<PAGE>

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

                                   FORM 10-KSB

(Mark One)

         /X/        ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
                         SECURITIES EXCHANGE ACT OF 1934

                   FOR THE FISCAL YEAR ENDED DECEMBER 31, 1999

         / /        TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
                         SECURITIES EXCHANGE ACT OF 1934

                          Commission File No. 0-230 17

                         CHOICETEL COMMUNICATIONS, INC.
                 (Name of small business issuer in its charter)

             MINNESOTA                                  41-1649949
(State or other jurisdiction of             (I.R.S. Employer Identification No.)
incorporation or organization)

                   9724 10TH AVENUE NORTH, PLYMOUTH, MN 55441
                    (Address of principal executive offices)

Issuer's telephone number: (612) 544-1260

Securities registered pursuant to Section 12(b) of the Act:   NONE

Securities registered pursuant to Section 12(g) of the Act:

   Title of each class:              Name of each exchange on which registered:
       COMMON STOCK, $.01 PAR VALUE         THE NASDAQ SMALLCAP MARKET
       REDEEMABLE WARRANT                   THE NASDAQ SMALLCAP MARKET

         Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Securities Exchange Act of 1934 during the past 12
months (or for such shorter period that the registrant was required to file such
reports), and (2) has been subject to such filing requirements for the past 90
days.
      Yes /X/  No / /

         Check if there is no disclosure of delinquent filers in response to
Item 405 of Regulation S-B is not contained in this form, and no disclosure will
be contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-KSB
or any amendment to this Form 10-KSB. /X/

         The revenues for ChoiceTel Communications, Inc. for the fiscal year
ended December 31, 1999 were $10,215,000.

         The aggregate market value of the voting and non-voting common equity
held by non-affiliates as of March 20, 2000, based on the closing sale price of
the Common Stock on such date as reported on the NASDAQ SmallCap Market, was
$6,204,650.

                                       1

<PAGE>

On March 20, 2000, the Company had outstanding 2,926,906 shares of Common Stock,
par value $.01 per share.

                       DOCUMENTS INCORPORATED BY REFERENCE

         Portions of the Registrant's Form SB-2, Registration Number 333-29969,
are incorporated by reference into Part II of this Form 10-KSB.

         Transitional Small Business Disclosure Format (Check one):
                                                     Yes   ;  No X
                                                        ---     ---

                                       2

<PAGE>

                                TABLE OF CONTENTS

<TABLE>
<CAPTION>
                                                                             PAGE
                                                                             ----
<S>      <C>                                                                 <C>
                                     PART I

ITEM 1.  DESCRIPTION OF BUSINESS............................................. 04
ITEM 2.  DESCRIPTION OF PROPERTY............................................. 09
ITEM 3.  LEGAL PROCEEDINGS................................................... 10
ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS................. 10

                                     PART II

ITEM 5.  MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS............ 11
ITEM 6.  MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION........... 11
ITEM 7.  FINANCIAL STATEMENTS...................................................
ITEM 8.  CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
         ACCOUNTING AND FINANCIAL DISCLOSURE....................................

                                    PART III

ITEM 9.  DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL
         PERSONS; COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT........... 15
ITEM 10. EXECUTIVE COMPENSATION............................................... 16
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
         AND MANAGEMENT....................................................... 17
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS....................... 19
ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K..................................... 20

         SIGNATURES........................................................... 21

         FINANCIAL STATEMENTS.................................................

         INDEX TO EXHIBITS.................................................... 22
</TABLE>

                                       3

<PAGE>



                                     PART I

ITEM 1.  DESCRIPTION OF BUSINESS

GENERAL

         ChoiceTel Communications, Inc. (the "Company") was formed as a
Minnesota corporation in 1989. The Company installed its first payphones in
early 1990 and as of December 31, 1999, had an installed phone base of
approximately 1,950 payphones in four states and Puerto Rico. The Company has
grown its business through the installation of pay telephones in new areas and
through strategic asset acquisitions of payphone routes and related assets,
including 270 payphones located in Minnesota acquired from American Amusement
Arcade in 1993; 85 payphones acquired in Nevada from Telco West in 1995; an
additional 1,020 payphones acquired from Telco West in 1997 in Oregon, Idaho,
Colorado, Washington and Wyoming; 586 payphones located in Minnesota and
Wisconsin acquired from Computer Assisted Technologies, Inc. ("CAT") in 1997,
and 965 phones in Pennsylvania, New Jersey and Delaware from Edward Steven
Corporation and Drake Telephone Company in 1998. During 1999 the Company sold
approximately 3,000 phones located primarily Minnesota, Oregon, Idaho, Wisconsin
and Nevada.

         In 1999 the pay telephone industry generally, and the Company
specifically, continued to experience a significant and continuing decline in
revenues from the operation of public payphones. Management believed that the
decline was attributable primarily to the proliferation of wireless
communication devices, in particular cell phones. The Board of directors
concluded that the pay telephone industry was no longer a growth industry and in
order to successfully compete in the business, a provider must be significantly
larger than the Company was in order to take advantage of economies of scale.
Management determined that the Company lacked the resources to achieve the size
necessary to improve its economies of scale.

         In 1999 the Board of Directors considered various strategic
alternatives for the Company that would maximize stockholder value. These
alternatives included the sales and/or retention of the Company's operating
businesses in various combinations. Ultimately, The Board of Directors
authorized management to sell its payphone assets. Accordingly, by December 31,
1999 the Company completed sales of approximately 3,000 of its 5,000 payphones.
In February 2000 the Company completed the sale of an additional 900 phones
leaving 1,100 phones located in Puerto Rico, which the Company intends to divest
during 2000, although there can be no assurances that an acceptable transaction
will be completed in 2000. The sales resulted in Cash on hand at December 31,
1999 and March 21, 2000 of $2.4 million and $4.2 million respectively. The
Company's strategic goal is to continue to develop a profitable model for
employing internet access terminals through its majority owned subsidiary
Advants, Inc. Accordingly, the Company's payphone business is reflected as
"discontinued operations" throughout this annual report.

INDUSTRY OVERVIEW

         In 1996, calls made from pay telephones were estimated at $7 billion in
annual revenues to the United States telecommunications industry. Pay telephones
may be "public," meaning they are owned by local exchange carriers ("LECs"), or
"independent," meaning they are owned and operated by companies independent of
the LECs, such as the Company. Of the approximately 2 million pay telephones
operating in the United States in 1996, it is estimated that approximately
350,000 were independent.

         Today's telecommunications marketplace was principally shaped by the
1985 AT&T divestiture of the 22 regional Bell operating companies ("RBOCs"),
which provided local telephone services within their areas of operation. The
AT&T divestiture and the many regulatory changes adopted by the FCC and state
regulatory authorities in response to the AT&T divestiture resulted in the
creation of new business segments in the telecommunications industry.

                                       4

<PAGE>

         As part of the AT&T divestiture, the United States was divided into
geographic areas known as local access transport areas or "LATAs." Telephone
service that both originates and terminates within the same LATA
("intraLATA") is priced based on tariffs filed with and approved by state
regulatory authorities. LECs provide intraLATA telephone service to, among
others, independent pay telephone companies. LECs are generally prohibited
from offering or deriving revenues or income from services between LATAs
("interLATA"). In addition, most state regulatory authorities require LECs to
provide local access line service to independent pay telephone companies. See
"Business - Government Regulation."

         Long-distance carriers provide interLATA service and, in some
circumstances, may also provide long-distance service within LATAs. An interLATA
long-distance pay telephone call begins with an originating LEC transmitting the
call from the pay telephone that originates the call to a point of connection
with a long-distance carrier. The long-distance carrier, through its owned or
leased switching and transmission facilities, transmits the call across its
long-distance network to the LEC serving the local area in which the recipient
of the call is located. This terminating LEC then delivers the call to the
recipient. Independent PSPs contract with one or more long-distance carriers to
provide long-distance service to their pay telephones.

BUSINESS STRATEGY

         The Company has focused on identifying payphone sites that have the
potential to achieve a high return on investment ("ROI") after depreciating the
equipment over the life of the phone lease. Although others in the industry have
used shorter leases, the Company's analysis indicated that a long-term lease was
necessary in order to achieve the Company's ROI objective and to offer a
competitive commission to location owners ("Site Providers"). Therefore, most of
the Company's pay telephones are placed with Site Providers under leases having
terms of five years or more.

         During 1998, the Company researched the Puerto Rican payphone market
and determined that if and when the full benefits of the Telecommunications Act
of 1996 are reflected in the Puerto Rican payphone market, Puerto Rico would be
an attractive market for ChoiceTel to operate payphones. Whereas revenues have
fallen at most of the Company's payphone located outside of Puerto Rico,
payphones located within Puerto Rico have continued to generate above average
revenues. Although the Company intends to divest its payphones in Puerto Rico
during 2000, in order to maximize the value of the route it continues to
contract for and install additional phones at acceptable locations.

OPERATIONS

         During 1999 the Company operated, serviced and maintained a system of
approximately 5,000 pay telephones, with approximately 89% of payphones located
in Minnesota, Pennsylvania, Oregon, and Puerto Rico. All of the Company's pay
telephones accept coins as payment for local or long-distance calls and can also
be used to place local or long-distance cashless calls.

         COIN CALLS

         The Company's pay telephones generate coin revenue primarily from local
calls. Until October 1997, the public utilities commissions of the states in
which the Company operated regulated the cost of local coin calls, at that time,
rates were deregulated. Management believes it can maximize payphone coin
revenues by matching the cost of a local call to the market conditions at the
phone. The amount charged for a local call ranges from $0.25 to $0.35.

                                       5

<PAGE>

         Long-distance coin calls are carried by long-distance carriers that
have agreed to provide long-distance service to the Company's telephones. The
majority of the Company's phones sell coin long-distance for a rate of $0.25 per
minute, with a two-minute minimum. Management believes that its $0.25 per minute
long-distance rate results in considerable goodwill and is a point of
differentiation between its phones and its local exchange carrier ("LEC")
competitors.

         NON-COIN CALLS

         The Company also receives revenue from non-coin, or cashless, calls
made from its pay telephones, including credit card calls, calling card calls,
collect calls and third party billed calls. These calls are processed by the
Company's designated operator service provider ("OSP").

         DIAL-AROUND CALLS

         A Dial-Around call originates from a payphone when the user dials a
non-billable access number such as, for example, 1-800-Collect, 1-800-CallATT or
10-10-333, and thereby dials around the Company's long-distance carrier in order
to reach another long-distance carrier. The user deposits no money for the call
and, prior to 1992, the long-distance provider carrying the call paid no
commission to the payphone owner. Since 1992, payphone owners have been
compensated by long-distance carriers for Dial-Around calls. See "Government
Regulation - Dial-Around Compensation."

         COMPUTER NETWORK AND EQUIPMENT. The Company focused its early efforts
on building a computer processing network that automated many of the operations
of managing a pay telephone enterprise. Specialized software was designed and
written when it was not available from industry suppliers. The Company's smart
phones are part of a centralized network that links all of the Company's phones
in the field with central processors. The system allows the Company to monitor
phone call volume, identify malfunctioning equipment, dispatch repair service,
schedule efficient coin collections, calculate commissions, print checks to Site
Providers, and generate necessary reports that analyze and monitor profitability
of the phones.

