As filed with the Securities and Exchange Commission on April 11, 2002

Registration No. 333-83396

SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
--------------

AMENDMENT NO. 1(*) TO

FORM SB-2
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------
INSYNQ, INC.
(Exact name of registrant as specified in its charter)

Delaware 6510 74-2964608
(State or other (Primary Standard (I.R.S. Employer
jurisdiction of Industrial Identification No.)
incorporation or Classification No.)
organization)
1127 Broadway Plaza, Suite 10
Tacoma, Washington 98402
(253) 284-2000
(Address and telephone number of principal executive offices)

John P. Gorst
Chief Executive Officer
1127 Broadway Plaza, Suite 10
Tacoma, Washington 98402
(253) 284-2000
(Name, address, including zip code, and telephone number,
including area code, of agent for service)

Copies to:
Seth A. Farbman, PC

Seth A. Farbman
301 Eastwood Road
Woodmere, New York 11598
(516) 569-6089

APPROXIMATE DATE OF PROPOSED SALE TO THE PUBLIC: As soon as practicable after
the effective date of this registration statement.

(*) The facing page of the initial filing on Form SB2 filed with the
Commission on February 26, 2002 incorrectly identified the filed
registration statement as Amendment No. 1.

If this form is filed to register additional securities for an offering pursuant
to rule 462(b) under the Securities Act, please check the following box and list
the Securities Act registration statement number of the earlier effective
registration statement for the same offering. [_]

If this form is a post-effective amendment filed pursuant to rule 462(c) under
the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_]

If this form is a post-effective amendment filed pursuant to rule 462(d) under
the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_]

If any of the securities being registered on this form are to be offered on a
delayed or continuous basis pursuant to rule 415

under the Securities Act of 1933, other than securities offered only in
connection with dividend or interest reinvestment plans, check the following
box. [X]

If delivery of the prospectus is expected to be made pursuant to rule 434,
please check the following box. [_]

CALCULATION OF REGISTRATION FEE

Proposed Maximum Proposed Maximum
Title of Securities to Amount to be Offering Price Per Aggregate Offering Amount of
be Registered Registered (1) Share (2) Price Registration Fee
- ------------------------- ---------------------- ----------------------- ---------------------- ----------------------

Common Stock, $0.001 121,157,143 $0.015 $1,817,357 $454.34
par value
- ------------------------- ---------------------- ----------------------- ---------------------- ----------------------

(1) Includes 121,157,143 shares of common stock, par value $0.001 per share,
which may be offered pursuant to this registration statement, which shares
are issuable upon conversion of secured convertible debentures and are
issuable upon exercise of related warrants. We are also registering such
additional shares of common stock as may be issued as a result of the
anti-dilution provisions contained in such securities. The number of
shares of common stock registered hereunder represents a good faith
estimate by us of the number of shares of common stock issuable upon
conversion of the debentures and upon exercise of the warrants. Should the
conversion ratio result in our having insufficient shares, we will not
rely upon Rule 416, but will file a new registration statement to cover
the resale of such additional shares should that become necessary.

(2) Estimated solely for purposes of calculating the registration fee. The
registration fee is calculated in accordance with Rule 457(c) based upon
$0.015, which is the average of the bid and asked prices of our common
stock reported on the OTC Bulletin Board on February 22, 2002.

THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES
AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL FILE
A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT
SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF THE
SECURITIES ACT OF 1933, AS AMENDED, OR UNTIL THIS REGISTRATION STATEMENT SHALL
BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION
8(A), MAY DETERMINE.

The information in this prospectus is not complete and may be changed. The
selling stockholders may not sell these securities until the registration
statement filed with the Securities and Exchange Commission becomes effective.
This prospectus is not an offer to sell these securities and it is not
soliciting offers to buy these securities in any state where the offer or sale
is not permitted.

SUBJECT TO COMPLETION, DATED APRIL 11, 2002

PROSPECTUS

INSYNQ, INC.

121,157,143 OF COMMON STOCK

This prospectus relates to the offer and sale from time to time by the
selling stockholders of up to 121,157,143 shares of common stock of Insynq,
Inc., all of which are issuable upon the conversion rights of convertible
debentures and the exercise of outstanding warrants. The offer and sale of the
shares of common stock covered by this prospectus is not being underwritten. The
prices at which the stockholders may sell the shares will be determined by the
prevailing market price for the shares or in negotiated transactions.

We will not receive any of the proceeds from the sale of the shares of
common stock offered by this prospectus.

Our common stock is now quoted on the OTC Bulletin Board under the symbol
"ISNQ." On February 22, 2002, the last reported average closing of the bid and
asked price for our common stock on the OTC Bulletin Board was $0.015 per share.

Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or passed upon the
adequacy or accuracy of this prospectus. Any representation to the contrary is a
criminal offense.

THE DATE OF THIS PROSPECTUS IS ___________, 2002.

TABLE OF CONTENTS

PROSPECTUS SUMMARY................................................................2
THE OFFERING......................................................................3
RISK FACTORS......................................................................5
NOTE REGARDING FORWARD-LOOKING STATEMENTS........................................18
USE OF PROCEEDS..................................................................18
SELLING STOCKHOLDERS.............................................................18
PLAN OF DISTRIBUTION.............................................................21
MARKET PRICES OF COMMON STOCK AND DIVIDEND POLICY................................23
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS..................................24
OUR BUSINESS.....................................................................30
GENERAL..........................................................................30
OUR STRATEGIC PLAN...............................................................35
PROPERTIES.......................................................................40
LEGAL PROCEEDINGS................................................................40
MANAGEMENT.......................................................................41
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS...................................48
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT...................49
DESCRIPTION OF CAPITAL STOCK.....................................................50
LIMITATION OF LIABILITY AND INDEMNIFICATION MATTERS..............................52
SECURITIES AND EXCHANGE COMMISSION'S POSITION ON INDEMNIFICATION.................53
STOCK TRANSFER AGENT AND REGISTRAR...............................................53
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON.................................53
ACCOUNTING AND FINANCIAL DISCLOSURE..............................................53
LEGAL MATTERS....................................................................53
EXPERTS..........................................................................54
ABOUT THIS PROSPECTUS AND WHERE YOU CAN FIND MORE INFORMATION....................54
INDEX TO FINANCIAL STATEMENTS....................................................F-1

PROSPECTUS SUMMARY

This summary sets forth the material highlights of the information
contained elsewhere in this prospectus. It does not contain all of the
information that you should consider before investing in us, and you should read
the entire prospectus carefully, especially the discussion of Risk Factors.
Unless specified otherwise, as used herein, the terms "we," "us," or "our" refer
to Insynq, Inc., a Delaware corporation and its predecessor entity, Xcel
Management, Inc., a Utah corporation. References to "Insynq-WA" refer to Insynq,
Inc., a Washington corporation, the assets of which were purchased by us in
February 2000. The term "you" refers to a prospective investor.

INSYNQ, INC.

We install software applications on our servers located at the data center,
allowing our customers, with a Web-enabled computer, access to computing
services. This service is called application hosting. We are a provider of
Internet equipment, managed software services (through on-site customer premise
equipment and application hosting), Web-hosting services, and access to Internet
marketing assistance and related equipment and services. We offer these products
and services as an integrated whole, either sold directly or on a fee or
subscription basis.

We target small and medium enterprises and the high-end segment of the
small office and home office market for the sale of hardware and hosted software
and access to Internet-related services. We believe we provide a cost-effective,
on-line solution to building and maintaining an information technology system
through the adoption of "Web-based" computing as an alternative to traditional
computer network implementations. Generally, we market ourselves as an Internet
utility company that can cost-effectively provide all of the computer software,
hardware, connectivity and Internet-access needs for our customers.

We believe our core competency is providing products and services related
to hosted computing technologies. In the process of developing the IQ Delivery
System and the IQ Data Utility Service, we believe we acquired valuable
technological expertise. We have created new methodologies and produced
proprietary hardware and software that we believe is essential to the
configuration and effective management of Internet-based networks and outside
deployment of shared data and software applications.

Our IQ Data Utility Service and IQ Delivery System provides our customers
with the following key benefits:

o Capacity-based pricing and reduced capital investment.
o Enable customers to expand as their business needs require.
o Consistent business operations across multiple locations.
o Rapid implementation of our customers' Internet businesses.
o Ability of our customers to focus on their core business.
o In-depth technology and operations expertise.

We were incorporated in August 1998 and were a development stage company
through fiscal year 2001. Although we are still devoting substantially all of
our present efforts to establishing our core business, our planned operations
have commenced, and, operating revenues are being generated. As a result, we
have a history of losses, and have not achieved profitability. We have an
accumulated deficit through November 30, 2001 of $20,861,736, which includes
approximately $10,194,214 related to non-cash stock-based compensation and
non-cash interest expense. We anticipate that we will increase our investment in
our business and, therefore, we are incurring, and expect to continue to incur,
for the foreseeable future, significant operating losses and negative cash flow.

Our principal executive offices are located at 1127 Broadway Plaza, Suite
10, Tacoma, Washington, 98402, and our telephone number is (253) 284-2000.

THE OFFERING

Securities Offered 121,157,143 shares of common stock issued or
issuable upon exercise by selling stockholders of the
warrants and/or conversion of convertible debentures in the
aggregated principal amount of $550,000. (1)

Common Stock to be Outstanding 605,141,212 shares of common stock.(2)(3)(4)
After this Offering

Common Stock Outstanding as 56,686,373 shares of common stock
of April 1, 2002

Use of Proceeds We will not receive any of the proceeds from the sale of the
shares of common stock offered by this prospectus; however, we
will receive estimated gross proceeds of up to $13,640 if the
selling stockholders exercise warrants to purchase an
aggregate of 2,200,000 shares of our common stock covered by
this prospectus, assuming the selling stockholders do not
utilize the cashless exercise feature of such warrants, based
on an exercise date of April 1, 2002 at $.0062. Of the
2,200,000 warrants which may be exercised, 1,000,000 warrants
are to be issued only after the effectiveness of this
registration statement. We currently intend to use such net
proceeds, if any, for working capital and general corporate
purposes. See "Use of Proceeds."

Risk Factors An investment in the shares of common stock offered hereby involves
a high degree of risk and should be made only investors who can
afford the loss of their entire investment. See "Risk Factors."

OTC Bulletin Board Market ISNQ
trading symbol

(1) The number of shares of common stock registered hereunder represents the
number of shares we have reserved, as requested by the investors,
representing a good faith estimate by us of the remaining number of shares
of common stock that we are authorized to issue which will be issuable upon
conversion of the debentures and upon exercise of the warrants. Should the
conversion ratio result in our having insufficient shares, we will not rely
upon Rule 416, but will file a new registration statement to cover the
resale of such additional shares should that become necessary.

(2) Such figure includes (i) 56,686,373 shares of our common stock currently
outstanding, (ii) 179,619,355 shares of our common stock to be issued
assuming the exercise or conversion in full of the warrants and conversion
rights purchased on January 24, 2002 and held by the selling stockholders
and (iii) 368,835,484 shares of our common stock to be issued assuming the
exercise or conversion in full of the warrants and conversion rights
purchased on June 29, 2001. The figure represented as the total number of
shares outstanding after this offering represents a number that is greater
than the number of shares of common stock that we are authorized to issue.

(3) The selling stockholders will continue to use the prospectus included in
our prior registration statement filed with the Commission and declared
effective on October 3, 2001 in connection with the resale of shares to be
issued in connection with the debentures and warrants issued on June 29,
2001. The prospectus included in this registration statement will not serve
as a combined prospectus and will be used only in connection with the
debentures and warrants issued on January 24, 2002.

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(4) If all of the debentures and warrants issued on June 29, 2001 together with
all of the debentures and warrants issued on January 24, 2002 were
converted into shares of our common stock we would be required to issue
548,454,839 shares of our common stock based on the closing bid price of
our common stock as of April 1, 2002. We currently have 250,000,000 shares
of our common stock authorized. We would not have enough shares of our
common stock authorized to complete the issuance of common stock upon full
conversion of the outstanding warrants and debentures. We will need to
obtain either or both of the following: (i) approval from our board of
directors and from our shareholders to approve an amendment to our
certificate of incorporation to increase our authorized shares of common
stock from 250,000,000 shares to 500,000,000 shares and/or (ii) approval
from our board of directors and from our shareholders to effect a reverse
split of our common stock at a yet undetermined ratio. In the second
quarter of 2002, we intend to make one or both of such proposals to our
shareholders to vote upon. If our shareholders do not vote to increase our
authorized shares or to reverse split our outstanding shares of common
stock, we will not have enough shares to issue to the holders of our
debentures and warrants. Pursuant to our securities purchase agreement
dated January 24, 2002 we are required to promptly take all corporate
action necessary to increase our authorized common stock to a level
necessary to allow us to issue up to two (2) times the shares of common
stock issuable upon conversion or exercise of, or otherwise with respect to
the debentures and warrants, including, without limitation, calling a
special meeting of stockholders to authorize additional shares to meet our
obligations. The investors have agreed to extend the deadline of May 1,
2002, by which we are required to hold our shareholders meeting to vote
upon a reverse split or increase in our authorized shares. In the event
that we do not have the necessary shares to honor a conversion notice by
the investors, we will be obligated to pay the investors a conversion
default payment in the amount of (x) the sum of (1) the then outstanding
principal amount of the debenture plus (2) accrued and unpaid interest on
the unpaid principal amount of the debenture plus (3) default interest
payments, multiplied by (y) .24, multiplied (z) (N/365), where N = the
number of days from the day the investor submits a conversion notice.

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RISK FACTORS

An investment in our stock involves a high degree of risk. The following
information discusses the material risk factors which are unique to our company
and that make an investment in our common stock risky or speculative. If any of
the risks discussed below actually occur, our business, financial condition,
operating results or cash flows could be materially adversely affected, which
could cause the trading price of our common stock to decline.

RISKS PARTICULAR TO INSYNQ, INC.

WE HAVE HISTORICALLY OPERATED AT A LOSS, HAVE EXPERIENCED NEGATIVE
OPERATING CASH FLOWS, AND ANTICIPATE THAT LOSES WILL CONTINUE.

We have experienced net losses and negative cash flows since we began
implementing our current business plan. We expect that the ongoing
implementation of our current business plan will increase our net losses and our
negative cash flows for the foreseeable future as we continue to incur
significant operating expenses and make capital investments in our business. We
may never generate sufficient revenues to achieve profitability, and if we are
unable to make a profit, we may not be able to continue to operate our business.
Even if we do become profitable, we may not be able to sustain or increase
profitability on a quarterly or annual basis.

WE HAVE RECEIVED A GOING CONCERN OPINION FROM OUR AUDITORS INDICATING
THERE IS DOUBT AS TO WHETHER WE CAN REMAIN IN BUSINESS.

In its audit report dated July 26, 2001, our auditors indicated that there
was substantial doubt as to our ability to continue as a going concern and that
our ability to continue as a going concern was dependant upon our obtaining
additional financing for our operations or reaching profitability. There can be
no assurance that we will be able to do either of these.

OUR LIMITED OPERATING HISTORY MAKES EVALUATING OUR BUSINESS DIFFICULT.

Insynq-WA commenced operations in September 1998. Accordingly, we have only
a very limited operating history upon which you can evaluate our business and
prospects. We face the risks, expenses and difficulties frequently encountered
by early-stage companies in new and rapidly evolving markets, including on-line
companies which host hardware and software applications for other companies. Our
past financial results may not be representative of our future financial
results.

WE ARE DELINQUENT IN THE PAYMENT OF BUSINESS AND PAYROLL TAXES. IF WE ARE
UNABLE TO NEGOTIATE WORKOUT ARRANGEMENTS OR TO MAKE TIMELY PAYMENTS, WE COULD
EXPERIENCE A SEVERE NEGATIVE IMPACT ON OUR BUSINESS OR OUR RESOURCES.

As of February 28, 2002, we are delinquent in the payment of approximately
$549,200 of business and payroll taxes, plus an estimated $157,000 of related
assessed penalties and interest. We have retained legal counsel to represent us
in our current negotiations with the Internal Revenue Service about a payment
plan for the past due taxes. We are currently negotiating with the Internal
Revenue Service about a payment plan for the past due taxes. The IRS has imposed
certain conditions on us in order to proceed with negotiations, one of which
requires us to remain current on all future payroll tax deposits. We have also
been in contact with other respective taxing authorities to initiate payment
plans in settlement of their respective past due taxes. There can be no
assurances, however, that we will be able to agree or commit to any proposed
terms set forth by the Internal Revenue Service or favorably negotiate terms
with other taxing authorities. If we are unsuccessful, the taxing authorities
could obtain a lien against some or all of our assets. Should this occur, we
likely would be forced to cease our operations.

Additionally, a lien has been filed by the State of Utah for approximately
$28,000 for prior year's income taxes assessed to our predecessor company. This
amount is in dispute and amended returns to correct this deficiency have been
filed.

WE ARE IN DEFAULT ON AN EQUIPMENT LEASE OBLIGATION, AND IF WE ARE UNABLE
TO SUCCESSFULLY RESTRUCTURE

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THIS LEASE OBLIGATION, WE MAY NOT BE ABLE TO DELIVER TO OUR CUSTOMERS THEIR
CONTRACTED SERVICES.

As of February 28, 2002, we are in default on an equipment lease
obligation. We are attempting to renegotiate with the lessor and have initiated
contact with them. When they are prepared to enter discussions we will attempt
to negotiate for a lesser amount owed and we believe that given the current
market conditions, we should be successful in such negotiations. However, there
is no assurance that we will be successful in such attempts. If we are unable to
successfully restructure this lease obligation, we may be required to seek other
equipment or methods of delivering our services. In the meantime, we have signed
an additional lease agreement for equipment to support our customer base.
However, there is no assurance that we would be able to locate other necessary
equipment or methods on acceptable terms, or at all. In addition, because we are
in default we may be obligated to pay penalties. As such, the lessor could
repossess the equipment. Moreover, any such actions could negatively impact our
ability to obtain services for the maintenance of our equipment under applicable
warranties, and ultimately make it difficult for our business to continue.

WE ARE DELINQUENT IN THE PAYMENT OF CERTAIN TRADE PAYABLES. IF WE ARE
UNABLE TO NEGOTIATE WORKOUT ARRANGEMENTS OR TO MAKE TIMELY PAYMENTS, WE COULD
EXPERIENCE A SEVERE NEGATIVE IMPACT ON OUR BUSINESS OR OUR RESOURCES.

As of February 28, 2002, we were late in payment of certain creditor trade
payables. We have initiated contact with these vendors and have offered three
separate payment plans and definitive agreements have been finalized with some,
but not all, of these vendors. If we are unable to negotiate payment plans with
the remaining vendors, or if we are unable to execute such negotiated payment
plans with those who have accepted such plans, we could experience a severe
negative impact on our business resources.

OUR QUARTERLY RESULTS OF OPERATIONS FLUCTUATE, WHICH COULD RESULT IN A
LOWER PRICE FOR OUR COMMON STOCK.

