SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                   FORM 10-K/A


                  ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D)
                     OF THE SECURITIES EXCHANGE ACT OF 1934
    FOR THE FISCAL YEAR ENDED DECEMBER 31, 2001 COMMISSION FILE NUMBER 0-2564

                         TELESOURCE INTERNATIONAL, INC.

             (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)

          Delaware                          6770                  59-3671568
State or other jurisdiction of   PRIMARY STANDARD INDUSTRIAL   I.R.S. Employer
Incorporation or organization    CLASSIFICATION CODE NUMBER   Identification No.

               REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE
                                 (630) 620-4787

           SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT:

                     COMMON STOCK, PAR VALUE $.01 PER SHARE
                              (Title of each class)

           SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT:

                                      NONE

Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the Registrant
was required to file such reports) and (2) has been subject to such filing
requirements for the past 90 days. Yes [X] No [_]

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not 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-K or any amendment to the
Form 10-K. [X]

The aggregate market value of the Registrant's voting stock held by
non-affiliates of the Registrant on December 31, 2001 was approximately
$5,205,000.


Number of shares of $0.01 par value Common Stock outstanding as of the close of
business on July 12, 2002: 15,000,000 shares.


                       DOCUMENTS INCORPORATED BY REFERENCE

Portions of the registrant's definitive proxy statement for its 2002 Annual
Meeting of Stockholders to be filed pursuant to Regulation 14A are incorporated
by reference into Part III of this Form 10-K.

<PAGE>

                                TABLE OF CONTENTS
                                                                            PAGE
                                     PART I

Item 1.   Business

            General .........................................................  3

            The Business ....................................................  3

            Competition .....................................................  8

            Employees ....................................................... 10

Item 2.   Properties ........................................................ 10

Item 3.   Legal Proceedings ................................................. 10

Item 4.   Submission of Matters to a Vote of Security Holders ............... 11

                                     PART II

Item 5.   Market for the Registrant's Common Equity and Related
          Stockholder Matters ............................................... 12

Item 6.   Selected Financial Data ........................................... 13

Item 7.   Management's Discussion and Analysis of Results of Operations
          and Financial Condition ........................................... 14

Item 8.   Financial Statements and Supplementary Data .......................F-1

Item 9.   Changes in and Disagreements with Accountants on Accounting
          and Financial Disclosure .......................................... 39

                                    PART III

Item 10.  Directors and Executive Officers of the Registrant ................ 39

Item 11.  Executive Compensation ............................................ 39

Item 12.  Security Ownership of Certain Beneficial Owners and Management .... 39

Item 13.  Certain Relationships and Related Transactions .................... 39

                                     PART IV

Item 14.  Exhibits, Financial Statement Schedules and Reports on Form 8-K ... 40

<PAGE>

PART I

ITEM 1. BUSINESS

GENERAL

Telesource International, Inc. was formed in 1994 to facilitate various
intra-corporate activities and, until July 1999, was a wholly owned subsidiary
of Sayed Hamid Behbehani & Sons Co. W.L.L. ("SHBC"), a Kuwait-based civil,
electrical and mechanical construction company. Telesource International is an
international engineering and construction company, constructing single family
homes, airports, radio towers and in the construction and operation of energy
conversion power plants. In Tinian, an island in the Commonwealth of the
Northern Mariana Islands, a U.S. Territory, Telesource operates a diesel fired
electric power generation plant for the sale of electricity to the local power
grid. Telesource International's facility in Lombard, Illinois, handles the
procurement, export and shipping of U.S. fabricated products for use by its
subsidiaries or for resale to customers outside of the mainland.

Telesource International conducts its operations through three subsidiaries: (i)
Telesource CNMI, handles construction and management of the energy conversion
facilities in the Commonwealth of the Northern Mariana Islands and operates a
branch office in Guam; (ii) Commsource International, which is an international
export company that facilitates the purchase of equipment in the U.S. (the
business activities of Commsource have been assumed by Telesource); and (iii)
Telesource Fiji, Limited, that handles the construction activities in Fiji.

Telesource has three main operating segments: construction services, brokerage
of goods and services and power generation and construction of power plants. The
power generation activities commenced in March 1999.

Construction Services

Telesource International's Micronesian construction services are primarily
carried out through Telesource International's Mariana subsidiary. In late 1996,
Telesource International's Mariana subsidiary was subcontracted by Telesource
International's then-parent corporation to build a radio relay station in the
Commonwealth of the Northern Mariana Islands for the United States Information
Agency.

In 1999, through a competitive bidding process, Telesource International was
awarded a contract to build 45 housing units for the Northern Mariana Housing
Agency, a government agency. These are government-subsidized, low-income housing
units. This project was completed as of December 31, 2001. Management believes
that there may be additional contracts or phases to this project in the future,
though there can be no assurances that additional phases will be contracted or
whether Telesource International would be successful in being awarded the
contract.

In 2000, through a competitive bidding process, Telesource was awarded a
contract to expand two existing power generation stations in Fiji. The project
contemplated the expansion of the building housing the power plant and the
addition of two power generation engines at each of the two sites. The total
power production capacity to be added for both sites is approximately 16 Mwh.
This project was completed as of December 31, 2001.

<PAGE>

In November 2000, through a competitive bidding process, Telesource
International was awarded a contract to construct a 7,800 linear foot airport
runway on the Island of Tinian. This contract is valued at $16,949,105 and was
47.5% complete at December 31, 2001. This contract has a required completion
date of July 2002 and has an estimated net profit of $2,249,000.

In August 2001, through a competitive bidding process, Telesource International
was awarded a contract to construct a radio broadcast station in Lebanon. This
contract is valued at $1.5 million and was 82.9% complete at December 31, 2001.

In December 2001, through a competitive bidding process, Telesource was awarded
a contact to install on overhead transmission line on the island of Tinian. This
contract is valued at $1.0 million and will begin construction in early 2002
with a completion during the second quarter of 2002.

In February 2002, through a competitive bidding process, Telesource was awarded
a contract to construct a 334-bed prison in accordance with the requirements as
specified by the U.S. Department of Justice. The notice to proceed on the
construction of the this project was issued in March 2002. This contract is
valued at $17.3 million and is expected to be completed in spring of 2004.

With Telesource's expansion into Guam to take advantage of the growing U.S.
military presence there, Telesource International is seeking opportunities for
construction services not only in Micronesia, but also throughout the Pacific
basin.

Specialized Construction Processes

Building an airport or a broadcasting facility is not like the construction of a
more conventional building. Because of the high levels of radio frequency
emissions or the generation of electrical currents, every part of the structure
is integrated into the overall design and plays a role in making the overall
facility safer and more efficient.

The building of these specialized structures requires additional engineering
skills, the knowledge of specialized construction techniques and relationships
with specialized subcontractors. The situation is made harder when building
offshore, where distance from raw materials and subcontractors becomes a risk
factor.


<PAGE>


Past and Present Power Generation Construction Projects

Telesource International's power generation business involves:

      *     Building the power plants

      *     Operating the power plants for a contracted period of time

      *     Selling wholesale power to the client to be distributed on their
            power grid

      *     The transfer of the ownership of the properties to the clients at
            the end of the contract.

In 1997, a governmental agency located in the Commonwealth of the Northern
Mariana Islands, awarded Telesource International's Mariana subsidiary a
contract to design, build and operate a 10-30 megawatt power plant.

The initial 10 megawatts are now on-line, completed within budget and on time
and the plant has been operational since March 1999. The second phase of the
project was completed in March 2000, also within budget and on time. The third
phase will be constructed at the discretion of Telesource International's
Mariana subsidiary as the demand for power increases. Accordingly, if power
demand fails to meet Telesource International's projections, this phase may
never be constructed.

In 2000, Telesource International was contracted to expand two existing power
stations in Fiji and to add additional power generators with a combined
production capacity of 32 Mwh for a fixed price of approximately $12.1 million.
This project was completed in late 2001 at a cost of $11.1 million. Performance
for this contract was divided between Telesource International and a subsidiary
of Telesource International, Telesource Fiji, Ltd., based on the location and
type of service to be performed. The construction services were recognized under
Telesource Fiji, Ltd. while the purchasing of the power generation engines was
recognized on a net basis under Telesource International. The contract with the
customer reflects this arrangement. This contract was a performance pay contract
(i.e., as specified milestones are reached, Telesource bills the customer and
receives payments within 30 days).

Power Plant Operation and Maintenance

Our agreement with governmental agency in the Commonwealth of the Northern
Mariana Islands is an example of a power plant operation and maintenance
project. Under the terms of this agreement, Telesource International designed,
financed and built the power plant. Telesource International obtained financing
for the project through a $25,000,000 line of credit from the Commercial Bank of
Kuwait, New York Branch. For the construction of the first phase of this power
plant Telesource International is paid $180,000 per month for ten years by the
governmental agency. Each monthly payment is secured by a promissory note in the
amount of $180,000 issued by the Commonwealth Utilities Corporation.

<PAGE>

Telesource International has a 20-year lease on the land on which the power
plant is built, plus title to the entire plant and a two-month escrow account of
no less than $360,000 on which Telesource International has a first lien. In the
event of the governmental agency unable to meet their obligations either to make
payments of monthly maintenance fees or on the promissory notes, Telesource
International may sell, lease, assign or transfer the power plant or any of the
plant equipment.

In the first phase of the project, the governmental agency also pays Telesource
a production fee of $.02 per kilowatt-hour for each kilowatt-hour produced on
its behalf for the first 5,140,000-kilowatt hours per month. In the second
phase, which added 10-megawatts of capacity, the governmental agency has agreed
to pay Telesource International an additional production fee of $.065 per
kilowatt-hour produced over the initial 5,140,000-kilowatt hours per month.

In addition, the governmental agency pays Telesource a service fee of $50,000
per month for operating and maintaining the power plant.

The governmental agency has the right to terminate the contract for operation
and maintenance at any time with six month's notice. In this event, Telesource
International would still have title to the power plant until fully repaid.

In May 2001, the governmental agency and Telesource executed Change Order No. 3
to the Tinian Power Plant Contract. Change Order No. 3 provides a suspension in
the Escalator on the variable payments from January 1, 2001 to December 31,
2005. This Change Order extends the term of the contract from an expiration of
10 years following commissioning of the last constructed phase (currently Phase
II was commissioned in March 2000 and therefore the contract was to have expired
in March 2010) to an new expiration date of March 31, 2020. Change Order No. 3
does not include an expansion of the power generation capacity of the power
plant. The power plant will continue to operate at its current maximum
generation capacity of 20 Mwh. Effectively the contract has been extended for an
additional 10 years. Power rates agreed to under the original contract and
Change Order No. 1 remain unchanged. Change Order No. 3 does provide the
customer with an early termination option of the extended agreement beginning on
March 31, 2010 and available annually thereafter; however, the customer is
required to give a six month notice and pay an early termination fee of
$6,000,000. Change Order No. 3 prohibits the customer from purchasing power from
any source other than Telesource for the first 30 MW. The expanded agreement
executed under Change Order No. 3 only extends the power generation contract
term and does not require additional performance by Telesource, with respect to
construction activities.

Potential Future Power Plant Construction and Power Supply

Based on previous experience, management believes there will be a growing demand
for power around the world; however competition and deregulation could eliminate
the financial feasibility of these projects and thereby prevent Telesource
International from taking advantage of the expected growth in demand. In the
U.S., two-thirds of the country's installed plants are 25 or more years old and
need to be replaced and repowered, principally with new gas combustion turbines.
The world's use of electricity is projected to increase by two-thirds over the
forecast

<PAGE>


horizon, from 13 trillion kilowatt hours in 1999 to 22 trillion kilowatt-hours
in 2020. The strongest growth rates in electricity consumption are projected for
the developing world. The most rapid expansion in electricity use in the
reference case is expected for developing Asia and Central and South America,
with average annual growth rates exceeding 3.5 percent between 1999 and 2020. In
the industrialized world, electricity consumption is expected to grow at a more
modest pace. Slower population and economic growth, along with the market
saturation of certain electronic appliances (such as washers and dryers) and
efficiency gains from electrical appliances help to explain the expected slower
growth of electricity use in the industrialized nations, although growing
computer usage and the introduction of new electronic devices could modulate
that trend in the future. Telesource International also believes that those
situations where the local governments lack the up-front funding to build the
additional power plants will represent an opportunity for Telesource
International to find alternative solutions up to and including having
Telesource International locate the needed project financing. Without the
additional energy, Telesource International believes that many of the
infrastructure upgrades envisioned by local governments can't take place. In
Telesource International's experience, in return for securing project financing
in a manner similar to that obtained for the project in the Commonwealth of the
Northern Mariana Islands, local governments will be willing to enter into
contracts which guarantee Telesource International a minimum amount of power
consumption, coupled with long-term operations and maintenance contracts similar
to Telesource International's contract with the governmental agency in the
Commonwealth of the Northern Mariana Islands.

Telesource International anticipates that these contracts will generally be
secured by governmental guarantees, promissory notes, liens and collateral in
the land and in the physical power plants.

Sales and Marketing Strategies

Most of Telesource International's jobs are obtained through a public bid
process, and clients are either governments or governmental agencies. In
obtaining contracts:

      * Telesource International performs significant market research.
Telesource International analyzes potential markets, looking for future building
plans or plans to expand the capital infrastructure. Telesource International's
research also includes analyzing numerous government documents and reviewing
previous and current requests for bids.

      * Telesource International is actively involved in public relations with
the governments and agencies that might contract for Telesource International's
services. Much of this effort is informational, learning the specific needs of
each governmental agency while at the same time explaining what services
Telesource International has to offer.

      * Telesource International has created and provides to potential clients a
survey to help governmental agencies evaluate whether Telesource International's
resources and services might be more efficient and cost-effective than their
current system.