         The Company installs pay telephones which it believes incorporate the
latest technology. The equipment makes use of microprocessors to provide voice
synthesized calling instructions in English or Spanish, detect and count coins
deposited during each call, inform the caller at certain intervals of the time
remaining on each call, and identify the need for and the amount of an
additional deposit. The pay telephones can be programmed and reprogrammed from
the Company's central computer facilities to update rate information or to
direct different kinds of calls to particular carriers. The Company's pay
telephones can distinguish coins by size and weight, report to a remote location
the total coinage in the coin box, perform self-diagnosis and automatically
report problems to a pre-programmed service number, and immediately report
attempts of vandalism or theft. Some of the telephones also operate on power
available from the telephone lines, thereby avoiding the need for and reliance
upon an additional power source at the installation location. The telephones are
designed to have a user-friendly appearance and manner of operation similar to
LEC-owned pay telephones.

         PLACEMENT OF PAY TELEPHONES. As of December 31, 1999, the Company's pay
telephone system consisted of approximately 1,950 telephones located in 4 states
and Puerto Rico. The following table sets forth certain information as of the
dates indicated concerning the number and location of pay telephones operated by
the Company:

                                       6

<PAGE>

                                   NUMBER OF PAY TELEPHONES
<TABLE>
<CAPTION>
STATE                                                                  DECEMBER 31,     DECEMBER 31,
-----                                                                         1998             1999
                                                                              -----            -----
<S>                                                                    <C>              <C>
Puerto Rico..........................................................           300              995
Pennsylvania.........................................................           960              920
Minnesota............................................................         1,930
Oregon...............................................................           665
Idaho................................................................           285
Nevada...............................................................            95
Additional phones (9 states in 1998; 3 states in 1999) ..............           265               35
                                                                              -----            -----
                                                                       Total  4,500            1,950
</TABLE>

         The Company's ROI focus has enabled it to profile locations based on
the likely profitability of a location. While this methodology is proprietary,
as are the specific locations under contract, the Company's locations include a
wide variety of establishments, such as restaurants, shopping malls, convenience
stores, grocery stores, and gas stations. The Company's pay telephone lease mix
includes indoor phones, walk-up outdoor phones and drive-up payphones. While the
Company had a single Site Provider which accounted for more than 5% of its pay
telephones and revenue in the years ended December 31, 1995 and 1996, no single
Site Provider accounted for more than 5% of its pay telephones and revenues in
either of the years ended December 31, 1997, 1998 and 1999.

         Agreements with Site Providers to install the Company's pay telephones
(the "Site Agreements") provide for revenue sharing with Site Providers,
typically a commission based on a negotiated percentage of revenue from the pay
telephone. The Site Agreements give the Company the exclusive right to install
pay telephones at that location and are generally of a five-year or greater term
with automatic renewal provisions. The Company's Site Agreements normally give
the Company the right to remove poor performing phones. Further, the Company can
typically terminate a Site Agreement on 30 days notice to the Site Provider.
Site Providers do not generally have the right to terminate a Site Agreement.

         PHONE LINE RATES. The Company pays local line charges for each of its
installed payphones. These line charges cover basic service to the telephone as
well as the transport of local calls. Line charges are regulated by state public
utilities commissions ("PUCs").

         MARKETING. The Company engages independent contractors to locate new
sites for payphone installations in Puerto Rico. Management believes a
successful contracting program requires identifying good locations, selling Site
Providers on the benefits of the Company's payphones, and negotiating favorable
Site Agreement terms. Identifying good locations for payphones is the most
important aspect of the Company's marketing program, which includes an
evaluation of population density, calling patterns and neighborhood
socio-economic factors. The Company concentrates its efforts towards high
traffic locations, lower income neighborhoods, and venues where people expect to
find payphones.

         The Company promotes its payphone program to Site Providers by
emphasizing service and maintenance. Site Providers generally view the payphone
as a customer service rather than a profit center. Providing repair and
collection services during evenings and on weekends and providing live call
placement assistance sometimes is more important in securing the Site Agreement
than the amount of commission paid to the Site Provider.

                                       7

<PAGE>

         SERVICE AND MAINTENANCE. The Company believes it offers many of its
Site Providers a higher level of service than is provided by the LEC
competitors, who typically offer low or no commissions and do not monitor
payphone performance. The Company monitors its payphones electronically and
offers evening and weekend repair service. The Company uses full- and part-time
field service technicians who collect money, clean phones and respond to trouble
calls made by either a consumer or by the telephone itself as part of its
internal diagnostic procedures. Some technicians are also responsible for the
installation of new telephones. Due to the ability of the field service
technicians to perform multiple service and maintenance functions, the Company
is able to limit the frequency of trips to each pay telephone as well as the
number of employees needed to service the pay telephones.

COMPETITION

         The Company competes for pay telephone locations with LECs and other
independent pay telephone operators. Most LECs against which the Company
competes and some independent pay telephone companies have substantially greater
financial, marketing and other resources than the Company. In addition, many
LECs, faced with competition from the Company and other independent pay
telephone companies, have increased their compensation arrangements with Site
Providers to offer more favorable commission schedules.

         The Company believes the principal competitive factors in the pay
telephone business are (i) responsiveness to customer service needs, (ii) the
amount of commission payments to a Site Provider, (iii) the quality of service
and the availability of specialized services provided to a Site Provider and
telephone users, and (iv) the ability to serve accounts with locations in
several LATAs or states.

         Commencing in the 1998 fourth quarter, the Company began to experience
a negative impact on its revenues, which management believes results from
increased usage of wireless devices, which appear to be reducing consumers'
reliance on payphones. This trend continued throughout 1999, though was not
detected in Puerto Rico. This negative impact on revenue is the primary
determinant of the Company's decision to divest its payphone assets.

GOVERNMENT REGULATION

         In January 1996, Congress passed the Telecom Act, a comprehensive
telecommunications bill that, in part, dealt with several concerns of the
independent pay telephone industry. Congress stated that its intent was to
create a "pro-competitive, de-regulatory national policy framework designed to
accelerate rapidly private sector deployment of advanced telecommunications and
information technologies and services to all Americans by opening all
telecommunications markets to competition." The Telecom Act, among other things,
requires local telephone companies to eliminate subsidies of their pay telephone
services and to treat their own and independent payphones in a nondiscriminatory
manner. Of particular importance to the Company, the Telecom Act addressed the
inherently unfair disadvantage independent pay telephone companies have in
competing with regulated monopolies, the compensation of independent pay
telephone companies for calls made from their equipment that previously offered
no compensation, and the issue of price regulation of local calls by the various
state PUCs.

         COMPETITION WITH RBOCS. Under the Telecom Act, the RBOCs must operate
their payphone divisions with separate profit and loss statements. The Company
believes that this will likely result in the Company's RBOC competitors being
less aggressive in bidding for locations. It also may result in the RBOCs
removing many low volume pay telephones that collectively compete with the
Company's pay telephones.

                                       8

<PAGE>

         DIAL-AROUND COMPENSATION. Pay telephones are required by the FCC to
provide equal Dial-Around access to all long-distance carriers, either by access
code (such as "10-10-333") or by 800 service. Prior to November 1996, the
Company received $6 per payphone per month from long-distance carriers for
providing this Dial-Around service. The Telecom Act recognized that it is a
burden to payphone companies to provide such access and that the compensation
paid to payphone companies for this access should be greater. Because the
infrastructure to track and compensate for these calls did not exist at that
time, the FCC's 1996 order raised the flat rate of compensation for the
Dial-Around service to approximately $45 per payphone per month, based on $0.35
per call times the national average of 131 monthly Dial-Around calls placed per
payphone.

         The FCC's 1996 order implementing the increased Dial-Around
compensation was appealed, with the intent of decreasing the amount of
Dial-Around compensation mandated by the order. In July 1997, the Court remanded
the matter to the FCC for reconsideration of the rate of Dial-Around
compensation. The Court found that the per call charge of $0.35 was
inappropriate because the FCC did not consider evidence of the differences in
the cost of coin calls and Dial-Around calls. The long-distance carriers then
petitioned the Court to clarify the effect of the Court's July decision and to
vacate the portion of the FCC's 1996 order setting the rate of Dial-Around
compensation pending the FCC's re-examination of the Dial-Around rate. Further,
in a letter to the FCC dated August 15, 1997, AT&T challenged the FCC's
authority to order the long-distance carriers to make any payments during the
pendency of the rate determination. The Court agreed with the long-distance
carriers. In a decision dated September 16, 1997, the Court vacated the portion
of the FCC's 1996 order setting the rate of Dial-Around compensation pending a
new FCC order on remand. Accordingly, the long-distance carriers were not
required to make Dial-Around payments to payphone service providers until the
FCC issued a new order setting the Dial- Around rate.

         On October 9, 1997, the FCC issued an order establishing the
Dial-Around rate as of October 7, 1997 at $0.284 per call ($0.35 minus an offset
of $0.066 for expenses unique to coin calls) for the two years beginning October
7, 1997. On May 15, 1998 the Court again remanded the dial-around rate back to
the FCC for further justification of the $0.35 starting point. On February 4,
1999 the FCC issued an order reducing the dial around rate to $0.24 retroactive
to October 7, 1997 and going forward until at least January 31, 2002. Further,
the FCC indicated that it planned to address Dial-Around compensation for the
period from November 7, 1996 through October 6, 1997 in a subsequent order and
tentatively concluded that the $0.24 per call rate adopted on a going forward
basis should also govern compensation during the period from November 7, 1996
through October 6, 1997, though it has not yet issued an order as such. There
can be no assurance that Dial-Around compensation will not be based on a rate
that is less than what was previously collected by the Company. Such a rate
could have an adverse effect on the results of operations and financial
condition of the Company, which could be material.

EMPLOYEES

         As of December 31, 1999, the Company had 28 full-time employees. No
employees are covered by a collective bargaining agreement. The Company believes
that its relationships with employees are good.

ITEM 2.  DESCRIPTION OF PROPERTY

         The Company's corporate offices are located in approximately 1,000
square feet of leased space in Plymouth, Minnesota. The lease for this property
expires in May 2000 and the Company has two successive options to extend the
lease for additional one-year periods. The Company also leases approximately
2,000 square feet of office space in San Juan Puerto Rico. The lease for this
property expires in April 2000 and the Company holds three successive options to
extend the lease for additional one-year periods. The Company also leases 2,000
square feet of warehouse space in Conshohocken, Pennsylvania. The Company
believes that its current facilities are sufficient for its needs for the
foreseeable future.

                                       9

<PAGE>

ITEM 3.  LEGAL PROCEEDINGS

         MINNESOTA SALES TAX. Based on its analysis of the published regulations
of the Minnesota Department of Revenue the Company has not remitted any sales
tax payments to the State of Minnesota. In 1996, the Company learned that the
opinion of the Department was that coin-operated payphone receipts were subject
to state sales tax. Despite the Department's position, management is still of
the view that the Company is not subject to sales tax, and the Company is
challenging the imposition of the tax. The Company retained special tax counsel
to contest the Department's position that coin-operated payphone receipts are
subject to sales tax. Nonetheless, the Company has established a reserve of
$1,550,000 as of December 31, 1999, to provide for the potential sales tax
liability and will continue to reserve on a monthly basis until a definitive
ruling is obtained.