Our revenue and operating results could vary significantly from quarter to
quarter. These fluctuations could cause our stock price to fluctuate or decline.
Important factors that could cause our quarterly results to materially fluctuate
that are within our control include the following:

o Difficulty managing growth;
o Increases in necessary operating expenses;
o Problems with our technology;
o The amount and timing of costs associated with the development and
maintenance of new hardware and software products; and
o Costs and risks associated with potential acquisitions.

Important factors that could cause our quarterly results to materially
fluctuate that are not within our control include the following:

o Introduction of new products or pricing programs by our competitors;
o Changes in pricing for, and changes in the gross margins of, certain
products, services, or lines of business as our business model
continues to develop;
o Variations in spending patterns by companies;
o Technical difficulties or systems downtime affecting our services and
products;
o Business interruptions due to outside causes and forces;
o Differences with the business practices of third parties with whom we
do business;
o Economic conditions specific to the Internet or to the hardware and
software hosting business, as well as general economic conditions;
o Inability to frame additional bandwidth to adequately service customer
growth;
o Customer acceptance of our products and business model; and
o Inability to acquire or lack of availability of necessary hardware or
software components, or difficulties in manufacturing.

Our current and future levels of operating expenses and capital
expenditures are based largely on our growth

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plans and estimates of future revenue. These expenditure levels are, to a large
extent, fixed in the short term. We may not be able to adjust spending in a
timely manner to compensate for any unexpected revenue shortfall, and any
significant shortfall in revenue relative to planned expenditures could
negatively impact our business and results of operations. In addition, if our
customer base expands rapidly or unpredictably, we may not be able to
efficiently utilize our leased third-party data center space and infrastructure
or we may not have sufficient capacity to satisfy our customers' requirements,
which could harm our operating results.

OUR SHARES COULD BE THE VICTIM OF SHORT SELLING AND, IF THIS OCCURS, THE
MARKET PRICE OF OUR STOCK COULD BE ADVERSELY AFFECTED

It is conceivable that our stock could be subject to the practice of short
selling. Short selling, or "shorting," occurs when stock is sold which is not
owned directly by the seller; rather, the stock is "loaned" for the sale by a
broker-dealer to someone who "shorts" the stock. In most situations, this is a
short-term strategy by a seller, and based upon volume, may at times drive stock
values down. If such shorting occurs in our common stock, there could be a
negative effect on the trading price of our stock.

OUR SHARES ARE SUBJECT TO RULES REGULATING BROKER-DEALER ACTIVITY WITH
RESPECT TO PENNY STOCKS, WHICH COULD HAVE A NEGATIVE EFFECT ON THE MARKET FOR
OUR SHARES AND OUR SHARE PRICE.

Broker-dealers who effect trades in our common stock are subject to SEC
rules that regulate trading in penny stocks. Such rules require broker-dealers
to provide additional warnings and risk factors pertaining to an investment in
penny stocks. Such additional warnings may act to inhibit investment in our
common stock, which could have a depressive effect on both the market for our
shares and the trading price of our shares.

IN ORDER TO EXECUTE OUR BUSINESS PLAN, WE WILL NEED TO RAISE ADDITIONAL
CAPITAL. IF WE ARE UNABLE TO RAISE ADDITIONAL CAPITAL, WE WILL NOT BE ABLE TO
ACHIEVE OUR BUSINESS PLAN AND YOU COULD LOSE YOUR INVESTMENT.

We need to raise additional funds through public or private debt or equity
financings to be able to fully execute our business plan. Any additional capital
raised through the sale of equity may dilute your ownership interest. We may not
be able to raise additional funds on favorable terms, or at all. If we are
unable to obtain additional funds, we will be unable to execute our business
plan and you could lose your investment.

OUR FUTURE CAPITAL REQUIREMENTS WILL DEPEND UPON MANY FACTORS, INCLUDING
THE FOLLOWING:

o Costs to develop and maintain our on-line hosting of hardware and software;

o The rate at which we expand our operations;

o The extent to which we develop and upgrade our technology;

o The occurrence, timing, size and success of acquisitions; and

o The response of competitors to our service offerings.

WE WILL REQUIRE VENDOR CREDIT IN THE FUTURE, WHICH MAY NOT BE AVAILABLE TO
US.

In order to execute our short-term and long-term strategic plans, we need
to continue to obtain credit from our vendors. If we are unable to maintain or
obtain vendor credit on favorable terms, or at all, we may not be able to
execute our business plan, develop or enhance our products or services, take
advantage of business opportunities or respond to competitive pressures, any of
which could harm our business.

We have recently negotiated with many of our vendors to reduce the amounts
owed or to extend more favorable payment terms. While these negotiated terms
have reduced cash out-lays and expenditures, we cannot rely on future
relationships with these vendors, which could result in limiting our purchasing
and credit abilities.

WE HAVE CERTAIN CONVERTIBLE SECURITIES OUTSTANDING FROM OUR JUNE 29, 2001
TRANSACTION, SOME OF WHOSE CONVERSION RATE IS CURRENTLY INDETERMINABLE. AS SUCH,
PURCHASERS OF OUR COMMON STOCK COULD EXPERIENCE SUBSTANTIAL DILUTION OF THEIR
INVESTMENT UPON CONVERSION OF SUCH SECURITIES.

Pursuant to a transaction dated June 29, 2001, we entered into an agreement
with (i) AJW Partners, LLC, (ii)

8
New Millennium Capital Partners II, LLC and (iii) AJW/New Millennium Offshore,
Ltd. to issue convertible debentures and warrants in return for investment
dollars. Under that agreement, we received certain portions of the aggregate
investment based on certain criteria. As of April 1, 2002, $1,135,950 principal
amount of secured convertible debentures and 2,400,000 warrants issued in
connection therewith, were outstanding. Pursuant to the registration statement
that was declared effective by the Commission on October 3, 2002, 12,995,973
shares have been issued and 22,001,264 shares remain available for issuance.

The June 29, 2001 debentures are convertible into such number of shares of
common stock as is determined by dividing the principal amount thereof by the
then current variable conversion price. If converted on April 1, 2002, the
$1,135,950 debentures would have been convertible into approximately 366,435,484
shares of our common stock, which number of shares is greater than the number of
shares that we are authorized to issue. If all remaining $1,135,950 debentures
and 2,400,000 warrants were exercised on April 1, 2002, they would have equaled
368,835,484 shares of our common stock. Pursuant to the terms of the
transaction, however, the number of convertible debentures could prove to be
significantly greater in the event of a decrease in the trading price of our
common stock. The following table presents the number of shares of our common
stock that we would be required to issue as of April 1, 2002 and the number of
shares we would be required to issue if our common stock declined by 50%.

APRIL 1, 2002 50% DECLINE
------------- ------------

Market price per share: $.0062 $.0031

Total warrant and convertible shares issuable: 368,835,484(*) 735,270,967(*)

(*) The issuance of such shares represents a number greater than the number of
shares that we are authorized to issue pursuant to our certificate of
incorporation. The greater the decline in our stock price, the greater number of
shares we will be required to issue under the terms of our convertible
debentures and warrants.

The 2,400,000 warrants issued in connection with our June 29, 2001
debentures are exercisable any time before the second anniversary date of
issuance at an exercise price per share equal to the lesser of (i) $.04 and (ii)
the average of lowest three (3) trading prices during the twenty (20) trading
days immediately prior to exercise of the warrants. If the 2,400,000 warrants
were exercised on April 1, 2002, the warrant conversion price would be $.0062.

While we registered 34,997,237 shares of our common stock in connection
with the warrants and debentures issued on June 29, 2001, we are obligated to
file an additional registration statement to cover the resale of additional
shares to be issued upon the conversion of warrants and debentures issued on
June 29, 2002 should the conversation ratio of such warrants and debentures
exceed the shares registered in the registration statement which was declared
effective by the commission on October 3, 2001.

The selling stockholders will continue to use the prospectus included in
our prior registration statement filed with the Commission and declared
effective on October 3, 2001 in connection with the resale of shares to be
issued in connection with the debentures and warrants issued on June 29, 2001.
The prospectus included in this registration statement will not serve as a
combined prospectus and will be used only in connection with the debentures and
warrants issued on January 24, 2002.

WE HAVE CERTAIN CONVERTIBLE SECURITIES OUTSTANDING FROM OUR JANUARY 24,
2002 TRANSACTION, SOME OF WHOSE CONVERSION RATE IS CURRENTLY INDETERMINABLE. AS
SUCH, PURCHASERS OF OUR COMMON STOCK COULD EXPERIENCE SUBSTANTIAL DILUTION OF
THEIR INVESTMENT UPON CONVERSION OF SUCH SECURITIES.

On January 24, 2002, we entered into a second agreement with (i) AJW
Partners, LLC, (ii) New Millennium Capital Partners II, LLC, (iii) AJW/New
Millennium Offshore, Ltd., and, (iv) Pegasus Capital Partners to issue 12%
convertible debentures and to issue warrants in return for investment dollars.
Under this agreement, we will receive portions of the aggregate investment based
on certain criteria. We have received $300,000 of principal amount of the
secured convertible debentures and issued 1,200,000 warrants in connection
therewith. Upon effectiveness of our registration statement and upon a final
closing, there will be an aggregate of $550,000 principal amount of debentures
and 2,200,000 warrants issued in connection therewith. The 12% debentures are
convertible into such number

9
of shares of common stock as is determined by dividing the principal amount
thereof by the then current conversion price. If all $550,000 debentures and
2,200,000 warrants were exercised on April 1, 2002 they would have equaled
179,619,355 shares of our common stock. Pursuant to the terms of the
transaction, however, the number of convertible debentures could prove to be
significantly greater in the event of a decrease in the trading price of our
common stock.

The following table presents the number of shares of our common stock that
we would be required to issue as of April 1, 2002 and the number of shares we
would be required to issue if our common stock declined by 50%.

APRIL 1, 2002 50% DECLINE
------------- ------------

Market price per share: $.0062 $.0031

Total warrant and convertible shares issuable: 179,619,355(*) 357,038,709(*)

The warrants issued in connection with our 12% convertible debentures are
exercisable any time before the second anniversary date of issuance at an
exercise price equal to the lesser of $0.007 or the average of the three lowest
inter-day trading prices during the twenty days immediately prior to the
exercise. If the 2,200,000 warrants were exercised on April 1, 2002, the warrant
conversion price would be $.0062. The shares of common stock into which the
debentures may be converted and the shares of common stock issuable upon
exercise of the warrants are being registered pursuant to this registration
statement.

As of April 1, 2002, we have reserved 22,001,264 in connection with the
sale of our debentures and warrants related to the transaction on June 29, 2001,
and we have reserved an additional 121,157,143 shares of common stock for
issuance upon conversion of the debentures and exercise of the warrants issued
in connection with our 12% convertible debenture transactions dated January 24,
2002.

As of April 1, 2002, in addition to the securities described above,
28,533,639 shares of common stock were reserved for issuance upon exercise of
our outstanding warrants and options other than those issued in connection with
the debentures. As of April 1, 2002, there were 56,686,373 shares of common
stock and 5,000,000 class A common stock outstanding. Of these outstanding
shares, 31,698,886 shares were freely tradable without restriction under the
Securities Act unless held by affiliates.

Purchasers of common stock could, therefore, experience substantial
dilution of their investment upon conversion of the debentures. In addition, a
sale by the selling stockholders of large blocks of the shares being registered
pursuant to this registration statement could have a depressive effect on our
stock price. The debentures are not registered and may be sold only if
registered under the Securities Act of 1933, as amended, or sold in accordance
with an applicable exemption from registration, such as Rule 144.

FUTURE DEMAND FOR APPLICATION SERVICE PROVIDER SERVICES IS HIGHLY
UNCERTAIN.

The market for application service provider services has only recently
begun to develop and is evolving rapidly. Future demand for these services is
highly uncertain. We believe that many of our potential customers are not fully
aware of the benefits of application service provider services. We must educate
potential customers regarding these benefits and convince them of our ability to
provide complete and reliable services. The market for application service
provider services may never become viable or grow further. If the market for our
application service provider services does not grow or grows more slowly than we
currently anticipate, our business, financial condition and operating results
will be materially adversely affected.

WE RELY ON THIRD PARTY OUTSIDE SALES ORGANIZATIONS TO REFER MANY OF OUR
CLIENTS TO US.

We rely on referrals from third-party organizations for a portion of our
business. Companies, with whom we

10
have such a relationship, including Peregrine and Macola, refer their customers
to us because we can provide an array of services that complement the products
and services they offer. However, these companies may stop or substantially
reduce referring business to us or they may decide to cooperate with our
competitors and thereby adversely impact or eliminate the amount of referrals
made to us. If these third party referrals cease or materially decrease, our
sales will materially decline.

IF WE ARE UNABLE TO OBTAIN KEY SOFTWARE APPLICATIONS AND HARDWARE
COMPONENTS FROM CERTAIN VENDORS, WE WILL BE UNABLE TO DELIVER OUR SERVICES.

We rely on third-party suppliers, including Microsoft, Citrix, and Cisco to
provide us with key software applications and hardware components for our
infrastructure. Certain components or applications are only available from
limited sources. If we are unable to obtain these products or other services,
including connectivity services, in a timely manner at an acceptable cost or at
all, may substantially inhibit our ability to deliver our services.

SOME OF OUR APPLICATION SERVICE PROVIDER SERVICE CONTRACTS GUARANTEE
CERTAIN SERVICE LEVELS.

Some of our application service provider contracts contain service
guarantees that obligate us to provide our hosted applications at a guaranteed
level of performance. To the extent we fail to meet those service levels we may
be obligated to provide our customers certain services free of charge. If we
continue to fail to meet these service levels, our application service provider
customers have the right to cancel their contracts with us. These credits or
cancellations will cost us money and damage our reputation with our customers
and prospective customers.

RAPID GROWTH IN OUR BUSINESS DUE TO AN INCREASE IN THE NUMBER OF CUSTOMERS
PURCHASING OUR PRODUCTS AND SERVICES COULD STRAIN OUR OPERATIONAL AND FINANCIAL
RESOURCES AND CAUSE US TO LOSE CUSTOMERS AND INCREASE OUR OPERATING EXPENSES.

Any increase in the volume of users of our computer systems could strain
the capacity of our software or hardware, which could lead to slower response
times or system failures. Any future growth may require us, among other things,
to:

o Expand and upgrade our hardware and software systems;

o Expand and improve our operational and financial procedures, systems and
controls;

o Improve our financial and management information systems; o Expand, train
and manage a larger workforce; and

o Improve the coordination among our product development, sales and
marketing, financial, accounting and management personnel.

We cannot assure you that our current level of personnel, systems, and
controls will be adequate to support future growth. Our inability to manage
growth effectively or to maintain the quality of our products and services could
cause us to lose customers and could materially increase our operating expenses.

IF WE DO NOT INCREASE AWARENESS OF OUR PRODUCTS AND SERVICES, OUR ABILITY
TO REACH NEW CUSTOMERS WILL BE LIMITED.

Our future success will depend, in part, on our ability to increase
awareness of our products and services. To do so, we must succeed in our
marketing efforts, provide high-quality products and services, and increase
traffic to our Website. If our marketing efforts are unsuccessful, or if we
cannot increase our brand awareness, we may not be able to attract new customers
and increase our revenues.

WE DEPEND HEAVILY ON OUR MANAGEMENT TEAM THAT HAS LITTLE EXPERIENCE
WORKING TOGETHER OR MANAGING A PUBLIC COMPANY.

Our success depends, to a significant extent, upon the efforts and
abilities of John P. Gorst, President, Chairman of the Board and Chief Executive
Officer, as well as on the efforts of other officers and senior management. Loss
of the services of any or all of our executive management team could materially
adversely affect our business, results of operations and financial condition,
and could cause us to fail to successfully implement our business plan. Also,

11
our executive management team has worked together for less than two years. The
short period of time that they have worked together, or their inability to work
successfully together, may adversely affect our ability to manage growth.
Moreover, our executive management team has a limited amount of experience
managing a public company. Our executive management team may not be able to
manage future growth, if any, or the demands of successfully operating a public
company.

THERE IS INTENSE COMPETITION FOR QUALIFIED TECHNICAL PROFESSIONALS AND
SALES AND MARKETING PERSONNEL, AND OUR FAILURE TO ATTRACT AND RETAIN THESE
PEOPLE COULD AFFECT OUR ABILITY TO RESPOND TO RAPID TECHNOLOGICAL CHANGE AND TO
INCREASE OUR REVENUES.

Our future success also depends upon our ability to attract and retain
qualified technical professionals and sales and marketing personnel. Competition
for talented personnel, particularly technical professionals, is intense. This
competition could increase the costs of hiring and retaining personnel. We may
not be able to attract, retain, and adequately motivate our personnel or to
integrate new personnel into our operations successfully.

WE MAY NOT BE ABLE TO PROTECT OUR PATENTS, COPYRIGHTS, TRADEMARKS AND
PROPRIETARY AND/OR NON-PROPRIETARY TECHNOLOGY, AND WE MAY INFRINGE UPON THE
PATENTS, COPYRIGHTS, TRADEMARKS AND PROPRIETARY RIGHTS OF OTHERS.

Our services are highly dependent upon proprietary technology, including,
for example, our IQ Delivery System, which allows us to upgrade and manage the
customer's computing environment, both at the data center and customer level. In
addition, we rely on contracts, confidentiality agreements, and copyright,
patent, trademark, and trade-secrecy laws to protect our proprietary rights in
our technology. We have also obtained, or are pursuing, several trademark,
copyright, and patent registrations for our various product names. The
protective steps we have taken may not be adequate to deter misappropriation of
our proprietary information. In addition, some end-user license provisions
protecting against unauthorized use, copying, transfer and disclosure of a
licensed program may be unenforceable under the laws of certain jurisdictions
and foreign countries. In addition, the laws of some foreign countries do not
protect proprietary rights to the same extent as the laws of the United States.
Failure to adequately protect our intellectual property could harm our brand
name, devalue our proprietary content, and affect our ability to compete
effectively. Furthermore, defending our intellectual property rights could
result in the expenditure of significant financial and managerial resources,
which could materially adversely affect our business, results of operations and
financial condition. Also, it is possible that our competitors or others will
adopt product or service brands similar to ours, possibly leading to customer
confusion.

WE UTILIZE OPEN SOURCE SERVICES AND CODE FOR SOME PRODUCTS. WHILE WE CAN
MODIFY OPEN SOURCE AND CHARGE FOR IT, WE MUST RELEASE CERTAIN CHANGES BACK TO
THE OPEN SOURCE COMMUNITY, WHICH MAY INCLUDE COMPETITORS. THIS COULD NEGATIVELY
AFFECT OUR ABILITY TO COMPETE EFFECTIVELY, AND HAVE A MATERIAL ADVERSE AFFECT ON
OUR FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

Some of our technology, including our proprietary code, performs functions
similar to technology available from third parties. Therefore, we could be
subject to claims that our technology infringes the proprietary rights of third
parties. Claims against us, even if without merit, could subject us to costly
litigation and could divert the time and attention of our technical and
management teams. A claim of infringement may require us, and our customers, to
obtain one or more licenses from third parties. We cannot assure you that we or
our customers will be able to obtain necessary licenses from third parties at a
reasonable cost or at all. Any failure to obtain a required license could
negatively affect our ability to do business.