<PAGE>

Telesource International maintains three full-time salaried marketing executives
to help sales and marketing efforts; one in the Illinois headquarters and two
offshore.

Competition

The independent power industry has grown rapidly over the past twenty years.
There are a large number of suppliers in the wholesale market and a surplus of
capacity, which has led to intense competition in this market. The principal
sources of competition in this market include traditional regulated utilities
who have excess capacity, unregulated subsidiaries of regulated utilities,
energy brokers and traders, energy service companies in the development and
operation of energy-producing projects and the marketing of electric energy,
equipment suppliers and other non-utility generators like Telesource
International. Competition in this industry is substantially based on price with
competitors discovering lower cost alternatives for providing electricity. The
electric industry is also characterized by rapid changes in regulations, which
Telesource International expects could continue to increase competition.
Telesource International does not believe the Tinian power plant would be
significantly impacted by competition in the wholesale energy market since its
revenues are subject to contracted rates which are substantially fixed for
several years.

Telesource International also competes in the market to develop power generation
facilities. The primary bases of competition in this market are the quality of
development plans, the ability of the developer to finance and complete the
project and the price. In some cases, competitive bidding for a development
opportunity is required. Competition for attractive development opportunities is
expected to be intense as there are a number of competitors in the industry
interested in the limited number of opportunities. Many of the companies
competing in this market have substantially greater resources. Telesource
International believes its project development experience and its experience in
creating strategic alignments with other development firms with greater
financial and technical resources could enable Telesource to continue to compete
effectively in the development market if and when opportunities arise.
Presently, Telesource International believes there are a number of opportunities
for additional project development worldwide for projects similar to those
previously developed by Telesource. However, Telesource International is
currently evaluating whether it should seek development opportunities in other
areas outside of the south pacific to diversify its activities.

Presently, there is significant merger and consolidation activity occurring in
the electric industry. From time to time, Telesource International may consider
merger and acquisition proposals when they appear to present an opportunity to
enhance stockholder value. Telesource International is not involved in any of
these discussions or negotiations at this time.


<PAGE>

Energy Regulation

Telesource International's projects are subject to regulation under federal and
local energy laws and regulations. Telesource International is subject to the
requirements established by its permitting authorities, i.e. the Department of
Environmental Quality ("DEQ") and the Environmental Protection Agency ("EPA").

Presently, neither the Customer Choice Act nor proposed legislation dealing with
U.S. energy policy directly impacts Telesource International because the
legislation and restructuring plan pertain to the retail market or new contracts
in the wholesale market. However, as discussed above, Telesource International
could be impacted in the future by, among other things, increases in competition
as a result of deregulation. Telesource International is actively monitoring
these developments in energy proceedings in order to evaluate the impact on
existing projects and also to evaluate new business opportunities created by the
restructuring of the electric industry.

Environmental Regulation

Telesource International's projects are subject to regulation under federal,
foreign and local environmental laws and regulations and must also comply with
the applicable laws pertaining to the protection of the environment, primarily
in the areas of water and air pollution. These laws and regulations in many
cases require a lengthy and complex process of obtaining and maintaining
licenses, permits and approvals from federal and local agencies. As regulations
are enacted or adopted in any of these jurisdictions, Telesource International
cannot predict the effect of compliance therewith on its business. Telesource
International's failure to comply with all applicable requirements could result
in delays in proceeding with any projects under development or require
modifications to operating facilities. During periods of non-compliance,
Telesource International's operating facilities may be forced to shutdown until
the instances of non-compliance are corrected. Telesource International is
responsible for ensuring compliance of its facilities with applicable
requirements and, accordingly, attempts to minimize these risks by dealing with
reputable contractors and using appropriate technology to measure compliance
with the applicable standards.

Insurance and Bonding

Telesource International maintains general and excess liability, construction
equipment, and workers' compensation insurance; all in amounts consistent with
industry practices. Telesource International believes its insurance programs are
adequate.

Telesource International was required to provide bonding for the airport runway
project on the island of Tinian. This project has partial funding from the U.S.
Government (the FAA) and consequently, U.S. Treasury Listed Bonding was
required. Telesource International's ability to obtain additional surety bonding
depends upon its capitalization, working capital, past performance, management
expertise and other factors, which may change from time to time. Currently
Telesource is required to provide collateral equal to 100% of the surety bond by
Telesource International's surety company.

<PAGE>

Employees

Telesource International presently employs 179 people, consisting of 16
employees in management, 27 engineers and technical staff members, 15 support
staff members and 121 hourly employees. All of Telesource International's
employees are nonunion workers, although Telesource International may employ
union subcontractors from time to time.

Ninety percent of Telesource International's crews include engineers and
technical staff, due to the technical nature of its construction contracts.
Working on a power plant, broadcasting facility or other technical construction
site requires a higher level of expertise and a greater attention to safety
issues.

Telesource International's non-engineering level employees are hourly workers,
while its engineering and supervisory staffs are on monthly salaries.

ITEM 2. PROPERTIES

Properties

Telesource International maintains leased office space and leases land for
storage of construction equipment. Telesource International's Mariana
subsidiary's head office in the Commonwealth of the Northern Mariana Islands is
leased for an additional two years. In Guam, Telesource has an office leased by
the year with 90 days notice for termination of lease. In Fiji, Telesource has
an office leased on a month-to-month basis. Telesource International's corporate
offices in Illinois are leased on a month-to-month basis. Additionally,
Telesource has approximately five leased vehicles in its fleet.

ITEM 3. LEGAL PROCEEDINGS

Telesource is involved in legal proceedings and claims asserted by and against
Telesource, which have arisen in the ordinary course of business. Telesource
believes it has a number of valid defenses to these actions, and Telesource
intends to vigorously defend or assert these claims and does not believe that a
material liability will result.

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

None


<PAGE>

ITEM 4(a). EXECUTIVE OFFICERS OF THE REGISTRANT

The names, ages and backgrounds of Telesource International's executive officers
are as follows:

    Name and Age;
   Years Served as         Principal Occupation for Past Five Years; Other
     Director                               Directorships
-------------------   ---------------------------------------------------------
Khajadour Semikian    Khajadour Semikian, President, joined Telesource
Age 48                International in September 1996. From January 1986 to
Director Since 1995   December 1996, Mr. Semikian was Assistant General Manager
                      with Sayed Hamid Behbehani & Sons. Mr. Semikian has also
                      served as a director for Computhink Incorporated since
                      1994, Telebond Insurance Corporation and Retsa Development
                      Incorporated since 1998, and as President of Telebond
                      Insurance Corporation since 1998.



Nidal Zayed           Nidal Zayed, Executive Vice President, joined Telesource
Age 41                International in January 1996. He is also engaged in the
Director Since 1998   practice of law. He received a law degree from Loyola
                      University School of Law in 1985 and a B.A. in Accounting
                      from Loyola University of Chicago in 1982. He serves as
                      Chairman for Computhink Incorporated and has been a
                      director for Computhink since 1994.



Bud Curley            Mr. Curley joined Telesource International as its Chief
Age 38                Financial Officer in September 1999. Prior to September
                      1999, Mr. Curley served as the Chief Financial Officer,
                      Secretary and Executive Vice President for Surety Capital
                      Corporation's and Surety Bank, N.A. from 1996 to 1999.
                      From 1993 to 1996, Mr. Curley served as Surety Capital
                      Corporation and Surety Bank, N.A.'s Controller and Senior
                      Vice President. In 1989, Mr. Curley received a B.A. in
                      Business Administration from the University of Texas. He
                      has also served as a director for Surety Capital
                      Corporation and Surety Bank, N.A. from 1998 to 1999.



Jeff Karandjeff       Mr. Karandjeff joined Telesource International as
Age 34                Secretary in 1997. From October 1996 to February 1997, Mr.
                      Karandjeff was an Associate with Schoenberg, Fisher,
                      Newman & Rosenberg, LTD. He received a law degree from
                      Loyola University School of Law in 1993 and a Bachelors
                      Degree from Massachusetts Institute of Technology in 1988.



<PAGE>

                                     PART II

ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND
        RELATED STOCKHOLDER MATTERS

MARKET INFORMATION. On November 1, 2001, Telesource's common stock began trading
on the Over-the-Counter Bulletin Board under the symbol "TSCI". Prior to that
time, Telesource's common stock was not listed for trading.

The following table sets forth high and low sales prices for the common stock
for the periods indicated as reported by the Over-the-Counter Bulletin Board
since November 1, 2001:


        2001                                       HIGH       LOW
        ----                                      ------    -------
        Fourth Quarter ........................   $2.05      $0.51


As of July 11, 2002, the latest stock quote for Telesource was $1.61 per share.

HOLDERS. As of June 17, 2002, there were 192 shareholders of record.


DIVIDENDS. Telesource did not pay dividends on its common stock during 2001 or
2000, and it does not anticipate that it will pay dividends on its common stock
in the foreseeable future. Telesource's working capital credit facility limits
the payment of dividends on its common stock.


<PAGE>

ITEM 6. SELECTED FINANCIAL DATA
        (IN THOUSANDS, EXCEPT PER SHARE DATA)

The following selected financial data as of and for the years ended December 31,
2001, 2000, 1999 and 1998, has been derived from the audited consolidated
financial statements of Telesource International, Inc. and subsidiaries. The
consolidated financial statements as of December 31, 2001 and 2000, and for each
of the years in the three-year period ended December 31, 2001, are included
elsewhere in the Form 10-K. The selected financial data as of and for the year
ended December 31, 1997 was derived from the unaudited financial statements of
Telesource International. This selected financial data should be read in
conjunction with the consolidated financial statements and the notes thereto
included elsewhere in this Form 10-K..

<TABLE>
<CAPTION>
                                                                        Twelve Months Ended
                                                                            December 31,
                                                    -------------------------------------------------------------
                                                      2001         2000         1999         1998          1997
                                                    ---------    ---------     --------    ---------     --------
                                                                                                        (unaudited)
<S>                                              <C>          <C>           <C>         <C>           <C>
Income Statement Data:  ($ in 000's)

   Construction revenues                         $    11,824  $     7,810   $    1,079  $        --   $       --
   Construction revenues - related party                   -          852        2,181        3,786        3,561
   Construction revenues on power plants               4,053          536           --           --           --
   Service fees - power generation plant                 858          692          305           --           --
   Sales, net                                            131          872          161           --           --
   Sales, net - related party                              -          198          181          145          513
   Other revenues                                      1,420        1,545        1,366           --           --
   Other revenues - related party                          -           84          815        1,733        1,244
                                                    ---------    ---------     --------    ---------     --------
            Gross revenues                            18,286       12,590        6,088        5,664        5,318

   Construction costs                                 12,382        7,145        2,932        3,198        3,562
   Construction costs on power plants                  3,504          496           --           --           --
   Operations & maintenance costs - power
     generation plant                                  1,159          991          638           --           --
   Loss on sale of power plant                            --           --           --       12,521        1,749
                                                    ---------    ---------     --------    ---------     --------
            Gross profits                              1,241        3,958        2,518     (10,055)            7

   Salaries and employee benefits                      1,849        1,580          693          387          453
   Occupancy and equipment                               561          535          246          293          305
   General and administrative expenses                 3,735        3,359        1,480          848          373
   Impairment of long-lived asset                         --           --           --          271           --
                                                    ---------    ---------     --------    ---------     --------
            Operating (loss) income                  (4,904)      (1,516)           99     (11,854)      (1,124)
   Other income (expense):
       Interest income                                    33          125          251           12           --
       Interest expense                              (2,399)      (2,427)      (1,132)         (39)         (37)
       Other income, net                                  44           80           14            4            6
                                                    ---------    ---------     --------    ---------     --------
          Total other expense                        (2,322)      (2,222)        (867)         (23)         (31)
   Loss before taxes                                 (7,226)      (3,738)        (768)     (11,877)      (1,155)
   Income tax expense                                     19            4           --           --           --
                                                    ---------    ---------     --------    ---------     --------
   Net loss                                      $   (7,245)  $   (3,742)   $    (768)  $  (11,877)   $  (1,155)
                                                    =========    =========     ========    =========     ========

Common Share Data:
   Net loss per share                                 (0.52)       (0.36)       (0.08)       (1.19)       (0.12)
   Weighted average common shares outstanding
     (in 000's)                                       13,849       10,356       10,000       10,000       10,000
   Period end shares outstanding (in 000's)           15,000       13,000       10,000       10,000       10,000

Balance Sheet Data:
   Total assets                                       24,022       30,496       22,886       19,893       27,272
   Working capital (deficit)                        (14,332)      (3,400)      (3,400)     (12,037)      (25,496)
   Short-term debt                                    15,500        7,127          500           --        6,700
   Long-term obligations                              20,000       27,021       28,000       17,500          278
   Shareholders' equity (deficit)                   (18,566)     (13,534)      (12,610)    (11,842)        (665)

Performance Data:
   Loss on total assets                              (30.2)%      (12.3)%       (3.4)%      (59.7)%       (4.2)%
Capital Ratios:
   Quick ratio                                         36.6%        80.0%        54.6%        15.4%         7.8%
</TABLE>

<PAGE>

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS
        OF OPERATIONS AND FINANCIAL CONDITION

HIGHLIGHTS

Revenues for the year ended December 31, 2001 were $18.3 million, compared to
$12.6 million and $6.1 million for the years ended December 31, 2000 and 1999,
respectively. Net loss was $7.3 million for 2001, an increase of $3.5 million,
or 93.6%, from $3.7 million for 2000. For 1999, net loss was $768,344. Basic and
diluted net loss per share on net loss was $0.52 per share for 2001, compared to
$0.36 per share for 2000 and $0.08 per share for 1999.