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

         A special meeting of the shareholders was held in Dec. 1999 for the
purpose of obtaining shareholder approval of management's proposed sale of
substantially all of its pay telephone asset. The requisite majority of
shareholders voted in favor of Management's proposal to sell such assets.


                                       10

<PAGE>

                                     PART II

ITEM 5.  MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

         The Company's Common Stock and Redeemable Warrants have been quoted on
the NASDAQ SmallCap Market under the symbol "PHON" and "PHONW", respectively,
since November 10, 1997 . The following table sets forth, for the periods
indicated, the range of high and low prices for the Company's Common Stock and
Redeemable Warrants as reported on the NASDAQ SmallCap Market.

<TABLE>
<CAPTION>
                                                                                        REDEEMABLE
                                                                  COMMON STOCK           WARRANTS
                                                                  --------------       -------------
                                                                  High       Low       High     Low
<S>                                                               <C>        <C>        <C>     <C>
              1998:
              First Quarter.................................      $4.00      $3.25      $0.75   $0.50
              Second Quarter................................      $4.38      $3.50      $0.63   $0.50
              Third Quarter.................................      $5.13      $3.00      $0.56   $0.25
              Fourth Quarter................................      $4.25      $2.50      $0.25   $0.06

              1999:
              First Quarter.................................      $3.25      $2.50      $0.13  $0.06
              Second Quarter................................      $3.63      $1.50      $0.56   $0.13
              Third Quarter.................................      $3.00      $1.88      $0.31   $0.19
              Fourth Quarter................................      $2.94      $1.75      $0.44    $0.13
</TABLE>

         As of March 20, 2000 there were 665 shareholders of the Company's
Common Stock.

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

         EXCEPT FOR HISTORICAL INFORMATION CONTAINED IN THIS REPORT, INFORMATION
CONTAINED IN THIS FORM 10-KSB CONTAINS "FORWARD-LOOKING STATEMENTS" WITHIN THE
MEANING OF THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995, WHICH CAN BE
IDENTIFIED BY THE USE OF FORWARD-LOOKING TERMINOLOGY SUCH AS "MAY", "WILL",
"EXPECT", "PLAN", "ESTIMATE", OR "CONTINUE" OR THE NEGATIVE THEREOF OR OTHER
VARIATIONS THEREON OR COMPARABLE TERMINOLOGY. THERE ARE CERTAIN IMPORTANT
FACTORS THAT COULD CAUSE RESULTS TO DIFFER MATERIALLY FROM THOSE ANTICIPATED BY
SOME OF THESE FORWARD-LOOKING STATEMENTS, INCLUDING WITHOUT LIMITATION, THE
EFFECTS OF CHANGES IN ECONOMIC CONDITIONS AND THE "RISK FACTORS" ENTITLED "RISKS
ASSOCIATED WITH EXPANSION STRATEGY," "COMPETITION," "PENDING DETERMINATION OF
DIAL-AROUND COMPENSATION RATE," "OTHER REGULATORY FACTORS," "TECHNOLOGICAL
CHANGE AND NEW SERVICES," "DEPENDENCE UPON THIRD-PARTY PROVIDERS," "SERVICE
INTERRUPTIONS; EQUIPMENT FAILURES," "RELIANCE ON SINGLE BRAND OF PAYPHONES,"
"SEASONALITY" AND "RELIANCE ON KEY PERSONNEL" CONTAINED IN THE COMPANY'S
PROSPECTUS DATED NOVEMBER 10, 1997 INCLUDED IN THE REGISTRATION STATEMENT ON
FORM SB-2 FILED WITH THE SECURITIES AND EXCHANGE COMMISSION (REGISTRATION NO.
333-29969). SUCH "RISK FACTORS" ARE INCORPORATED HEREIN BY REFERENCE. INVESTORS
ARE CAUTIONED THAT ALL FORWARD-LOOKING STATEMENTS INVOLVE RISK AND UNCERTAINTY.

GENERAL

         The Company derives revenue from three principal sources: coin calls,
non-coin calls and dial-around calls. Coin calls represent calls paid for with
coins deposited in the telephone. The Company recognizes coin revenue in the
amount deposited. Non-coin calls are calls charged to a customer credit card or
billed to the

                                       11

<PAGE>

called party (collect calls). These calls are routed to and processed by an
operator service provider ("OSP"). Compensation for Dial-Around calls is paid by
long-distance carriers when consumers access a long-distance carrier directly by
dialing an access number, or by dialing an 800 number, or by using a
non-billable calling card.

         The principal costs related to ongoing operation of the Company's
payphones include telephone line charges, consisting of payments made by the
Company to telephone companies and long-distance carriers for access charges and
use of their networks; commission payments to Site Providers; and service,
repair and maintenance costs.

RESULTS OF DISCONTINUED OPERATIONS

         The following table presents certain items in the combined statements
of discontinued operations as a percentage of revenue for the years ended
December 31, 1998 and 1999.

<TABLE>
<CAPTION>

STATEMENT OF OPERATIONS DATA:                        1998          1999
                                                     ----          ----
<S>                                                  <C>           <C>
REVENUE:
Coin  revenue............................            72.7%         70.2%
Non-coin revenue.........................            12.0          13.5
Dial-around revenue......................            15.3          16.3
Total Revenue............................             100%          100%

SERVICE COSTS AND EXPENSES:
Telephone line charges...................            26.1%         30.3%
Commissions..............................            17.1          16.3
Total cost of service....................            43.2%         46.6%

Gross margin.............................            56.8%         53.4%
Selling, general and admin. .............            37.1          33.2
Interest.................................             3.4           4.6
Depreciation and amortization............            14.5          13.7
Net income (loss) before income tax
provision................................             1.8%          1.9%

Average phones in service................           3,800         4,500
</TABLE>


YEAR ENDED DECEMBER 31, 1999 COMPARED TO YEAR ENDED DECEMBER 31 1998.

         The after tax loss on continuing operations (Advants, Inc. -
subsidiary), for the year ended December 31, 1999 was $178,000 compared to a
loss of $1,000 in the year ended December 31, 1998. The loss resulted from
SG&A spending to develop, fund and begin implementing the Company's stratgey
for public internet access terminals.

         The after tax income from discontinued operations for the year ended
December 31, 1999 was $161,000 compared to $116,000 in 1998. The Company
operated an average of 4,500 payphones during 1999, compared to 3,800 in 1998.

YEAR ENDED DECEMBER 31, 1998 COMPARED TO YEAR ENDED DECEMBER 31 1997.

         The loss on continuing operations for the year ended December 31,
1998 was $1,000. There were no continuing operations in 1997.

         The after tax income from discontinued operations for the year ended
December 31, 1998 was $115,000 compared to an after tax loss of $134,000 in
1997. The Company operated 3,800 payphones in 1998 compared to 3,000 in 1997.

SUBSIDIARY ACTIVITIES IN PUBLIC INTERNET ACCESS TERMINALS - ADVANTS, INC.

         During 1998, the Company began test marketing public internet access
terminals, which allow a customer to access the internet while away from their
home or office computer. Customers have the option

                                       12

<PAGE>

of paying the charges, currently $1.00 for 5 minutes, using cash or a credit
card. In 1999, the Company engaged consultants to devise a strategy to develop
the market more quickly by bringing into the business joint venture partners who
might benefit in owning part of a network of public internet terminals.
Subsequently, these activities were transferred to a newly formed subsidiary,
Advants, Inc., and several consultants were engaged as full-time management
employees and senior executives of Advants.

         In November 1999 Advants completed a private placement of common stock
raising approximately $500,000 to implement the strategy. Subsequent to the
private placement, and the issuance of shares to the initial management team at
Advants, Inc., Choicetel's equity position in Advants, Inc. stood at 60%. The
Company anticipates providing additional funding in 2000 of approximately $3
million and thereby increasing its equity position to approximately 80%.

SALES TAX CONTINGENCY

         The Company, based on its analysis of the published regulations of the
Minnesota Department of Revenue, has not remitted any sales tax payments to the
State of Minnesota. In 1996, the Company learned that the opinion of the
Department was that calls from payphones were subject to state sales tax.
Management is of the view that the payphone service it provides is not subject
to sales tax and the Company is challenging the imposition of the tax.
Nonetheless, on December 31, 1996, the Company established a reserve of $865,000
for the years prior thereto and has reserved an additional $243,000, $254,000
and $213,500 for the year ended December 31, 1997, 1998 and 1999 respectively.

ENTRY INTO PUERTO RICO PAYPHONE MARKET

During 1998, the Company began researching the Puerto Rico payphone market. It
was determined that although the Puerto Rico Regulatory Board (PRRB) had not
required the Puerto Rico Telephone Company (PRTC) to provide "competition
neutral" service to independent payphone providers at a "cost-based rate", the
Company was confident that the Telecom Act would eventually correct this
situation. In March 1998, the Company began contracting with local businesses to
provide payphone service. In April 1998 the Company received its first payphone
lines from the PRTC and installed its first payphones. As of December 31, 1999
the Company had installed 995 payphones.

     In March of 1998, the Company received verbal assurances from the PRTC,
that payphone lines would be made available, and the charge would be a flat rate
of $50.00 per month per line. However, when actually invoiced the bills included
additional charges ranging from $0.13 to $0.26 per call. At that time, the PRTC
and the Company agreed that until a final decision was reached on a rate case
before the PRRB, the Company would not pay the per call charges. On May 27, 1998
the PRRB ruled on that rate case and instructed the PRTC to reduce the per call
charges to between $0.01 and $0.03 per call, depending upon the routing of the
call. The PRTC appealed the ruling to the Court of Appeals, which upheld the
ruling in December 1998. The PRTC then appealed that ruling to the Puerto Rico
Supreme Court, which on January 28, 1999 agreed to hear the case and issued a
stay of execution until the court renders a decision on the appeal. During 1998
and 1999 the Company accrued line charges at the rate of $0.06 per call. If the
Puerto Rico Supreme Court reverses the Court of Appeals, and reinstates the old
rates, then the Company estimates it would have unrecorded liabilities at
December 31, 1998, and December 31, 1999 of $45,000 and $430,000 respectively.
If the Puerto Rico Supreme Court upholds the Court of Appeals decision, then the
Company would have overestimated expenses by $300,000 as of December 31, 1999.

                                       13

<PAGE>

LIQUIDITY AND CAPITAL RESOURCES

         For the year ended December 31, 1998, the Company's operating
activites provided $1,763,000, the proceeds from sales of phones and rental
agreements were $6,035,000, and the proceeds from issuing stock and
collecting subscription receivables generated an additional $160,000.
Payments of long-term debt and notes used $4,720,000 and investments in
equipment used $1,064,000, resulting in a $2,167,000 increase in cash
balances.

In December the Company completed the sale of approximately 2,050 phones located
in the Midwest, and received $4.3 million. Proceeds were used to repay bank debt
and leasing debt in full, resulting in cash on hand of $2.4 million at year end.

During 1999, the Company sold approximately 1,000 payphones located in the
Pacific Northwest. Proceeds of approximately $2.5 million were used to reduce
bank debt and to install payphones in Puerto Rico.