DISRUPTIONS TO THE DATA CENTERS, OR TO THE OFFSITE BACKUP STORAGE
FACILITIES OF THIRD PARTIES WITH WHOM WE DO BUSINESS, COULD MATERIALLY AFFECT
OUR BUSINESS.

The continued and uninterrupted performance of our computer systems, and of
the backup storage facilities of third parties with whom we do business, is
critical to our success. Any system failure that causes interruptions in our
ability to deliver our products and services to our customers, including
failures that affect our customers' abilities to access our hosted hardware,
software, and stored data, could reduce customer satisfaction and, if sustained
or repeated, would reduce the attractiveness of our services or result in
material liabilities or costs.

12
Our hardware and software hosting business strategy, including data backup
and storage, depends on the consistent performance of the data centers and those
of third parties. We offer offsite back-up storage of data for all customers.
The current data centers, and those of third parties, may be vulnerable to
interruption from fire, earthquake, flood, power loss, connectivity failures,
vandalism and other malicious acts, and other events beyond our control,
including natural disasters. If the data centers are damaged in any way, a
customer whose data is stored there may lose some or all data, despite routine
backup procedures. Our operations are dependent on our ability to protect our
computer system, and customer systems, applications and data against damages,
including, but not limited to those from computer viruses, fire, earthquake,
flood, power loss, connectivity failures, vandalism and other malicious acts,
and other events beyond our control, including natural disasters. Damage to our
computer system, or to the systems, applications, or data of our customers,
could delay or prevent delivery of our products and result in the loss of our
customers or in material liabilities. In addition, a failure of our
telecommunication providers to provide the data communications capacity in the
time frame required by us for any reason could cause interruptions in the
delivery of our products. Substantially all of our computer and communications
hardware is located at two facilities, and the loss of this hardware or the data
it contains would cause severe business interruptions. In the event that we
experience significant disruptions that affect the data centers, we could lose
customers or fail to attract new customers.

WE COULD EXPERIENCE BREACHES OF SECURITY WHEN TRANSMITTING DATA TO OR FROM
OUR CUSTOMERS, INCLUDING THE USE OF THIRD PARTY VENDOR SECURITY TECHNOLOGIES AND
METHODOLOGIES.

Our business depends upon our ability to securely transmit confidential
information between the data centers, third-party backup locations, and the
servers of our customers, including the use of third-party vendor security
technologies and methodologies. Despite our physical design and setup, and the
implementation of a variety of security measures, there exists the risk that
certain unauthorized access, computer viruses, accidental or intentional
disturbances could occur. We may need to devote substantial capital and
personnel resources to protect against the threat of unauthorized penetration of
our delivery system or to remedy any problems that such penetration might cause.
The occurrence of any of these events could cause us to lose customers, cause
harm to our reputation, and expose us to material liability.

WE DEPEND ON LICENSED SOFTWARE APPLICATIONS.

We depend on contracts with third-party software manufacturers to allow
their software applications to be hosted or run at the data centers and provided
to our customers. We have entered into non-exclusive agreements with third-party
companies, including, but not limited to, Microsoft and Citrix that allow us to
host some of their software applications at the data center or re-license their
software applications to our customers. Under most of these agreements, the
software manufacturer can terminate its relationship with us for any reason by
giving us as little as 30 days notice. In these instances, the software
manufacturer is not liable to us, or to our customers, for any damages resulting
from termination. If our relationships with these software manufacturers are
terminated, or if these or other software manufacturers do not allow our
customers to obtain a license to operate the software application on the data
centers, our ability to do business would be severely inhibited.

THE HARDWARE AND SOFTWARE WE USE IS COMPLEX AND MAY CONTAIN DEFECTS.

Our service offerings depend on complex hardware and software that may
contain defects, particularly when initially introduced or when new versions are
released. Although we test internal and third party software applications prior
to deployment, we may not discover software defects that could affect our new or
current services or enhancements until deployed. These defects could cause
service interruptions or the loss of data, which could damage our reputation,
increase our operating costs, impair our ability to generate or collect revenue,
delay market acceptance or divert our management and technical resources. Any
software modifications we perform as part of our integration services could
cause problems in application delivery. Also, because we offer an open-source
software solution to our customers, they are likely to hold us accountable for
any problems associated with their software, even if the manufacturer caused the
problem or defect. Typically, software manufacturers disclaim liability for any
damages suffered as a result of software defects and provide only limited
warranties. As a result, we may have no recourse against the providers of
defective software applications.

GROSS MARGINS ON CERTAIN PRODUCTS OR LINES OF BUSINESS MAY DECLINE OVER
TIME.

13
Gross margins may be adversely affected by increases in material or labor
costs, heightened price competition, changes in channels of distribution, or in
the mix of products sold. We have recently introduced several new products, and
we plan to release additional new products in the future. If warranty costs
associated with new products are greater than we have experienced historically,
gross margins may be adversely affected. Geographic mix, as well as the mix of
configurations within each product group may also impact our gross margins. We
continue to expand third party and indirect distribution channels, which
generally result in reduced gross margins. In addition, increasing third party
and indirect distribution channels generally results in greater difficulty in
forecasting the mix of our products, and to a certain degree, the timing of our
orders.

WE ARE INVOLVED IN, AND MAY BECOME INVOLVED IN, LEGAL PROCEEDINGS WITH
FORMER EMPLOYEES, CONSULTANTS, AND OTHER THIRD PARTIES THAT, IF DETERMINED
AGAINST US, COULD REQUIRE US TO PAY DAMAGES. THE PAYMENT OF DAMAGES COULD
MATERIALLY ADVERSELY AFFECT OUR FINANCIAL CONDITION AND THEREFORE, OUR ABILITY
TO ACHIEVE OUR BUSINESS PLAN.

We are a party to a lawsuit, dated May 31, 2001, in which our former vice
president of sales and marketing seeks payment for various claims in the amount
of approximately $115,000. See "Legal Proceedings."

We are a party to a lawsuit, dated August 6, 2001, in which one of our
vendors seeks payment for goods and services provided in the amount of $20,760.
We have reached a partial settlement of the matter. See "Legal Proceedings."

We have been served with a summons and complaint by a temporary staffing
company, which appears to threaten litigation against us. The allegations relate
to their demand for the payment of their trade payables. We have now reached a
settlement of the matter. See "Legal Proceedings."

We are a party to a lawsuit, dated October 4, 2001 by our former landlords.
The allegations relate to the default by us of our long-term lease obligations
and a settlement agreement dated May 2001. See "Legal Proceedings."

Certain of our vendors have also indicated that they might file suit
against us if they do not receive satisfactory payment of their trade payables.
See "Legal Proceedings."

In the past, we have negotiated with third parties and entered into
contracts, in the normal course of our business, with advisors, consultants and
others based on business plans and strategies that we may no longer be pursuing.
We believe that such negotiations were terminated and that those contracts are
no longer effective. However, it is possible that the other parties to those
negotiations and contracts could claim that we did not fulfill our obligations.
If a court found that we are obligated under any of those contracts,
arrangements or otherwise, we could be liable for an undeterminable amount of
compensation or stock or both.

If any such litigation occurs, it is likely to be expensive for us. If such
suits are determined against us, and a court awards a material amount of cash
damages, our business, results of operations and financial condition will be
materially adversely affected. In addition, any such litigation could divert our
management's attention and resources.

WE PLAN TO GROW, IN PART, THROUGH MERGERS WITH AND ACQUISITIONS OF OTHER
COMPANIES, HOWEVER, WE MAY NOT BE ABLE TO IDENTIFY, ACQUIRE, AND SUCCESSFULLY
INTEGRATE FUTURE ACQUISITIONS INTO OUR OWN OPERATIONS, WHICH COULD MATERIALLY
ADVERSELY AFFECT OUR GROWTH AND OUR OPERATING RESULTS.

Our business strategy contemplates that we will seek a number of
significant acquisitions within the next few years. While we have initiated
discussions with at least one acquisition target, there is no assurance that we
will complete any such acquisitions or, if we do complete acquisitions, whether
we will successfully integrate these acquisitions into our business. In
addition, there is no assurance that if we acquire any businesses, we will
achieve anticipated revenue and earnings. Our failure to acquire suitable
companies or to successfully integrate any acquired

14
companies into our operations could materially affect our ability to maintain
our business.

MANY COMPANIES USE NAMES SIMILAR IN SOUND OR SPELLING TO "INSYNQ."
INTELLECTUAL PROPERTY INFRINGEMENT CLAIMS AGAINST US FOR THE USE OF THE NAME
"INSYNQ", OR ONE SIMILAR IN SOUND OR SPELLING, EVEN IF WITHOUT MERIT, COULD BE
EXPENSIVE TO DEFEND AND DIVERT MANAGEMENT'S ATTENTION FROM OUR BUSINESS. IF A
CLAIM TO STOP US FROM USING OUR NAME IS SUCCESSFUL, WE WILL HAVE TO EITHER BUY
THE RIGHT TO USE OUR NAME, WHICH MAY BE EXPENSIVE, OR CHANGE OUR NAME, WHICH MAY
ALSO BE EXPENSIVE.

We are aware that other companies have claimed use of names similar to
"Insynq" for products or services similar to our own. We are in the process of
investigating the rights, if any, others may have to the name. In addition, we
are attempting to register "Insynq" as a trademark in the United States, Europe,
and Canada. However, we may not be able to obtain proprietary rights to the use
of this name. We will incur expenses if called to defend our use of the "Insynq"
name. Any such litigation, even if without merit, may be time consuming and
expensive to defend. It also could divert our management's attention and
resources and require us to enter into costly royalty or licensing agreements.
In addition, if any company in our industry is able to establish a use of the
"Insynq" name that is prior to our use, we could be liable for damages and could
be forced to stop using the name unless we are able to buy the right to use the
name. If we were unable to buy the right to use our name after we lose an
infringement claim, we would have to change our name, which may require us to
spend money to build new brand recognition and incur other costs. Third parties
may assert other infringement claims against us. Any of these events could
divert management attention and complicate our ability to do business.

OTHERS MAY SEIZE THE MARKET OPPORTUNITY WE HAVE IDENTIFIED BECAUSE WE MAY
NOT EFFICIENTLY EXECUTE OUR STRATEGY.

If we fail to execute our strategy in a timely or effective manner, our
competitors may be able to seize the marketing opportunities we have identified.
Our business strategy is complex and requires that we successfully and
simultaneously complete many tasks. In order to be successful, we will need to:

o Negotiate effective strategic alliances and develop economically attractive
service offerings; o Attract and retain customers; o Attract and retain highly
skilled employees; o Integrate acquired companies into our operations; and o
Evolve our business to gain advantages in an increasingly competitive
environment.

In addition, although some of our management team has worked together for
approximately one year, there can be no assurance that we will be able to
successfully execute all elements of our strategy.

OUR INDUSTRY IS CHARACTERIZED BY RAPIDLY CHANGING TECHNOLOGY WITH
CONTINUOUS IMPROVEMENTS IN BOTH COMPUTER HARDWARE AND SOFTWARE, AND RAPID
OBSOLESCENCE OF CURRENT SYSTEMS. IF WE DO NOT RESPOND EFFECTIVELY AND ON A
TIMELY BASIS TO RAPID TECHNOLOGICAL CHANGE IN OUR INDUSTRY, WE WILL NOT BE ABLE
TO EFFECTIVELY SELL OUR SERVICES AND OUR SALES WILL MATERIALLY ADVERSELY
DECLINE.

We must continually buy new computer hardware and license new computer
software systems to effectively compete in our industry. Our software delivery
methodologies must be able to support changes in the underlying software
applications that are delivered to our customers. The rapid development of new
technologies increases the risk that current or new competitors could develop
products or services that would reduce the competitiveness of our products or
services. We rely on software providers to produce software applications that
keep pace with our customers' demands.

There is no assurance that we will successfully develop or adopt new
technologies, introduce new services or enhance our existing services on a
timely basis, or that new technologies, new services or enhancements we use or
develop will achieve market acceptance. If we fail to address these
developments, we will lose sales to our competitors.

ALTHOUGH OUR CURRENT OPERATIONS INCLUDE OPERATING AS A TECHNOLOGY-FOCUSED
COMPANY, OUR PREVIOUS BUSINESS ACTIVITIES INCLUDED GAMING, NATURAL RESOURCE
MINING, AND EXPLORATION. AS A RESULT, WE MAY BE

15
EXPOSED TO UNKNOWN ENVIRONMENTAL AND OTHER LIABILITIES THAT COULD REQUIRE US TO
EXPAND OUR FINANCIAL RESOURCES AND MATERIALLY ADVERSELY AFFECT OUR FINANCIAL
CONDITION.

The assets of a predecessor company were acquired by a publicly-traded
company that was engaged, prior to August 1999, in gaming, and prior to 1993, in
natural resource exploration and development, including mining, and oil and gas.
We no longer own any mining, oil and gas, or gaming-related assets. The mining,
mineral processing, and oil and gas industries are subject to extensive
governmental regulations for the protection of the environment, including
regulations relating to air and water quality, site reclamation, solid and
hazardous waste handling and disposal and the promotion of occupational safety.
We could be held responsible for any liabilities relating to our previous
involvement in gaming, mining or oil and gas exploration and development, which
liabilities would result in our spending our cash resources.

RELIABILITY OF MARKET DATA.

Market data used within this report was obtained from internal sources and
from industry publications. Such industry publications typically contain a
statement to the effect that the information contained therein was obtained from
sources considered to be reliable, but that the completeness and accuracy of
such information is not guaranteed. While we believe that the market data
presented herein is reliable, we have not independently verified such data.
Similarly, market data supplied by internal sources, which we believe to be
reliable, has not been verified by independent sources.

THIRD PARTY REPORTS AND PRESS RELEASES.

We do not make financial forecasts or projections, nor do we endorse the
financial forecasts or projections of third parties or comment on the accuracy
of third party reports. We do not participate in the preparation of the reports
or the estimates given by analysts. Analysts who issue financial reports are not
privy to non-public financial information. Any purchase of our securities based
on financial estimates provided by analysts or third parties is done entirely at
the risk of the purchaser.

We periodically issue press releases to update stockholders on new
developments relating to Insynq and our business. These releases may contain
certain statements of a forward-looking nature relating to future events or our
future financial performance. Readers are cautioned that such statements are
only predictions, and actual events or results may materially differ with those
statements. In evaluating such statements, readers should specifically review
the various risk factors described herein, among others we identify in documents
we file with the SEC, which could cause actual results to differ materially from
those indicated by such forward-looking statements.

RISKS RELATED TO OUR INDUSTRY

THE FAILURE OF THE INTERNET TO GROW OR REMAIN A VIABLE COMMERCIAL MEDIUM
COULD HARM OUR GROWTH.

Our success depends in large part on the maintenance of the Internet
infrastructure as a reliable network frame that provides adequate speed, data
capacity, and security. Our success also depends on the timely development of
products, such as high-speed modems, that enable reliable Internet access and
services. The Internet may continue to experience significant growth in the
number of users, frequency of use and amount of data transmitted. The Internet
infrastructure may not be able to support the demands placed on it and the
performance or reliability of the Internet may be adversely affected by this
continued growth. In addition, the Internet could lose its commercial viability
if the number of people who use the Internet does not continue to grow. A number
of factors, including unreliable service, unavailability of cost-effective,
high-speed access to the Internet or concerns about security, could impede this
growth. The infrastructure or complementary products and services necessary to
maintain the Internet, as a viable commercial medium may not be developed, and,
as a result, the Internet may not continue to be a viable commercial medium for
us.

IF THE GOVERNMENT ADAPTS REGULATIONS THAT CHARGE INTERNET ACCESS FEES OR
IMPOSE TAXES ON SUBSCRIPTIONS TO OUR WEB-BASED PRODUCTS, OUR OPERATING EXPENSE
WILL INCREASE.

Currently there are few laws or regulations that specifically regulate
communications or commerce on the

16
Internet. However, laws and regulations may be adopted that address issues such
as pricing and the characteristics of products and services. In addition,
several connectivity companies have petitioned the Federal Communications
Commission to regulate Internet and on-line service providers in a manner
similar to long-distance telephone carriers and to impose access fees on them.
This regulation, if imposed, could increase the cost of transmitting data over
the Internet. Moreover, it may take years to determine the extent to which
existing laws relating to issues such as intellectual property ownership and
infringement, libel, obscenity and personal privacy are applicable to the
Internet. Finally, state tax laws and regulations relating to the provision of
products and services over the Internet are still developing. A few states have
tried to impose taxes on products and services provided over the Internet. If
additional states try to do so, our operating costs may increase and we may not
be able to increase the price that we charge for our products to cover these
costs. Any new laws or regulations or new interpretations of existing laws and
regulations relating to the Internet could decrease the growth in the use of the
Internet, decrease the demand for traffic on our Website, increase our operating
expenses, or otherwise adversely affect our business.

OUR INDUSTRY IS RAPIDLY CHANGING.

Our industry is characterized by rapidly changing technology with
continuous improvements in both computer hardware and software. If we do not
respond effectively and on a timely basis to rapid technological change in our
industry, we will not be able to effectively sell our services and our sales
will materially decline. We must continually purchase new computer hardware and
license new computer software systems to effectively compete in our industry. In
addition, our software delivery methodologies must be able to support changes in
the software applications that are delivered to our customers. The rapid
development of new technologies increases the risk that current or new
competitors could develop products or services that would reduce the
competitiveness of our products or services. And moreover, we rely on software
providers to produce software that keeps pace with our customers' demands.

We may not successfully develop or adopt new technologies, introduce new
services or enhance our existing services on a timely basis; in addition, new
technologies, services, or enhancements we use may never achieve market
acceptance. If we fail to address these developments, we will lose sales to our
competitors.

RISKS RELATED TO OUR COMMON STOCK

ANTI-TAKEOVER ACTIONS AND/OR PROVISIONS COULD PREVENT OR DELAY A CHANGE IN
CONTROL.

Provisions of our certificate of incorporation and bylaws and Delaware law
may make it more difficult for a third party to acquire us, even if so doing
would be beneficial to our stockholders. These include the following:

o Our board of directors is authorized to issue of up to 10,000,000 shares of
preferred stock and to fix the rights, preferences, privileges and
restrictions of those shares without any further vote or action by the
stockholders, which may be used by the board to create voting impediments
or otherwise delay or prevent a change in control or to modify the rights
of holders of our common stock;

o Our board of directors is authorized to issue of up to 10,000,000 shares of
class A common stock pursuant to which the holders of such stock are
entitled to three (3) votes for each share held, on all matters submitted
to stockholders, which voting power may be used by the holders of such
stock to create voting impediments or otherwise delay or prevent a change
in control or to modify the rights of holders of our common stock;

o A prohibition on cumulative voting in the election of directors, which
would otherwise allow less than a majority of stockholders to elect
directors;

o Our articles of incorporation provide that Section 203 of the Delaware
General Corporation Law, an anti-takeover law, will not apply to us. In
general, this statute prohibits a publicly held Delaware corporation from
engaging in a business combination with an interested stockholder for a
period of three years after the date of the transaction by which that
person became an interested stockholder, unless the business combination is
approved in a prescribed manner. For purposes of Section 203, a business
combination includes a merger, asset sale or other transaction resulting in
a financial benefit to the interested

17
stockholder, and an interested stockholder is a person who, together with
affiliates and associated, owns, or within three years prior, did own, 15% or
more of our voting stock; and

o Limitations on who may call annual and special meetings of stockholders.