OPERATING SEGMENTS

Telesource's business consists of the following operating segments: power
generation and construction of power plants, trading, and construction services.
Power generation activities did not commence until March 1999. Revenue of the
power generation and construction of power plants segment includes sales-type
lease revenues. The power generation activities occurred in the Commonwealth of
Northern Mariana Islands, a U.S. territory, ("CNMI") and construction of power
plants occurred in Fiji. Construction services occurred in the CNMI and trading
activities occurred in the United States and the CNMI.

RESULTS OF OPERATIONS

Telesource's significant accounting policies are described in Note 2 to the
consolidated financial statements included in Item 8 of this Form 10-K.
Telesource believes its most critical accounting policy is revenue recognition
from long-term contracts for which Telesource uses the percentage-of-completion
method of accounting. Percentage of completion accounting is the preferred
method of accounting for long-term contracts under accounting principles
generally accepted in the United States of America, and accordingly, is the
method used for revenue recognition within Telesource's industry.
Percentage-of-completion is measured principally by the ratio of costs incurred
to date for each contract to the estimated total costs for each contract at
completion. Provisions for estimated losses on uncompleted contracts are made in
the period in which such losses are determined. Application of
percentage-of-completion accounting results in the recognition of costs and
estimated earnings in excess of billings on uncompleted contracts within the
consolidated balance sheets. Costs and estimated earnings in excess of billings
on uncompleted contracts reflected on the consolidated balance sheets arise when
revenues have been recognized but the amounts cannot be billed under the terms
of the contracts. Such amounts are recoverable from customers upon achievement
of various measures of performance, including achievement of certain milestones,
completion of specified units or completion of the contract. Costs and estimated
earnings in excess of billings on uncompleted contracts also includes amounts
Telesource seeks or will seek to collect from customers or others for errors or
changes in contract specifications or design, contract change orders in dispute
or unapproved as to both scope and price, or other customer-related causes of
unanticipated additional contract costs. Such amounts are recorded at estimated
net realizable value. Due to uncertainties inherent within estimates employed to
apply percentage-of-completion accounting, it is possible that estimates will be
revised as project work progresses. Application of percentage of completion
accounting requires that the impact of those revised estimates be reported in
the consolidated financial statements prospectively.

Liquidity

As of December 31, 2001, the Company's current liabilities exceeded its current
assets by $14,331,462, and the Company had a total stockholders' deficit of
$18,566,269. The Company has been and expects to continue to seek support from
its principal stockholder, SHBC, for its operations, for working capital needs,
debt repayment and business expansion as may be required (see Note 8). SHBC has
agreed to guarantee certain of the Company's obligations, and if necessary,
repay these borrowings, and has also arranged for letters of credit to secure
the repayment of certain loans. At December 31, 2001, the Company had
$35,500,000 in debt outstanding, $15,500,000 of which is due and payable in
2002. SHBC has also agreed that any additional funding from SHBC to the Company
will not be due until after December 31, 2002. As of December 31, 2001, there
was $29,900,000 in total debt which is either guaranteed by SHBC or which is
secured by a letter of credit from SHBC.


Impairment of Long-Lived Assets

When we undergo changes in our business, including the closure or relocation of
facilities, we may have equipment and other assets that are no longer needed in
our business. When this occurs, we estimate how much we believe we are likely to
receive upon disposal of the assets and we record an impairment charge if this
amount is less than the net carrying value. If actual market conditions for
these assets are less favorable than those projected by management, additional
impairment charges may be required.

The investment in sales-type lease along with our property, plant and equipment
are considered to be a long-lived assets. Based on the anticipated cash flows
for the assets along with the current revenues and expenses and an evaluation of
future changes in the market and economic outlook as well as the length of the
contractual commitment, Telesource does not believe any impairment was indicated
at December 31, 2001.

REVENUES

Overview

Telesource International is an international engineering and construction
company, which has among its operations power generation and specialty
construction services in the Commonwealth of the Northern Mariana Islands.
Telesource International operates a diesel fired electric power generation plant
for the sale of electricity to the local power grid in CNMI. Telesource
International's facility in Lombard, Illinois handles the procurement, export
and shipping of U.S. fabricated products for use by Telesource International's
subsidiaries or for resale to customers outside of the mainland.

<PAGE>

Telesource International was formed in 1994 to facilitate various
intra-corporate activities and, until July 1999, was a wholly owned subsidiary
of SHBC, a Kuwait-based civil, electrical and mechanical construction company.
Operations are conducted primarily through subsidiaries. Telesource
International currently has three subsidiaries. Telesource CNMI, Inc. handles
construction and management for the power facilities in the Commonwealth of the
Northern Mariana Islands. Telesource CNMI, Inc. has branch offices in Guam,
Telesource International Pacifica and Pacifica Power Resources. Commsource
International located in Chicago, Illinois, is an international export company
that facilitates the purchase of equipment fabricated in the U.S. The business
activities of Commsource have been assumed by Telesource. Telesource Fiji, Ltd.
was established to oversee Telesource International, Inc.'s power plant
construction activities within Fiji, which currently involves the installation
of additional power generators for existing power plants in Fiji.

Telesource International has three main operating segments: construction
services, trading activities, and power generation and construction of power
plants.

Revenue from construction and construction of power plants is recognized using
the percentage-of-completion method of accounting based upon costs incurred and
projected costs. Construction revenue includes revenues recognized by Telesource
International, Inc.'s power plant construction segment and from other projects
ranging from housing development to the construction of airports and prisons.
The construction of power generation plants is considered by management to be a
part of Telesource International, Inc.'s power generation and construction of
power plants segment. Cost of revenue consists of direct costs on contracts;
including labor and materials, amounts payable to subcontractors, direct
overhead costs, equipment expense (primarily depreciation, maintenance and
repairs), interest associated with construction projects and insurance costs.
Depreciation is provided using straight-line methods for construction equipment.
Contracts frequently extend over a period of more than one year and revisions in
cost and profit estimates during construction are reflected in the accounting
period in which the facts that require the revision become known. Losses on
contracts, if any, are provided in total when determined, regardless of the
degree of project completion. Claims for additional contract revenue are
recognized in the period when it is probable that the claim will result in
additional revenue and the amount can be reliably estimated. The foregoing as
well as the stage of completion, and mix of contracts at different margins may
cause fluctuations in gross profit between periods.

Construction revenues on power plants are recognized using the
percentage-of-completion method of accounting, based upon costs incurred and
projected costs. This revenue is separated on the face of the consolidated
financial statements due to its origin within Telesource International's power
generation and construction of power plants segment. Cost of revenue consists of
direct costs on contracts; including labor and materials, amounts payable to
subcontractors, direct overhead costs, equipment expense (primarily
depreciation, maintenance and repairs), interest associated with construction
projects and insurance costs. Depreciation is provided using straight-line
methods for construction equipment. Contracts frequently extend over a period of
more than one year and revisions in cost and profit estimates during
construction are reflected in the accounting period in which the facts that
require the revision become known. Losses on contracts, if any, are provided in
total when determined, regardless of the degree of project completion. Claims
for additional contract revenue are recognized in the period when it is probable
that the claim will result in additional revenue and the amount can be reliably
estimated. The foregoing as well as the stage of completion, and mix of
contracts at different margins may cause fluctuations in gross profit between
periods.

<PAGE>

Telesource accounts for its leasing activities in accordance with the
requirements of Statement of Financial Accounting Standards No. 13, Accounting
for Leases. Revenue associated with the sale of the Tinian power plant
constructed and sold under a sales-type lease, measured as the present value of
non-cancelable rents, was recognized in connection with recording the loss on
sale in 1997 and 1998. Telesource recognizes finance lease revenue on the
resulting sales-type lease receivable at a constant rate using the interest
method. Service revenues received from operating and maintaining the Tinian
power plant for the duration of the lease are recognized as earned based on
actual kilowatt hours of electricity produced and delivered to the lessee's
customers. To the extent that variable payments based on kilowatt hours of
production exceed the fair value of operation and maintenance services provided,
Telesource recognizes such contingent payments as additional finance lease
revenue as they are earned.

Sales revenues are derived from brokering of U.S. fabricated goods and
management of various projects outside of Telesource International's
construction and power generation segments. Sales of goods exported are
recognized at the time of shipment. When an order is received, the customer's
product specifications are sent to the manufacturer and upon completion the
goods are shipped from the manufacturer directly to the customer. In most cases,
the risk of loss during shipping is either borne by the manufacturer or the
customer. Telesource International is responsible for payment to the
manufacturer; however, Telesource normally collects payment from the customer
before the manufacturer is paid. The sales revenues are recognized net of cost
of goods sold. In 1999, Telesource entered into an agreement with its primary
customer, SHBC, to charge a flat fee of 7.5% of the invoice amount for all
orders executed by Telesource on behalf of SHBC.

Service revenues are recognized in the period in which the work is performed.
Service revenues consist of amounts billed to SHBC for project management of the
radio relay station and for other types of services provided to local customers
for small projects. The cost of services provided was not recorded separately,
and therefore was included in the general and administrative expenses.

Rental income consists of fees collected on rental of equipment to SHBC for use
in construction of the radio relay station as well as to local customers. The
rental fees are billed on a monthly basis for equipment used during the billing
period. Telesource recognizes rental revenue on the accrual basis pursuant to
contractual arrangements between Telesource and its customers.

Finance lease revenues are recognized on the amortization of the minimum lease
payments for the power plant located on the Island of Tinian that were
discounted upon execution of the contract in June of 1997 at an interest rate of
6.74%. The amortization of the minimum lease payments began in March 1999 at an
effective interest rate of 9.40% and will fully amortize in March 2010.

Construction costs are comprised of both variable and semi-variable expenses,
including labor and materials, amounts payable to subcontractors, direct
overhead costs, equipment expense (primarily depreciation, maintenance and
repairs), interest associated with construction projects and insurance costs.
Depreciation is provided using straight-line methods for construction equipment.

<PAGE>

Construction costs on power plants are comprised of both variable and
semi-variable expenses, including labor and materials, amounts payable to
subcontractors, direct overhead costs, equipment expense (primarily
depreciation, maintenance and repairs), interest associated with construction
projects and insurance costs. Depreciation is provided using straight-line
methods for construction equipment. These costs are disclosed separately from
construction costs due to their origin within the power generation segment.

Operations and maintenance costs - power generation plant consist of labor,
direct overhead costs, equipment expense (primarily maintenance and repairs),
and insurance costs. These costs are recognized as incurred.

Salaries and employee benefits consist of all wages and benefits for management
and staff wages and benefits that are not directly associated with a particular
project. Telesource's principal market, the Commonwealth of the Northern Mariana
Islands, allows employers to import guest employees. The local labor laws
require employers importing guest employees, principally from the Philippines,
to execute a one-year employment contract with the guest employee. Since
Telesource has a few large contracts, this can lead to short periods of
inactivity for some employees. As Telesource continues to grow, this issue is
expected to be minimized; however, it can have a significant impact on
Telesource's operating results.

Occupancy and equipment expense consist of rent, utilities and office equipment
for Telesource International's offices in Lombard, Illinois; Saipan, Tinian,
Guam and Fiji.

General and administrative expenses consist primarily of depreciation, telephone
expense, insurance, travel, financial and legal expenses and a gross revenue tax
incurred on Telesource International's operations in the Commonwealth of the
Northern Mariana Islands.

Telesource International, Inc., Commsource International, Inc., Telesource CNMI,
Inc. and Telesource Fiji, Ltd. file separate corporate income tax returns.
Telesource International, Inc. and Commsource International, Inc. are U.S.
corporations that file separate U.S. corporate tax returns. Telesource CNMI,
Inc. is a Commonwealth of the Northern Mariana Island corporation and files a
corporation tax return for this commonwealth. Telesource Fiji, Ltd. is a Fijian
corporation and files a Fijian corporation tax return.

Deferred income taxes are accounted for under the asset and liability method.
Deferred tax assets and liabilities are recognized for the estimated future tax
consequences attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and their respective income
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. The effect on deferred tax
assets and liabilities of a change in tax rates is recognized in income in the
period that includes the enactment date.

Tinian Power Plant

Phase I

In June 1997, Telesource International entered into a contract to construct and
operate a power plant on the island of Tinian. The June 1997 agreement
(hereafter referred to as Phase I) called for Telesource International to
construct a 10Mwh power generation plant with the capacity to add an additional
20Mwh of power at later dates, and to operate the power plant for a period of 10
years from the date of commissioning. Phase I was commissioned in March 1999.
The terms for Phase I call for fixed payments of $180,000 per month plus a
production fee of $0.02 per Kwh produced for the first 5,140,000 Kwh produced
each month (hereafter referred to as the Base Load). The agreement also provides
that Telesource International will receive a monthly service fee of $50,000 for
a period of 10 years from the date of commissioning. Following the conclusion of
that 10-year period, the only payments Telesource International will receive for
the Base Load is a production fee of $0.03 per Kwh produced, as adjusted for
inflation per the agreement.


<PAGE>

Phase II

In November 1998, Telesource International received a change order instructing
Telesource to add an additional 10Mwh of power generation capacity (hereafter
referred to as Phase II). This change order provided for Telesource
International to receive only variable payments in the form of a production fee
of $0.065 per Kwh produced in excess of the Base Load (hereafter referred to as
the Expansion Rate) and for these payments to occur over a ten-year period
commencing upon the commissioning of Phase II. After the completion of the
ten-year period, the production fee changes from $0.065 per Kwh to $0.03 per Kwh
for all power produced. Phase II was commissioned in March 2000 and increased
the power plant's total generation capacity to its maximum current level of
20Mwh.