ITEM 7.           FINANCIAL STATEMENTS

         The following financial information of the Company is included as
follows:

<TABLE>
<CAPTION>
                                                                                                          PAGE
                                                                                                          ----
<S>                                                                                                       <C>
Report of Independent Auditors...................................................................
Consolidated Financial Statements:
         Consolidated Balance Sheets for Years Ended December 31, 1999 and 1998..................
         Consolidated Statements of Operations for Years Ended December 31, 1999
          and 1998...............................................................................
         Consolidated Statements of Shareholders' Equity for Years Ended December 31, 1999
          and 1998...............................................................................
         Consolidated Statements of Cash Flows for Years Ended December 31, 1999
         and 1998................................................................................
         Notes to Consolidated Financial Statements..............................................
</TABLE>

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

         None.

                                       14

<PAGE>

                                    PART III

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

DIRECTORS

         The following discussion sets forth certain information concerning the
directors of the Company.

         GARY S. KOHLER is a founder of the Company and since its inception in
1989 has served as Chairman of the Board of Directors. Mr. Kohler is a partner
and portfolio manager for Whitebox Advisors, which he joined in October 1999.
Prior to that he served as a managing director of Second Avenue Capital
Management, a money management company, from December 1998 through September
1999. Prior to that he served as President of Kohler Capital Management from
October 1997 through November 1998. From July to October 1997, Mr. Kohler was a
partner in Tarmachan Holdings, Inc. From 1984 through June 1997, Mr. Kohler was
Vice President and Portfolio Manager at Okabena Company. Mr. Kohler serves on
the Boards of Destron Fearing, Inc., a publicly traded identification products
company, and a number of private companies, including Emerald First Financial,
Northwest Mortgage Services, Made in the Shades, Inc., and Health EZ, Inc. Mr.
Kohler has an M.B.A. degree from Cornell University and a B.A. degree from the
University of Minnesota. Mr. Kohler is the brother of Jack S. Kohler.

      JEFFREY R. PALETZ is a founder of the Company, has been a director since
its inception and has been President since 1991, overseeing all operations of
the Company. Prior to founding the Company in 1989, Mr. Paletz was employed for
13 years at Sportsman's Guide, a mail order retailer, where he oversaw the
computer data operations. Mr. Paletz has a B.S. degree in Business from the
University of Minnesota.

      MELVIN GRAF is a founder of the Company, has been a director since its
inception and has been Executive Vice President and Secretary since 1991,
overseeing all marketing and leasing activities. Mr. Graf served as President of
the Company until 1991. Prior to founding the Company in 1989, Mr. Graf was
President of Network Travel, a Minneapolis travel agency, for five years. Mr.
Graf has a B.S. degree in Business from the University of Minnesota.

         ROBERT A. HEGSTROM became a director of the Company in June 1997. In
January 1997, Mr. Hegstrom joined Northwest Services, Inc. as Chairman,
President and Chief Executive Officer. Prior to that, he was a private investor
for two years and, from October 1979 to January 1995, he was Executive Vice
President of Green Tree Financial Corporation. Mr. Hegstrom is also a director
of Beacon Bank.

         MICHAEL WIGLEY became a director of the Company in January 1998. Since
1989 Mr. Wigley has been President and Chief Executive Officer of Great Plains
Companies, Inc., a diversified holding company. Mr. Wigley has an M.B.A. from
Harvard Business School, a M.S. from Stanford University and a B.S. degree from
the University of Minnesota. Mr. Wigley serves on the Board of Intelefilm, Inc.
and is a regent of Luther College.

         GREG JOHNSON became a director of the Company in March 1999 and since
November 1999 has served as CEO of the Company's subsidiary Advants, Inc. Prior
to that Mr. Johnson served as President of Global Corporation from 1997 to 1999
and has worked for Global since 1990. Prior to that, Mr. Johnson was President
and Chief Financial Officer of Simitar Entertainment, Inc. Mr. Johnson has a
B.A. degree from the University of Saint Thomas.

                                       15

<PAGE>

BOARD COMMITTEES AND ACTIONS

      During calendar year 1999, the Board of Directors met 4 times and each
director attended all meetings. The Board of Directors has two standing
committees, a Compensation Committee and an Audit Committee which were appointed
in January, 1998. Each committee met once during 1999.

      The Compensation Committee reviews and make recommendations to the Board
of Directors regarding salaries, compensation and benefits of executive officers
of the Company and administers the Company's 1997 Long-Term Incentive and Stock
Option Plan. The Committee members are Robert A. Hegstrom, Gary S. Kohler and
Jeffrey R. Paletz.

      The Audit Committee is responsible for recommending the appointment of a
firm of independent public accountants to audit the books and records of the
Company and its subsidiaries, reviews the internal and external financial
reporting of the Company and the scope of the independent audit. The Committee
members are Michael Wigley, Robert A. Hegstrom and Gary S. Kohler.

      The Board of Directors acts as the nominating committee. See "Information
Concerning directors and Nominees - Nomination of Directors"

DIRECTOR COMPENSATION

         No cash compensation is paid to the Company's directors. Independent,
non-employee directors (Mr. Hegstrom and Mr. Wigley) upon reelection receive an
option to purchase $75,000 of Common Stock, valued as of the annual shareholders
meeting. The options are pursuant to the Company's 1997 Long-Term Incentive and
Stock Option Plan, are exercisable upon grant and have five-year term and an
exercise price equal to the fair market value of the Common Stock as of the date
of grant. No options will be issued to employee directors for their service as
directors.

NOMINATION OF DIRECTORS

      The Board of Directors acts as the nominating committee for selecting the
Board's nominees for election as directors. The Board does not intend to
consider nominees recommended by shareholders. Directors of the Company are
elected annually to serve until the next annual meeting of shareholders or until
their successors are duly elected. The Company knows of no arrangements or
understandings between a director or nominee and any other person pursuant to
which he has been selected as a director or nominee. The only family
relationship between any of the nominees, directors or executive officers of the
Company is between Gary S. Kohler and Jack S. Kohler, who are brothers.

EXECUTIVE OFFICERS

         The following discussion sets forth information about the executive
officers of the Company who are not directors.

         JACK S. KOHLER has been Vice President and Chief Financial Officer of
the Company since 1993. Prior to joining the Company, Mr. Kohler was employed
for 13 years in various management and accounting positions at Cargill, Inc. Mr.
Kohler has a B.S. degree in Accounting from the University of Minnesota. Mr.
Kohler is the brother of Gary S. Kohler.

ITEM 10. EXECUTIVE COMPENSATION

                                       16

<PAGE>

         The following table and accompanying footnotes set forth certain
summary information, relating to the three years ended December 31, 1997-99,
with respect to the Company's Chief Executive Officer.

<TABLE>
<CAPTION>
                                                                                  LONG-TERM
                                                                                 COMPENSATION
                                                ANNUAL COMPENSATION                 AWARDS
                              ------------------------------------------------   ---------------
                                                                                  SECURITIES
NAME AND PRINCIPAL                                               OTHER ANNUAL     UNDERLYING          ALL OTHER
    POSITION                  YEAR        SALARY($)  BONUS($)   COMPENSATION($)  OPTIONS/SARS(#)    COMPENSATIONS
----------------------        -------------------------------------------------  ---------------   ---------------
<S>                           <C>         <C>        <C>        <C>              <C>               <C>
Jeffrey R. Paletz,            1999        $108,375   $      0       ------           ------             ------
President                     1998          86,398          0       ------           ------             ------
                              1997          77,350     15,476       ------           ------             ------
</TABLE>


AGREEMENTS WITH EXECUTIVES

         At December 31, 1999 the Company had employment agreements with Jeffrey
R. Paletz, Melvin Graf and Jack S. Kohler. The agreements provide for an annual
base salary and the right to receive additional compensation in the form of
salary, bonus and other benefits as the Board of Directors shall determines in
its sole discretion. The agreements prohibit each officer from competing against
the Company for a period of one year after employment ceases and from
communicating with a Site Provider until six months following expiration of the
Site Agreement. In the event of termination of the officer's employment, except
a termination for cause, the terminated officer is entitled to receive full
compensation and benefits for a six-month period.

         In light of the Company's efforts to dispose of its payphone assets,
the Company has determined to not renew its employment agreements beyond April
15, 2000.

BONUS PROGRAMS

         In 1997, the Company implemented its Incentive Compensation Plan to
provide an opportunity for executive officers and other Company employees to
receive a bonus based on individual and Company performance. Under this program
no bonuses were granted or paid in 1999.

         In 1999, the Board of Directors authorized potential bonuses to senior
management to be triggered by the completion of the sale of assets. Under this
plan no bonuses were granted or paid in 1999.

         The bonus opportunity for other Company employees is discretionary and
not subject to specific criteria.

ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

         The following table sets forth information as of December 31, 1999,
regarding the beneficial ownership of shares of Common Stock of the Company by
each director and executive officer of the Company, by all directors and
executive officers of the Company as a group, and by each shareholder known by
the Company to own beneficially more than five percent (5%) of the outstanding
shares of the Company's Common Stock. Unless otherwise noted, each person or
group identified possesses sole voting and investment power with respect to such
shares.

<TABLE>
<CAPTION>
                                                                NUMBER OF SHARES                  PERCENT OF
NAME AND ADDRESS OF BENEFICIAL OWNER                         BENEFICIALLY OWNED (1)         OUTSTANDING SHARES (2)
------------------------------------                       --------------------------     -------------------------
<S>                                                        <C>                             <C>
                                                                             170,000                           5.8%

                                       17

<PAGE>

Perkins Capital Management, Inc. (3)
730 East Lake Street
Wayzata, MN 55391-1769

DIRECTORS, NOMINEES AND EXECUTIVE OFFICERS:

Gary S. Kohler (4)(6)................................                      1,032,784                          35.3%

Jeffrey  R. Paletz...................................                        347,358                          11.9%

Melvin  Graf  (5)....................................                        213,334                           7.3%

Jack S. Kohler (6)(7)................................                        347,500                          11.6%

Robert A. Hegstrom(8)................................                         60,294                           2.0%

Michael Wigley(8)....................................                         65,294                           2.2%

Greg  Johnson........................................                         ------                           ----

All directors, nominees and executive officers as a
group (7 persons)                                                          1,866,564                          60.1%
</TABLE>

(1)      Each person has sole voting power and sole dispositive power with
         respect to all outstanding shares, except as otherwise noted or
         disclosed by the beneficial owners in the Schedule 13G filing described
         at footnote 3 below.

(2)      Based on 2,926,906 shares outstanding at March 21, 2000. Such amount
         does not include 264,588 shares of common stock issuable upon exercise
         of stock options. Each figure showing the percentage of outstanding
         shares owned beneficially has been calculated by treating as
         outstanding and owned the shares which could be purchased by the
         indicated person(s) within 60 days upon the exercise of existing stock
         options or warrants.

(3)      Reflects information included on Schedule 13G dated February 2, 2000
         filed with the Securities and Exchange Commission.

(4)      Includes 40,000 shares held by Gary S. Kohler as custodian for the
         benefit of his children. Mr. Kohler disclaims beneficial ownership of
         such shares.

(5)      Included 13,334 shares held by Mr. Graf's spouse. Mr. Graf disclaims
         beneficial ownership of such shares.

(6)      Includes 200,000 shares currently owned by Gary S. Kohler, who has
         granted Jack S. Kohler an option to purchase such shares.

(7)      Includes options to acquire 70,000 shares from the Company.