CONTROL BY OFFICERS AND DIRECTORS COULD HAVE AN ADVERSE EFFECT ON OUR
STOCKHOLDERS.

As of April 1, 2002, our directors, executive officers, and their
affiliates beneficially owned approximately 36.2% of our outstanding common
stock. John P. Gorst, our chairman of the board, chief executive officer and
president, beneficially owns approximately 22.4% of our outstanding common stock
and 60% of our outstanding class A common stock. M. Carroll Benton, our chief
administrative officer, secretary and treasurer, beneficially owns approximately
15.0% of our outstanding common stock and 40% of our outstanding class A common
stock. As a result, these stockholders, acting together and with others, have
the ability to potentially control substantially all matters submitted to our
stockholders for approval, including the election and removal of directors and
any merger, consolidation, takeover or other business combination involving us,
and to control our management and affairs. This may discourage a potential
acquirer from making a tender offer or otherwise attempting to obtain control of
us, which could materially adversely affect the market price of our common
stock.

THE VOLATILITY OF OUR STOCK PRICE COULD ADVERSELY AFFECT OUR STOCKHOLDERS.

There currently is a public market for our common stock, but there is no
assurance that there will always be such a market. The trading price of our
common stock is highly volatile and could be subject to wide fluctuations in
response to factors such as:

o Actual or anticipated variations in quarterly operating results; o
Announcements of technological innovations; o New sales methodologies,
contracts, products or services by us or our competitors; o Changes in financial
estimates by securities analysts;
o Announcements of significant acquisitions, strategic partnerships, joint
ventures or capital commitments; o Additions or departures of key personnel; o
Sales of common stock; or o Other general economic or stock market conditions,
many of which are beyond our control.

In addition, the stock market in general, and the market for
Internet-related and technology companies in particular, have experienced
extreme price and volume fluctuations that have often been unrelated or
disproportionate to the operating performance of such companies. The trading
prices of many technology companies' stock were at or near unprecedented levels
in the past year; however, such levels have recently given way to a depressed
stock price for technology companies, and there can be no assurance that these
trading prices will increase again. Such fluctuation may materially adversely
affect the market price of our common stock, regardless of our operating
performance. Historically, following periods of volatility in the market price
of a company's securities, securities class action litigation has often been
instituted against that company. The institution of similar litigation against
us could result in substantial costs and a diversion of our management's
attention and resources.

18
NOTE REGARDING FORWARD-LOOKING STATEMENTS

This prospectus and the documents incorporated by reference contain
forward-looking statements. Generally, these forward-looking statements include
but are not limited to statements about our plans, objectives, expectations,
intentions and other statements contained in this prospectus that are not
historical facts. You can identify these statements by forward-looking words,
such as "expect," "anticipate," "intend," "plan," "believe," "seek," "estimate,"
"may," "will" and "continue" or similar words. You should read statements that
contain these words carefully because they may discuss our future expectations
contain projections of our future results of operations or of our financial
condition or state other forward-looking information. We caution readers that
these forward-looking statements are not guarantees of future performance or
events and are subject to a number of uncertainties, risks and other influences,
many of which are beyond our control and may influence the accuracy of the
statements and projections upon which the statements are based. The factors
listed in the sections captioned "Risk Factors" as well as any cautionary
language in this prospectus, provide examples of risks, uncertainties and events
that may cause our actual results to differ materially from the expectations we
describe in our forward-looking statements. Before you invest in our common
stock, you should be aware that the occurrence of the events described in the
"Risk Factors" section and elsewhere in this prospectus could have a material
adverse effect on our business, operating results and financial condition.

USE OF PROCEEDS

We will not receive any of the proceeds from the sale of the shares of
common stock offered by the selling stockholders under this prospectus. We will
receive estimated gross proceeds of up to $13,640 if the selling stockholders
exercise warrants to purchase an aggregate of 2,200,000 shares of our common
stock covered by this prospectus, assuming the selling stockholders do not
utilize the cashless exercise feature of such warrants. Of the 2,200,000
warrants which may be exercised, 1,000,000 warrants are to be issued only after
the effectiveness of this registration statement.

The net proceeds, if any, that we receive from the exercise of warrants
will be used for working capital and general corporate purposes. We may also use
all or a portion of the net proceeds for the acquisition of businesses, products
and technologies or otherwise to enter into strategic alliances. We reserve the
right to change the use of the net proceeds if unanticipated developments in our
business, business opportunities, or changes in economic, regulatory or
competitive conditions, make shifts in the allocations of proceeds necessary or
desirable.

SELLING STOCKHOLDERS

This prospectus relates to the offer and sale by the following selling
stockholders of the indicated number of shares, all of which are issuable
pursuant to warrants and/or convertible debentures held by these selling
stockholders. We are not aware that any of these selling stockholders has any
plan, arrangement, understanding, agreement, commitment or intention to sell
their securities. See "Plan of Distribution." None of the following selling
stockholders has held any position or office within our Company, nor has had any
other material relationship with us in the past three years, other than in
connection with transactions pursuant to which the selling stockholders acquired
convertible debentures and warrants.

Of the 121,157,143 shares of common stock offered by this prospectus, none
of the shares are issued and outstanding as of April 1, 2002, and we have
reserved all of the shares for issuance to the selling stockholders upon (i) the
conversion of shares of outstanding convertible debentures, and (ii) the
exercise of outstanding common stock warrants. Such registered shares represent
a good faith estimate of the number of shares that could be issuable pursuant to
such warrants and debentures. Should our conversion ratio result in our having
insufficient shares registered, we will file a new registration statement to
cover the resale of such additional securities. We have also registered as part
of this offering an additional indeterminate number of shares of our common
stock that we may be required to issue to the selling stockholders upon the
conversion or exercise of the outstanding convertible debentures and common
stock warrants as a result of the anti-dilution provisions of the respective
securities. We are registering all of the shares of common stock offered for
sale pursuant to this prospectus pursuant to certain registration rights
obligations.

Shares of our common stock will be acquired by the selling stockholders
pursuant to the exercise by AJW

19
Partners, LLC, New Millennium Capital Partners II, LLC, Pegasus Capital
Partners, LLC and AJW/New Millennium Offshore, Ltd. of up to $550,000 in secured
convertible debentures and warrants to purchase up to 2,200,000 shares of common
stock, in the aggregate, in accordance with the terms of that certain securities
purchase agreement dated January 24, 2002.

As stated under the caption "Need for Additional Capital," in order to
execute our long-term and short-term strategic plans and to continue our
operations, we need to continue to raise funds through public or private debt or
equity financings. Consistent with this approach, we entered into a consulting
agreement with The N.I.R. Group, LLC, which agreement is more fully explained in
this document under the caption "Sales of Unregistered Securities."

Under the securities purchase agreement, we will receive up to $550,000
from the selling stockholders, and they will receive in return a corresponding
amount of our 12% convertible debentures and warrants to purchase up to an
aggregate of 2,200,00 shares of common stock. The terms of the debentures
provide for full payment on or before January 24, 2003, with interest of 12% per
annum, which may be converted at any time at the lesser of (i) $0.008 or (ii)
the average of the lowest three inter-day trading prices during the twenty
trading days immediately prior to the date the conversion notice is sent,
discounted by 50%. The terms of the warrants entitle each selling stockholder to
purchase shares of our common stock at a price equal to the lesser of (i) $0.007
per share and (ii) the average of the lowest three inter-day trading prices
during the twenty trading days immediately prior to exercise, at any time after
January 24, 2002 and before the second anniversary date of the issuance. Under
the related Registration Rights Agreement, we agreed to register all of the
shares underlying such convertible debentures and warrants to allow the selling
stockholders to sell them in a public offering or other distribution.

As of April 1, 2002, (i) $300,000 of the 12% convertible debentures have
been issued, none of which have been converted, and (ii) 1,200,000 of the
warrants have been issued, none of which have been exercised. Pursuant to the
terms of the securities purchase agreement, upon the registration statement
registering the shares subject to the debentures and warrants being declared
effective by the SEC, the remaining $250,000 of debentures and 1,000,000
warrants will be issued to the selling stockholders. If all $550,000 debentures
were converted and all 2,200,000 warrants were exercised on April 1, 2002, a
total of 179,619,355 shares of common stock would be required for issuance.

Of the selling security holders, AJW Partners, LLC is a private investment
fund that is owned by its investors and managed by SMS Group, LLC. SMS Group,
LLC, of which Mr. Corey S. Ribotsky is the fund manager, has voting and
investment control over the shares listed below owned by AJW Partners, LLC. New
Millennium Capital Partners II, LLC is a private investment fund that is owned
by its investors and managed by First Street Manager II, LLC. First Street
Manager II, LLC, of which Corey S. Ribotsky is the fund managers and has voting
and investment control over the shares listed below owned by New Millennium
Capital Partner II, LLC. AJW/New Millennium Offshore, Ltd. is a private
investment fund that is owned by its investors and managed by First Street
Manager II, LLC. First Street Manager II, LLC, of which Corey S. Ribotsky is the
fund managers and has voting and investment control over the shares listed below
owned by AJW/New Millennium Offshore, Ltd. Pegasus Capital Partners, LLC is a
private investment fund that is owned by its investors and managed by Pegasus
Manager, LLC of which Corey S. Ribotsky, and Lloyd A. Groveman are the fund
managers and have voting and investment control over the shares listed below
owned by Pegasus Capital Partners, LLC. None of the selling stockholders are
broker-dealers or affiliates of broker-dealers.

The following table sets forth certain information about the selling
stockholders for whom we are registering shares of common stock for resale to
the public. The information in the table assumes no sales are effected by the
selling stockholders other than pursuant to this registration statement, and
that all shares of common stock being registered pursuant to this registration
statement are sold.

The number of shares set forth in the table for the selling stockholders
represents an estimate of the number of shares of common stock to be offered by
the selling stockholders pursuant to this prospectus. The actual number of
shares of common stock issuable upon conversion of the debentures and exercise
of the related warrants is indeterminate, is subject to adjustment and could be
materially less or more than such estimated number depending on

20
factors which cannot be predicted by us at this time including, among other
factors, the future market price of the common stock. The actual number of
shares of common stock offered in this prospectus, and included in the
registration statement of which this prospectus is a part, includes such
additional number of shares of common stock as may be issued or issuable upon
conversion of the debentures and exercise of the related warrants by reason of
any stock split, stock dividend or similar transaction involving the common
stock, in accordance with Rule 416 under the Securities Act of 1933. Should the
conversion ratio result in our not having sufficient shares registered, we will
not rely on Rule 416 to cover such shares, but will file a new registration
statement to cover such resale of additional securities should that become
necessary.

- ----------------- ---------------------- ----------------- ---------------- ----------------- ----------------- --------------

NAME NUMBER OF SHARES NUMBER OF NUMBER OF NUMBER OF NUMBER OF PERCENT
BENEFICIALLY OWNED SHARES SHARES SHARES BEING SHARES BENEFICIALLY
IN CONNECTION WITH BENEFICIALLY BENEFICIALLY REGISTERED BENEFICIALLY OWNED AFTER
THE JUNE 29, 2001 OWNED IN OWNED PRIOR TO UNDER OFFERING OWNED AFTER OFFERING(6)
DEBENTURES AND CONNECTION WITH THE OFFERING(3) (4) OFFERING (5)
WARRANTS (1) THE JANUARY 24,
2001 DEBENTURES
AND WARRANTS
(2)

- ------------------------------------------------------------------------------------------------------------------------------

AJW PARTNERS, 122,945,161 29,936,559 152,881,720 20,192,858 132,688,862 4.9%
LLC

- -----------------------------------------------------------------------------------------------------------------------------

NEW MILLENNIUM 122,945,161 29,936,559 152,881,720 20,192,857 132,688,863 4.9%
CAPITAL
PARTNERS II, LLC

- ------------------------------------------------------------------------------------------------------------------------------

AJW/NEW 122,945,162 59,873,118 182,818,280 40,385,714 142,432,566 4.9%
MILLENNIUM
OFFSHORE, LTD.

- ------------------------------------------------------------------------------------------------------------------------------

PEGASUS CAPITAL 0 59,873,119 59,873,119 40,385,714 19,487,405 4.9%
PARTNERS, LLC

- ------------------------------------------------------------------------------------------------------------------------------

1. Such figures assume the conversion in full of the remaining June 29,
2001 convertible debenture in the amount of $1,135,950 and 2,400,000
warrants assuming full conversion as of April 1, 2002 at a conversion
price of $.0031.

2. Such figures assume the conversion in full of the January 24, 2002
convertible debenture in the amount of $550,000 and 2,200,000 warrants
assuming full conversion as of April 1, 2002 at a conversion price of
$.0031.

3. Such figures assume the conversion in full of the remaining June 29,
2001 convertible debenture in the amount of $1,135,950 and 2,400,000
warrants assuming full conversion as of April 1, 2002 at a conversion
price of $.0031 and assume the conversion in full of the January 24,
2002 convertible debenture in the amount of $550,000 and 2,200,000
warrants assuming full conversion as of April 1, 2002 at a conversion
price of $.0031, notwithstanding the 4.9% limitation on ownership as
outlined below in footnote 4.

4. Under the terms of the debentures and the related warrants, the
debentures are convertible and the warrants are exercisable by any
holder only to the extent that the number of shares of common stock
issuable pursuant to such securities, together with the number of
shares of common stock owned by such holder and its affiliates (but not
including shares of common stock underlying unconverted shares of
debentures or

21
unexercised portions of the warrants) would not exceed 4.9% of the
then outstanding common stock as determined in accordance with Section
13(d) of the Exchange Act. This limitation on ownership may be waived
with 61 days notice to us. Accordingly, the number of shares of common
stock set forth in the table for the selling stockholder exceeds the
number of shares of common stock that the selling stockholder could
own beneficially at any given time through their ownership of the
debentures and the warrants. In that regard, the beneficial ownership
of the common stock by the selling stockholder set forth in the table
is not determined in accordance with Rule 13d-3 under the Exchange
Act. The number of shares shown represents 4.9% of the outstanding
common stock assuming full conversion of all debentures and full
exercise of all warrants held by the holder and its affiliates.

5. Such figure represents the maximum number of shares that each selling
stockholder could hold pursuant to the 4.9% limitation imposed under
the securities purchase agreement.

6. Such figure assumes the 4.9% limitation imposed under the securities
purchase agreement. As of April 1, 2002, 4.9% of our shares
outstanding would equal to 2,777,632 shares of our common stock.

Of the shares of common stock covered by this prospectus, none have been
issued and the related warrants, and convertible debentures with rights to
conversion, remain outstanding.

In connection with the issuance of convertible debentures and warrants to
certain selling stockholders, we agreed to file and use our best efforts to
cause to be declared effective the registration statement of which this
prospectus is a part.

We have agreed to indemnify certain of the selling stockholders against
some expenses, claims, losses, damages and liabilities (or action in respect
thereof). We have agreed to pay the expenses of registering the shares under the
Securities Act, including registration and filing fees, blue sky expenses,
printing expenses, accounting fees, administrative expenses and our own counsel
fees.

PLAN OF DISTRIBUTION

The shares being offered by the selling stockholders or their respective
pledges, donees, transferees or other successors in interest, will be sold from
time to time in one or more transactions, which may involve block transactions:

o on the Over-the-Counter Bulletin Board or on such other market on which
the common stock may from time to time be trading;

o in privately-negotiated transactions;

o through the writing of options on the shares;

o short sales; or

o any combination thereof.

The sale price to the public may be:

o the market price prevailing at the time of sale;

22
o a price related to such prevailing market price;

o at negotiated prices; or

o such other price as the selling stockholders determine from time to
time.

The shares may also be sold pursuant to Rule 144. The selling stockholders
shall have the sole and absolute discretion not to accept any purchase offer or
make any sale of shares if they deem the purchase price to be unsatisfactory at
any particular time.

The selling stockholders or their respective pledges, donees, transferees
or other successors in interest, may also sell the shares directly to market
makers acting as principals and/or broker-dealers acting as agents for
themselves or their customers. Such broker-dealers may receive compensation in
the form of discounts, concessions or commissions from the selling stockholders
and/or the purchasers of shares for whom such broker/dealer might be in excess
of customary commissions. Market makers and block purchasers purchasing the
shares will do so for their own account and at their own risk. It is possible
that a selling stockholder will attempt to sell shares of common stock in block
transactions to market makers or other purchasers at a price per share which may
be below the then market price. The selling stockholders cannot assure that all
or any of the shares offered in this prospectus will be issued to, or by, the
selling stockholders. The selling stockholders and any brokers, dealers or
agents, upon effecting the sale of any of the shares offered in this prospectus
may be deemed "underwriters" as that term is defined under the Securities Act or
the Exchange Act, or the rules and regulations under such acts.

The selling stockholders, alternately, may sell all or any part of the
shares offered in this prospectus through an underwriter. No selling stockholder
has entered into any agreement with a prospective underwriter and there is no
assurance that any such agreement will be entered into. If a selling stockholder
enters into such an agreement or agreements, the relevant details will be set
forth in a supplement or revisions to this prospectus.

The selling stockholders and any other persons participating in the sale or
distribution of the shares will be subject to applicable provisions of the
Exchange Act and the rules and regulations under such act, including, without
limitation, Regulation M. These provisions may restrict certain activities of,
and limit the timing of purchases and sales of any of the shares by, the selling
stockholders or any other such person. Furthermore, under Regulation M, persons
engaged in a distribution of securities are prohibited from simultaneously
engaging in market making and certain other activities with respect to such
securities for a specified period of time prior to the commencement of such
distributions, subject to specified exceptions or exemptions. All of these
limitations may affect the marketability of the shares.

We have agreed to indemnify the selling stockholders, or their transferees
or assignees, against certain liabilities, including liabilities under the
Securities Act, or to contribute to payments the selling stockholders or their
respective pledges, donees, transferees or other successors in interest, may be
required to make in respect of such liabilities.

AMENDMENT AND SUPPLEMENTATION NECESSITATED BY FUTURE SALES.