Expanded Agreement

In May 2001, Telesource International received a third change order extending
the term of the agreement for an additional ten years or to March 31, 2020
(hereafter referred to as the Expanded Agreement). The Expanded Agreement leaves
the option to expand the power plant by adding an additional 10Mwh of generation
capacity unchanged. The power generation plant currently has 20Mwh of production
capacity, which can be increased to 30Mwh by installing the appropriate power
generators. The production rates for the Base Load and the Expansion Rate do not
change from the amounts originally agreed upon. In summary, Telesource will
receive $0.03 (adjusted for inflation) per Kwh produced after March 31, 2010 for
all power produced.

Accounting for the Construction of the Power Plant

Telesource accounts for its leasing activities in accordance with the
requirements of Statement of Financial Accounting Standards No. 13, Accounting
for Leases. Revenue associated with the sale of the Tinian power plant
constructed and sold under a sales-type lease, measured as the present value of
non-cancelable rents, was recognized in connection with recording the loss on
sale in 1997 and 1998. Telesource recognizes finance lease revenue on the
resulting sales-type lease receivable at a constant rate using the interest
method. Service revenues received from operating and maintaining the Tinian
power plant for the duration of the lease are recognized as earned based on
actual kilowatt hours of electricity produced and delivered to the lessee's
customers. To the extent that variable payments based on kilowatt hours of
production exceed the fair value of operation and maintenance services provided,
Telesource recognizes such contingent payments as additional finance lease
revenue as they are earned.

<PAGE>

The original net investment in sales-type lease was recognized in June 1997, the
date the contract was executed. The components of the net investment in
sales-type lease are as follows:

                                                December 31,
                                         ------------------------ June 10, 1997
                                            2001          2000      Inception
                                         -----------   ----------   ----------
Total minimum lease payments to be
    received                             $15,480,000   17,640,000   21,600,000
Add:  Operation and maintenance fee        4,300,000    4,900,000    6,000,000
                                         -----------   ----------   ----------
     Minimum lease payments
       receivable                         19,780,000   22,540,000   27,600,000
Less: unearned income                      5,427,360    6,845,816    9,750,000
                                         -----------   ----------   ----------
     Net investment in sales-type
       lease                             $14,352,640   15,694,184   17,850,000
                                         ===========   ==========   ==========

When Telesource recognized the net investment in sales-type lease at the
inception of the agreement in June 1997, Telesource also recognized a loss on
the sale of Phase I in the amount of $1,748,713. In 1998, Telesource recognized
a loss on the sale of Phase II in the amount of $12,521,457 (equal to the entire
amount of the construction costs for Phase II), as there were no additional
minimum lease payments related to this phase. The loss recognized on the sale of
Phase II was recognized when the contract for Phase II was executed in November
1998.

Phase I of the power plant was commissioned in March of 1999. Phase II was
commissioned in March of 2000. Telesource recognized power generation revenues
from billings at the rate of $0.02 per Kwh produced of $858,336, $692,160 and
$304,920 for the years ended December 31, 2001, 2000 and 1999, respectively. No
power generation income was recognized during 1998.

Revenues for this contract consist of the present value of the total contractual
minimum lease payments which were recognized at lease inception. The minimum
lease payments were discounted using an interest rate of 6.74% and the minimum
lease payments are comprised of a guaranteed monthly payment along with an
operation and maintenance fee. Interest earned on the minimum lease payments,
which is recognized over the lease term so as to yield a constant percentage
return on the net investment in the lease beginning in March 1999, is included
in finance lease revenues in the statement of operations.

Telesource also receives variable monthly payments as compensation for its
production of power. The variable payments are recognized based upon power
produced and billed to the customer as earned during each accounting period.

The total construction costs for the power plant were $32,120,170. A substantial
portion (approximately $14,270,000) of the repayment to Telesource International
for these construction costs is expected to come from the variable production
fees that will be recognized as revenue when power is produced and billed to the
customer. Due to the fact that the agreement does not provide for any minimum
production fees, there is no guarantee that Telesource International will
recover all of the construction costs incurred to construct the power plant;
however, the agreement does require the customer to purchase 100% of its power
from Telesource International until the maximum power generation capacity has
been reached each month. The future minimum lease payments to be collected by
Telesource are $2,760,000 each year through March 2009.

<PAGE>

Future revenue related to the construction and operation of the power plant will
be recorded as service fees until the amount exceeds the estimated fair value of
the services performed. Amounts in excess of the fair value of the services
performed will be accounted for as additional finance lease revenue.

Results of Operations

The following table sets forth results of operations expressed as a percentage
of total revenues:

                                                      Twelve Months Ended
                                                         December 31,
                                             -----------------------------------
                                              2001          2000          1999
                                             -------      -------       --------
Revenues:
   Construction revenues                       64.7%         62.0%         17.7%
   Construction revenues - related party         --           6.8          35.8
   Construction revenues on power plants       22.1           4.3            --
   Service fees - power generation plant        4.7           5.5           5.0
   Sales, net                                   0.7           6.9           2.6
   Sales, net - related party                    --           1.6           3.0
   Rental income                                 --           0.1            --
   Rental income - related party                 --           0.4          10.0
   Management fees - related party               --           0.3           3.4
   Finance lease revenues                       7.8          12.2          22.5
                                             ------      -------       --------
         Gross revenues                       100.0        100.0          100.0
Costs and expenses:
   Construction costs                          67.8         56.8           48.2
   Construction costs on power plants          19.2          3.9             --
   Operations & maintenance costs -
     power generation plant                     6.3          7.9           10.5
                                             ------      -------       --------
         Gross profit                           6.8         31.4           41.4
Operating expenses:
   Salaries and employee benefits              10.1         12.5           11.4
   Occupancy and equipment                      3.1          4.2            4.0
   General and administrative                  20.4         26.7           24.3
                                             ------      -------       --------
         Total operating expenses              33.6         43.5           39.7

         Operating income                    (26.8)       (12.0)            1.6
Other income (expense):
   Other interest income                        0.2          1.0            4.1
   Interest expense                          (13.1)       (19.3)          (18.6)
   Other income, net                            0.2          0.6            0.2
                                             ------      -------       --------
         Total other expense                 (12.7)       (17.6)          (14.2)
         Loss before income taxes            (39.5)       (29.7)          (12.6)
   Income tax expense                           0.1           --             --
                                             ------      -------      ---------
         Net loss                            (39.6)       (29.7)          (12.6)
                                             ======      =======      =========

Backlog

The following schedule shows a reconciliation of backlog representing the amount
of revenue Telesource International expects to realize from work to be performed
on uncompleted contracts accounted for using the percentage-of-completion method
of accounting in progress at December 31, 2001:

Contracts as of December 31, 2000                              $18,848,579
New contracts and change orders added during 2001                6,643,606
                                                               -----------
                                                                25,492,185

Less: Contract revenue for 2001                                 15,876,372
                                                               -----------
Balance at December 31, 2001                                   $ 9,615,813
                                                               ===========

<PAGE>

Subsequent to the year-end, Telesource was awarded a $17.3 million project to
construct a federal prison on Saipan. The ground breaking for the project
occurred on April 8, 2002. The prison project award did not occur until 2002 and
is not included in the backlog balance at December 31, 2001.

Comparison of the twelve months ended December 31, 2001 and 2000

Revenues

Construction Revenues. Construction revenues, including related party, increased
36.5% to $11.8 million in 2001 from $8.7 million in 2000. The growth in
construction revenues is attributed to the commencement of the $17 million
airport expansion project during 2001. The airport expansion project is expected
to be completed by July 2002. The growth in construction revenues is expected to
continue in future periods but not at the pace experienced in 2001. The backlog
was $9.7 million at December 31, 2001 and was $18.9 million at December 31,
2000. The backlog of $9.7 million at December 31, 2001 does not include a
contract awarded to Telesource in February 2002 to construct a federal prison on
Saipan for $17.3 million. Construction revenues from SHBC were none and 9.8% of
total construction revenues for the years ended December 31, 2001 and 2000,
respectively.

Construction Revenues on Power Plants. Construction revenues on power plants
increased to $4.1 million in 2001 as compared to $536,210 for 2000. These
revenues were recognized on a contract Telesource International has to expand
two existing power stations in Fiji by expanding the facilities and installing
additional power generators with a combined output of 32 Mwh. This contract is
being accounted for under the percentage-of-completion method of accounting and
was completed during 2001. Construction revenues on power plants will decrease
in future periods until Telesource is successful in being awarded additional
contracts.

Service Fees - Power Generation Plant. Service fees - power generation plant
increased 24.0% to $858,336 in 2000 from $692,160 in 1999. The growth in service
fees - power generation plant is attributed to two factors. The local casino on
Tinian was not connected to the local power grid until November 2001 and,
secondly, there was an increase in power demand by the radio relay broadcast
station in Tinian during 2001.

Sales Revenues, Net. Sales revenues decreased 87.8% to $130,674 in 2001 from
$872,680 in 2000. The decrease is attributed to the completion of the project in
Fiji during 2001. The equipment sales for this project were executed in late
2000 and were accordingly recognized during 2000 in the amount of approximately
$700,000. Sales to SHBC decreased to $256 in 2000 from $197,845 in 1999. The
substantial decrease in sales to SHBC is a result of an order from SHBC for U.S.
fabricated goods for a project SHBC had in the Middle East that was completed
during 2000. Sales to SHBC are not expected to increase in future periods.


<PAGE>

Rental Income. Rental income decreased to none in 2001 from $59,658 in 2000. The
decrease in rental income is a result of the completion of the radio relay
station on the island of Tinian. Telesource provided equipment for use in the
construction of the radio relay station and charged a rental fee for use of this
equipment to SHBC.

Service Fees. Service fees decreased to none from $31,625. The decrease is a
result of the completion of the radio relay station for SHBC. The completion of
this project represents the completion of the only project Telesource
International has had for SHBC whereby service fees were earned for the
management of the project.

Finance Lease Revenues. Finance lease revenues decreased 7.8% to $1.4 million in
2001 from $1.5 million in 2000. Finance lease revenue for the Tinian power plant
will decrease each year until the investment in sales type lease is fully
amortized in March 2010.

Expenses

Construction Costs. Total construction costs (includes related party and third
party) increased 73.3% to $12.4 million from $7.1 million for 2001 and 2000,
respectively. The growth in construction costs is a direct result of an increase
in construction activities, primarily due to the airport expansion project which
began in November 2000 and has revenues of approximately $17 million; however,
the notice to proceed on this project was delayed until late February 2001 due
to permitting delays and additional costs incurred on the Koblerville housing
project. Construction costs as a percentage of construction revenues were 104.7%
and 82.5% for 2001 and 2000, respectively. The negative gross margin on
construction revenues is primarily attributed to a cost over run on the
Kobblerville housing project due to delays encountered as a result of inclement
weather. Additionally, there were delays in the processing of Telesource
International's invoices by the Federal Housing Authority which resulted in a
delay in the collection of payments for the Kobblerville project. This
ultimately led to an increase in interest expense incurred directly on this
project, as well as increased costs for supplies. The weather delays and the
delay in the processing of Telesource's invoices occurred during the first
quarter of 2001 and were identified in connection with management's quarterly
project review process. These delays have resulted in a decline in the margin
for third party construction revenues since 2000. The costs estimates for the
Kobblerville project were revised to $6,153,417 during 2001 from an estimated
total costs of $4,830,000. The estimated profit for the Kobblerville project was
reduced from $1,480,000 to $136,583. The change in estimate decreased profit on
third party construction revenues by $1,343,417 and was reflected in 2001
operating results. This increase in estimated costs was recognized during 2001
and is attributed to the delays encountered in completing the project. The
Kobblerville project was completed in December 2001. Telesource expects the
construction segment to return to profitability in 2002.

Construction Costs on Power Plants. Construction costs on power plants were $3.5
million in 2001 as compared to $496,655 in 2000. The growth in construction
costs on power generation plants is a result of the contract Telesource
International has in Fiji. The net margin realized in 2001 on the construction
of power generation plants was 13.5%.


<PAGE>

Operation and Maintenance Costs - Power Generation Plant. Operation and
maintenance costs - power generation plant increased 17.0% to $1.2 million in
2001 from $990,541 in 2000. The increase in operation and maintenance costs for
the Tinian power plant is attributed to additional staffing for the power plant
to meet the expected future demand increases for power from the radio relay
broadcast station along with the local casino. Telesource recognized a loss on
power generation activities of $300,796 and $298,381 for the twelve months ended
December 31, 2001 and 2000, respectively. The net loss on operations and
maintenance at the power plant on Tinian was 35.0% in 2001 and 43.1% in 2000,
and is attributed to management and staffing costs associated with the power
plant exceeding the power production revenues.

Salaries and Employee Benefits. Salaries and employee benefits increased 17.1%
to $1.9 million in 2001 from $1.6 million in 2000. The increase in salaries and
employee benefits is attributed to growth within Telesource's management team
and the transition between projects. Telesource currently hires guest workers
from the Philippines for staffing its projects within the Commonwealth of the
Northern Mariana Islands. These guest workers are under contract for one year
and the existence of these contractual obligations results in an increase in
salaries and employee benefits when transitioning between large projects.

Occupancy and Equipment. Occupancy and equipment expenses rose 4.8% to $560,476
in 2001 from $534,876 in 2000. The increase in occupancy and equipment expense
is attributed to the additional office space added in Fiji during late 2000.
Occupancy and equipment expenses are expected to decrease in future periods due
to efforts by management to reduce these costs.

General and Administrative Expenses. General and administrative expenses
increased 11.2% to $3.7 million in 2001 from $3.4 million in 2000. The increase
is attributed to increased professional fees, telephone expense, bank service
charges, insurance, travel and entertainment and gross revenue taxes associated
with the growth and development of the business.