(8)      Includes options to acquire 55,294 shares from the Company.

SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE

         The Company's directors, executive officers and any persons holding
more than 10% of the outstanding Common Stock of the Company are required to
file with the Securities and Exchange Commission reports concerning their
initial ownership of Common Stock and any subsequent changes in such ownership.
The Company believes that during 1997 the filing requirements were satisfied on
a timely basis by all such persons. In making this disclosure, the Company has
relied solely on written representations of its directors, officers and
beneficial owners of more than 10% of the Common Stock and copies of the reports
they have filed with the Securities and Exchange Commission and furnished to the
Company.

                                       18

<PAGE>

ITEM 12.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

      The information concerning certain relationships and related transaction
is set forth in the Proxy Statement under the heading "Certain Transactions",
which information is incorporated herein by reference. The Company has an
arrangement with Gary S. Kohler, the Company's Chairman of the Board, pursuant
to which Mr. Kohler advises the Company's management on an as-needed basis. The
consulting fees paid to Mr. Kohler for rendering this service for the year ended
December 31, 1999, totaled $28,800.

                                       19

<PAGE>

                                     PART IV

ITEM 13.  EXHIBITS AND REPORTS ON FORM 8-K

(a)      EXHIBITS.  SEE "EXHIBIT INDEX" ON PAGE FOLLOWING SIGNATURES.

(b)      REPORTS ON FORM 8-K

         The Company filed reports on Form 8-K on November 15, 1999 reporting
the Company's financial results for the third quarter ended September 30, 1999
and reporting the sale of its Midwest assets. On December 23, 1999 the Company
reported the sale of its Pennsylvania assets.

                                       20

<PAGE>

                                   SIGNATURES

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

                                                 CHOICETEL COMMUNICATIONS, INC.

                                                 Date: March 30, 2000
                                                 By /s/ Gary S. Kohler
                                                        --------------
                                                        Gary S. Kohler

Chairman of the Board of Directors

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

                                Power of Attorney

         Each person whose signature appears below constitutes and appoints
JEFFREY R. PALETZ and JACK S. KOHLER as his true and lawful attorneys-in-fact
and agents, each acting alone, with full power of substitution and
resubstitution, for him and in his name, place and stead, in any and all
capacities, to sign any and all amendments to this Annual Report on Form
10-KSB and to file the same, with all exhibits thereto, and other documents
in connection therewith, with the Securities and Exchange Commission,
granting unto said attorneys-in-fact and agents, each acting alone, full
power and authority to do and perform each and every act and thing requisite
and necessary to be done in and about the premises, as fully to all intents
and purposes as he might or could do in person, hereby ratifying and
confirming all said attorneys-in-fact and agents, each acting alone, or his
substitute or substitutes, may lawfully do or cause to be done by virtue
thereof.

<TABLE>
<CAPTION>

SIGNATURE                                           TITLE                                 DATE
<S>                                                 <C>                                   <C>

/s/ Gary S. Kohler                                  Director                              March 30, 1999
------------------------------------------------
      Gary S. Kohler


/s/ Jeffrey R. Paletz                               President and Director                March 30, 1999
------------------------------------------------
      Jeffrey R. Paletz


/s/ Melvin Graf                                     Executive Vice President and          March 30, 1999
------------------------------------------------    Director
     Melvin Graf


/s/ Jack S. Kohler                                  Vice President and Chief Financial    March 30, 1999
------------------------------------------------    Officer
      Jack S. Kohler

/s/ Dustin Elder                                    Vice President                        March 30, 1999
------------------------------------------------
     Dustin Elder


/s/ Robert A. Hegstrom                              Director                              March 30, 1999
------------------------------------------------
      Robert A. Hegstrom

/s/ Michael Wigley                                  Director                              March 30, 1999
------------------------------------------------
      Michael Wigley
</TABLE>

                                       21

<PAGE>


                          INDEPENDENT AUDITORS' REPORT

Board of Directors
ChoiceTel Communications, Inc.
Minneapolis, Minnesota

We have audited the accompanying consolidated balance sheets of ChoiceTel
Communications, Inc. and Subsidiaries as of December 31, 1999 and 1998, and the
related consolidated statements of operations, shareholders' equity, and cash
flows for the years then ended. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.

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

In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of ChoiceTel
Communications, Inc. and Subsidiaries as of December 31, 1999 and 1998, and the
consolidated results of its operations and its cash flows for the years then
ended, in conformity with generally accepted accounting principles.




/s/ Schechter Dokken Kanter Andrews & Selcer Ltd

Minneapolis, Minnesota
March 23, 2000


<PAGE>

                                                                  CONSOLIDATED
CHOICETEL COMMUNICATIONS, INC.                                  BALANCE SHEETS
AND SUBSIDIARIES                                                   DECEMBER 31
------------------------------------------------------------------------------

<TABLE>
<CAPTION>

                                                                                            1999                1998
                                                                                     ----------------      ---------------
<S>                                                                                  <C>                   <C>
ASSETS:
    Current assets:
       Cash and cash equivalents                                                     $      2,323,344      $       155,907
       Receivables                                                                          1,241,952              932,905
       Prepaid and other assets                                                               319,492              309,301
       Deferred taxes                                                                         302,000               57,000
                                                                                     ----------------      ---------------

          Total current assets                                                              4,186,788            1,455,113

    Property and equipment, net                                                               113,302               37,628

    Net assets of discontinued operations                                                   4,849,926           12,162,767

    Deferred financing, net of accumulated
      amortization of $3,000 in 1998                                                                                27,000
                                                                                     ----------------      ---------------

                                                                                     $      9,150,016      $    13,682,508
                                                                                     ================      ===============


LIABILITIES AND SHAREHOLDERS' EQUITY:
    Current liabilities:
       Checks outstanding in excess of bank balance                                                        $        74,604
       Notes payable                                                                 $        350,000              350,000
       Current portion of long-term debt                                                      383,190            1,222,559
       Accounts payable                                                                       157,808              238,944
       Accrued expenses                                                                     1,835,251            1,918,550
       Income tax payable                                                                     221,000
                                                                                     ----------------      ---------------

          Total current liabilities                                                         2,947,249            3,804,657

    Long-term liabilities, net of current portion                                               4,285            3,891,732

    Minority interest                                                                          23,611

    Shareholders' equity                                                                    6,174,871            5,986,119
                                                                                     ----------------      ---------------

                                                                                     $      9,150,016      $    13,682,508
                                                                                     ================      ===============
</TABLE>

                 See notes to consolidated financial statements.


                                                                             2

<PAGE>

                                                                  CONSOLIDATED
CHOICETEL COMMUNICATIONS, INC.                        STATEMENTS OF OPERATIONS
AND SUBSIDIARIES                                       YEARS ENDED DECEMBER 31
------------------------------------------------------------------------------
<TABLE>
<CAPTION>
                                                                                            1999                1998
                                                                                     ----------------      ---------------
<S>                                                                                  <C>                   <C>
Service revenue                                                                      $          5,031      $           106
Cost of service                                                                                 9,940                1,350
                                                                                     ----------------      ---------------

Gross margin                                                                                   (4,909)              (1,244)

Selling, general and administrative expenses                                                  292,235
                                                                                     ----------------      ---------------
Loss from continuing operations before income tax benefit                                    (297,144)              (1,244)

Provision for income tax benefit                                                               66,000
                                                                                     ----------------      ---------------
Loss from continuing operations before minority interest                                     (231,144)              (1,244)

Minority interest                                                                              53,338
                                                                                     ----------------      ---------------
Loss from continuing operations                                                              (177,806)              (1,244)

Income from discontinued operations (net of income
  tax expense of $42,000 and $95,000 for 1999 and
  1998, respectively)                                                                         160,890              116,312
                                                                                     ----------------      ---------------

Net income (loss)                                                                    $        (16,916)     $       115,068
                                                                                     ================      ===============

Earnings (loss) per share:
    Continuing operations, basic and diluted                                         $          (0.06)     $        (0.00)
                                                                                     ================      ==============

    Discontinued operations, basic and diluted                                       $           0.05      $          0.04
                                                                                     ================      ===============

    Net income (loss), basic and diluted                                             $          (0.01)     $          0.04
                                                                                     ================      ===============

Weighted average number of shares outstanding:
    Basic                                                                            $      2,915,528      $   2,915,006
                                                                                     ================      ===============

    Diluted                                                                          $      2,925,776      $   2,916,457
                                                                                     ================      =============
</TABLE>

                 See notes to consolidated financial statements.

                                                                               3


<PAGE>

CHOICETEL COMMUNICATIONS, INC.
AND SUBSIDIARIES
------------------------------------------------------------------------------
<TABLE>
<CAPTION>
                                                                                                   15,000,000 shares
                                                                                                 authorized, $.01 par
                                                                                             -------------------------------
                                                                                                  Shares           Amount
                                                                                             ---------------  --------------
<S>                                                                                          <C>              <C>
Balance, January 1, 1998                                                                        2,915,006     $     29,150

Issuance of stock warrants for services

Issuance of stock options for services

Collection of subscription receivable

Net income
                                                                                           ---------------  --------------

Balance, December 31, 1998                                                                      2,915,006           29,150

Issuance of minority shares of subsidiary

Issuance of stock options for services

Issuance of common stock                                                                           11,900              119

Collection of subscription receivable

Net loss
                                                                                          ---------------   --------------

Balance, December 31, 1999                                                                      2,926,906   $       29,269
                                                                                          ===============   ==============
</TABLE>


                 See notes to consolidated financial statements.


<PAGE>


                                                       CONSOLIDATED STATEMENTS
                                                       OF SHAREHOLDERS' EQUITY
                                        YEARS ENDED DECEMBER 31, 1999 AND 1998
------------------------------------------------------------------------------

<TABLE>
<CAPTION>
<S>                             <C>                    <C>                       <C>
             Additional
               paid-in                Accumulated           Subscriptions
               capital                  deficit              receivable                 Total
--------------------------      -----------------       -------------------      ------------------

         $       5,956,680      $        (134,171)      $           (18,581)     $        5,833,078

                     9,000                                                                    9,000

                    20,392                                                                   20,392

                                                                      8,581                   8,581

                                          115,068                                           115,068
--------------------------      -----------------       -------------------      ------------------

                 5,986,072                (19,103)                  (10,000)              5,986,119

                    73,050                                                                   73,050

                    99,562                                                                   99,562

                    22,937                                                                   23,056

                                                                     10,000                  10,000

                                          (16,916)                                          (16,916)
--------------------------      -----------------       -------------------      ------------------

         $       6,181,621      $         (36,019)      $                 0      $        6,174,871
==========================      =================       ===================      ==================
</TABLE>