To the extent required, this prospectus may be amended and supplemented
from time to time to describe a specific plan of distribution. In connection
with distributions of such shares or otherwise, the selling stockholders may
enter into hedging transactions with broker-dealer or other financial
institutions. In connection with these transactions, broker-dealer or other
financial institutions may engage in short sales of our common stock in the
course of hedging the positions they assume with the selling stockholders. The
selling stockholders may also sell our common stock short and redeliver the
shares to close out such short positions. The selling stockholders may also
enter into option or other transactions with broker-dealers or other financial
institutions which require the delivery to the broker-dealer or other financial
institution of the shares offered in this prospectus, which shares the
broker-dealer or other financial institution may resell pursuant to this
prospectus (as supplemented or amended to reflect such transaction). The selling
stockholders may also pledge their shares to a broker-dealer or other financial
institution, and, upon a default, the broker-dealer or other financial
institution may effect sales of the pledged shares pursuant to this prospectus
(as supplemented or amended to reflect such transaction). In addition, any
shares that qualify for sale pursuant to Rule 144 may be sold under Rule 144
rather than pursuant to this prospectus.

23
In effecting sales, brokers, dealers or agents engaged by the selling
stockholders may arrange for other brokers or dealers to participate. Brokers,
dealers or agents may receive commissions, discounts or concessions from the
selling stockholders in amounts to be negotiated prior to the sale. These
brokers or dealers, the selling stockholders, and any other participating
brokers or dealers may be deemed to be "underwriters" within the meaning of the
Securities Act in connection with such sales, and any such commissions,
discounts or concessions may be deemed to be underwriting discounts or
commissions under the Securities Act. The selling stockholders have advised us
that they have not entered into any agreements, understandings or arrangements
with any underwriters or broker-dealers regarding the sale of their securities,
nor is there an underwriter or coordinating broker acting in connection with the
proposed sale of shares by the selling stockholders.

If a selling stockholder enters into an underwriting agreement, the
relevant details will be set forth in a post-effective amendment to the
registration statement, rather than a prospectus supplement.

OTHER INFORMATION REGARDING FUTURE SALES

In order to comply with the securities laws of some states, if applicable,
the shares being offered in this prospectus must be sold in such jurisdictions
only through registered or licensed brokers or dealers. In addition, in some
states shares may not be sold unless they have been registered or qualified for
sale in the applicable state or a seller complies with an available exemption
from the registration or qualification requirement.

We will make copies of this prospectus available to the selling
stockholders and will inform them of the need for delivery of copies of this
prospectus to purchasers at or prior to the time of any sale of the shares
offered hereby. The selling shareholders may indemnify any broker-dealer that
participates in transactions involving the sale of the shares against some
liabilities, including liabilities arising under the Securities Act.

At the time a particular offer of shares is made, if required, a prospectus
supplement will be filed and distributed that will set forth the number of
shares being offered and the terms of the offering, including the name of any
underwriter, dealer or agent, the purchase price paid by any underwriter, any
discount, commission and other item constituting compensation, any discount
commission or concession allowed or re-allowed or paid to any dealer, and the
proposed selling price to the public. In addition, upon being notified by a
selling stockholder that a donee or pledgee intends to sell more than 500
shares, a prospectus supplement will be filed and distributed.

PAYMENT OF EXPENSES

We will pay all the expenses related to the registration of the shares
offered by this prospectus, except for any underwriting, brokerage or related
fees, discounts, commissions or the fees or expenses of counsel or advisors to
the selling stockholders.

MARKET PRICES OF COMMON STOCK AND DIVIDEND POLICY

Our common stock currently trades on the OTC Bulletin Board under the
symbol "ISNQ." Until August 3, 2000, our common stock was traded on the OTC
Bulletin Board under the symbol "XCLL." The following table sets forth, for the
periods indicated, the high and low bid and ask prices for the common stock as
reported on the OTC Bulletin Board. The table gives effect to our two-for-one
stock split that occurred on August 3, 2000. The quotations reflect inter-dealer
prices, without retail mark-up, mark-down or commission and may not represent
actual transactions:

- --------------------- -------------------- ------------------------------------ --------------------------------------
FISCAL YEAR QUARTER BID ASK
- --------------------- -------------------- ------------------------------------ --------------------------------------
HIGH LOW HIGH LOW
- --------------------- -------------------- ----------------- ------------------ ------------------- ------------------

2000 August 31, 1999 0.01 + 0.05 0.05
- --------------------- -------------------- ----------------- ------------------ ------------------- ------------------
November 30, 1999 0.04 0.01 0.12 0.05
- --------------------- -------------------- ----------------- ------------------ ------------------- ------------------
February 29, 2000 N/A N/A N/A N/A
- --------------------- -------------------- ----------------- ------------------ ------------------- ------------------
May 31, 2000 10.00 2.00 12.75 2.06
- --------------------- -------------------- ----------------- ------------------ ------------------- ------------------
2001 August 31, 2000 6.25 1.75 6.38 0.06
- --------------------- -------------------- ----------------- ------------------ ------------------- ------------------
November 30, 2000 2.50 0.69 2.75 0.72
- --------------------- -------------------- ----------------- ------------------ ------------------- ------------------
February 28, 2001 0.94 0.31 1.00 0.31
- --------------------- -------------------- ----------------- ------------------ --------------------------------------

24
May 31, 2001 0.72 0.05 0.81 0.08
- --------------------- -------------------- ----------------- ------------------ ------------------- ------------------
2002 August 31, 2001 0.09 0.045 0.05 0.05
- --------------------- -------------------- ----------------- ------------------ ------------------- ------------------
November 30, 2001 0.05 0.013 0.058 0.014
- --------------------- -------------------- ----------------- ------------------ ------------------- ------------------
o Less than $0.01.

On April 1, 2002, the last reported sale price for our common stock on the
OTC Bulletin Board was $0.0055 per share. On April 1, 2002, there were 1,008
stockholders of record of our common stock.

Holders of our common stock are entitled to dividends when, as and if
declared by the board of directors out of funds legally available therefore. We
have never paid cash dividends on our common stock, and management intends, for
the immediate future, to retain any earnings, if any, for the operation and
expansion of our business. Any future determination regarding the payment of
dividends will depend upon results of operations, capital requirements, our
financial condition and such other factors that our board of directors may
consider.

MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion and analysis should be read in conjunction with
the financial statements and notes thereto included elsewhere in this
prospectus. The statements contained in this report that are not historical
facts, including, without limitation, statements containing the words
"believes," "anticipates," "estimates," "expects," and words of similar import,
constitute "forward-looking statements." Forward-looking statements are made
based upon our management's current expectations and beliefs concerning future
developments and their potential effects upon us. Our actual results could
differ materially from those anticipated for many reasons, including risks faced
by us described in this prospectus under "Risk Factors."

OVERVIEW

Insynq, Inc. was incorporated in the state of Washington on August 31,
1998. We provide Internet appliances, known as customer premise equipment,
managed and hosted software services, Web hosting services, Web-based local and
wide area networks, and access to Internet marketing assistance and related
equipment and services. These products and services are offered as components or
as an integrated whole, either sold directly or on a fee or subscription basis.

In late 1999, Insynq decided to seek out a combination with a public
company. On February 18, 2000, Xcel Management, Inc., a publicly held company,
and Insynq closed an asset purchase transaction in which Xcel acquired
substantially all of the assets of Insynq. Xcel continued to develop the
business of Insynq, and on August 3, 2000, at a special meeting of Xcel's
stockholders, Xcel completed a re-incorporation merger with its wholly owned
subsidiary, Insynq, Inc., a Delaware corporation. Today, as the combined and
surviving entity, Insynq, Inc. continues to develop the IQ Utility Service while
incorporating the customer premise equipment developed as part of the IQ
Delivery System.

We target small and medium enterprises and the high-end segment of the
small office and home office market for the sale of hardware and hosted software
and access to Internet-related services. The products and services are provided
by developing a customer subscriber base that adopts a cost-effective, on-line
solution to building and maintaining an information technology system through
the adoption of "Web-based" computing as an alternative to both traditional
local wide area networks and traditional client-server implementations.
Generally, we market our self as an Internet utility company that can
cost-effectively provide all of the computer software, hardware, connectivity
and Internet-access needs for its customers.

We currently have several independent software vendors' products on line
using the IQ Data Utility Service computing services and anticipate signing
various agreements with additional organizations in the next few months. We
expect to increase the subscriber base through these respective sales channels.
Software vendor relationships currently in place include Microsoft Corporation,
Network Associates, Inc./McAfee, Peregrine Corporation, Macola Software, and
Novell, Inc.

The complete IQ Delivery System and Internet Utility Service includes
managed network and application

25
services, and can span from a customer's keyboard to the data center. We provide
certain equipment, which is kept on our customer's premises, including a
simplified, diskless workstation or thin client, and a multi-function router,
our IQ Delivery System, which is entirely managed and maintained by us. The
system can also include Internet- access services provided by us or by a user
selected telecommunications partner/provider. The final pieces of the system are
the data centers, which are located in Tacoma and Bellingham, Washington. These
facilities, with redundant power, bandwidth, and cooling, house the server
equipment and routers. While this is the recommended configuration for customer
use to take advantage of the full services, customers are free to choose which
components they use.

In the process of developing the IQ Delivery System, our management
believes we have acquired valuable technological expertise. We have created new
methodologies and produced proprietary hardware and software that is believed to
be essential to the configuration and effective management of Internet-based
networks and outside deployment of shared software applications.

RESULTS OF OPERATIONS

We had limited operational activity during the three month and six month
periods ended November 30, 2001. Therefore, we believe that any comparison of
the results of operations for the respective periods have very limited value for
evaluating trends and/or as a basis for predicting future results.

We incurred a net loss of $1,207,338 and $5,841,824 for the three months
ended November 30, 2001 and November 30, 2000, respectively. For the six months
ended November 30, 2001 and November 30, 2000, the net loss incurred was
$2,864,176 and $8,975,322, respectively. The respective quarterly losses
resulted primarily from: (1) providing discounted or free services as we
test-marketed our products and services, (2) initial network, infrastructure,
and research and development costs associated with the start-up of operations,
(3) adjustments to salaries and directly related benefits, (4) increased
professional and consulting fees, and, (5) the issuance of warrants and options
for services.

Total revenue for three months ended November 30, 2001 and November 30,
2000 was $227,729 and $106,171, respectively, representing an increase of
$121,558. The primary sources of revenue during the three month period ended
November 30, 2001: (1) seat subscription revenue of $183,444, net of discounts,
(2) managed software and support service revenue of $10,762, and (3) hardware
and software sales and other revenue of $33,523. Total revenue for the six
months ended November 30, 2001 and November 30, 2000 was $422,294 and $173,933,
respectively. Primary revenue sources for the six month period ended November
30, 2001 are: (1) seat subscription revenue of $325,892, net of discounts; (2)
managed software service revenue of $16,144; and, (3) hardware and software
sales and services revenue of $80,258. Seat revenue for the six months ended
November 30, 2001 increased approximately 290% over the same period ended
November 30, 2000. For the six months ended November 30, 2001, seat revenue
accounts for approximately 85% of total revenue. While we have experienced
growth in revenue in recent periods, prior growth rates should not be considered
as necessarily indicative of future growth rates or operating results for Fiscal
2002. We expect future revenue from all sources to trend away from our practice
of providing discounts and free offerings experienced in second quarter, Fiscal
2002, as we continue to develop our sales and implement our sales and marketing
strategies, increase consumer understanding and awareness of our technology and
prove our business model.

Our continued growth is significantly dependent upon our ability to
generate sales relating to our subscription and managed software services. Our
main priorities relating to revenue are: (1) increase market awareness of our
products and services through our strategic marketing plan, (2) growth in the
number of customers and seats per customer, (3) continue to accomplish
technological economies of scale, and (4) continue to streamline and maximize
efficiencies in our system implementation model.

COSTS AND EXPENSES

During the three months ended November 30, 2001, we recorded direct costs
of services of $338,534, an increase of $68,306 over the limited operations
experienced in the same period one year ago. Network and infrastructure costs
were $3,458 for the period ended November 30, 2001, which is a decrease of
$38,309 over the same period ended November 30, 2000. For the six-month periods
ended November 30, 2001 and November 30,

26
2000, we incurred $658,401 and $616,966 in direct costs, and, $32,785 and
$79,182 in network and infrastructure costs, respectively.

Selling, general, and administrative costs were $800,383 for the three
months ended November 30, 2001, representing a decrease of $1,575,411 over the
same three month period one year ago. For the six months ended November 30,
2001, selling, general and administrative costs decreased $2,518,444 over the
same period ended November 30, 2000. The decrease can be directly attributed to
our management's committed efforts, beginning in the fall of 2000, to
restructure our operations and reduce our expenses. Of significance for the six
months ended November 30, 2001, is a $2,113,484 decrease of comparable period
expenses requiring cash payments. Non-cash expenses for the quarter ended
November 30, 2001 and November 30, 2000 was $261,974 and $535,802, respectively.
For the six-month period ended November 30, 2001 and November 30, 2000, non-cash
compensation was $778,642 and $1,183,602, respectively, representing a decrease
of $404,960. Non-cash compensation is generally representative of the fair value
of common stock, options and warrants issued for services, and the amortization
of unearned compensation.

Interest expense was $337,584 for the three months ended November 30, 2001
versus $3,188,382 for the three months ended November 30, 2000. For the
six-month periods ended November 30, 2001 and November 30, 2000, interest
expense was $528,026 and $3,749,672, respectively. The decrease of $3,221,646
was due primarily to the recognition in prior comparable periods of: (1)
accounting for non-cash interest recognized on the fair value of warrants issued
with notes payable and convertible debentures, (2) interest recognized for the
beneficial conversion features on the conversion of debentures and notes
payable, (3) reductions in the original conversion prices offered significantly
below the fair market value of the common stock on the conversion dates, and,
(4) capitalized equipment lease obligations. Accounting for non-cash interest
resulted in $243,416 and $3,166,570 of the reported expense for the three months
ended November 30, 2001 and November 30, 2000, and, $347,394 and $3,692,747 for
the six months ended November 30, 2001 and November 30, 2000, respectively. For
the six months ended November 30, 2001, non-cash interest expense included
$331,659 related to the amortization of the 12% convertible debenture discounts.

We have recorded other income of $79,857 for the six months ended November
30, 2001. The reported amount represents approximately $77,610 of favorable
vendor negotiated settlements.

LIQUIDITY AND CAPITAL RESOURCES

We had cash and cash equivalents of $135,366 as of November 30, 2001, and a
deficit in working capital of $4,321,523 at the same date. For the six months
ended November 30, 2001, we used cash in our operating activities totaling
$1,173,172.

We finance our operations and capital requirements primarily through
private debt and equity offerings. For the six months ended November 30, 2001,
we received cash totaling $1,280,076 from the issuance of promissory notes
payable and convertible debentures. For the six months ended November 30, 2001,
we received $35,526 from the issuance of common stock and the exercise of
options and warrants.

As of February 28, 2002, our most recent practical date, we have
approximately $5,316,600 in current liabilities and past due debt. This amount
includes a reclassification of our convertible debentures, net of discounts,
from `other liabilities' as previously reported on our November 30, 2001 balance
sheet. Of the $5,316,600 liability, approximately $431,500 is deemed as a
current trade payable or an accrual.

We are late in payment of certain creditor trade payables of approximately
$772,500. In June 2001, our management negotiated either substantial reduction
of amounts owed or negotiated more favorable long-term payment plans. We offered
three payment plans: (1) seventy percent reduction in the amount owed with
payment due in one installment; (2) fifty percent reduction of the amount owed
with payment in twelve installments; and (3) no reduction of the amount owed
with payment in twenty-four installments. We believe that these negotiations
were well received by our vendors. However, as of February 28, 2002, many
creditors, accepting one of the payment plans, have not been paid. The creditors
who accepted payments plans are owed approximately $125,468, and are included in
current trade payables and in the past due amount of $772,500. Currently,
payable balances due by each plan are: (a) plan 1 - $40,395; (b) plan 2 -
$2,670; and, (c) plan 3 - $82,403. As a result of these plans and

27
subsequent additional negotiations with our vendors, we recorded over $113,000
of forgiven creditor payables for the six months ended November 30, 2001, and an
additional $349,000 for the three months ended February 28, 2002. Also,
management has entered into re-negotiations, and has approached the remaining
outstanding creditors, with trade payables of approximately $648,000, by
offering them cash payments for substantially less than the amounts due, or
request a total forgiveness of the debt. To-date this has been well received by
many of these creditors. However, if we are not able to negotiate payment plans
or complete settlements with these vendors, or if we are not able to execute the
negotiated payment plans with those who have accepted such plans, we could
experience a severe negative impact on our business resources and we may be
forced to cease operations.

As of February 28, 2002 we have approximately $231,800 recorded in accrued
liabilities that are to two creditors. We are in the process of determining the
validity of these liabilities under the terms and conditions of the pre-existing
agreements.

We lease equipment under a capital leases expiring in 2003. As of February
28, 2002, our principal capital lease obligation for computer hardware, printers
and related infrastructure is in default in the amount of approximately
$757,560. We have initiated discussions to restructure this obligation, and,
given the current market conditions, believe we will be successful in such
attempt. If we are unable to successfully restructure this obligation, options
remain open to us including, for example, returning the equipment and purchasing
new equipment on the open market. In the meantime, we have signed an additional
lease agreement for equipment to support our customer base. However, there can
be no assurance that we will able to locate other necessary equipment or raise
the funds necessary to make such further purchases. In addition, if all other
methods fail, we might be able to outsource our data center function; there is
no assurance that such methods will be available to us on favorable terms, or at
all. If this were to occur then we may be unable to deliver to our customers
their contracted services.

In addition, approximately $549,200 of business and payroll taxes are
delinquent, plus an estimated $157,000 of related assessed penalties and
interest. We have retained legal counsel to represent us in our current
negotiations with the Internal Revenue Service about a payment plan for the past
due taxes. The IRS has imposed certain conditions on us in order to proceed with
negotiations, one of which requires us to remain current on all future payroll
tax deposits. We have also been in contact with other respective taxing
authorities to initiate payment plans in settlement of their respective past due
taxes. There can be no assurances, however, that we will be able to agree or
commit to any proposed terms set forth by the Internal Revenue Service or
favorably negotiate terms with other taxing authorities. If we are unsuccessful,
the taxing authorities could obtain a lien against some or all of our assets.
Should this occur, we likely would be forced to cease our operations.

Additionally, there is one lien for approximately $28,000, filed by the
State of Utah, for prior year's income taxes, plus accrued penalties and
interest. The State of Utah assessed these taxes to Xcel Management, Inc., our
predecessor company. This amount is in dispute and amended returns to correct
this deficiency have been filed.

As of February 28, 2002, we have approximately $259,125 of employee
agreement related obligations in the form of accrued and deferred salaries.
These obligations are primarily a result of applying the terms of existing
employment agreements against that which we actually paid. Currently, management
is negotiating with employees with employment agreements to forgive all deferred
and accrued salaries and bonuses to-date. On December 31, 2001, two key officers
forgave $126,100 of deferred compensation.

As of February 28, 2002, we have approximately $1,468,050 in short-term
notes, loans and related accrued interest. In settlement of these debts, our
board of directors may authorize the issuance of class A preferred stock.
To-date we have received a letter of intent to convert approximately $1,300,000
of this debt.

As of February 28, 2002, we have recorded outstanding convertible
debentures of $1,435,950, plus related accrued interest of $33,100 and
unamortized discounts of $807,184.