Other Expense, Net. Other expense increased 4.6% to $2.3 million in 2001 from
$2.2 million in 2000. The increase is a result of additional interest expense on
a larger balance of borrowings for Telesource International.

Income Tax Expense. Income tax expense in 2001 was $19,440. Telesource had a net
operating loss carryforwards at December 31, 2001 of approximately $22,000,000,
however, Telesource International's subsidiary in Fiji had taxable income during
2001 and incurred an estimated tax liability of $19,440.

Comparison of the twelve months ended December 31, 2000 and 1999

Revenues

Construction Revenues. Construction revenues, including related party, increased
165.7% to $8.7 million in 2000 from $3.3 million in 1999. The growth in
construction revenues is attributed to the completion of the construction of the
power plant located on Tinian. The construction of the power plant on Tinian
represented a significant amount of Telesource's activity during 1999 and these
activities are being accounted for under the sales-type lease accounting method.
The growth in construction revenues is expected to continue in future periods
but not at the pace experienced in 2000. The backlog was $18.9 million at
December 31, 2000 and was $7.3 million at December 31, 1999. Construction
revenues from SHBC were 9.8% and 66.9% of total construction revenues for the
years ended December 31, 2000 and 1999, respectively.


<PAGE>

Construction Revenues on Power Plants. Construction revenues on power plants
increased to $536,210 in 2000. These revenues were recognized on a contract
Telesource International has to expand two existing power stations in Fiji by
expanding the facilities and installing additional power generators with a
combined output of 32 Mwh. This contract is being accounted for under the
percentage-of-completion method of accounting and was 66.0% complete as of
December 31, 2000.

Service Fees - Power Generation Plant. Service fees - power generation plant
increased 127.0% to $692,160 in 2000 from $304,920 in 1999. The growth in
service fees - power generation plant is attributed to two factors. The power
plant was not commissioned until late March 1999 and therefore 1999 does not
include twelve months of activity. The increase in service fees - power
generation plant was affected also by the amount of power being sold locally.
The average monthly amounts billed for 2000 was $57,680, an 89.2% increase over
the average monthly amount billed in 1999 of $30,492.

Sales Revenues, Net. Sales revenues increased 212.7% to $1.1 million in 2000
from $342,328 in 1999. The increase is a result of the project in Fiji. Sales
for the project in Fiji are reported on a net basis for a net yield on sales for
this project of 7.4%. Gross sales revenues for the twelve months ended December
31, 2000 for the Fiji project were $7,869,096. Sales to SHBC increased 9.2 % to
$197,845 in 2000 from $181,118 in 1999. The increase in sales to SHBC is a
result of an order from SHBC for U.S. fabricated goods for a project SHBC has in
the Middle East which was completed during 2000.

Rental Income. Rental income decreased 90.2% to $59,658 in 2000 from $610,918 in
1999. The decrease in rental income is a result of the completion of the radio
relay station on the island of Tinian. Telesource provided equipment for use in
the construction of the radio relay station and charged a rental fee for use of
this equipment to SHBC.

Service Fees. Service fees decreased 84.6% to $31,625 from $204,628. The
decrease is a result of the completion of the radio relay station for SHBC. The
completion of this project represents the completion of the only project
Telesource International has had for SHBC whereby service fees were earned for
the management of the project.

Finance Lease Revenues. Finance lease revenues increased 12.6% to $1.5 million
in 2000 from $1.4 million in 1999. The increase in 2000 was a result of the
commencement of the amortization of the minimum lease payments beginning in
March 1999. This resulted in the recognition of twelve months of interest on the
minimum lease payments received in 2000 versus ten months in 1999. On an
annualized basis, lease revenue for the Tinian power plant were below the 1999
level, and will decrease each year until full amortization in March 2010.


<PAGE>

Expenses

Construction Costs. Construction costs increased 143.7% to $7.2 million in 2000
from $2.9 million in 1999. The growth in construction costs is a direct result
of the increase in construction activities in 2000. The net margin on
construction activities increased to 17.5% or $1.5 million in 2000 versus 10.1%
or $327,856 in 1999. The growth in the net margin on construction activities is
attributed to the increased general construction activities and an effort by
management to increase the net margin by raising the hurdle rate for project
bidding to 20%. Exceptions to this hurdle rate will be made only after senior
management has reviewed the proposal and determined that Telesource expects to
derive additional benefits beyond the project revenues as proposed, for example,
Telesource may elect to perform a project below Telesource International's
hurdle rate as a part of Telesource International's efforts to improve the local
community. The 20% hurdle rate was implemented in late 2000 and is intended to
give the project development team a guideline to be used in assessing potential
projects. Due to exceptions to the 20% guideline, Telesource International's net
margin will be below 20%. Construction costs as a percentage of construction
revenues were 82.5% and 89.9% for the years ended December 31, 2000 and 1999,
respectively. The improvement is attributed to change orders received on the
radio relay station project. Work performed as a modification generally carries
a higher margin than work performed under a fixed price contract. These change
orders carried a higher margin as demonstrated through the returns realized on
our related party construction revenues. The related party construction costs as
a percentage of the related party construction revenues were 44.5% and 98.9% for
the years ended December 31, 2000 and 1999, respectively, with the improvement
attributed to the change orders on the radio relay station. Third party
construction costs as a percentage of the third party construction revenues were
88.0% and 71.9% for the years ended December 31, 2000 and 1999, respectively.
The increase in the construction costs as a percentage of construction revenues
is attributed to Telesource's decision to accept the college expansion project,
the Marpo Well project and the transmission line project at lower margins as a
part of Telesource's desire to make a contribution to the local community and to
strengthen its relationship with its existing customers.

Construction Costs on Power Plants. Construction costs on power plants were
$496,655 in 2000 as compared to none in 1999. The growth in construction costs
on power generation plants is a result of the contract Telesource International
has in Fiji. The net margin realized in 2000 on the construction of power
generation plants was 7.4%.

Operation and Maintenance Costs - Power Generation Plant. Operation and
maintenance costs - power generation plant increased 55.2% to $990,541 in 2000
from $638,062 in 1999. The growth in operation and maintenance costs - power
generation plant is due to the commissioning date of the power plant (March
1999) and the additional staffing added to support the operations of the plant.
By annualizing the costs incurred in 1999, the growth rate in power generation
costs is reduced to 16.4%. Telesource recognized a loss on power generation
activities of $298,381 and $333,142 for the twelve months ended December 31,
2000 and 1999, respectively. The net margin (loss) on operations and maintenance
at the power plant on Tinian was (43.1)% in 2000 and (109.3)% in 1999, and is
attributed to management and staffing costs associated with the power plant
exceeding the power production revenues. Service fees - power generation plant
are expected to increase upon completion of the runway under construction on
Tinian that will allow for direct flights from Asia and is expected to result in
the construction of additional hotels and casinos on the island.

Salaries and Employee Benefits. Salaries and employee benefits increased 127.8%
to $1.6 million in 2000 from $693,426 in 1999. The increase in salaries and
employee benefits is attributed to growth within Telesource's management team,
the transition between projects and the additional staffing required in
connection with the opening of a new office in Fiji. Telesource added a
President, Chief Financial Officer and an Executive Vice President in late 1999.
Telesource currently hires guest workers from the Philippines for staffing its
projects within the Commonwealth of Northern Mariana Islands. These guest
workers are under contract for one year and the existence of these contractual
obligations results in an increase in salaries and employee benefits when
transitioning between large projects.

Occupancy and Equipment. Occupancy and equipment expenses rose 117.8% to
$534,876 in 2000 from $245,551 in 1999. The increase is a direct result of
additional office space added for the Saipan, Guam and Fiji offices.

General and Administrative Expenses. General and administrative expenses
increased 126.9% to $3.4 million in 2000 from $1.5 million in 1999. The increase
is attributed to increased professional fees, telephone expense, bank service
charges, director fees, insurance, travel and entertainment and gross revenue
taxes associated with the growth and development of the business.

Other Income, Net. Other income increased 156.3% to an expense of $2.2 million
in 2000 from an expense of $866,909 in 1999. The increase is a result of
increased interest expense on borrowings for Telesource International. Income
Tax Expense.

Income tax expense in 2000 was $4,746. Telesource had a net operating loss
carryforwards at December 31, 2000 of approximately $15,000,000, however,
Telesource International's subsidiary in Fiji had taxable income during 2000 and
incurred an estimated tax liability of $4,746.


<PAGE>

Liquidity and Capital Resources

Since 1994, Telesource International's primary sources of operating funds have
been bank borrowings, contributions of equity capital and profits realized on
projects completed. On December 31, 2001, 15,000,000 shares of Telesource
International's common stock were issued and outstanding. Telesource had
13,000,000 shares issued and outstanding until on June 29, 2001, then SHBC
exercised the 2,000,000 warrants it held for the purchase of Telesource
International common stock at $1.00 per share.

Cash used in operating activities during the twelve months ended December 31,
2001 and 2000 were $4.4 million and $4.6 million, respectively. Significant
collections on accounts receivables and payments on accounts payable were made
in 2001. During 2001, there was $5.4 million in collections on receivables which
mainly consisted of amounts collected for the Fiji project which was offset by a
$2.9 million reduction in accounts payable. The increase in costs and estimated
earnings in excess of billings was principally due to the West Tinian Airport
project getting under way.

Cash provided by investing activities was $196,308 for the twelve months ended
December 31, 2001 as compared to net cash used in investing activities of
$843,567 for 2000. During 2001, a certificate of deposit held at a financial
institution in the amount of $1.0 million matured, thereby generating most of
the cash provided by investing activities for the year. The cash used in
investing activities was used in the purchase of equipment to be used on
projects.

Cash provided by financing activities generated $3.4 million for the twelve
months ended December 31, 2001 as compared to $5.7 million for the same period
in 2000. The cash generated by financing came from additional borrowings and the
proceeds from the exercise of stock purchase warrants by SHBC. An increase in
interest rates of 1.0% at December 31, 2001 would increase Telesource's interest
expense on adjustable loans by approximately $319,000 per year. A decrease in
interest rates of 1.0% would result in a savings on interest expense of
approximately the same amount, $319,000.

Cash used in operating activities during 2000 and 1999 was $4.6 million and $8.6
million, respectively. The principal reason for the significant amount of cash
used in operating activities is attributed to an increase in accounts
receivables of $7.8 million, mainly related to amounts due on the Koblerville
housing project and the power plant expansion project in Fiji. The balance of
receivables outstanding at year-end 2000 on the Koblerville and Fijian projects
were collected subsequent to year-end.

Cash used in investing activities was $843,567 for the year ended December 31,
2000 as compared to net cash used in investing activities of $2.5 million for
1999. The decrease in the amount of cash used in investing in 2000 is attributed
to the decrease in the amount of capital expenditures made by Telesource
International as well as the purchase of a certificate of deposit in 1999.

<PAGE>

Cash provided by financing activities generated $5.7 million during 2000 as
compared to $11.0 million for 1999. The cash generated by financing came from
$6.1 million in additional borrowings.

Telesource International had a working capital deficit of $14.3 million at
December 31, 2001 and $3.4 million at December 31, 2000. The sharp increase in
the deficit is a result of all loans, with the exception of $20.0 million owed
on the Commercial Bank of Kuwait credit line, becoming short term as of December
31, 2001. On December 11, 2001, the Company refinanced the $25,000,000 loan from
the Commercial Bank of Kuwait which now has principal payments due as follows:


          Payment Date                    Principal Payment
      --------------------                -----------------
      February 18, 2002                      $  2,500,000
      August 19, 2002                           2,500,000
      February 19, 2003                         1,750,000
      May 19, 2003                              1,750,000
      August 19, 2003                           1,750,000
      November 19, 2003                         1,750,000
      February 19, 2004                         1,750,000
      May 19, 2004                              1,750,000
      August 19, 2004                           1,750,000
      November 19, 2004                         1,750,000
      February 21, 2005                         1,500,000
      May 21, 2005                              1,500,000
      August 21, 2005                           1,500,000
      November 23, 2005                         1,500,000
                                       ------------------
                            Total            $ 25,000,000
                                       ==================

Since January 1, 2002, Telesource International has made some reductions to
loans outstanding at December 31, 2001. Telesource has made a $2.5 million
reduction on the Commercial Bank of Kuwait credit line. Telesource has also paid
off the $3.0 million outstanding at December 31, 2001 to the Kuwait Real Estate
Bank and paid off the $2.0 million due the Hongkong and Shanghai Banking
Corporation. Telesource obtained a $7.5 million credit line secured by a letter
of credit from SHBC with the Hongkong and Shanghai Banking Corporation during
the first quarter of 2002, which was used to make most of the debt repayments
made in the first quarter of 2002. This credit line matures in November 2002.

The following debt repayments have occurred since January 1, 2002:

               Debt that has been paid-off
      ------------------------------------------------
      The Hongkong and Shanghai  Banking  Corporation
      debt due January 31, 2002                               $2,000,000

      Citytrust Bank loan due May 17, 2002                     1,000,000

      Kuwait Real Estate Bank loan with $1.0  million
      due on January  31,  2002 and $2.0  million due
      on March 31, 2002                                        3,000,000

      Commercial   Bank  of  Kuwait  loan  with  $2.5
      million due on February 18, 2002                         2,500,000
                                                               ---------
         Total debt reductions since December 31, 2001        $8,500,000
                                                               =========


<PAGE>

The Company borrowed $5.3 million from SHBC during the first quarter of 2002 in
order to make required debt payments (principal and interest) on debt due to the
Kuwait Real Estate Bank and the Commercial Bank of Kuwait which came due during
the first quarter of 2002. The Company repaid this short-term facility to SHBC
in April 2002 when it established a new line of credit with the Hongkong and
Shanghai Banking Corporation in the amount of $7.5 million. This line of credit
is secured by a $7.5 million standby letter of credit from SHBC along with three
promissory notes on the Tinian power plant with a par value of $540,000, and is
payable on demand but in no event later than November 2002. After first securing
an extension to April 15, 2002, the Company repaid the $2.0 million credit
facility with the Hongkong and Shanghai Banking Corporation that was originally
due on January 31, 2002, with the proceeds from the $7.5 million credit line.

