued to Bluefire under the
Agreement  should the Company choose to draw down on these shares and on January
23,  2002,  the  registration statement was declared effective.  Pursuant to the
Agreement,  the  Company  must  draw  a minimum of $500,000 over the term of the
Agreement,  or the Company shall pay liquidated damages equal to one-half of the
amount  not  drawndown, in an amount up to $250,000.  As of August 29, 2004, the
Company  has  not  drawn  under  this  Agreement.

OPERATING  LEASES  -  The  Company leases a total of 7,651 square feet of office
space  for  its  headquarters  and  customer  service  operations in Costa Mesa,
California  at  a  monthly  rental rate of $14,745 pursuant to a six month lease
agreement  ending  February  28,  2005.

Effective  October  1, 2002, Perfexa-U.S.'s Indian subsidiary, Perfexa Solutions
Pvt.  Ltd.  ("Perfexa-India"), began leasing approximately 15,422 square feet of
office  space in Gurgaon, India, a suburb of New Delhi, at a monthly rate of Rs.
524,348  (approximately  $11,400)  per  month.  This  facility  serves  as
Perfexa-India's  call center, IT development center, and administrative offices.
The lease is for a term of three years with an option to renew for an additional
three  year  term with an increase in the rental rate of 20%.  Effective October
1,  2002,  Perfexa-India  also  entered into a maintenance agreement for its New
Delhi  facility.  Pursuant  to  the  terms  of  the  agreement, Perfexa-India is
obligated to pay a monthly maintenance fee of Rs. 138,798 (approximately $3,000)
per  month  for  the  first  twelve months.  Thereafter, the monthly fee will be
calculated  based  on the actual costs of maintenance (including electricity and
water)  plus  a  20%  mark-up.

                                      F-20
<PAGE>

                       GTC TELECOM CORP. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                   FOR THE YEARS ENDED JUNE 30, 2004 AND 2003

Future  minimum  annual  commitments under long-term facility lease and supplier
arrangements  (see  below)  approximate  the  following:

<TABLE>
<CAPTION>
<S>            <C>                     <C>        <C>         <C>

Years Ending   Facility Leases         Internet   Telecom
June 30,       and Other Commitments   Supplier   Supplier    Total
-------------  ----------------------  ---------  ----------  ----------
2005           $              295,000  $ 525,000  $  369,000  $1,189,000
2006                           43,000         --     323,000     366,000
2007                               --         --      50,000      50,000
               ----------------------  ---------  ----------  ----------
               $              338,000  $ 525,000  $  742,000  $1,605,000
               ======================  =========  ==========  ==========
</TABLE>

Rent  expense for the fiscal years ended June 30, 2004 and 2003 was $433,953 and
$408,065,  respectively.

CONTRACTS  AND  AGREEMENTS  -  The  Company  does  not own its own long distance
network and currently depends upon third parties to provide for the transmission
of  phone  calls  by  its  customers and to provide the call detail records upon
which  the  Company  bases  its  customer's  billings.  Previously,  the Company
contracted  with  MCI  WorldCom Network Services, Inc. ("MCI") as its underlying
carrier.  On  July  1, 2004, the Company received notice from MCI that it was in
default  of  the  terms  of  its  Promissory  Note  with  MCI  as  well  as  the
Telecommunications  Services  Agreement  and Data Services Agreement between MCI
and  GTC.  According  to  MCI,  GTC has a total balance due MCI of approximately
$5,679,329  at  June  30,  2004.  The  Company  is  attempting  to  resolve  its
outstanding  balance and the amounts past due with MCI. However, there can be no
guarantees  that  the  Company  will  be  successful  in its efforts to reach an
amicable  resolution  with  MCI  regarding  the  amounts  past  due.  Failure to
successfully restructure the amounts due MCI will have a material adverse effect
on  the  Company's  operations.