On June 29, 2001, we entered into a private financing transaction with
three investors under which the investors initially purchased $550,000 from a
total of $1,200,000 of our 12% convertible debentures. Investors purchased an
additional $100,000 on August 15, 2001, $150,000 on October 18, 2001, and,
$400,000 on November 2, 2001 under this financing agreement. The debentures are
convertible into shares of our common stock at the lesser of (i) $0.18

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or (ii) the average of the lowest three trading prices on the twenty trading
days prior to the notice of such conversion, discounted by 50%. The convertible
debentures carry attached warrants that allow the investor, under the terms of
the warrants, to purchase up to 2,400,000 shares of common stock at an exercise
price per share equal to the lesser of (i) $.04 and (ii) the average of lowest
three (3) trading prices during the twenty (20) trading days immediately prior
to exercise of the warrants. If the 2,400,000 warrants were exercised on April
1, 2002, the warrant conversion price would be $.0062. Terms of the debentures
provide for full payment on or before one year from the date of issuance, plus
accrued interest of 12% per annum. Through April 1, 2002, all the net proceeds
were used to fund our necessary day-to-day operations, which included payroll
and related taxes; infrastructure and delivery costs; and, certain legal and
accounting fees.

On January 24, 2002, we entered into a second private financing transaction
to sell our 12% convertible debentures, to four investors, under which, the
investors initially purchased $300,000. Proceeds from this initial transaction,
net of fees and expenses, were $221,000, of which $77,000 was specifically
escrowed and reserved for selected vendor settlements. The conversion price of
the debentures is the lesser of $0.008, the fixed conversion price, or, the
average of the lowest three inter-day trading prices during the twenty days
immediately prior to the conversion date, discounted by 50%. For each one-dollar
($1.00) of debenture investment, we will issue warrants to purchase four (4)
shares of common stock. The warrant is exercisable from time to time up to two
(2) years from date of issuance, at an exercise price equal to the lesser of
$0.007 or the average of the three lowest inter-day trading prices during the
twenty days immediately prior to the exercise. If the 2,200,000 warrants were
exercised on April 1, 2002, the warrant conversion price would be $.0062.

We anticipate receiving the remaining $250,000, less approximately $30,000
in applicable fees, upon this registration statement being declared effective by
the SEC. Our management believes that the likelihood of receiving the remaining
$250,000 is good; however, our ability to receive the remaining $250,000
pursuant to the securities purchase agreement is subject to conditions, which
include, but are not limited to:

(i) that our representations and warranties in the securities purchase
agreement are true and correct in all material respects as of the date when made
and as of the closing date and that we have performed, satisfied and complied in
all material respects with the covenants, agreements and condition required by
the securities purchase agreement; (ii) that no litigation, statute, rule,
regulation, executive order, decree, ruling or injunction shall have been
enacted, entered, promulgated or endorsed by or in any court or governmental
authority of competent jurisdiction or any self-regulatory organization having
authority over the matters contemplated hereby which prohibits the consummation
of any of the transactions contemplated by the securities purchase agreement;
and (iii) that our shares of common stock shall have been authorized for
quotation on the OTCBB and trading in our common stock on the OTCBB shall not
have been suspended by the SEC or the OTCBB.

On June 29, 2002 we will be obligated to repay any unconverted funds
pursuant to our June 29, 2001 debenture and on January 24, 2003 we will be
obligated to repay any unconverted funds pursuant to our January, 24, 2002
debenture. We do not currently have the funds to repay the amounts that may
become due under such debentures and we may not have the funds available to meet
those requirements when they come due. Pursuant to the June 2001 and the January
2002 debenture agreements, any amount of principal or interest which is not paid
when due shall bear interest at the rate of fifteen percent (15%) per annum from
the due date thereof until the same is paid.

Our continuation as a going concern is dependent on our ability to obtain
additional financing, and, generate sufficient cash flow from operations to meet
our obligations on a timely basis. Our ability to raise capital in the future
will be difficult because our securities purchase agreements with our debenture
investors prohibit us from entering into any financial arrangement which would
involve the issuance of common stock for a period of two years from the date
this registration statement becomes effective without offering a right of first
refusal to the debenture investors. Moreover, our ability to raise capital would
also be difficult because our debentures issued in connection with the June 29,
2001 and January 24, 2002 private placements have floating conversion features
which, when converted, would cause purchasers of our common stock to experience
a substantial dilution of their investment.

From December 1, 2001 to April 1, 2002, we have received $144,000 in cash
from the issuance of $300,000 of convertible debentures. Certain investment
related fees and payments to creditors totaling $156,000 were deducted or held
back through escrow pursuant to the terms of our financing agreement.

29
On September 6, 2001, we were served with a summons and complaint by our
former landlords, asserting: (a.) a breach of a settlement agreement entered
into in May 2001 to register 500,000 shares of common stock, valued at $80,000,
in partial settlement of the then existing lease, and, (b.) a default by us on
two new long-term lease obligations. Terms of the first lease call for base
monthly payments of $12,046 for the period of August 1, 2001 to July 31, 2006,
plus estimated triple net charges currently at $3,038 per month and beginning in
year two, annual consumer price index with a minimum annual increase of 3%.
Minimum aggregate lease payments and triple net charges approximate $954,500
over the term of the lease, excluding late fees, interest and other charges.
Terms of the second lease call for monthly payments, beginning in June 2001 of
approximately $4,000 per month, or a total of $80,000 for the remaining term of
the lease from August 1, 2001 to May 31, 2003. On October 4, 2001, our former
landlords filed a summons and complaint with the Superior Court of Washington
for Pierce County for a summary judgment motion on all claims. All claims under
this motion were denied. We deny the allegations under this claim and believe it
is without merit. It is the opinion of our management and our legal counsel that
the settlement agreement signed in May 2001 that required the signing of the new
leases were entered into under economic duress, based on misrepresentation and
fraud and were signed in bad faith on the part of the former landlords. As such,
it is our management's opinion that the settlement agreement and the lease
agreement are void. We intend to continue to vigorously defend against this
lawsuit.

We currently have no material commitments for capital requirements. If we
were forced to purchase new equipment to replace the equipment we currently
lease, any new leases would constitute a material capital commitment; however,
we are currently unable to quantify such amounts. If this occurs, we will
attempt to raise the necessary finances to make such purchases, but there is no
assurance that we will be able to do so. Without the ability to quantify these
amounts, we nonetheless believe that it would have a material impact on our
business and our ability to maintain our operations.

Since September 2000, we began implementation of an internal cost
restructuring of our operations, both in sales and marketing, as well in our
executive management team, and other critical cost cutting measures. In June
2001, we negotiated with many of our vendors to materially reduce amounts owed
or attain more favorable long-term payment terms. In October 2001 we further
reduced our staffing requirements and as a result of these measures, we have
tightened the controls over our use of cash and, additionally, have taken steps
to improve the billing and collection process. Our management forecasts the
continuing effects of these changes will result in a substantial improvement of
monthly cash flows. In addition to these changes, we have implemented a
marketing program through our recently developed accounting vertical, which has
dramatically reduced customer acquisition costs. The combination of the internal
restructuring efforts and increased operational efficiencies will allow us to
move toward profitability and to achieve our business plan and goals. We are
also pursuing opportunities to merge and/or acquire compatible companies with
which to leverage management, financial and operational resources. We believe
these changes and strategies will position us well for future opportunities.

We have recently signed several sales and marketing agreements. In
particular, we have completed negotiations with a large U.S. telecommunication
firm who will re-market, via private label, various services beginning in
December 2001. These services will include the delivery of Windows(TM) desktops,
data storage and virus protection delivered on a subscription bases for a fixed
monthly cost. We have recently launched our e-Accounting Center portal located
at WWW.CPA-ASP.COM, which has been designed to help the accounting professional
manage and expand their business. It includes resources for marketing,
promotion, professional education, and web design, as well as, step-by-step tips
for transforming a traditional accounting business into an e-Accounting
practice. This, in addition to an agreement with an accounting affiliation of
approximately 60,000 subscribers and the adoption of the IQ Data Utility Service
solution by these and other accountants is providing access to professional
accounting organizations and their client bases. There can be no assurances,
however, that we will substantially increase our monthly recurring revenues.

We believe that technology outsourcing, focused on business fundamentals,
such as finance, accounting, customer relationship management and sales force
automation, will be the primary adopters of application service providers and
managed service solutions in the next year. We are focusing all possible
resources in developing our domain expertise in these areas to gain additional
leverage and build broader service offerings that compliment our current
services already being delivered to those markets.

30
We currently have no arrangements or commitments for accounts receivable
financing. We believe our need for additional capital going forward will be met
from private debt and equity offerings, and, increasingly, from revenues from
operations as we continue to implement our strategic plan; however, future
operations will be dependent upon our ability to secure sufficient sources of
financing and adequate vendor credit. However, there can be no assurance that we
will achieve any or all of these requirements.

We are currently developing and refining our acquisition and expansion
strategy. If we expand more rapidly than currently anticipated, if our working
capital needs exceed our current expectations, or if we consummate acquisitions,
we will need to raise additional capital from equity or debt sources. We cannot
be sure that we will be able to obtain the additional financing to satisfy our
cash requirements or to implement our growth strategy on acceptable terms or at
all. Our ability to raise capital in the future will be difficult because our
securities purchase agreements with our debenture investors prohibit us from
entering into any financial arrangement which would involve the issuance of
common stock for a period of two years from the date this registration statement
becomes effective without offering a right of first refusal to the debenture
investors. If we cannot obtain such financing on terms acceptable to us, our
ability to fund our planned business expansion and to fund our on-going
operations will be materially adversely affected. If we incur debt, the risks
associated with our business and with owning our common stock could increase. If
we raise capital through the sale of equity securities, the percentage ownership
of our stockholders will be diluted. In addition, any new equity securities may
have rights, preferences, or privileges senior to those of our common stock.

OUR BUSINESS

Except for historical information, the following description of our
business contains forward-looking statements based on current expectations that
involve risks and uncertainties. Our actual results could differ materially from
those set forth in these forward-looking statements as a result of a number of
factors, including those set forth in this prospectus under the heading "Risk
Factors."

GENERAL

We are an application service provider, or ASP and we have been delivering
outsourced software application hosting and managed information technology
services through our IQ Data Utility Service and IQ Delivery System since 1997.
We host software applications on our servers located at the data center, rent
computing services to our customers for a monthly fee, and perform remote
management and maintenance of our customers' servers from our network operations
center. Our customers connect to our facilities over the Internet, through a
dedicated telecommunications line or by wireless connection. Our goal is to
provide our services with the speed, simplicity and reliability of a utility
service. Like a utility company, we allow business customers to "turn on", or
access, their software applications and data instantly through any web enabled
computer, regardless of operating system. Our current 817 users can freely
access their software and data in real time from any computer, anywhere in the
world.

We provide our customers with the tools necessary to implement business
workflow and process ideas quickly and cost effectively. We make it possible for
many businesses to take advantage of technology solutions that have typically
been reserved for larger business enterprises. These solutions enable our
customers to benefit from reliable, high-quality technology operations, which
can grow to accommodate increasing business needs, and can be delivered without
undertaking the difficulty and expense associated with building the required
expertise in-house.

We provide our services through our IQ Data Utility Service and IQ Delivery
System, which allows us to consistently deploy our customers operations across
multiple locations and to maintain those services through our centralized
operations center. Among other things, our services enable our customers to:

o Quickly expand their Internet presence as business opportunities arise in
new geographies; and
o Efficiently incorporate new technologies into their existing business
operations as these technologies evolve.

The application service provider model of distributing computer processing
services over the Internet has proven itself to deliver a lower total cost of
ownership as compared to building and maintaining physically separated

31
information technology systems. This due in part to the increasing complexities
of successfully deploying and maintaining the various components of software
solutions, as well as the hardware and connectivity required for a successful
Internet business operation. In addition, the in-house expertise required to
meet these challenges is significant and typically requires a host of technical
specialists.

We target small and medium enterprises and the high-end segment of the
small office and home office market for the sale of hardware and hosted software
and access to Internet-related services. The products and services are provided
by developing a customer subscriber base that adopts a cost-effective, on-line
solution to building and maintaining an information technology system through
the adoption of "Web-based" computing as an alternative to both local area
networks and traditional network implementations. Generally, we market ourselves
as an Internet utility company that can cost-effectively provide all of the
computer software, hardware, connectivity and Internet-access needs for its
customers.

HISTORY

One of our predecessor companies, Xcel Management, Inc., formerly known as
"Palace Casinos, Inc.," was inactive from the end of 1995 until the consummation
of an asset purchase transaction with another of our predecessor companies,
Insynq, Inc., a Washington corporation. During the two-year period prior to the
transaction with Insynq-WA, Xcel and its then management worked to complete a
plan of reorganization confirmed in the United States Bankruptcy Court under
Chapter 11 of the federal bankruptcy laws, and undertook necessary steps to
position Xcel to seek a new business enterprise in which it could become
involved, either through a merger or reorganization, or an acquisition
transaction. These efforts resulted in the transaction with Insynq-WA, completed
in February 2000.

Xcel was originally incorporated in the state of Utah on May 22, 1980,
under the name Ward's Gas & Oil, to engage in the oil and gas business. This
business was terminated after a few years of operations. From November 1992
until approximately the end of 1995, Xcel (then called Palace Casinos, Inc.),
was engaged, through its then wholly-owned subsidiary, Maritime Group, Ltd., in
the development of a dockside gaming facility in Biloxi, Mississippi. In April
1994, the subsidiary completed the development of the Biloxi gaming facility,
Palace Casino, and commenced operations. On December 1, 1994, Xcel and its
subsidiary separately filed voluntary petitions for relief under Chapter 11 of
the federal bankruptcy laws. Although the original bankruptcy petition was filed
in the United States Bankruptcy Court for the District of Utah, Central
Division, the supervision of Xcel's Chapter 11 proceedings was transferred to
the United States Bankruptcy Court for the Southern District of Mississippi. On
September 22, 1995, Xcel, having been operating as a debtor-in-possession in
connection with the bankruptcy proceeding, entered into an asset purchase
agreement under the terms of which it agreed, subject to the approval of the
bankruptcy court, to sell substantially all of its subsidiary's operating
assets. This transaction was approved by the bankruptcy court and completed in
the end of 1995, with all of the net proceeds of the transaction being
distributed to creditors. Following the completion of the sale of the
subsidiary's assets, Xcel had essentially no assets and liabilities and its
business operations essentially ceased, except for efforts to complete a plan of
reorganization, described below.

In February 1999, Steve Rippon and Edward D. Bagley, Xcel's management at
the time, submitted to the bankruptcy court, as plan proponents, a plan of
reorganization, which was confirmed by the bankruptcy court on June 16, 1999.
Under the terms of the plan: (a) all of Xcel's priority creditors were paid a
total of $5,000; (b) unsecured creditors, holding between $300,000 and $500,000
in claims, were issued pro rata a total of 90,000 shares of post- bankruptcy
common stock in full satisfaction of such obligations; and (c) all of the equity
holders of Xcel common stock were issued, pro rata, a total of approximately
90,000 shares of common stock in lieu of a total of 8,794,329 shares of
preferred and common stock issued and outstanding, with the result that .0102
shares of common stock were issued for each previously outstanding share of
common stock. Under the terms of the plan, all of Xcel's outstanding warrants
and options expired. In connection with the plan, Messrs. Rippon and Bagley,
creditors of the estate and the plan proponents, were elected as Xcel's officers
and directors, and were issued a total of 1,620,000 shares of common stock
(810,000 shares each) in consideration of their contributions of services and
approximately $20,000 in cash provided to pay for legal services and costs
incurred in the plan confirmation process and related activities.

Following the confirmation of the plan in June 1999, Xcel completed the
plan in accordance with its terms.

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Immediately following the confirmation of the plan, Xcel had a total of
approximately 1,800,000 shares of common stock, par value $0.001 per share,
issued and outstanding. On December 3, 1999, the bankruptcy court, after
reviewing the efforts by the plan proponents, issued an order closing the
bankruptcy estate.

Subsequent to the completion of the plan, Xcel undertook efforts to
complete updated financial statements, to prepare and file updated periodic
reports with the Securities and Exchange Commission, and to undertake actions to
enable Xcel to seek a business opportunity for acquisition or involvement by
Xcel. These efforts resulted in the asset purchase transaction with Insynq-WA.

On January 26, 2000, Xcel entered into an asset purchase agreement with
Insynq-WA. Since September 1998, Insynq WA was engaged in providing hardware,
software, computer Internet and related connectivity services and products to
the small to medium enterprise and the high end small office home office
markets. On or about that same time, Insynq-WA engaged in a 1.41056 to 1 stock
split. The terms of the asset purchase agreement were substantially completed on
February 18, 2000. Under the terms of the asset purchase agreement, Xcel
acquired substantially all of the assets of Insynq-WA and assumed substantially
all of the obligations of Insynq-WA, in exchange for the issuance by Xcel of a
total of 7,604,050 shares of restricted common stock of Xcel to the Insynq-WA
shareholders pro rata in a liquidating distribution. As a result of the
transaction, Xcel had a total of approximately 9,404,050 shares issued and
outstanding, of which the former Insynq-WA shareholders held 7,604,050 shares,
or approximately 80.9%. In connection with the asset purchase agreement,
Insynq-WA obtained approval of the sale of its assets by its shareholders at a
duly called and convened shareholders' meeting.

As a result of the asset purchase agreement, Xcel acquired essentially all
of the assets, tangible and intangible, of Insynq-WA and became engaged in
Insynq-WA's business. These assets included computer hardware and software and
related equipment, furniture and fixtures, proprietary technology developed by
Insynq-WA, all contractual rights including capitalized lease equipment and
other leasehold rights, trade names and trademarks, all client lists and
marketing data and materials, cash and cash equivalents, accounts receivable,
inventory, work-in-progress and related assets. Xcel also assumed essentially
all of the obligations and liabilities of Insynq-WA, including capital lease
obligations on equipment, accounts payable, accrued payroll and other business
taxes, notes payable, and other liabilities. In addition to such liabilities,
Xcel agreed to assume all other contractual obligations of Insynq-WA. In that
regard, Xcel entered into employment contracts with certain individuals who were
executives or key employees of Insynq-WA on substantially the same terms as the
terms of employment between Insynq-WA and such individuals.

Prior to September 1998, the business which ultimately became Insynq-WA's
business was under development as a potential product/services line of
Interactive Information Systems Corporation, a company wholly owned by M.
Carroll Benton, our secretary, treasurer and chief administrative officer. In
September 1998, Interactive transferred to Charles Benton, husband of Ms. Benton
and then a creditor of Interactive, in satisfaction of a debt obligation owed by
Interactive to Charles Benton, all of Interactive's right, title and interest in
and to (1) certain equipment and other tangible personal property, and (2) the
intellectual properties, computer software, trademarks, copyrights, ideas,
work-in-progress, and other tangible and intangible property comprising the
system known as the "Insynq Project" which later developed into our IQ Delivery
System. Mr. Benton then contributed all of the Insynq Project intellectual
property assets to Insynq-WA in exchange for the initial shares of common stock
issued by Insynq-WA at the time of its formation. Mr. Benton also sold the
equipment and other tangible property to the newly formed Insynq-WA in exchange
for a note. Mr. Benton then sold all of his shares of Insynq-WA common stock to
M. Carroll Benton and John P. Gorst, our chief executive officer, chairman of
the board and president. Insynq-WA continued the development of the Insynq
Project business until February 18, 2000, when Xcel acquired all of that
business under the terms of the asset purchase agreement.