Telesource is substantially dependent upon SHBC to provide resources for
operating, working capital, and business expansion. SHBC has either given a
guarantee or provided a letter of credit for a majority of the credit facilities
now in place for Telesource as of March 31, 2002. If Telesource is unable to
make a scheduled payment on one of the credit facilities guaranteed by SHBC or
secured by a standby letter of credit from SHBC, SHBC has committed to provide
the funds necessary to make the payment and will not require repayment from
Telesource until after January 31, 2003.

To address the its working capital deficit and reduce its dependence on debt
financing obtained with the support of SHBC, Telesource plans on making some
reductions on existing lines and renewing the credit lines. The amount of the
reductions is dependent upon the amounts of capital raised by Telesource
International within the next twelve months. Telesource has engaged an
investment banking firm, Fletcher Spaght, Inc. of Boston, to assist Telesource
in identifying the appropriate type of offering and amount to be raised during
2002.

Telesource International currently expects that its existing cash balances along
with credit lines established in 2002 together with funds available through SHBC
will be sufficient to meet anticipated cash requirements for at least the next
12 months. Telesource International had a $17 million credit line committed from
the Gulf Bank for the prison project at December 31, 2001. The prison project
was awarded in March 2002 and the project-related credit line from the Gulf Bank
was finalized in March 2002.

Telesource has forecasted cash inflows for the next twelve months from projects
of $38.9 million, $20 million from a planned capital raising in 2002, and $2.4
million in additional borrowings. Telesource's forecasted cash outflows consist
of $20.2 million in principal and interest payments on credit lines and $33.5
million for project costs and general and administrative expenses. Telesource
had a cash on hand balance at December 31, 2001 of $204,752 and a forecasted
cash on had after these collections and payments of $7.6 million in December of
2002. This forecast does include cash available from the planned offering by
Telesource during 2002. Ultimately, the success of the proposed offering will
determine the amount of principal reductions on outstanding debts. Currently,
the amount expected from an offering is estimated to be $20.0 million, while the
principal and interest payments on debt during 2002 are expected to be $20.2
million.

<PAGE>

While Telesource International believes it has sufficient financing for its
current working capital needs, Telesource is considering bidding on additional
projects in addition to the current backlog. There can be no assurance that
Telesource International's present capital and financing will be sufficient to
finance future operations thereafter. Telesource International may seek to raise
additional capital in 2002 through the sale of equity to reduce the existing
credit line borrowings as well as to provide capital needed for growth. There
can no assurance that Telesource will be successful in such efforts. If
Telesource International sells additional shares of common stock to raise funds,
the terms and conditions of the issuances and any dilutive effect may have an
adverse impact on the existing stockholders. If additional financing beyond
current levels becomes necessary, there can be no assurance that the financing
can be obtained on satisfactory terms, if at all. In this event, Telesource
International could be required to restrict its operations.

NEW ACCOUNTING PRONOUNCEMENTS

In July 2001, the Financial Accounting Standards Board ("FASB") issued Statement
of Financial Accounting Standards No. 141, "Business Combinations" ("SFAS 141")
and Statement of Financial Accounting Standards No. 142, "Goodwill and Other
Intangible Assets" ("SFAS 142"). SFAS 141 requires all business combinations to
be accounted for using the purchase method of accounting and that certain
intangible assets acquired in a business combination be recognized as assets
apart from goodwill. SFAS 141 was effective for all business combinations
initiated after June 30, 2001. SFAS 142 requires goodwill to be tested for
impairment under certain circumstances, and written down when impaired, rather
than being amortized as previous standards required. Furthermore, SFAS 142
requires purchased intangible assets other than goodwill to be amortized over
their useful lives unless these lives are determined to be indefinite. SFAS 142
is effective for fiscal years beginning after December 15, 2001. All companies
have six months subsequent to the date of adoption to complete the initial
goodwill impairment test. Telesource has does not have any existing goodwill and
therefore believes that SFAS 142 will not have an impact on Telesource's
financial statements.

In August 2001, the FASB issued Statement of Financial Accounting Standards No.
144, "Accounting for the Impairment or Disposal of Long-Lived Assets" ("SFAS
144"). SFAS 144 establishes a single accounting model, based on the framework
established in Statement of Financial Accounting Standards No. 121, "Accounting
for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed
Of" ("SFAS 121"), for long-lived assets to be disposed of by sale, and resolves
significant implementation issues related to SFAS 121. This statement also
supercedes the accounting and reporting provisions of Accounting Principles
Board Opinion No. 30, "Reporting the Results of Operations - Reporting the
Effects of Disposal of a Segment of a Business, and Extraordinary, Unusual and
Infrequently Occurring Events and Transactions," ("APB 30") for the disposal of
a segment of a business. The provisions of SFAS No. 144 are effective for the
fiscal years beginning after December 15, 2001. Telesource believes that the
adoption of SFAS 144 will not have a material impact on its results of
operations, financial position or cash flows.


<PAGE>

SUBSEQUENT EVENTS

Telesource executed a contract during the first quarter of 2002 with the
Department of Public Works in the CNMI to construct a prison on the island of
Saipan. Known as the CNMI Adult Correctional Facility, Telesource will have
turnkey responsibility for the construction of a 344-bed prison in accordance
with the requirements as specified by the U.S. Department of Justice. Completion
of the project is expected in spring of 2004. The CNMI government has secured
funding for the project with matching funds from the U.S. Government. The
contract is valued at $17.3 million.

In January 2002, Telesource agreed to issue warrants to SHBC for the option to
purchase of 1,000,000 shares of Telesource's common stock at an exercise price
of $3.00 per share in connection with SHBC's agreement to provide a standby
letter of credit to Telesource to be used to secure financing with The Hongkong
Shanghai Banking Corporation Limited. These warrants will expire on December 31,
2003.

In January 2002, Telesource engaged Fletcher Spaght, Inc, a Boston based
investment-banking firm to provide financial advisory and investment banking
services to the Company. Telesource is in the process of evaluating available
options to raise capital during 2002.

ITEM 7.A QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Telesource is exposed to market risk for changes in interest rates for
borrowings under some of its credit facilities. These credit facilities that
bear interest at variable rates, and the fair value of the borrowings are not
significantly affected by changes in market interest rates.

Amounts invested in Telesource's foreign operations (Telesource Fiji, Ltd.) are
translated into U.S. dollars at the exchange rates in effect at year end. The
resulting translation adjustments are recorded as accumulated other
comprehensive loss, a component of stockholders' equity, in the consolidated
balance sheets.

An increase in interest rates of 1.0% at December 31, 2001 would increase
Telesource's interest expense on adjustable loans by approximately $319,000 per
year. A decrease in interest rates of approximately the same amount, $319,000.

THIS ANNUAL REPORT ON FORM 10-K CONTAINS CERTAIN FORWARD-LOOKING STATEMENTS
WITHIN THE MEANING OF THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995,
PARTICULARLY STATEMENTS REGARDING MARKET OPPORTUNITIES, MARKET SHARE GROWTH,
COMPETITIVE GROWTH, GROSS PROFIT, AND SELLING, GENERAL AND ADMINISTRATIVE
EXPENSES AND THE INVESTMENT CONSIDERATIONS LISTED BELOW. THESE FORWARD-LOOKING
STATEMENTS INVOLVE RISKS AND UNCERTAINTIES, THAT COULD CAUSE ACTUAL RESULTS TO
DIFFER MATERIALLY FROM THOSE IN ANY SUCH FORWARD-LOOKING STATEMENTS. SUCH RISKS
AND UNCERTAINTIES INCLUDE, BUT ARE NOT LIMITED TO ADVERSE CHANGES IN GENERAL
ECONOMIC CONDITIONS, INCLUDING CHANGES IN THE SPECIFIC MARKETS FOR TELESOURCE'S
SERVICES, ADVERSE BUSINESS CONDITIONS, DECREASED OR LACK OF GROWTH IN THE
MECHANICAL AND ELECTRICAL CONSTRUCTION AND FACILITIES SERVICES INDUSTRIES,
INCREASED COMPETITION, PRICING PRESSURES AND RISK ASSOCIATED WITH FOREIGN
OPERATIONS AND OTHER FACTORS.


<PAGE>

Investment Considerations

Telesource International - Risks related to construction activities

Telesource International will likely experience significant fluctuation in
quarterly results, which makes it difficult for investors to make reliable
period-to-period comparisons of its business.

Telesource International's quarterly operating results will depend on revenues
from contracts for major projects. Telesource International can only undertake a
specific number of projects at any one time. If Telesource International
finishes one large project and does not have another large project to start on,
revenues and results of operations within the quarter and possibly subsequent
periods could suffer. Customers may also cancel or defer existing contracts
resulting in reduced revenues for the quarter. Though management intends to take
steps to adjust spending in a timely manner to compensate for any unexpected
revenue shortfalls, it may not be successful. For example staffing reductions
cannot be implemented quickly due to local labor and employment laws in the
Commonwealth of Northern Mariana Islands which limit our ability to release
employees at will and losses could result. Accordingly, any such revenue
shortfalls could result in continued operating losses.

Telesource International's revenues are derived mainly from fixed-price
contracts that may lead to variations in profits due to a failure to control
costs.

All of Telesource International's construction revenues are derived from
fixed-price contracts. Because Telesource International assumes the risk of
performing such contracts at the stipulated price, any change in the estimate of
ultimate costs to be incurred under the contract or to control costs during
contract performance could result in losses or reduced profits for particular
fixed-price contracts, which, in turn, could result in periods of operating
losses.

Telesource International's principal market is highly competitive, and if
Telesource International is unable to compete successfully in this market, it
may be unable to increase it's operations or become profitable.

The market for construction services is highly competitive and rapidly changing.
Telesource International competes directly with other firms that focus on
providing general construction services as well as services for more
sophisticated structures, including power plants and broadcasting facilities.
Many of Telesource International's competitors have well-established reputations
for building residential and technical structures and have longer operating
histories and significantly greater financial, technical, marketing, personnel
and other resources than Telesource International has. Telesource International
is subject to competition that is expected to increase in the future. If
Telesource International does not successfully compete in it's market, it's
growth opportunities will be limited and it's business will not grow and it's
revenues may be reduced.


<PAGE>

Telesource International relies on third parties for important raw materials and
technical expertise. Telesource International's ability to enter into new
engagements or to engage the business in a profitable manner will be harmed if
its access to these important resources is limited or becomes too costly.

Telesource International relies on third-party suppliers for raw materials like
wood, steel and concrete; for fabrication of technical equipment subsystems
including diesel generations, antennas, towers and transmitters, and for
providing technical expertise.

Telesource International's ability to obtain raw materials, fabrication services
and technical assistance is subject to a number of external factors which are
outside of its control, including:

      o     Third-parties may increase the price of the raw materials,
            fabrication services or technical assistance they provide.

      o     Third-party raw material suppliers, fabricators or technical
            expertise providers may decide not to provide Telesource
            International with materials or services.

      o     Telesource International has no long-term contracts with third-party
            suppliers of raw materials, fabrication services or technical
            expertise providers.

      o     Telesource International's third-party contracts are usually short
            term in duration and are cancelable by such third party.

If Telesource International fails to obtain what it needs from these providers,
it may not be able to successfully compete for new business or to complete
exisiting engagements profitably.

Telesource International is subject to substantial claims for warranty coverage
which, if such claims arise, could harm its financial condition.

Telesource International offers warranties on its construction services and
power generating plants. Telesource International does not maintain any material
warranty reserves because these warranties are usually backed by warranties from
its vendors. Should Telesource International be required to cover the cost of
repairs not covered by the warranties of Telesource International's vendors or
should one of Telesource International's major vendors be unable to cover future
warranty claims, Telesource International could be required to outlay
substantial funds, which could harm its financial condition.


<PAGE>

Telesource International - Risks related to power generation activities

Telesource International's power-generating facility could be shut down
unexpectedly, making it difficult to sustain revenues and cash flow.

Telesource International owns a diesel fired electric generating facility with a
maximum power generation capacity of 20 mega-watts (Mw) located on the island of
Tinian, in the Commonwealth of the Northern Mariana Islands, a U.S. possession.
This facility from time to time may experience both scheduled and unscheduled
shutdowns. Periodically, the facility will incur scheduled shutdowns in order to
perform maintenance procedures to equipment that cannot be performed while the
equipment is operating. The facility may also incur unscheduled shutdowns or may
be required to operate at reduced capacity levels following the detection of
equipment malfunctions, or following minimum generation orders received by the
utility. During periods when the facility is shutdown or operating at reduced
capacity levels, Telesource International may incur losses due to the loss of
its operating revenues and/or due to additional costs which may be required to
complete any maintenance procedures. It is not possible for it to predict the
frequency of future unscheduled shutdowns or to predict the extent of
maintenance that may be required during shutdowns related to equipment
maintenance.

Telesource International depends on a single customer at its power-generation
facility. The loss of this single customer could cause Telesource
International's revenues to decline.

Since March 1999, Telesource International began deriving a portion of it's
revenues from the sale of electric power. Under Telesource International's
agreement with a governmental agency, the electrical power generated at
Telesource International's power generation facility is owned by the
governmental agency. Telesource International is paid a fee to produce the
electric power. The governmental agency in turn sells the electric power to the
various users throughout the Island of Tinian. If the end-user customer defaults
or increases in power use do not materialize as anticipated, Telesource
International's revenues base may not grow to support other operations.