In  order to minimize service disruptions to the Company's customers, on July 7,
2004,  the  Company transferred its customer accounts to its alternate supplier,
Sprint  Communications  Company  L.P.  ("Sprint").  As  a  consequence  of  this
conversion, a not yet determined number of the Company's long distance customers
have either left the Company or were not successfully converted due to technical
issues.  As  a  result, the Company has experienced an approximate 16% reduction
in  its  call  volumes and corresponding revenues.  The Company is attempting to
resolve  all  outstanding  technical issues relating to this conversion and will
continue  to  market  its  services in order to re-acquire or add new customers.
Pursuant  to  the terms of its agreement with Sprint, as amended, the Company is
obligated to a monthly minimum of $25,000 through July 26, 2006.  For any period
during which the Company fails to meet its monthly minimum, the Company would be
liable  for  25%  of  the  difference between the Company's actual usage and the
stated  minimum.  The  Company may terminate the agreement upon ninety (90) days
written  notice provided that the Company pays a termination fee equal to 50% of
the aggregate minimum revenue requirement for the remaining term of the contract
if  the Company terminates for convenience or by default of the Company prior to
the  expiration  date  which  was  $371,000  as  of  June  30, 2004.  Sprint may
terminate  the  agreement  upon thirty (30) days written notice and then only in
the  event that the Company is in material breach of the agreement.  However, in
cases  of  nonpayment,  Sprint may elect to immediately terminate the Agreement.

The  termination  of  the  Company's  contract  with  Sprint,  the  loss  of
telecommunications services provided by Sprint, or a reduction in the quality of
service the Company receives from Sprint could have a material adverse effect on
the  Company's  results  of  operations.  In  addition,  the accurate and prompt
billing of the Company's customers is dependent upon the timeliness and accuracy
of  call  detail  records  provided  to  the Company by Sprint.  There can be no
assurance  that  accurate  information  will  be  provided by Sprint on a timely
basis,  the  failure  of  which  would  have  a  material  adverse effect on the
Company's  results  of  operations.

In  the  event  that  the  services  provided  by  Sprint  to  the  Company were
discontinued,  the  Company believes that it would be able to identify alternate
suppliers  which  would be able to provide it with sufficient levels of services
at  terms  similar  to  those  of Sprint.  Although the Company has the right to
switch  its  current customers to an alternate underlying carrier, the Company's
customers  have  the  right to discontinue their service with the Company at any
time.  Accordingly,  the  termination  or  non-renewal of the Company's contract
tariffs  with  Sprint or the loss of telecommunications services from Sprint may
have  a  material  adverse  effect  on  the  Company's results of operations and
financial  condition.

                                      F-21
<PAGE>

                       GTC TELECOM CORP. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                   FOR THE YEARS ENDED JUNE 30, 2004 AND 2003

GTC  does  not  currently have its own Internet Network.  Currently, the Company
provides  its Internet Service Provider Access services pursuant to an agreement
with  a  third  party  company  for  the  provisioning of the Company's Internet
Service  Provider  Access  service.  The Company is not obligated to any monthly
minimums  under  its  agreement  with  its underlying Internet service provider.
Although  the  Company  believes  that  its  relationship  with  its third-party
provider  is strong and should remain so with continued contract compliance, the
termination  of the Company's contract with its underlying provider, the loss of
Internet  services provided by these companies, or a reduction in the quality of
service  the  Company receives from these companies could have an adverse effect
on the Company's internet operations.  In the event that its underlying provider
was  to discontinue its service to the Company, the Company believes, based upon
discussions that the Company has had with other Internet service providers, that
it  could  negotiate  and  obtain  contracts  with Internet service providers at
comparable  rates.