Under the asset purchase agreement, Xcel also agreed to assume all
equipment leases, leaseholder obligations covering office space utilized by
Insynq-WA, all consulting contracts, and all other contract obligations.
Finally, at the time of completion of the Insynq-WA asset acquisition, Insynq-WA
had outstanding to various shareholders a number of warrants and options which
entitled the holders to purchase shares of restricted common stock of Insynq-WA,
which warrants and options were converted into like warrants and options to
purchase shares of Xcel's common stock.

On August 3, 2000, at a special meeting of shareholders, Xcel completed a
re-incorporation merger with its

33
wholly owned subsidiary, Insynq, Inc., a Delaware corporation, pursuant to a
plan of merger dated June 30, 2000. Pursuant to the plan of merger, each
shareholder of Xcel received two (2) shares of Insynq common stock for each one
(1) share of Xcel stock held on the date of the merger.

INDUSTRY BACKGROUND

THE INTERNET

The Internet is fundamentally changing the way businesses interact with
their customers, partners and other businesses and has become an important
medium for both commerce and communications. Improvements in the quality and
reliability of global telecommunications networks and common Internet protocols
permit large volumes of data to be delivered to end users over a variety of
Internet-enabled devices. Businesses are now able to access and distribute a
wide array of software services over the Internet, allowing them to, among other
things, implement supply chain management solutions and enable other operating
functions on-line, market and sell products and services to customers and offer
web-based customer self-service programs. As a result, businesses are
substantially increasing their investments in Internet sites, services,
software, network infrastructure, information technology personnel and hardware
to utilize the reach and efficiency of the Internet.

Even as companies have increased their investments in Internet
infrastructure, the complexity of successfully deploying and maintaining
Internet business operations continues to increase. In particular, the software
infrastructure required to deploy and maintain Internet business operations has
become increasingly complex. For example, businesses deploying Internet business
operations can choose from multiple software applications with varying levels of
functionality and complexity, all of which must integrate to become a seamless
information system. In addition, with increasing globalization, businesses often
must maintain their operations in multiple locations and design their
infrastructure to accommodate local standards, while remaining synchronized with
operations in other geographies.

The in-house expertise required to meet these challenges is significant and
typically requires a host of technical specialists, including network
administrators, systems administrators, database administrators, security
experts, monitoring and management experts, project managers, software
operations specialists, troubleshooting specialists and performance engineers.
It is often difficult, time consuming and costly to hire and retain these
experts. Even if businesses can effectively hire and retain these experts,
deploying this talent to maintain a business' Internet infrastructure is
inefficient as it diverts these resources from enhancing a business' core
competencies.

To effectively manage the increasing complexity of Internet business
operations, we believe that companies require a new set of infrastructure
services to run Internet business operations on an automated and global basis. A
reliable, secure, expandable and cost-effective software infrastructure network
would permit businesses to focus on their core competencies and provide greater
functionality and flexibility than they could otherwise attain on their own.
Businesses could also access a global and robust technology infrastructure
without incurring the time or financial costs associated with building
equivalent functionality on their own. In addition, businesses would be able

32
to access the operational capacity they require to efficiently run their
Internet-based software applications, and to efficiently increase or reduce that
capacity as business needs dictate. The solution would also consistently deploy
and maintain businesses' operations across multiple locations via centralized
network operations centers.

We believe that we provide all of these services in an affordable and easy
to deliver package and that corporate information technology departments have a
resource that they can depend on to deliver advanced technology solutions.

THE INDUSTRY

An application service provider can be defined as an entity that supplies
another company with leased applications, information technology infrastructure
and support services. Instead of buying hardware and business software from
vendors and using its own information technology staff to implement and maintain
the system, a customer contracts with an application service provider for
software applications and services that may include system administration,
upgrades and day-to-day operations such as backup, recovery and security.

34
This arrangement enables customers to focus on getting value from leased
applications, free of the need to administer, maintain and upgrade them. Renting
rather than buying may provide a financial advantage, since such services are
treated as operating expenses, rather than capital investments.

Organizations reap several significant benefits from using application
service providers. These include a solution to the scarcity of information
technology staff, rapid software application deployment, and a lower

total cost of ownership. By avoiding the time and cost of developing internal
systems, customers also save money that would otherwise be spent on maintenance,
updates and training, raising their overall productivity. Finally, application
service provider customers are protected from technological obsolescence and
benefit from the latest applications and services.

As reported in Computerworld, ASP Winners and Losers, August 20, 2001, "The
total market for application services last year came to just $770.5 million
worldwide, according to IDC. But the total market is expected to more than do
this year and jump to $15 billion by 2005, the market research firm says."

We believe that the value of our service is further enhanced by delivering
a customer-premise equipment solution, our IQ Delivery System, that can provide
both a less expensive computing model, as well as provide the customer with a
fully managed and secure outsourcing option.

THE TECHNOLOGY

We believe that the following key features of our technology allow us to
provide dependable and affordable services to our clients:

Our IQ Data Utility Service and our IQ Delivery System were originally
developed by Interactive, a computer integration company located in Tacoma,
Washington. The early stages of the IQ Data Utility Services and the IQ Delivery
System were purchased by Insynq- WA in September 1998 and were subsequently
assumed by Xcel as part of the Insynq-WA asset purchase agreement in February
2000. The complete IQ Data Utility Service includes managed network and
application services, and can span from a customer's keyboard to the data
center. We provide certain equipment, which is kept on our customer's premises,
including a simplified, diskless workstation, or Thin Client, and multi-function
router or utility server, our IQ Delivery System, which we manage and maintain.
The final pieces of the system are the data centers, which are located in Tacoma
and Bellingham, Washington. These facilities, with redundant power, bandwidth,
and cooling, house our server equipment and routers.

In the process of developing the IQ Delivery System, we believe we acquired
valuable technological expertise. We have created new methodologies and produced
hardware and software that we believe is essential to the configuration and
effective management of Internet-based networks and outside deployment of shared
software applications. Some of our key employees are certified as Microsoft
Systems Engineers, Microsoft Certified Professionals, Certified Netware
Administrators, Certified Citrix Administrators, Certified Netware Engineers and
Certified Cisco Architects.

To support Microsoft Corporation's Windows-based applications, the IQ Data
Utility Service uses proprietary Citrix Systems, Inc. independent computer
architecture software to increase end-user performance and reduce a customer's
total cost of owning and maintaining computer hardware and software. Our
technology utilizes our IQ Delivery System, a simple device at the client site,
which allows us to manage all hosted application processing functions. The
centrally managed servers also house customers' data, provide storage and
backup, file and directory security, and anti-virus protection.

The IQ Data Utility Service receives and transmits information in the form
of images rather than data, requiring less bandwidth than traditional network
configurations. Customers may connect to the IQ Data Utility Service via a
variety of carriers and connectivity technologies, including public access over
the Internet with encryption, through private connections, or other available
access methods. Properly provisioned connections, whether public or private,
generally provide a quality end-user experience.

The first type of customer configuration, Internet browser-based Thin
Client devices, also called Internet Appliances, allow a user to interact with
the images transmitted over the Internet using only a monitor, keyboard,

35
and a mouse. The Internet Appliance actually does very little since its
functions are limited to sending user instructions to centrally managed servers.
Using the IQ Data Utility Services, an Internet Appliance communicates the
user's data-entry and retrieval commands to servers located at the data center,
where all computing functions are performed. Internet Appliances do not have
disk or tape drives which generally increases customer productivity by
restricting users' ability to install extraneous software applications, such as
computer games, or tamper with a computer's operating system. This access device
imposes a singleness of purpose upon the operation, and improves manageability,
simplicity, and reliability.

The traditional computer workstation, utilizing a central processing unit
and disk resources, constitutes the second type of customer configuration. These
customers may need to use fully equipped workstations for certain individuals
that utilize non-Windows software applications or very specialized, complex
applications such as computer aided design used, for example, in engineering.
This is not our recommended option because it does not free the customer from
the technical problems and service costs associated with maintaining this type
of configuration. Customers may choose to use existing workstations to connect
to the IQ Data Utility Services, however, because this machine uses an operating
system that we do not manage, the workstation may be more susceptible to various
failures.

Once connected to the IQ Delivery System, users can acquire any of the
following computer services:

VIRTUAL OFFICE - We can establish a virtual office for a customer, allowing
professionals, employers, employees, clients, and customers to utilize a wide
variety of software applications and/or interact directly in a network
environment. This office is always open, irrespective of the time of day or the
user's location.

OFFICE SOFTWARE SUITE - Customers may select from one of three (3) Office
Software Suites as part of the virtual desktop subscription. Customers may also
select from a wide variety of other fully supported Windows-based software
applications. We serve some vertical markets and in many cases incorporate
specialized software for these customers. We regularly test new applications and
make them available to our customers. If a customer wishes to use Windows-based
software that is not already offered for use with our service, we may test, and
subsequently configure, load, and maintain compatible applications for an
additional monthly fee.

INTERNET CONNECTION - We may provide customers with connectivity to the Internet
through their Virtual Office as part of our service. Our customers must provide
their own local Internet connection in order access their service with us.
Customers may also provide private connections to our data centers.

WEB SITE HOSTING - For an additional fee, we may put the customer's Internet Web
site on one of our servers and host the site for them. Further, we can assist
our customer in performing Web site changes and updates.

DATA BACK-UP AND STORAGE - The IQ Data Utility Service provides daily automatic
backup of customer data on high-speed tape and logs the activity. Upon request,
a customer can receive their backup data and related backup logs. On average we
provide one (1) gigabyte of data storage with each business subscription. For
larger customers, we tailor storage requirements to the customers' needs and
price it accordingly.

SECURITY - Our IQ Data Utility Service generally raise the level of a customer's
computer security in several ways. First, our servers are located in secured
rooms, with keycard access. Second, customers utilizing thin client technology
additionally prevent unauthorized disk installation and installation of
extraneous software, both of which can introduce computer corruptions and
viruses. Third, access to customer data is restricted through the use of secured
application servers located at the data centers, which are protected by firewall
filters and Internet protocol based networking rules. Last, customer data is
rarely transmitted; transmissions between the customer's site and the servers
located in the data centers generally occur in the form of indecipherable,
encrypted images.

REDUNDANCY - Our IQ Delivery System secures customer data on redundant disk
arrays with ready spare disk drives. We make a best effort to assure application
redundancy, so that if one server fails, we can reroute customers to similar
servers, thereby minimizing customer downtime.

OUR STRATEGIC PLAN

36
MARKET DRIVERS

Primary research conducted by Gartner Dataquest uncovered that the
information technology requirements of midsize enterprises were almost identical
to those of Fortune 1000 enterprises. Despite their large numbers and
information technology requirements, small to medium sized enterprises have
limited budgets, which rarely makes them the direct target of sophisticated
professional service providers who are considered our competitors. As a result,
this sector of the economy remains open to the services of emerging professional
services providers like us.

KEY DIFFERENTIATORS

We are different from other service providers due to our focus on the
information technology needs of both the small to medium sized enterprise and
the small office home office customers for low cost services. These businesses
require the same level of reliable information technology services as Fortune
1000 businesses do but generally don't have the financial resources to make the
required investment for Internet business operations. We enable these customers
to rent just what they need when they need it.

CHALLENGES

Our greatest challenge is to educate our target markets regarding the cost
savings and productivity enhancements gained through using Internet based
computing services as an alternative to traditionally deployed computer
networks.

STRATEGY

We will continue to position our products and services as a cost effective
way to utilize the latest computer network technologies without making a
significant investment in computer equipment, software or private
telecommunications network infrastructure.

We market and sell our services primarily through the sales organizations
of independent software vendors, telecommunications and Internet service
providers, managed service providers and technology consultants.

We intend to continue to invest in the development and integration of
additional services that address the evolving needs of our customers. Our goal
is to integrate additional product enhancements that extend the capabilities of
our services across a large universe of existing and potential customers. We
believe that by continuing to broaden our service offerings, we will be viewed
by our customers as the single and best source for all of their information
technology service requirements. There can be no assurance, however, that we
will be successful in accomplishing our goal.

In addition to expanding the scope of our services, we are also developing
services geared to the needs of particular segments of our customer base. We
will continue to review the applicability of our service offerings to our target
customers and create additional category- specific offerings based on the size
and profitability of the market segment.

While we believe that it is paramount that we remain focused on our plan,
we must have the ability inherent in any company to adapt to changing market
conditions.

In addition to internally generated growth, we intend to expand our
business through strategic acquisitions in the United States and possibly
abroad. We believe our acquisitions will allow us to accelerate our penetration
of key geographical markets, broaden our offerings of products and services,
expand our technical staff, as well as our market entry points. To attain this
goal, we are aggressively pursuing opportunities to merge and/or acquire
compatible companies with which to utilize management, financial and operational
resources.

SALES AND MARKETING

We focus our sales and marketing efforts on the small to medium size
enterprise and the small office home office market. Although specific definition
for these market segments vary somewhat, we view the high-end small

37
office home office market to represent small offices with up to 10 employees,
and the small to medium size enterprise market to represent companies that
employs approximately 11 to 500 people. We will occasionally pursue larger
opportunities. We sell to these segments through the sales organizations of the
software publishers, information technology consultants, telecommunication
carriers and Internet service providers.

We have developed a packaged service offering targeting these small
businesses that delivers a combination of software and marketing services
designed for these market segments.

COMPETITION

The market for Internet based data processing and information technology
services is rapidly evolving and intensely competitive. In addition to
internally built and supported operations, our primary current and prospective
competitors include:

o providers of computer equipment;

o co-location, web site hosting and related services;

o technology vendors that have recently announced their intentions to
offer some of the services that we offer currently to a portion of our
targeted customer base; and

o providers of Internet based systems integration or professional
services.

Many of our competitors have been in business longer than us, have
significantly greater financial, technical, and other resources, or greater name
recognition. Our competitors may be able to respond more quickly to new or
emerging technologies and changes in customer requirements. Competition could
negatively impact our ability to sell additional services on terms favorable to
us. Competitive pressures could cause us to lose market share or to reduce the
price of our services, either of which could harm our business, financial
condition and operating results.

We believe that the principal competitive factors in our market
include:

o quality and reliability of services offered;

o scope of supported applications and technology platforms;

o ability to expand the operational environments supported;

o extent to which the services offered provide a complete solution to a
potential customer's operations requirements;

o engineering and technical expertise and development of automation
software;

o rapid deployment of services; quality of customer service and support;
and price.

GOVERNMENT REGULATION

There are currently few laws or regulations directly governing access to,
or commerce upon, the Internet. Due to the increasing popularity and use of the
Internet, it is possible that a number of laws and regulations may be adopted
with respect to the Internet, covering issues such as user privacy, pricing and
characteristics and quality of products and services.

Such legislation could dampen the growth in the use of the Internet
generally and decrease the acceptance of the Internet as a communications and
commercial medium, and could, thereby, have a material adverse effect on our
business, results of operations and financial condition. Other nations,
including Germany, have taken actions to restrict the free flow of material
deemed to be objectionable on the Internet. In addition, several connectivity
carriers

38
are seeking to have connectivity over the Internet regulated by the Federal
Communications Commission in the same manner as other connectivity services. For
example, America's Carriers Connectivity Association has filed a petition with
the Commission for this purpose. In addition, because the growing popularity and
use of the Internet has burdened the existing connectivity infrastructure and
many areas with high Internet use have begun to experience interruptions in
phone service, local telephone carriers, such as Pacific Bell, have petitioned
the Commission to regulate Internet service providers and online service
providers, in a manner similar to long distance telephone carriers and to impose
access fees on these service providers. If either of these petitions is granted,
or the relief sought therein is otherwise granted, the costs of communicating on
the Internet could increase substantially, potentially slowing the growth in use
of the Internet, which could in turn decrease the demand for our products.

Also it is possible that laws will be adopted or current laws interpreted
in a manner to impose liability on online service providers, such as us, for
linking to third party content providers and other Internet sites that include
materials that infringe copyrights or other rights of others. Such laws and
regulations if enacted could have an adverse effect on our business, operating
results and financial condition. Moreover, the applicability to the Internet
upon the existing laws governing issues such as property ownership, copyright
defamation, obscenity and personal privacy is uncertain, and we may be subject
to claims that our services violate such laws. Any such new legislation or
regulation or the application of existing laws and regulations to the Internet
could have a material adverse effect on our business, operating results and
financial condition.

In addition, as our products and services are available over the Internet
in multiple states and foreign countries, such jurisdictions may claim that we
are required to qualify to do business as a foreign corporation in each such
state or foreign country. We are qualified to do business only in the states of
Washington and California, and our failure to qualify as a foreign corporation
in a jurisdiction where we are required to do so could subject us to taxes and
penalties and could result in the our inability to enforce contracts in such
jurisdictions. Any such new legislation or regulation, the application of laws
and regulations from jurisdictions whose laws do not currently apply to our
business, or the application of existing laws and regulations to the Internet
and other online services may severely restrict the sale of new contracts and
materially effect our ability to maintain our current customers.

At present, we do not collect sales or other similar taxes in respect of
sales and shipments of our products through Internet purchases. However, various
states have sought to impose state sales tax collection obligations on out-of-
state direct marketing companies similar to us. A successful assertion by one or
more of these states that it should have collected or be collecting sales tax on
the sale of our products could result in additional costs and corresponding
price increases to its customers. The U.S. Congress has passed legislation
limiting for three years the ability of states to impose taxes on Internet-based
transactions. Failure to renew this legislation could result in the broad
imposition of state taxes on e-commerce.

INTELLECTUAL PROPERTY AND PROPRIETARY RIGHTS

We regard our service marks, trademarks, domain names, and similar
intellectual property as critical to our success. We have applied for federal
trademark or service mark registration of a number of names and terms, including
"Insynq," "Your Internet Utility Company," "Interlynq," and "Idesq." Our domain
names include, INSYNQ.com, ON-Q.net, SIMPLENETWORKS.net, APPLICATIONVAULT.com,
MESSAGEIQ.com, OURACCOUNTING.com, OURBOOKEEPER.com, and RAPIDNETWORKS.com, all
of which are now owned by us. We have also applied for a patent covering our
multi-platform network application management and connectivity system: our
InterLynQ and IdesQ components of our customer premise equipment solution.