Telesource International's insurance or reserves may be insufficient to cover
future claims on Telesource International's power generation activities.

Telesource International's power generation activities involve significant risks
of environmental damage, equipment damage and failures, personal injury and
fines and costs imposed by regulatory agencies. Though management believes its
insurance programs are adequate, if a liability claim is made against it, or if
there is an extended outage or equipment failure or damage at Telesource
International's power plant for which it is inadequately insured or subject to a
coverage exclusion, and Telesource International is unable to defend against
these claims successfully or obtain indemnification or warranty recoveries,
Telesource International may be required to pay substantial amounts, which could
have a materially adverse effect on its financial condition.


<PAGE>

Telesource International - Other risks

Telesource International is subject to several inherent risks of conducting
business internationally.

Telesource International's international operations are subject to the inherent
risks of doing business abroad. The loss of any or all of Telesource
International's international suppliers and customers could harm Telesource
International's ability to deliver Telesource International's construction
services and power services on time and cause Telesource International's sales
to decline. Telesource International's financial performance could be harmed by
many events and circumstances relating to international operations, including:

      *     Shipping delays and cancellations;

      *     Increases in import duties and tariffs;

      *     Foreign exchange rate fluctuations;

      *     Changes in foreign laws and regulations; and

      *     Political and economic instability.

Telesource International is subject to government regulation. Both the costs of
compliance and the penalties imposed for a failure to comply could be
substantial.

Although management does not believe that compliance with applicable regulatory
requirements has harmed Telesource International's operations in the past
relative to its competitors, government regulations can change, which could
increase Telesource International's costs of compliance with these requirements.
In addition, Telesource International's aggregate materials operations require
operating permits granted by governmental agencies. Telesource International
believes that tighter regulations for the protection of the environment and
other factors will make it increasingly difficult to obtain new permits and
renewal of existing permits may be subject to more restrictive conditions than
currently exist. Failure to comply with these laws and regulations could result
in fines, additional licensing requirements or the revocation of the Telesource
International's licenses in the particular jurisdiction. The costs of compliance
could affect adversely operating results. If a substantial fine or other penalty
is imposed, Telesource International's business and financial condition could be
harmed.

If Telesource International does not manage its growth effectively, its future
business prospects could be harmed.

Telesource International will need to expand in anticipation of a growing user
base and larger demand for Telesource International's services. The focus on
development of new business could cause disruptions of existing operations
adversely affecting Telesource International's business. Expansion will require
Telesource International to make significant up front expenditures for
increasing Telesource International's sales and marketing efforts and to hire
and train additional project managers, engineers and facilities operators as
well as incur costs in connection with constructing power plants to be owned by
Telesource. Telesource may not be successful in expanding its operations or
maintaining adequate management, financial and operating systems and controls of
its larger business base.


<PAGE>

Telesource International's largest stockholder and its affiliates will own
approximately 75.6% of the common stock, and their interest may not be the same
as the minority stockholders who will have little or no influence over
Telesource International's activities.

The largest stockholder, SHBC, is able to control the outcome of all matters
submitted to a vote of the holders of common stock, including the election of
directors, amendments to Telesource's certificate of incorporation and approval
of significant corporate transactions. SHBC owns beneficially approximately of
75.6% of the common stock.

<PAGE>

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

                 INSERT KPMG AUDIT REPORT HERE (ONCE COMPLETED)



<PAGE>


ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE

Not Applicable

                                    PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT




Our executive officers and directors and their ages as of July 12, 2002 were as
follows:

    Name and Age; Years        Principal Occupation for Past Five Years; Other
     Served as Director        Directorships
----------------------------   ------------------------------------------------
Ralph Beck                     Mr. Beck is a principal of Global Construction
Age 63                         Solutions, L.L.C. From 1994 to 1998, Mr. Beck
Chairman of the Board          served as the President of Kajima Construction
Director since 1999            Services, Inc., a North American investment of a
                               global engineering and construction firm. From
                               1965 to 1994, Mr. Beck was with the Turner
                               Corporation, an international engineering and
                               construction firm. Mr. Beck served as the
                               chairman of the board for Turner Steiner
                               International from 1987 to 1994, and as a senior
                               vice president for Turner Corporation.


Khajadour Semikian             Khajadour Semikian, President and Chief Executive
Age 48                         Officer, joined Telesource International in
President and                  September 1996. From January 1986 to December
Chief Executive Officer        1996 Mr. Semikian was Assistant General Manager
Director Since 1995            with Sayed Hamid Behbehani & Sons. Mr. Semikian
                               has also served as a director for Computhink
                               Incorporated since 1994, Telebond Insurance
                               Corporation from 1998 through 2002 and Retsa
                               Development Incorporated since 1998, and as
                               President of Telebond Insurance Corporation from
                               1998 through 2002.

Nidal Zayed
Age 41                         Nidal Zayed, Executive Vice President, joined
Executive Vice President       Telesource International in January 1996. He is
Director Since 1998            also engaged in the practice of law. He received
                               a law degree from Loyola University School of Law
                               in 1985 and a B.A. in Accounting from Loyola
                               University of Chicago in 1982. He serves as
                               Chairman for Computhink Incorporated and has been
                               a director for Computhink since 1994.


Jeffery Adams                  Mr. Adams is an Electrical Engineer trained in
Age 59                         the United Kingdom. From 1978 to 1986, Mr. Adams
Director Since 1999            served as the marketing director of Babcock
                               Industries and Electrical Group of Companies. In
                               1986, Mr. Adams became an independent
                               international sales marketing consultant. From
                               1987 to present, Mr. Adams is the general manager
                               for Trafex Ltd., an engineering supplies company
                               serving the Middle East.


Max Engler                     From 1988 to present Mr. Engler has been an
Age 52                         independent Financial Consultant and is also on
Director Since 1997            the Board of Directors of various companies in
                               Switzerland and abroad. From 1984 to 1988 Mr.
                               Engler headed the Private Banking desk (Middle
                               East and Far East) of Bank Leu as Vice President.
                               He is a director of Computhink Incorporated,
                               Belmoral S.A., Computhink Ltd., Telesource
                               International CNMI Inc., Retsa Development Inc.,
                               Golden Osprey Ltd., Computhink Technology Ltd.,
                               FSD Holdings PLC, Litra Holdings AG, Linos Finanz
                               AG, Trafex Ltd., R.C.W. Enterprises S.A., Formvac
                               S.A., Sanop AG, and Protea Beratungs-und Finanz
                               AG.

Ibrahim M. Ibrahim             Mr. Ibrahim has been Head of International
Age 60                         Banking for Commercial Bank of Kuwait since 2001
Director Since 1999            and the Head of International Banking for The
                               Gulf Bank K.S.C. in Kuwait from 1986 to 2001. Mr.
                               Ibrahim served as the Vice President and Head of
                               Credit and Marketing for the First National Bank
                               of Chicago for the middle east region from 1984
                               to 1986 and he also served as the Vice President
                               and General Manager of Continental Illinois
                               Bahrain Branch from 1969 to 1984. Mr. Ibrahim
                               received his M.B.A. in International Business
                               from De Paul University, his M.S. in Taxation and
                               Islamic Law from the University of Alexandria and
                               his B.A. in Accounting from the University of
                               Alexandria.



<PAGE>


Weston W. Marsh                Mr. Marsh is a member of the law firm Freeborn
Age 52                         and Peters. Prior to joining Freeborn and Peters
Director Since 1999            in September 1990, Mr. Marsh served as the
                               Assistant General Counsel for the nation's
                               seventh largest railroad. Mr. Marsh obtained his
                               law degree from the University of Illinois, where
                               he graduated with honors, Order of the Coif, and
                               was associate editor of the Law Review. He
                               received his B.A. from Yale University and an
                               M.B.A. from the University of Chicago, where he
                               graduated first in his class.

Bud Curley                     Mr. Curley joined Telesource International as its
Age 38                         Chief Financial Officer in September 1999. Prior
Chief Financial Officer        to September 1999, Mr. Curley served as the Chief
and Vice President             Financial Officer, Secretary and Executive Vice
                               President for Surety Capital Corporation's and
                               Surety Bank, N.A. from 1996 to 1999. From 1993 to
                               1996, Mr. Curley served as Surety Capital
                               Corporation and Surety Bank, N.A.'s Controller
                               and Senior Vice President. In 1989, Mr. Curley
                               received a B.A. in Business Administration from
                               the University of Texas. He has also served as a
                               director for Surety Capital Corporation and
                               Surety Bank, N.A. from 1998 to 1999.

Jeff Karandjeff                Mr. Karandjeff joined Telesource International as
Age 34                         Secretary in 1997. From October 1996 to February
General Counsel                1997, Mr. Karandjeff was an Associate with
and Secretary                  Schoenberg, Fisher, Newman & Rosenberg, LTD. He
                               received a law degree from Loyola University
                               School of Law in 1993 and a Bachelors Degree from
                               Massachusetts Institute of Technology in 1988.


COMPENSATION OF THE BOARD

The Board discontinued paying fees to directors who are also officers of
Telesource International for service as members of Telesource International's
Board of Directors or any committee thereof in 2002. Each director received
$20,000 as annual cash compensation for service on the Board of Directors for
2001. All directors are reimbursed for travel and other related expenses
incurred in attending Board and committee meetings. Directors who are not
employed by Telesource International are not eligible to participate in
Telesource International's employee benefit plans but participate in the
Telesource International 2000 Non-Employee Director Stock Option Plan that was
adopted in 2000. Under the terms of the plan, the Company issues options to
purchase shares of the Company's Common Stock at a price equal to the quoted
market price on the date the option is granted. These options become eligible
for exercise in installments of 33% at the end of each of the first three years.


<PAGE>

ITEM 11. EXECUTIVE COMPENSATION



The following table sets forth a summary of compensation as to the Chief
Executive Officer and the two other most highly compensated executive officers
as of December 31, 2001, whose salary exceeded $100,000 for the fiscal year
ended December 31, 2001:

                           SUMMARY COMPENSATION TABLE



<TABLE>
<CAPTION>
            Name and                                                                             All Other Annual
       Principal Position                Year           Salary (1)              Bonus            Compensation(2)
----------------------------------    -----------    ------------------    ----------------    ---------------------
<S>                                      <C>                 <C>                    <C>                  <C>
Khajadour Semikian                       2001                $ 296,250              $    -               $   53,288
  President and                          2000                $ 270,000              $    -               $   44,688
  Chief Executive Officer                1999                $ 152,337              $    -               $   26,871

Nidal Zayed                              2001                $ 125,000              $    -               $   32,329
  Executive Vice President               2000                $ 125,000              $    -               $   19,285
                                         1999                $ 142,404              $    -               $   17,935

Bud Curley                               2001                $ 161,635              $    -               $   16,598
  Vice President and                     2000                $  97,885              $    -               $   10,000
  Chief Financial Officer                1999                $  27,852              $    -               $    2,917
</TABLE>



(1)   Includes salary paid by Telesource International, before any salary
      reduction for contributions to Telesource International's 401(k) Savings
      Plan.

(2)   Telesource International paid director fees of $20,000 in 2001, $20,000 in
      2000 and $10,000 in 1999 to Mr. Semikian and Mr. Zayed. Beginning in 2002,
      director fees will not be paid to directors who are also employees.
      Telesource provided Mr. Semikian with housing in Saipan at a cost of
      $7,200 in 1999, $25,400 in 2000 and $24,000 in 2001. Telesource provided a
      vehicle to Mr. Semikian in Saipan at a cost of $8,831 in 1999, $8,400 in
      2000 and $8,400 in 2001. Telesource provided a vehicle to Mr. Zayed at a
      cost of $4,990 in 1999, $5,988 in 2000 and $8,350 in 2001. Telesource
      provided Mr. Curley with a car allowance of $2,917 in 1999, $10,000 in
      2000 and $10,000 in 2001. Telesource provided Mr. Curley with health
      insurance for him and his family in 2001 at a cost of $6,598.


ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT


The following table contains information as of June 17, 2002 regarding the
ownership of the Common Stock of the Company by: (i) all persons who, to the
knowledge of the Company, were the beneficial owners of 5% or more of the
outstanding shares of Common Stock of the Company, (ii) each director and
director nominee of the Company, (iii) the Chief Executive Officer and the two
other most highly compensated executive officers of the Company as of June 17,
2002, whose salary and bonus for the fiscal year ended exceeded $100,000, and
(iv) all executive officers and directors of the Company as a group:




<TABLE>
<CAPTION>
                                                        Amount and Nature          Percent of
                                                         of Beneficial            Common Stock
                 Name                                     Ownership (1)          Outstanding (2)
--------------------------------------------            -----------------        ---------------
<S>                                                     <C>                            <C>
Sayed Hamid Behbehani & Sons, Co. W.L.L. (3)            11,339,000                     75.59%

K.J. Semikian                                              200,000                      1.33%

Max Engler(4)                                               65,000                          *

Ibrahim Ibrahim(5)                                          27,500                          *

Jeff Adams(6)                                               15,000                          *

Ralph Beck(7)                                               15,000                          *

Weston Marsh(8)                                             15,000                          *

Nidal Z. Zayed                                                  --                          *

Bud Curley                                                      --                          *

All Executive Officers and Directors
    as a Group (9 Persons) (4-8)                           337,500                      2.24%
</TABLE>



*     Less than 1%

(1)   Except as indicated in the footnotes to this table, the persons named in
      the table have sole voting and investment power with respect to all shares
      of Common Stock shown as beneficially owned by them, subject to community
      property laws where applicable.