ACQUISITION  -  On April 23, 2004, the Company entered into an agreement for the
acquisition of Telspan, Inc., a California corporation ("Telspan").  Pursuant to
the  Reorganization  and  Stock Purchase Agreement (the "Acquisition Agreement")
entered  into  between  the  Company,  Telspan,  Inc.  and its shareholders, the
Company  agreed  to  acquire 100% of the outstanding capital stock of Telspan in
exchange  for  that  number  of shares of the Company's common stock which would
equate to 84% of the outstanding capital stock of the Company on a fully diluted
basis following the acquisition.  Closing of the acquisition is conditioned upon
various  events,  including  the approval of the Company's stockholders and upon
Telspan's  successful  acquisition  of certain telecommunications assets.  As of
August  29,  2004,  Telspan  has  not  completed  the  acquisition  of  the
telecommunications  assets.  There can be no assurances that Telspan Acquisition
will  be  successfully  completed.

In  a  related  agreement,  the  Company  on  April  23,  2004  agreed to sell a
controlling  interest in its Perfexa subsidiary to the shareholders of Infospan,
Inc.,  a  California  company commonly controlled by some of the shareholders of
TelSpan.  Closing  of  the  sale  of the controlling interest is conditioned, in
part,  upon the approval of the Company's stockholders as well as the generation
of  certain  amounts  of  business  for  Perfexa.  As  of  August 29,2004, these
conditions  have  not  been  completed and therefore, there can be no assurances
that  the  Infospan  transaction  will  be  successfully  completed.

NOTE  11  LOSS  PER  SHARE

The  following  is  a  reconciliation  of  the  number  of  shares  used  in the
calculation  of  basic earnings per share and diluted earnings per share for the
years  ended  June  30,  2004  and  2003:

<TABLE>
<CAPTION>
<S>                                                       <C>           <C>
                                                               2004          2003
                                                          ------------  ------------
Net loss                                                  $  (552,267)  $   (29,106)


Weighted average number of common shares outstanding       21,096,423    20,634,314
Incremental shares from the assumed exercise of dilutive
  stock options and warrants                                       --        51,806
                                                          ------------  ------------
Dilutive potential common shares                           21,096,423    20,686,120
                                                          ============  ============

Net earnings per share:
Basic                                                     $      0.03   $      0.00
                                                          ============  ============
Diluted                                                   $      0.03   $      0.00
                                                          ============  ============
</TABLE>

For  the  years  ended  June 30, 2004 and 2003, potentially dilutive incremental
shares  totaling  0  and 51,806, respectively, (based on the assumed exercise of
dilutive  stock  options  and  warrants  to  acquire  0  and  277,500  shares,
respectively,  of  the  Company's  common  stock)  were  not  included  in  the
computation  of  diluted  net loss per share because the Company had a net loss,
which  would make their inclusion antidilutive. Options and warrants to purchase
3,304,000  and  3,719,400  shares  of  the  Company's  common  stock  that  were
outstanding  at  June  30,  2004  and  2003,  respectively,  were not considered
potentially  dilutive because the exercise price of the options and warrants was
greater  than  the average market price of the common shares and, therefore, the
effect  of  their  inclusion  would  be  antidilutive.

                                      F-22
<PAGE>

                       GTC TELECOM CORP. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                   FOR THE YEARS ENDED JUNE 30, 2004 AND 2003

NOTE  12  -  PERFEXA  SOLUTIONS  SUBSIDIARY

In  October  2003,  Perfexa  issued  15,000  shares  of restricted common stock,
resulting  in net proceeds to Perfexa of $15,000, to an "accredited" investor at
a  price  of  $1.00  per  share.

On June 3, 2003, Perfexa-U.S. issued a confidential private placement memorandum
("PPM")  of  2,000,000  shares of Perfexa's restricted common stock at $1.00 per
share.  As  of  September  30,  2003, Perfexa had sold 60,000 shares pursuant to
this  offering,  resulting  in net proceeds of $54,000 which were transferred to
GTC as partial repayment of accrued advances.  The PPM closed on August 31, 2003
with  no  additional  investments.