                                                                               4

<PAGE>

                                                                  CONSOLIDATED
CHOICETEL COMMUNICATIONS, INC.                        STATEMENTS OF CASH FLOWS
AND SUBSIDIARIES                                       YEARS ENDED DECEMBER 31
------------------------------------------------------------------------------
<TABLE>
<CAPTION>
                                                                                            1999                1998
                                                                                     ----------------      ---------------
<S>                                                                                  <C>                   <C>
Cash flows from operating activities:
    Net income (loss)                                                                $        (16,916)     $       115,068
    Adjustments to reconcile net income (loss)to net
      cash provided by operating activities:
       Deferred taxes                                                                        (245,000)              95,000
       Depreciation                                                                           873,911              893,129
       Amortization                                                                           510,214              423,922
       Stock based compensation issued                                                        122,618               29,392
       Minority interest loss                                                                 (53,338)
       Loss on disposal                                                                       (14,621)
    Changes in operating assets and liabilities:
       Coin in phone                                                                          108,877              (61,106)
       Receivables                                                                            162,898             (505,481)
       Prepaid expenses                                                                       241,107              (93,513)
       Checks outstanding in excess of bank balance                                           (74,604)             (64,635)
       Accounts payable                                                                       (81,136)             190,944
       Accrued expenses                                                                         7,953              223,663
       Income tax payable                                                                     221,000
                                                                                     ----------------      ---------------

    Net cash provided by operating activities                                               1,762,963            1,246,383
                                                                                     ----------------      ---------------

Cash flows from investing activities:
    Purchase of:
       Equipment                                                                           (1,063,710)          (1,116,263)
       Rental contracts                                                                                           (296,506)
    Redemption of short-term investments                                                                         1,151,215
    Payments for acquisitions                                                                                     (205,987)
    Proceeds from sale of equipment and rental contracts                                    6,035,000
                                                                                     ----------------      ---------------

    Net cash provided by (used in) investing activities                                     4,971,290             (467,541)
                                                                                     ----------------      ---------------

Cash flows from financing activities:
    Proceeds from issuance of common stock in subsidiary                                      150,000
    Collection of subscription receivable                                                      10,000                8,581
    Principal payments on long-term debt                                                   (4,726,816)          (1,148,995)
    Increase in notes payable                                                                                      350,000
    Loan origination fees                                                                                          (30,000)
                                                                                     ----------------      ---------------

    Net cash used in financing activities                                                  (4,566,816)            (820,414)
                                                                                     ----------------      ---------------
</TABLE>

                 See notes to consolidated financial statements.

                                                                               5

<PAGE>


                                                                  CONSOLIDATED
CHOICETEL COMMUNICATIONS, INC.                        STATEMENTS OF CASH FLOWS
AND SUBSIDIARIES                                       YEARS ENDED DECEMBER 31
------------------------------------------------------------------------------
<TABLE>
<CAPTION>

                                                                                            1999                1998
                                                                                     ----------------      ---------------
<S>                                                                                  <C>                   <C>
Net increase (decrease) in cash
  and cash equivalents                                                               $      2,167,437      $       (41,572)

Cash and cash equivalents, beginning                                                          155,907              197,479
                                                                                     ----------------      ---------------

Cash and cash equivalents, ending                                                    $      2,323,344      $       155,907
                                                                                     ================      ===============

Supplemental disclosure of cash flow information:
    Cash paid for interest                                                           $        509,060      $       340,012
                                                                                     ================      ===============


Supplemental cash flows information:

    Details of acquisition:

       Fair value of assets                                                                                $     4,005,987

       Issuance of note                                                                                          3,800,000
                                                                                                           ---------------
       Cash paid for assets                                                                                $       205,987
                                                                                                           ===============

Non cash investing activities:
    Receivable from sale of assets                                                   $        365,810
                                                                                     ================
</TABLE>


                 See notes to consolidated financial statements.

                                                                               6


<PAGE>


                                                           NOTES TO CONSOLIDATED
                                                            FINANCIAL STATEMENTS
CHOICETEL COMMUNICATIONS, INC.                                       YEARS ENDED
AND SUBSIDIARIES                                      DECEMBER 31, 1999 AND 1998
--------------------------------------------------------------------------------

1.    Nature of business and discontinued operations:
-------------------------------------------------------------------------------

Nature of business:
      ChoiceTel Communications, Inc., and Subsidiaries (the Company) includes a
      wholly owned subsidiary, ChoiceTel, Inc., and a 60% owned subsidiary,
      Advants, Inc. (formerly Public Internet Access Holdings Corporation). The
      Company was in the business of providing pay phone services in several
      states and Puerto Rico. In December 1999 pursuant to a shareholders'
      meeting, the Company decided to sell its pay phone operations. The Company
      is currently focusing on Advants, Inc., (Advants) which is operating and
      rapidly expanding a network of public internet access terminals (kiosks).
      As part of this strategy, Advants raised additional equity outside of
      ChoiceTel Communications, Inc., through a private placement memorandum to
      fund this expansion.

Discontinued operations:
      The Company decided to discontinue its pay phone operations in December
      1999 (measurement date). The Company has estimated it will realize an
      overall gain on the disposal of discontinued operations and accordingly,
      has not recorded a loss from the measurement date. In 1999, the Company
      sold all of its phones in two territories (the Northwest and Midwest) in
      separate transactions totaling approximately $6.4 million. The Northwest
      sale occurred prior to the measurement date and a gain of approximately
      $32,000 is included in income from discontinued operations in 1999.
      Additionally, the Company entered into an agreement with the Midwest
      purchaser to sell 100% of the outstanding stock of ChoiceTel, Inc., the
      Company's Local Exchange Carrier (LEC) subsidiary, for $100,000 subject to
      approval by the public utilities commission. The Midwest purchaser has
      also agreed to have 100 kiosks installed by January 21, 2000 for an
      additional $400,000. The $400,000 price on the kiosks will be decreased by
      $4,000 times the number of kiosks not installed by that date. In March
      2000, the Company sold its operations in the Eastern United States for
      approximately $2,000,000.

The results of discontinued operations are follows:

<TABLE>
<CAPTION>
                              1999               1998
                         ---------------  ----------------
<S>                      <C>              <C>
Revenue                  $    10,376,055  $      9,344,140
Cost of service                4,885,419         4,230,661
                         ---------------  ----------------
Gross margin                   5,490,636         5,113,479
Selling, general and
  administrative               4,811,306         4,563,469
Interest expense                 476,440           338,698
                         ---------------  ----------------
Income before taxes              202,890           211,312
Income taxes                      42,000            95,000
                         ---------------  ----------------
Income from discon-
  tinued operations      $       160,890  $        116,312
                         ===============  ================
</TABLE>
The net assets of the discontinued operations consist of the following as of
December 31:

<TABLE>
<CAPTION>
                                 1999           1998
                           --------------  ---------------
<S>                        <C>             <C>
Cash                       $       98,455  $       207,332
Accounts receivable                41,753          147,889
Prepaid expenses                  176,960          428,257
Property and
  equipment, net                2,828,458        6,298,773
Rental contracts, net           2,150,527        5,501,771
Deferred loss                      66,280
Accrued expenses                 (512,507)        (421,255)
                           --------------  ---------------
                           $    4,849,926  $    12,162,767
                           ==============  ===============
</TABLE>
The 1998 financial statements have been reclassified for the discontinued
operations.

2. Summary of significant accounting policies:

Principles of consolidation:
      The consolidated financial statements for 1999 and 1998 include the
      accounts of ChoiceTel Communications, Inc. and its wholly owned
      subsidiary,

                                                                              7

<PAGE>


                                                           NOTES TO CONSOLIDATED
                                                            FINANCIAL STATEMENTS
CHOICETEL COMMUNICATIONS, INC.                                       YEARS ENDED
AND SUBSIDIARIES                                      DECEMBER 31, 1999 AND 1998
--------------------------------------------------------------------------------
2. Summary of significant accounting policies (continued):
-------------------------------------------------------------------------------
      ChoiceTel, Inc. and its 60% owned subsidiary, Advants, Inc. All material
      intercompany balances have been eliminated.

Concentration of credit risk:
      The Company maintains its cash in bank deposit accounts at financial
      institutions where balances, at times, may exceed federally insured
      limits. It is management's opinion that the risk of loss is minimal.

Property and equipment and depreciation methods:
      Property and equipment is recorded at cost. Depreciation is being provided
      by the straight-line method over the estimated useful lives, principally,
      seven years, of the related assets.

Capitalization of computer software development costs:
      The company capitalizes certain costs incurred in the development of
      software, including external direct material and service costs, once
      technical feasibility is reached.

Deferred financing:
      Deferred financing costs were being amortized over the life of the related
      notes on a straight-line basis. The related note was paid off during 1999.

Income taxes:
      Income taxes are provided for the tax effects of transactions reported in
      the financial statements and consist of taxes currently due plus deferred
      taxes. Deferred taxes are recognized from differences between the tax
      basis of assets and liabilities and their reported amounts in the
      financial statements. The deferred tax assets and liabilities represent
      the future tax expense of those differences.

      The Companies file a consolidated tax return that includes ChoiceTel
      Communications, Inc. and ChoiceTel, Inc. Advants, Inc. files a separate
      tax return.

Stock-based compensation:
      The Company accounts for its stock options in accordance with the
      provisions of Accounting Principles Board Opinion No. 25 (APB No. 25),
      ACCOUNTING FOR STOCK ISSUED TO EMPLOYEES, and related interpretations. As
      such, compensation expense is recorded on the date of grant only if the
      current market price of the underlying stock exceeded the exercise price.
      The Company has also adopted SFAS No. 123, ACCOUNTING FOR STOCK-BASED
      COMPENSATION (SFAS No. 123), which permits entities to recognize the
      expense over the vesting period the fair value of all stock-based awards
      on the date of grant. Alternatively, SFAS No. 123 allows entities to
      continue to apply the provisions of APB No. 25 and provide pro forma net
      income disclosures for employee stock option grants as if the fair-value
      based method defined in SFAS No. 123 had been applied. The Company has
      elected to continue to apply the provisions of APB No. 25 and provide the
      pro forma disclosure provisions of SFAS No. 123.

Earnings per share:
      The Company adopted SFAS Statement No. 128, EARNINGS PER SHARE. Basic
      earnings per common share are based on the weighted average number of
      common shares outstanding in each year. Diluted earnings per common share
      assume that outstanding common shares were increased by shares issuable
      upon exercise of stock options and warrants for which market price exceeds
      exercise price, less shares

                                                                               8


<PAGE>


                                                           NOTES TO CONSOLIDATED
                                                            FINANCIAL STATEMENTS
CHOICETEL COMMUNICATIONS, INC.                                       YEARS ENDED
AND SUBSIDIARIES                                      DECEMBER 31, 1999 AND 1998
--------------------------------------------------------------------------------
2. Nature of business and summary of significant accounting policies
(continued):
--------------------------------------------------------------------

      which could have been purchased by the Company with related proceeds. This
      calculation added 10,248 and 1,451 shares to the diluted weighted average
      shares outstanding for 1999 and 1998, respectively.

       Stock options and warrants of 1,226,000 and 1,225,000, for December 31,
      1999 and 1998, respectively, were not used in the calculation of diluted
      earnings per share because they were antidilutive.

Cash equivalents:
      The Company considers all highly liquid investments with original
      maturities of three months or less to be cash equivalents.

Use of estimates:
      The preparation of financial statements in conformity with generally
      accepted accounting principles requires management to make estimates and
      assumptions that affect certain reported amounts and disclosures.
      Accordingly, the actual amounts could differ from those estimates. Any
      adjustments applied to estimated amounts are recognized in the year in
      which such adjustments are determined. Estimates that are susceptible to
      significant change are disclosed in notes 1 and 7.