(2)   Calculated on the basis of 15,000,000 shares of Common Stock outstanding
      as of June 17, 2002, plus shares of Common Stock underlying options
      exercisable within 60 days of June 17, 2002 are deemed outstanding for
      purposes of calculating the beneficial ownership of Common Stock of the
      holders of such options.

(3)   Includes 2,020,000 shares of Common Stock held by eight members of the
      Behbehani family or their affiliates.

(4)   Max Engler serves as a director for Litra Holding AG. Litra Holding AG
      owns directly 495,000 shares of Telesource International's common stock.
      Based upon information provided to Telesource International, Telesource
      International does not consider these shares to be beneficially owned by
      Mr. Engler. Includes 15,000 shares of Common Stock which Mr. Engler has
      the right to acquire as of June 17, 2002 as a result of options vested and
      exercisable under the 2000 Non-Employees Director Stock Option Plan.

(5)   Includes 15,000 shares of Common Stock which Mr. Ibrahim has the right to
      acquire as of June 17, 2002 as a result of options vested and exercisable
      under the 2000 Non-Employees Director Stock Option Plan.

(6)   Includes 15,000 shares of Common Stock which Mr. Adams has the right to
      acquire as of June 17, 2002 as a result of options vested and exercisable
      under the 2000 Non-Employees Director Stock Option Plan.

(7)   Includes 15,000 shares of Common Stock which Mr. Beck has the right to
      acquire as of June 17, 2002 as a result of options vested and exercisable
      under the 2000 Non-Employees Director Stock Option Plan.

(8)   Includes 15,000 shares of Common Stock which Mr. Marsh has the right to
      acquire as of June 17, 2002 as a result of options vested and exercisable
      under the 2000 Non-Employees Director Stock Option Plan.



ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS


Certain of Telesource's executive officers, directors, and major stockholders
are also owners, officers, and/or directors of SHBC located in Kuwait. SHBC is a
civil, electrical, and mechanical engineering firm and construction contractor
with 750 employees and over 30 years of experience. SHBC and its affiliates were
the sole stockholder of Telesource International prior to July 1999 and now owns
approximately 75.6% of the common stock outstanding. SHBC and Telesource
International bid and compete within the same industries; however, SHBC has
agreed in writing to not bid projects within the United States and its
possessions. Additionally, SHBC and SHBC's majority stockholders, Fouad
Behbehani and Nasrallah Behbehani, have signed as guarantors on Telesource
CNMI's promissory note for $25,000,000 with the Commercial Bank of Kuwait,


<PAGE>


New York Branch, and as guarantors on a $3,000,000 credit facility for
Telesource CNMI with Kuwait Real Estate Bank. SHBC and SHBC's majority
stockholders have also signed as guarantors on a $2,000,000 letter of credit
issued to the Bank of Hawaii to secure a $1,900,000 credit facility. The
$25,000,000 promissory note is used by Telesource to finance the construction
activities on the power plant, the credit facility with the Kuwait Real Estate
Bank is being used to finance the West Tinian Airport Expansion project and the
letter of credit for the Bank of Hawaii is being used as project financing.
Additionally, from time-to-time Telesource may hire, on a part time or temporary
basis, individuals employed by SHBC to provide assistance to Telesource on
certain projects in the Northern Mariana Islands. The rates paid do not exceed
the fair market value of similar services provided by unrelated third parties.

In 1996, Telesource was subcontracted by SHBC to build a radio relay station in
the Commonwealth of Northern Mariana Islands for the United States Information
Agency. The agreement between SHBC and Telesource included payment to Telesource
on a monthly basis for all time and material plus a fee of 7.5% on local
purchases and procurements. The radio relay station project was completed in
early 1999, however, an addition to the radio relay station was approved and
Telesource was hired by SHBC to perform additional construction services on the
radio relay station under the same terms as the original agreement. This project
concluded in 2000.

The following table provides a summary of financial information related to all
services provided to SHBC by Telesource.



<TABLE>
<CAPTION>
                                                          Years ended December 31,
                                                  --------------------------------------
                                                  2001             2000             1999
                                                  ----        ---------        ---------
<S>                                               <C>        <C>               <C>
Construction revenues                             $ --          851,912        2,180,683
Sales                                              256          197,845          181,118
Rental income                                       --           53,103          610,918
Service fees                                        --           31,625          204,628
                                                  ----        ---------        ---------
              Total related party revenues        $256        1,134,485        3,177,347
                                                  ====        =========        =========
</TABLE>



The following table summarizes all balances related to transactions with SHBC as
of the end of each period.


                                                       2001                2000
                                                     -------             -------
Accounts receivable                                  $    --              99,809
Accounts payable                                          --             698,875
Other current liabilities                            125,000             125,000
                                                     =======             =======

The related party amounts recorded and disclosed in the consolidated financial
statements are not necessarily indicative of the amounts which would have been
incurred had comparable transactions been entered into with independent parties.

Telesource held an investment in Telebond Insurance Corporation at December 31,
2001, in the amount of $126,500. Telesource purchased insurance from Telebond
and paid premiums of $23,566, $158,278 and $138,203 during the years ended
December 31, 2001, 2000 and 1999, respectively. Telebond provides employment
bonds along with bid, performance and payment bonds for the Company's projects.
Telebond is not a U.S. Treasury listed bonding company. Most bid, performance
and payment bonds for Telesource are secured from third party vendors.
Telesource's President and CEO, K.J. Semikian, serves on Telebond Insurance
Corporation's board of directors and as President of Telebond, and owns 10% of
the stock of Telebond.



<PAGE>


Telesource paid legal fees to an employee and director of Telesource in the
amount of $84,000 during 1999. There were no legal fees paid to any employee or
director of Telesource during 2001 or 2000.

Telesource entered into an employment agreement with Khajadour Semikian in June
1999, Nidal Zayed in August 1999 and Bud Curley in April 2001. The term of the
agreement with Mr. Semikian is from July 1, 1999 to July 1, 2002. Under the
terms of the agreement, Mr. Semikian is required to devote his full time to the
Company's business. The Company has agreed to pay him an annualized base salary
of $220,000 during 1999 and 1998 increased to $270,000 during 2000 and to remain
at $270,000 per year until July 1, 2002. The payment of cash bonuses to Mr.
Semikian will be at the Board's discretion. The Company has agreed to provide
Mr. Semikian with health insurance for him and his family. The term of the
agreement with Mr. Zayed is from September 1, 1999 to September 1, 2002. Under
the terms of the agreement, Mr. Zayed's responsibilities comprise serving as the
number two operating officer accountable for the full range of operations. The
Company has agreed to pay him an annualized base salary of $125,000 per year for
the term of the agreement. The payment of cash bonuses to Mr. Zayed will be at
the Board's discretion. The Company has also agreed to provide Mr. Zayed with
health insurance for him and his family along with a company car. The term of
the agreement with Mr. Curley is from April 1, 2001 to October 1, 2003. Under
the terms of the agreement, Mr. Curley is required to devote his full time to
the Company's business. The Company has agreed to pay him an annualized base
salary of $165,000 during April 1, 2001 to October 31, 2001 and then increased
to $175,000 from November 1, 2001 to October 1, 2003. The payment of cash
bonuses to Mr. Curley will be at the Board's discretion. The Company has agreed
to provide Mr. Curley with health insurance for him and his family. The Company
has agreed to provide Mr. Curley with a $10,000 per year car allowance for the
term of this agreement.



                                     PART IV

ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K

(a)(1) The following consolidated financial statements of Telesource
International, Inc. and Subsidiaries are included in Part II, Item 8:

Financial Statements:

Consolidated Balance Sheets--December 31, 2001 and 2000

Consolidated Statements of Operations--Years Ended December 31, 2001, 2000 and
1999

Consolidated Statements of Cash Flows--Years Ended December 31, 2001, 2000 and
1999

Consolidated Statements of Stockholders' Equity and Comprehensive Income--Years
Ended December 31, 2001, 2000 and 1999

<PAGE>

Notes to Consolidated Financial Statements

Report of Independent Public Accountants

(a)(2) The following financial statement schedules are included in this Form
10-K report:

None.

(b) Reports on Form 8-K:

No reports on Form 8-K were filed by Telesource during the last quarter of the
year covered by this report.

ITEM 14(a)(3). EXECUTIVE COMPENSATION PLANS AND ARRANGEMENTS

The following executive compensation plans and arrangements are listed as
Exhibits in this Form 10-K:

   Employment Contract between K.J. Semikian and Telesource International, Inc.
   Employment Contract between Nidal Z. Zayed and Telesource International, Inc.
   Employment Contract between Bud Curley and Telesource International, Inc.
   Telesource International, Inc. 2000 Incentive Stock Option Plan
   Telesource International, Inc. 2000 Non-Qualified Stock Option Plan
   Telesource International, Inc. 2000 Non-Employee Director Stock Option Plan


<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.

                         TELESOURCE INTERNATIONAL, INC.
                                  (Registrant)




Date July 10, 2002                       /s/ K.J. Semikian
                                         -----------------------------
                                         K.J. Semikian
                                         President and Chief Executive Officer



PURSUANT TO THE REQUIREMENTS OF THE SECURITIES EXCHANGE ACT OF 1934, THIS REPORT
HAS BEEN SIGNED BELOW BY THE FOLLOWING PERSONS ON BEHALF OF THE REGISTRANT AND
IN THE CAPACITIES INDICATED ON APRIL 11, 2002.

/s/ Ralph Beck                                         Chairman of the Board of
-----------------------------------------------        Directors
Ralph Beck

/s/ K.J. Semikian                                      Director, President and
-----------------------------------------------        Chief Executive Officer
K.J. Semikian

/s/ Nidal Z. Zayed                                     Director and Executive
-----------------------------------------------        Vice President
Nidal Z. Zayed

/s/ Max Engler                                         Director
-----------------------------------------------
Max Engler

/s/Jeffery Adams                                       Director
-----------------------------------------------
Jeffery Adams

/s/ Weston Marsh                                       Director
-----------------------------------------------
Weston Marsh

/s/ Ibrahim Ibrahim                                    Director
-----------------------------------------------
Ibrahim Ibrahim

/s/ Bud Curley                                         Chief Financial Officer
-----------------------------------------------
Bud Curley

<PAGE>

                                  EXHIBIT INDEX

   EXHIBIT
   NUMBER                              EXHIBIT DESCRIPTION
-------------   ----------------------------------------------------------------

        2.01    Amended and Restated Agreement and Plan of Merger and Plan of
                Reorganization among Sixth Business Service Group and Telesource
                International, Inc. Appendix A**

        3.01    Certificate of Incorporation of Telesource International**

        3.02    By-laws of Telesource International**

        10.01   Agreement for Design, Supply of Plant and Equipment, Private
                Construction, Maintenance and Operation, and Transfer of
                Ownership dated June 10, 1997**

        10.02   Agreement for Design, Supply of Plant and Equipment, Private
                Construction, Maintenance and Operation, and Transfer of
                Ownership, Change Order Number 1, dated November 30, 1998**

        10.03   Agreement for Design, Supply of Plant and Equipment, Private
                Construction, Maintenance and Operation, and Transfer of
                Ownership, Change Order Number 2, dated November 30, 1998**

        10.04   Agreement and Contract for Construction of Koblerville Expansion
                Project between the Northern Mariana Islands and Telesource
                International dated July 28, 1998**

        10.06   Memorandum of Understanding between Sayed Hamid Behbehani &
                Sons, Co. W.L.L. and Telesource International, Inc. regarding
                right of first refusal for certain areas**

        10.07   Memorandum of Understanding between Sayed Hamid Behbehani &
                Sons, Co. W.L.L. and Telesource International, Inc. regarding
                commission fees**

        10.10   Note Agreement between the Commercial Bank of Kuwait, New York
                Branch, and Telesource International CNMI, Inc. dated August 20,
                1998**


        10.10A  Note Agreement between the Commercial Bank of Kuwait, New York
                Branch, and Telesource CNMI, Inc. dated December 11, 2001**


        10.11   Term Loan Agreement between the Kuwait Real Estate Bank and
                Telesource International CNMI, Inc. dated May 2, 1999**

        10.12   Line of Credit Agreement between the Bank of Hawaii and
                Telesource International CNMI, Inc.)**

        10.13   Credit Agreement between Hongkong and Shanghai Bank Corporation,
                Limited and Telesource CNMI, Inc. dated January 21, 2000**

        10.13A  Credit Agreement between Hongkong and Shanghai Bank Corporation,
                Limited and Telesource CNMI, Inc. dated March 26, 2002**


        10.14   Lease of Tinian Land between the Commonwealth Utilities
                Corporation and Telesource International CNMI, Inc.**

        10.15   Employment Contract between K.J. Semikian and Telesource
                International, Inc.**

        10.16   Employment Contract between Nidal Z. Zayed and Telesource
                International, Inc.**


        10.17   Employment Contract between Bud Curley and Telesource
                International, Inc.**


        10.18   Adoption Agreement for Aetna Life Insurance and Annuity Company
                Standardized 401(k) Profit Sharing Plan and Trust between Aetna
                Life Insurance and Annuity Company and Commsource International,
                Inc. dated November 13, 1998**

        10.19   Agreement for Design, Supply of Plant and Equipment, Private
                Construction, Maintenance and Operation, and Transfer of
                Ownership, Change Order Number 3 dated May 11, 2001**

        10.20   Telesource International, Inc. 2000 Incentive Stock Option Plan
                **

        10.21   Telesource International, Inc. 2000 Non-Qualified Stock Option
                Plan**

        10.22   Telesource International, Inc. 2000 Non-Employee Director Stock
                Option Plan**



        10.23   Warrant to Purchase 1,000,000 Shares of Common Stock between
                SHBC and Telesource International, Inc.**

**   Previously filed