During  fiscal  year 2003, Perfexa-U.S. issued an aggregate of 210,000 shares of
its  restricted  common  stock  to third party investors at a price of $0.50 per
share,  resulting  in  cash  of  $92,900,  net  of  offering  costs  of $12,100.

NOTE  13  BUSINESS  SEGMENT  INFORMATION

Segment and geographical information is assigned by region based upon management
responsibility  for  such items.  The following table presents information about
the  Company's operations by geographical area for the years ended June 30, 2004
and  2003.


<TABLE>
<CAPTION>


                                            2004           2003
                                      ---------------  ------------
     Revenues
     --------
<S>                                   <C>              <C>
    Telecommunications and Internet   $   10,878,944   $15,147,658
    BPO
       Perfexa-U.S.                           78,644            --
       Perfexa-India                              --            --
                                      ---------------  ------------
         Total                        $   10,957,588   $15,147,658
                                      ===============  ============

Cost of Sales
-------------
    Telecommunications and Internet   $    4,777,138   $ 7,410,590
    BPO
       Perfexa-U.S.                           59,239            --
       Perfexa-India                              --            --
                                      ---------------  ------------
         Total                        $    4,836,377   $ 7,410,590
                                      ===============  ============

Operating Income (Loss)
-----------------------
    Telecommunications and Internet   $    3,013,166   $ 1,813,280
    BPO
       Perfexa-U.S.                       (2,396,369)   (1,341,974)
       Perfexa-India                          84,500      (476,904)
                                      ---------------  ------------
         Total                        $      701,297   $    (5,598)
                                      ===============  ============

Capital Expenditures
--------------------
    Telecommunications and Internet   $      146,181   $    18,090
    BPO
       Perfexa-U.S.                            7,864        28,609
       Perfexa-India                         163,784       496,997
                                      ---------------  ------------
         Total                        $      317,829   $   543,696
                                      ===============  ============


Identifiable assets are assigned by region based upon management responsibility.
The following table presents information about the Company's identifiable assets
by  geographic  region:

                                       June 30, 2004    June 30, 2003
Assets
------
    Telecommunications and Internet   $    1,002,223   $ 1,222,734
    BPO
       Perfexa-U.S.                           28,549        26,130
       Perfexa-India                         553,714       569,862
                                      ---------------  ------------
         Total                        $    1,584,486   $ 1,818,726
                                      ===============  ============
</TABLE>

                                      F-23
<PAGE>

                       GTC TELECOM CORP. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                   FOR THE YEARS ENDED JUNE 30, 2004 AND 2003

NOTE  14  SUBSEQUENT  EVENTS

On  August  18, 2004, the Company amended 2 notes totaling $816,395 note payable
(see  Note 5), extending the note to November 30, 2004.  In consideration of the
extension,  the  Company has agreed to pay an additional $73,350 in interest and
issue  an  additional  250,000  shares  of the Company's restricted common stock
valued at $17,133 (based on the market price on the date of grant).  The Company
will  record  the  value of the common stock to interest expense in August 2004.

On  July 21, 2004, the Company amended a $45,000 note payable (see Note 5).  The
amended  note calls for payments of $20,000 due on July 21, 2004, $15,000 due on
August 21, 2004, and $10,000 due on September 21, 2004.  In consideration of the
extension,  the  Company  has agreed to issue an additional 45,000 shares of the
Company's restricted common stock valued at $2,944 (based on the market price on
the  date  of  grant).  The Company will record the value of the common stock to
interest  expense in July 2004.  As of August 29, 2004, the Company has not made
the  August 21 and September 21 payments pursuant to the extension.  The Company
is  currently  in  discussions  to  restructure  the  terms  of  the  note.

In July 2004, the Company financed additional upgrades to its existing telephone
system by entering into a term note in the amount of $23,357.  The note provides
for the Company to make 11 monthly payments of $2,123, with no interest charged,
commencing  August  2004.






                                      F-24
<PAGE>