3.    Acquisition:
-------------------------------------------------------------------------------
      On June 30, 1998, the Company purchased a route of pay phones in
      Philadelphia, Pennsylvania along with the trade name Jay Telephone Vending
      from Edward Steven Corporation and Drake Telephone Company. The total cost
      for the acquired assets was $4,005,987, and was financed by the bank with
      a $3,800,000 note payable. An additional amount, up to $500,000, was due
      based upon the performance of acquired phones during the twelve months
      ending June 30, 1999. No further amounts were due based upon the
      performance.

4. Property and equipment:
-------------------------------------------------------------------------------
<TABLE>
<CAPTION>

                               1999              1998
                          --------------   ---------------
<S>                       <C>              <C>
Office equipment          $       20,658
Kiosks                            54,682   $        40,212
Accumulated
  depreciation                   (10,738)           (2,584)
                          --------------   ---------------
                                  64,602            37,628
In process software               48,700
                          --------------   ---------------
                          $      113,302   $        37,628
                          ==============   ===============
</TABLE>

                                                                               9


<PAGE>


                                                           NOTES TO CONSOLIDATED
                                                            FINANCIAL STATEMENTS
CHOICETEL COMMUNICATIONS, INC.                                       YEARS ENDED
AND SUBSIDIARIES                                      DECEMBER 31, 1999 AND 1998
--------------------------------------------------------------------------------

5. Note payable:
---------------------------------------------
<TABLE>
<CAPTION>
                                                                                              1999                1998
                                                                                        ----------------    ---------------
<S>                                                                                     <C>                 <C>

Note payable, Computer Assisted Technology, Inc. (CAT), interest only at 8.5%
through February 7, 1998, at which time the principal is due. Convertible to
shares of common stock at $6.75 plus adjustment based on IPO price of stock. The
note has not been settled due to a dispute between the Company and CAT.  See Note 7.    $        350,000    $       350,000
                                                                                        ================    ===============

6. Long-term debt:
---------------------------------------------

                                                                                              1999                1998
                                                                                        ----------------    ---------------

Note payable, bank, due in increasing monthly principal installments starting at
$50,667, increasing up to $70,000 at July 2002 plus interest at a floating rate
through June 2003. The interest rate at December 31, 1998 was 8.75%. (A) (B) (C)                            $     3,495,998

Note payable, bank, revolving credit facility up to $1,000,000, due in
increasing monthly principal installments beginning October 1999 determined as a
percent of the amount outstanding on September 30, 1999. Installments are due
beginning October 1999 through June 2003,
plus interest at a floating rate. (B) (C)                                                                           350,000

Note payable, Telco, due in monthly installments of $21,342 including interest
at 10% through July 2001, secured by equipment, subordinated
to notes payable, bank, paid off in January 2000.                                       $        378,061            564,874

Note payable, Telecapital, due in monthly installments of $4,452 including
interest at 14.5% through April 2002, secured by
equipment. (C)                                                                                                      138,159

Capital leases, interest at 9.5%. (C)                                                                               551,156

Notes payable, vehicles, due in monthly installments of $480 including
interest at 8.95% through December 2001.                                                           9,414             14,104
                                                                                        ----------------    ---------------
                                                                                                 387,475          5,114,291
Less current portion                                                                             383,190          1,222,559
                                                                                        ----------------    ---------------

                                                                                        $          4,285    $     3,891,732
                                                                                        ================    ===============
</TABLE>


                                                                              10

<PAGE>


                                                           NOTES TO CONSOLIDATED
                                                            FINANCIAL STATEMENTS
CHOICETEL COMMUNICATIONS, INC.                                       YEARS ENDED
AND SUBSIDIARIES                                      DECEMBER 31, 1999 AND 1998
--------------------------------------------------------------------------------

6.    Long-term debt (continued):
--------------------------------------------------------------------------------

Future maturities of long-term debt are as follows:
<TABLE>
<CAPTION>
      Year ending December 31,                Amount
      ------------------------                ------
<S>                                       <C>
                    2000                  $     383,190
                    2001                          4,285
                                          -------------
                                          $     387,475
                                          =============
</TABLE>
(A) This note includes some mandatory prepayments based on cash flow and
penalties for other prepayments.

(B) These notes are secured by receivables, equipment, deposit accounts and an
insurance policy and are partially guaranteed by certain officers. The Company
is required to maintain certain financial ratios and the notes have certain
other restrictive covenants regarding transactions of the Company.

(C) Note paid off during 1999.

7. Commitments and contingencies:
--------------------------------------------------------------------------------

Phone locations:
      The Company rents phone locations from merchants and property owners under
      varying lease terms, usually ten years, generally cancelable by the
      Company upon 30 days notice.

Consulting agreement:
      The Company paid a director/shareholder $28,800 and $34,800 for certain
      consulting services in 1999 and 1998, respectively.

Leases:
      The Company leases its offices in Minnesota and Puerto Rico under
      operating leases expiring in May 2000. The Company also leases office
      space in Pennsylvania on a month-to-month basis. The leases have renewal
      options and require the Company to pay certain common area costs and real
      estate taxes. Rent expense under the leases was $129,641 and $101,737 for
      the years ended December 31, 1999 and 1998, respectively.

      The Company has a sublease agreement to receive a prorated portion of the
      future rent applicable to the Minnesota location for approximately
      $14,000.

      The future minimum lease payment is $26,795 for the year ending December
      31, 2000.

Contingencies:
    Sales tax:
      The Minnesota Department of Revenue has asserted sales taxes are due on
      telephone receipts. The Company does not agree with this assessment and
      has appealed it to the Minnesota Tax Court. Total assessments including
      taxes, penalties and interest are estimated to be $2.1 million. The
      Company has accrued $1,549,685 at December 31, 1999 and $1,367,732,
      at December 31, 1998 related to this contingency.

Puerto Rico line charges:
    In March 1998, the Company received verbal assurances from the Puerto Rican
    Telephone Company (PRTC) that pay phone lines would be made available and
    the charge would be a flat rate of $50.00 per month per line. However, when
    phone bills were received in the Company's offices, they included additional
    charges ranging from $0.13 to $0.26 per call. At that time, the PRTC and the
    Company agreed that until a final decision was reached on a rate case

                                                                              11


<PAGE>


                                                           NOTES TO CONSOLIDATED
                                                            FINANCIAL STATEMENTS
CHOICETEL COMMUNICATIONS, INC.                                       YEARS ENDED
AND SUBSIDIARIES                                      DECEMBER 31, 1999 AND 1998
--------------------------------------------------------------------------------

7.    Commitments and contingencies (continued):
--------------------------------------------------------------------------------
    before the Puerto Rican Regulatory Board (PRRB), the Company would not pay
    the per call charges. On May 27, 1998 the PRRB ruled on that rate case and
    instructed the PRTC to reduce the per call charges to between $.01 and $.03
    per call, depending upon the routing of the call. The PRTC appealed the
    ruling to the Court of Appeals, which upheld the ruling. PRTC has since
    appealed the ruling to the Puerto Rico Supreme Court, which has agreed to
    hear the case and has issued a stay of execution until the court renders a
    decision on the appeal. From April through September 1998, the Company
    accrued unpaid line charges at the rate of $0.15 per call. In October 1998,
    the Company reduced the rate it was accruing line charges to $0.06 per call
    based upon progress of this case. Since January 1, 1999, the Company has
    paid the PRTC $0.03 per call and is continuing to accrue $0.06 per call. The
    Company has accrued $356,000 at December 31, 1999 and $57,000 at
    December 31, 1998 related to this matter.

Dial around Compensation:
      The Company receives compensation for dial around activity related to its
      pay phones. The rates are set by the Federal Committees Commission and are
      subject to change both prospectively and retroactively. The financial
      statements include a provision for $80,000 as an estimated liability for
      amounts that may require repayment.

Computer Assisted Technologies (CAT):
      The Company's 1999 and 1998 financial statements included the following
      amounts related to a 1997 purchase from CAT of a route of pay telephones:
<TABLE>
<S>                                  <C>
         Prepaid expenses            $       302,142
         Accrued expenses                    (93,121)
         Note payable                       (350,000)
                                     ---------------
         Net liability               $      (140,979)
                                     ===============
</TABLE>
      The purchase agreement includes some contingent payments with which the
      Company and CAT have a disagreement. As a result, the above have not been
      settled. In December 1999, a principal of CAT filed a suit against the
      Company alleging that CAT is entitled to additional shares and cash. The
      outcome of this contingency is not known and no further amounts have been
      recorded in the financial statements.

                                                                              12


<PAGE>


                                                           NOTES TO CONSOLIDATED
                                                            FINANCIAL STATEMENTS
CHOICETEL COMMUNICATIONS, INC.                                       YEARS ENDED
AND SUBSIDIARIES                                      DECEMBER 31, 1999 AND 1998

8. Stock options and warrants:
-----------------------------------------------

On April 11, 1997, the Company's Board of Directors adopted the 1997 Long-Term
Incentive and Stock Option Plan (the "Plan"). The Plan provides for the issuance
of incentive stock options and non-qualified stock options to key employees and
directors of the Company. The total number of shares of common stock authorized
and reserved for issuance under the Plan is 100,000 shares. The exercise price
for each incentive stock option granted under the Plan may not be less than the
fair market value of the common stock on the date of the grant, unless, in the
case of incentive stock options, the optionee owns greater than 10% of the total
combined voting power of all classes of capital stock of the Company, in which
case the exercise price may not be less than 110% of the fair market value of
the common stock on the date of the grant. The exercise price for each
non-qualified option may not be less than 85% of the fair market value of the
common stock on the date of grant. Unless otherwise determined by the Board,
incentive options granted under the Plan have a maximum duration of 10 years,
non-qualified options and awards have a maximum duration of 15 years. Vesting is
based on such terms and conditions as the Board shall determine.

Utilizing the Black Scholes option pricing model, the Company determined that
the fair value of options granted during 1998 would not have affected net income
(loss) or income (loss) per share as reported, and accordingly, the Company has
not provided pro forma income and earnings per share information.

In 1999, the proforma effects of options issued to employees are as follows:

<TABLE>
<CAPTION>
                                                        As reported               Proforma
                                                   ---------------------   --------------------
<S>                                                <C>                     <C>
                  Net income (loss)                $            (16,916)   $            (93,728)
                                                   =====================   ====================

                  Earnings per share               $              (0.01)   $              (0.03)
                                                   ====================    =======================
</TABLE>

Assumptions used to estimate the fair value of employee options issued in 1999
using the Black Scholes model are as follows:

<TABLE>
                  <S>                              <C>
                  Risk free interest rate           5.85%
                  Estimated life                   2 years
                  Estimated volatility               140%
                  Estimated dividends                  0%
</TABLE>

Information with respect to options outstanding as of December 31 is summarized
as follows:

<TABLE>
<CAPTION>
                                                           1999                                     1998
                                           -------------------------------------     -------------------------------------
                                                                    WEIGHTED-                               Weighted-
                                                                     AVERAGE                                 Average
                                                                    EXERCISE                                Exercise
                                                SHARES                PRICE             Shares                Price
                                           ---------------        ------------       -------------         --------------
<S>                                        <C>                    <C>               <C>                    <C>
Outstanding at beginning of year                   130,000        $       4.34             122,500         $         3.37
Granted                                            136,666                2.25              70,000                   4.06
Exercised
Forfeited                                           14,000                3.62              62,500                   2.00
                                           ---------------                           -------------

Outstanding at end of year                         252,666        $       3.21             130,000         $         4.34
                                           ===============        ============       =============         ==============

Range of exercise prices of options
  outstanding at December 31                 $2.25 - $6.75                          $3.38 to $6.75

Options exercisable at year end                    245,999                                  80,000

Weighted average remaining life                  2.9 YEARS                               3.4 years
</TABLE>

                                                                              13

<PAGE>



                                                           NOTES TO CONSOLIDATED
                                                            FINANCIAL STATEMENTS
CHOICETEL COMMUNICATIONS, INC.                                       YEARS ENDED
AND SUBSIDIARIES                                      DECEMBER 31, 1999 AND 1998

8.    Stock options and warrants (continued):
--------------------------------------------------------------------------------

During 1998 the Company issued 150,000 warrants to purchase at any time one
share of common stock; 50,000 of the warrants have an exercise price of $5.00
expiring August 2000, and 50,000 of the warrants have an exercise price of $6.00
expiring in August 2001. The remaining 50,000 have an exercise price of $7.00
expiring in August 2002.

At December 31, the Company has outstanding the following warrants:

<TABLE>
<CAPTION>
                                               Weighted
                                               average
                                               exercise
                      1999          1998         price
                  ------------  -----------  -------------
<S>               <C>           <C>          <C>
Issued as part
  of units in
  public offering      800,000      800,000    $    9.50

Granted to
  underwriter
  in public
  offering             160,000      160,000         8.95

Granted to
  investment
  relations
  company              150,000      150,000         6.00
                  ------------  -----------
Outstanding
  at end
  of year            1,110,000    1,110,000    $    9.40
                     =========  ===========    =========
Warrants
  exercisable
  at year end        1,110,000    1,110,000

Weighted
  average
  remaining
  life             2.8 YEARS     3.8 years
</TABLE>


9. Income taxes:
--------------------------------------------------------------------------------

A reconciliation between the statutory federal and state income tax to the
Company's effective tax benefit rate is as follows:

<TABLE>
<CAPTION>
                                 1999
                            --------------
Provisions calculated
   At statutory rates:
<S>                         <C>
    Deferred:

         Federal            $    (101,000)
         State                    (18,000)
                            --------------
                                 (119,000)

    Valuation
      allowance                    53,000
                            --------------
                            $     (66,000)
                            ==============
</TABLE>

                                                                              14


<PAGE>


                                                           NOTES TO CONSOLIDATED
                                                            FINANCIAL STATEMENTS
CHOICETEL COMMUNICATIONS, INC.                                       YEARS ENDED
AND SUBSIDIARIES                                      DECEMBER 31, 1999 AND 1998
--------------------------------------------------------------------------------
9.    Income taxes (continued):
--------------------------------------------------------------------------------

The deferred tax asset and deferred tax liability consist of the following at
December 31:

<TABLE>
<CAPTION>
                                 1999             1998
                            -------------   --------------
<S>                         <C>             <C>
Deferred tax asset
  (liability):
    Sales tax
      contingency           $     620,000   $      545,000
    Accrued expenses               27,000           25,000
    Accrued dial-around
      compensation                 32,000          140,000
    Depreciation                 (395,000)        (839,000)
    Amortization                   45,000           31,000
    Net operating loss
      carryforward                 53,000          155,000
    Deferred loss on
      disposal                    (27,000)
                            -------------   --------------
                                  355,000           57,000
Valuation allowance               (53,000)
                            -------------   --------------
                            $     302,000   $       57,000
                            =============   ==============
</TABLE>
Advants, Inc. has federal and state net operation loss carryforwards of $133,000
expiring in 2014.

Utilization of the deferred tax asset of $302,000 disclosed above is dependent
on future taxable profits in excess of profits arising from existing taxable
temporary differences. Assets have been recognized based on management's
estimate of future taxable income which includes a valuation allowance related
to Advants, Inc., which has no operating history to determine future use of the
net operating loss carryforward.

10. Financial instruments:
--------------------------------------------------------------------------------
The Company's financial instruments recorded on the balance sheet include cash,
accounts receivable, notes and accounts payable and debt. Because of their short
maturity, the carrying amount of cash, accounts receivable and notes and
accounts payable approximates fair value. Fair value of long-term debt
approximates recorded value based on rates available to the Company for similar
terms and maturities.

                                                                              15


<PAGE>

                       SECURITIES AND EXCHANGE COMMISSION

                                 WASHINGTON D.C.

                          EXHIBIT INDEX TO FORM 10-KSB

                                       OF

                         CHOICETEL COMMUNICATIONS, INC.


                   For the Fiscal Year Ended December 31, 1999

                        Commission File Number: 0-230 17

<TABLE>
<CAPTION>
       EXHIBIT
         NO.      DESCRIPTION
       -------    -----------
<S>               <C>
         3.1      Amended and Restated Articles of Incorporation (incorporated
                  by reference to Exhibit 3.1 of the Registrant's Registration
                  Statement on Form SB-2; Registration No. 333-29969)


         3.2      Bylaws (incorporated by reference to Exhibit 3.2 of the
                  Registrant's Registration Statement on Form SB-2; Registration
                  No. 333-29969)

         4.1      Specimen Certificate representing the Common Stock
                  (incorporated by reference to Exhibit 4.1 of the Registrant's
                  Registration Statement on Form SB-2; Registration No.
                  333-29969)

         4.2      Form of Redeemable Warrant Agreement with Norwest Bank
                  Minnesota, National Association, including certificate
                  representing the Redeemable Warrants (incorporated by
                  reference to Exhibit 4.2 of the Registrant's Registration
                  Statement on Form SB-2; Registration No. 333-29969)

         10.1*    1997 Long-Term Incentive and Stock Option Plan (incorporated
                  by reference to Exhibit 10.1 of the Registrant's Registration
                  Statement on Form SB-2; Registration No. 333-29969)

         10.2     Lease Agreement (incorporated by reference to Exhibit 10.2 of
                  the Registrant's Registration Statement on Form SB-2;
                  Registration No. 333-29969)

         10.3*    Bonus Program (incorporated by reference to Exhibit 10.3 of
                  the Registrant's Registration Statement on Form SB-2;
                  Registration No. 333-29969)

         10.4     Amended and Restated Loan Agreement with National City Bank,
                  dated as of January 2, 1997 (incorporated by reference to
                  Exhibit 10.4 of the Registrant's Registration Statement on
                  Form SB-2; Registration No. 333-29969)

         10.5     Promissory Note payable to Serence Paletz, dated April 10,
                  1995 (incorporated by reference to Exhibit 10.5 of the
                  Registrant's Registration Statement on Form SB-2; Registration
                  No. 333-29969)

         10.6     Promissory Note payable to William Opsahl, dated April 18,
                  1995 (incorporated by reference to Exhibit 10.6 of the
                  Registrant's Registration Statement on Form SB-2; Registration
                  No. 333-29969)

                                       22

<PAGE>

         10.7     Promissory Note payable to Miriam Graf, dated November 3, 1995
                  (incorporated by reference to Exhibit 10.7 of the Registrant's
                  Registration Statement on Form SB-2; Registration No.
                  333-29969)

         10.8     Promissory Note payable to William Opsahl, dated December 2,
                  1995 (incorporated by reference to Exhibit 10.8 of the
                  Registrant's Registration Statement on Form SB-2; Registration
                  No. 333-29969)

         10.9     Promissory Note payable to Ronald M. Gross and Elaine
                  Weitzman, dated December 7, 1995 (incorporated by reference to
                  Exhibit 10.9 of the Registrant's Registration Statement on
                  Form SB-2; Registration No. 333-29969)

         10.10    Promissory Note payable to William B. Topp and Norma Topp,
                  dated July 7, 1996 (incorporated by reference to Exhibit 10.10
                  of the Registrant's Registration Statement on Form SB-2;
                  Registration No. 333-29969)

         10.11    Promissory Note payable to The Topp Family Trust, dated July
                  27, 1996 (incorporated by reference to Exhibit 10.11 of the
                  Registrant's Registration Statement on Form SB-2; Registration
                  No. 333-29969)

         10.12    Agreement for Sale and Purchase of Business Assets with Telco
                  West, Inc. ("Telco"), dated January 2, 1997 (incorporated by
                  reference to Exhibit 10.12 of the Registrant's Registration
                  Statement on Form SB-2; Registration No. 333-29969)

         10.13    Installment Collateral Note payable to Telco, dated January 2,
                  1997 (incorporated by reference to Exhibit 10.13 of the
                  Registrant's Registration Statement on Form SB-2; Registration
                  No. 333-29969)

         10.14    Installment Collateral Note payable to Telco, dated January 2,
                  1997 (incorporated by reference to Exhibit 10.14 of the
                  Registrant's Registration Statement on Form SB-2; Registration
                  No. 333-29969)

         10.15    Agreement for Sale and Purchase of Assets with Computer
                  Assisted Technologies, Inc. ("CAT"), dated as of March 14,
                  1997 (incorporated by reference to Exhibit 10.15 of the
                  Registrant's Registration Statement on Form SB-2; Registration
                  No. 333-29969)

         10.16    Route Service Agreement with CAT, dated as of February 1, 1997
                  (incorporated by reference to Exhibit 10.16 of the
                  Registrant's Registration Statement on Form SB-2; Registration
                  No. 333-29969)

         10.17*   Employment Agreement with Jeffrey R. Paletz, dated as of April
                  15, 1997 (incorporated by reference to Exhibit 10.17 of the
                  Registrant's Registration Statement on Form SB-2; Registration
                  No. 333-29969)

         10.18*   Employment Agreement with Melvin Graf, dated as of April 15,
                  1997 (incorporated by reference to Exhibit 10.18 of the
                  Registrant's Registration Statement on Form SB-2; Registration
                  No. 333-29969)

         10.19*   Employment Agreement with Jack S. Kohler, dated as of April
                  15, 1997 (incorporated by reference to Exhibit 10.19 of the
                  Registrant's Registration Statement on Form SB-2; Registration
                  No. 333-29969)

         10.20*   Employment Agreement with Dustin Elder, dated as of August 14,
                  1997

<PAGE>

         10.21    Agreement for Service Resale with U.S. West Communications,
                  Inc., undated (incorporated by reference to Exhibit 10.21 of
                  the Registrant's Registration Statement on Form SB-2;
                  Registration No. 333-29969)

         10.22    Agreement for Sale and Purchase of Business Assets with Edward
                  Steven Corporation and Drake Telephone Company, dated May 7,
                  1998

         10.23    Credit Agreement with Norwest Bank Minnesota, dated as of June
                  30, 1998

         10.24    First Amendment to the Credit Agreement with Norwest Bank
                  Minnesota, dated as of December 16, 1998

         10.25    Agreement for Sale and Purchase of Business Assets with Alpha
                  Telcom Inc., dated February 16, 1999. **

         10.26    Agreement for Sale and Purchase of Business Assets with Access
                  Anywhere, LLC, dated November 15, 1999**

         21       Subsidiary of ChoiceTel Communications, Inc. **

         24       Power of Attorney (included on the signature page of this Form
                  10-KSB)
</TABLE>
                  -------------
                  *  Management contract or compensatory plan or arrangement.
                  ** Filed herewith.