We rely on trademark, unfair competition and copyright law, trade secret
protection and contracts such as confidentiality and license agreements with our
employees, customers, partners, and others to protect our proprietary rights.
Despite precautions, it may be possible for competitors to obtain and/or use the
proprietary information without authorization, or to develop technologies
similar to ours and independently create a similarly functioning infrastructure.
Furthermore, the protection of proprietary rights in Internet-related industries
is uncertain and still evolving. The laws of some foreign countries do not
protect proprietary rights to the same extent, as do the laws of the United
States. Protection for proprietary rights in the United States or abroad may not
be adequate.

We intend to continue to license certain technology from third parties such
as Citrix, Microsoft, and others, for our technologies that support business
systems. The market is evolving and we may need to license additional

39
technologies to remain competitive. We may not be able to license these
technologies on commercially reasonable terms or at all. In addition, we may
fail to successfully integrate licensed technology into our operations.

Although we have not yet experienced infringement or misappropriation of
our intellectual property or similar proprietary rights, it may be anticipated
that infringements and misappropriations will occur as our business grows and
there is more brand loyalty attaching to our trade names and domain names. We
intend to police against infringement or misappropriation. However, we cannot
guarantee that we will be able to enforce our rights and enjoin the alleged
infringers from their use of confusingly similar trademarks, service marks,
telephone numbers, and domain names.

In addition, third parties may assert infringement claims against us. We
cannot be certain that our technologies or trademarks do not infringe valid
patents, trademarks, copyrights, or other proprietary rights held by third
parties. We may be subject to legal proceedings and claims from time to time
relating to the intellectual property of others in the ordinary course of our
business. Intellectual property litigation is expensive and time-consuming and
could divert management resources away from running the business.

RECENT RESTRUCTURING

Until recently, we operated several satellite sales offices in central and
southern California and in Washington State, selling our hosted and managed
network services to the small to medium enterprises. In September 2000, we
completed our test marketing allowing us to focus on building our product
offerings while creating relationships with outside sales organizations, which
we believe has proved to be a more beneficial method of increasing awareness and
generating market share of our products and services.

We have implemented cost restructuring strategies of our operations, both
in sales and marketing and in our executive management team, and implemented
certain cost-cutting measures. We believe this restructuring and the
cost-cutting measures, which resulted in a workforce reduction of approximately
55 people - mostly in sales-related positions - in addition to changes to our
executive management team, will allow us to (1) reduce operating costs, (2)
provide operational efficiencies, and (3) focus on the development of strategic
business plans in preparation for future growth initiatives.

As part of our corporate cost restructuring, we consolidated our sales
activities into our corporate headquarters office in Tacoma. We are planning a
redeployment of a national direct sales force in the future to augment our
relationship with out-side sales organizations; however, there can be no
assurance that the redeployment will occur.

In addition to the restructuring, retroactive to September 1, 2000 we
reduced salaries and benefits for certain members of executive management and
certain other employees. Also, as of April 1, 2002, we have negotiated with many
of our vendors to reduce the amounts owed or to extend more favorable payment
terms. We have also entered into a letter of intent whereby our board of
directors will designate a portion of our 10,000,000 shares of authorized
preferred stock which, pursuant to the letter of intent, will be sold to one
individual in exchange for the cancellation of approximately 1,300,000 of our
long term debt. Should our directors authorize the designation of class A
preferred stock and should a definitive preferred stock purchase agreement be
entered into, the 1,370,000 shares of our class A preferred stock issued to the
debt holder will be convertible into 25% of our company.

We believe that the combination of the restructuring, the salary reductions
and negotiated trade payables will reduce our corporate overhead.

CUSTOMER SERVICES

Our customer support service is comprised of Customer Service
Representatives, Customer Support Representatives and is further supplemented by
Senior Technical Support Representatives consisting of Microsoft, Citrix, Novell
and Cisco Certified Engineers and Insynq Server Technicians. Customer Support is
available via toll-free telephone lines to offer support for any aspect of the
IQ Delivery System and the IQ Utility Service.

EMPLOYEES

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We currently have approximately 16 employees: (a) seven management and
clerical, (b) approximately five technical people, (c) one full-time and one
part-time Customer Support personnel, and (d) an additional two marketing and
sales personnel.

MANAGEMENT

Our board of directors consists of John P. Gorst, M. Carroll Benton and
David D. Selmon, each of whom took this position upon or shortly after the
consummation of the asset purchase on February 18, 2000, and continued in these
positions after the re-incorporation merger effected on August 3, 2000. On
November 19, 2002, our shareholders approved the nomination of Donald Kaplan as
a board of director. Our executive officers include: John P. Gorst, chief
executive officer, president and chairman of the board, M. Carroll Benton, chief
administrative officer, secretary and treasurer, and Joanie C. Mann, vice
president of strategic alliances. In September 2000, DJ Johnson resigned his
position as our chief financial officer, and we appointed Stephen C. Smith as
our interim chief financial officer while we conduct a nationwide search for a
full-time chief financial officer. In January 2001, William G. Hargin, executive
vice president of marketing, resigned. In April, James R. Leigh, III, president
and chief technology officer resigned from executive management to become our
general manager of technical operations, and, subsequently resigned his position
with us in November 2001.

NEED FOR ADDITIONAL CAPITAL

Our securities purchase agreements with our debenture investors prohibits
us from entering into any financial arrangement which would involve the issuance
of common stock for a period of two years from the date this registration
statement becomes effective without offering a rate of first refusal to the
debenture investors.

PROPERTIES

Under our current internal cost restructuring, we have leased, for a term
of one year, new facilities, which consist of approximately 5,000 square feet
and is located in Tacoma Washington. We pay a monthly fee of $1,600 for the use
of these facilities. These new facilities consolidate all of our departments,
such as, sales, customer, engineering and administrative services. We moved from
the leased data center facilities at the Tacoma Technology Center and entered
into two co-location agreements: (a) one at commercial facilities located near
our new office space with a renewable one year term for a monthly fee of $6,000,
and, (b) the other in Bellingham, Washington with a renewable one year term for
a monthly fee of $3,000. In addition, we have terminated leased facilities in
Newport Beach, California and three leased facilities in Tacoma, Washington. We
believe this consolidation arrangement will satisfy our future operations.

LEGAL PROCEEDINGS

We are a party to a lawsuit filed in the Superior Court for the State of
Washington for Pierce County, dated May 31, 2001, by William G. Hargin, former
vice president of sales and marketing. The lawsuit alleges that we breached a
written employment contract and breached a written termination agreement. Mr.
Hargin alleges that under such contract and agreement, he is owed $114,858.39
plus 12% interest and 150,000 fully vested shares of our common stock
exercisable at $0.34 per share. We are currently negotiating a settlement with
Mr. Hargin and have reached a partial settlement.

We are a party to a lawsuit filed in the Superior Court of New Jersey
Hudson County, dated August 6, 2001, by PR Newswire Association, Inc., one of
our vendors. The lawsuit alleges that we breached a promise to pay for goods and
services rendered. PR Newswire alleges that under such promise it is owed
$20,760. We have entered into a payment arrangement with PR Newswire.

We have been served with a summons and complaint by Business Careers, a
temporary staffing company, which threatens litigation against us relating to
nonpayment of trade payables. We have settled the matter with a cash payment in
the amount of $4,195.

On September 6, 2001, we were served with a summons and complaint by our
former landlords, asserting: (a.) a breach of a settlement agreement entered
into in May 2001 to register 500,000 shares of common stock, valued at

41
$80,000, in partial settlement of the then existing lease, and, (b.) a default
by us on two new long-term lease obligations. Terms of the first lease call for
base monthly payments of $12,046 for the period of August 1, 2001 to July 31,
2006, plus estimated triple net charges currently at $3,038 per month and
beginning in year two, annual consumer price index with a minimum annual
increase of 3%. Minimum aggregate lease payments and triple net charges
approximate $954,500 over the term of the lease, excluding late fees, interest
and other charges. Terms of the second lease call for monthly payments,
beginning in June 2001 of approximately $4,000 per month, or a total of $80,000
for the remaining term of the lease from August 1, 2001 to May 31, 2003.

On October 4, 2001, our former landlords filed a summons and complaint with
the Superior Court of Washington for Pierce County for a summary judgment motion
on all claims. All claims under this motion were denied.

We deny the allegations under this claim and believe it is without merit.
It is the opinion of our management and our legal counsel that the settlement
agreement signed in May 2001 that required the signing of the new leases were
entered into under economic duress, based on misrepresentation and fraud were
signed in bad faith on the part of the former landlords. As such, it is our
management's opinion that the settlement agreement and the lease agreements are
void.

We intend to continue to vigorously defend against this lawsuit.

We have been served with a summons and complaint by Accountants on Call, a
temporary staffing company, which threatens litigation against us relating to
nonpayment of trade payables in the amount of $30,052. We intend to initiate
negotiations regarding an out of court settlement.

Certain of our vendors, including HSC Real Estate, Inc., Merrill
Corporation and Veca Electric have also indicated in writing that they might
file suit against us if they do not receive satisfactory payment of their trade
payables. The aggregate amount payable to these vendors is approximately $6,225.
We intend to initiate discussions regarding the negotiation of payment
schedules.

On September 3, 2001, subsequent to threatened litigation by Mr. Martin E.
Darrah, the owner of a former acquisition target, relating to allegations of an
improper termination of acquisition proceedings and the repayment of a $14,000
loan, we entered into a settlement agreement with Mr. Darrah. The settlement
agreement provides for the issuance of: (a) 200,000 options to purchase shares
of our common stock at an exercise price of $0.07 per share to Mr. Darrah; and,
(b) 50,000 options to purchase shares of our common stock at an exercise price
of $0.07 per share to Mr. Darrah's attorneys.

MANAGEMENT

DIRECTORS

The names of our directors, their principal occupations, and the year in
which each of our current directors initially joined the board of directors are
set forth below.

NAME AGE POSITION
- ---- --- --------
John P. Gorst 32 Chairman of the Board, Chief Executive Officer,

42
President and Director

M. Carroll Benton 57 Chief Administrative Officer, Secretary,
Treasurer and Director

David D. Selmon 45 Director

Donald Kaplan 60 Director

John P. Gorst has served as our chairman of the board, chief executive
officer and director since February 2000, and served as our president since
April 2001. Mr. Gorst, a co-founder of Insynq-WA, was with Insynq-WA from 1998
until its acquisition by Xcel Management, Inc. in 2000. Mr. Gorst has over
twelve years experience in founding entrepreneurial technology ventures,
specifically in the development of software and data services for businesses.
The prior experience of Mr. Gorst includes serving as a co-founder of
Microcomputer Training Professionals, Inc., a training/IS consulting business in
conjunction with Nynex Business Centers of New York, from 1989 to 1991; Vice
President and General Manager of Business Development for Relational Technology
Professionals, Inc. from 1991 to 1993; and as Vice President and General Manager
of Interactive Information Systems Corp. from 1996 to 1998.

M. Carroll Benton has served as our chief administrative officer,
secretary, treasurer and director since February 2000. Ms. Benton was a
co-founder of Insynq-WA and has been with us since its inception. Ms. Benton has
worked with banking systems and higher education institutions where she assisted
in information systems development and deployment strategies. She managed a 13
state insurance brokerage firm and has been a consultant to the small- to
medium-sized business markets via accounting system design, support, and
business practice analysis. Carroll also taught undergraduate accounting courses
at several Puget Sound colleges and universities. Formerly with a local CPA
firm, she brings us over 25 years of business and financial expertise.

David D. Selmon has served as our director since February 2000. Mr. Selmon
is a certified tax professional and has practiced with David Selmon, Inc. since
1982. In August 1999 a complaint against Mr. Selmon was filed by the National
Futures Association, or NFA, alleging that Mr. Selmon violated high standards of
commercial honor and just and equitable principals of trade in that he, along
with others, aided and abetted an individual in acting in a manner which
required such individual to be an NFA member or associated after such individual
had been barred permanently from the NFA. Mr. Selmon, without admitting or
denying the allegations raised in such complaint, agreed to withdraw from the
NFA in all capacities and to refrain from applying in the future for any status
with the NFA.

Donald Kaplan earned his Ph.D. in Computer Science at Stanford University
in 1968, following Engineering and Mathematics degrees at the University of
Toronto in 1963 and 1964. He has been qualified as Certified Management
Consultant and Professional Engineer. Dr. Kaplan was a Professor of Computer
Science at the University of Toronto from 1968 to 1970, and at York University
from 1971 to 1974. During his thirty-year business career, he has provided the
business concept, developed the financing, and was CEO for successful startup
businesses in the management consulting, publishing, hospitality and computer
service industries. In his private practice, he has provided client CEOs with
strategic direction consulting related to marketing, organization & management,
and enterprise information systems. Clients have included Four Seasons Hotels,
Xerox and Bell Canada. Dr. Kaplan works with us on a full time basis operating
in a number of management, consultative and leadership capacities.

There are no family relationships among any of our directors or executive
officers. See "Certain Relationships and Related Transactions" for a description
of transactions between our directors, executive officers and/or their
affiliates.

In a consulting agreement we assumed with One Click Investments, LLC,
originally entered into on September 20, 1999, with Insynq-WA, One Click was
granted the right to appoint one person to serve on our board of directors. One
Click has not yet exercised the right to appoint a member to our board.

In a business services agreement we assumed with Consulting & Strategy
International, LLC, originally entered into on November 18, 1999, with Insynq-
WA, CSI was granted the right to appoint two persons to serve on our board of
directors, such members not to exceed forty percent (40%) of our board, subject
to our stock becoming publicly traded. Pursuant to the purchase of Insynq-WA by
Xcel, our stock began trading publicly on February 18,

43
2000. CSI has not yet exercised its right to appoint two members to our board.

EXECUTIVE OFFICERS

Our executive officers as of April 1, 2002 are as follows:

NAME AGE POSITION
- ---- --- --------
John P. Gorst 32 Chairman of the Board, Chief Executive Officer,
President and Director

M. Carroll Benton 57 Secretary, Treasurer, Chief Administrative
Officer and Director

Stephen C. Smith 51 Interim Chief Financial Officer

Joanie C. Mann 40 Vice President of Strategic Alliances

Information concerning the business experience of Mr. Gorst and Ms. Benton
is provided under the caption "Directors" above. Set forth below is information
concerning the business experience of our other executive officers.

Stephen C. Smith has been our interim chief financial officer since
September 2000. Mr. Smith graduated from the University of Memphis in 1981. He
retired as director of finance for the City of Bartlett, Tennessee in 1978 after
21 years. During Mr. Smith's time with the City, he was an active member of the
Government Finance Officers Association of the United States and Canada, serving
as the Tennessee state representative for six years. While with the City of
Bartlett, Mr. Smith served on advisory committees for the Government Accounting
Standards Board. Mr. Smith has more than eight years experience as the chief
financial officer of several private companies including Public Properties
Management, Inc. of Memphis, Tennessee from 1992 to present, and Applied
Logistical Technologies, Inc. in Carlsbad, California from 1999 to present. He
is a licensed securities broker and has extensive experience in providing
financial advice for public and private companies.

Joanie C. Mann has served as our vice president of strategic alliances
since February 2001, and served as our vice president of operations from July
2000 to February 2001. She brings to us over 18 years of experience in
multi-user system design and implementation, voice and data networking, and
advanced network integrations. Ms. Mann also has extensive experience in
business process automation and a strong background in business accounting
principles. Previous positions held include founder of Com-Pacific Resources,
Inc., a network integration firm whose business operations were sold to
Communications World International, for whom she worked from 1984 to 1993,
manager of the Seattle-based computer telephony and data integration division of
Commworld from 1994 to 1996, and IS Management Consultant for Interactive
Information Systems from 1998 to 1999.

DIRECTORS' COMPENSATION

Pursuant to a consulting agreement we entered into with David D. Selmon,
Mr. Selmon will receive 3,500 shares of our common stock for each full fiscal
quarter he serves on our board beginning June 1, 2000. Mr. Selmon also receives
$250 for each board meeting attended. To date, Mr. Selmon has received 21,000
shares as director compensation and 295,614 shares in lieu of cash payments for
expenses.

COMPENSATION OF EXECUTIVE OFFICERS

The following table summarizes the compensation earned by or paid to our
chief executive officer and the other most highly compensated executive officers
whose total salary and bonuses exceeded $100,000 for services rendered in all
capacities during the fiscal year ended May 31, 2001. We refer to these
individuals as our named executive officers.

The total compensation for the two fiscal years ended May 31, 2001 of John
P. Gorst, our chief executive officer, M. Carroll Benton, our chief
administrative officer, and James R. Leigh, III, our former president and chief

44
technology officer and current general manager of technical operations, is set
forth below in the following Summary Compensation Table. No other person
received cash compensation in excess of $100,000 during the fiscal year ended
May 31, 2001.

SUMMARY COMPENSATION TABLE (1)

ANNUAL COMPENSATION

LONG-TERM AWARDS
NAME AND PRINCIPAL OTHER ANNUAL SECURITIES ALL OTHER
POSITION YEAR SALARY ($) BONUS ($) COMPENSATION ($)(3) UNDERLYING OPTIONS(#) COMPENSATION ($)
- -------- ---- ---------- --------- -------------------- ------------------- ----------------

John P. Gorst 2001 $160,000 - $ 6,876 75,355 -
President, Chief 2000 $107,919 $1,624 $20,129 3,000,000 (2) -
Executive Officer

M. Carroll Benton 2001 $96,900 - $ 6,876 74,555 -
Secretary, Treasurer 2000 $58,750 $8,060 $10,543 2,000,000 (2) -
and Chief
Administrative Officer

James R. Leigh, III (4) 2001 $102,630 - $ 6,876 21,453 -
Chief Technical 2000 $ 74,957 $1,624 $25,000 780,000 -
Officer

(1) The compensation described in this table does not include medical, group
life insurance or other benefits received by the named executive officers
that are available generally to all of our salaried employees, and may not
include certain perquisites and other personal benefits received by the
named executive officers that do not exceed the lesser of $50,000 or ten
percent (10%) of any such officer's salary and bonus disclosed in the
table.

(2) Represents options for class A common stock granted under our 2000
Executive Long Term Incentive Plan. As of April 1, 2002 these options
have been exercised and are outstanding

(3) Includes non-cash compensation, in the form of common stock, for services
performed for us. During fiscal year 2001 each executive officer rescinded
the non-cash compensation received in fiscal year 2000.

(4) Mr. Leigh served as our president from September 22, 2000 to April 4, 2001
and as chief technical officer from February 2000 to April 4, 2001.
Effective April 4, 2001, Mr. Leigh resigned his position as an officer and
assumed the position of general manager of technical operations.
Subsequently, in November 2001, Mr. Leigh resigned his position with us.

OPTION GRANTS DURING LAST FISCAL YEAR

LONG TERM INCENTIVE AWARDS

The following table provides information related to long-term incentive
awards granted to our named executive officers during the fiscal year ended May
31, 2001. The information in this table reflects options granted by the board of
directors under our 2000 Executive Long Term Incentive Plan and our 2000 Long
Term Incentive Plan, which plans were approved by our stockholders on August 3,
2000.

45
LONG TERM INCENTIVE PLAN - AWARDS IN LAST FISCAL YEAR

- ------------------------------------ ------------ ----------------------------------------------------------
NAME AND PRINCIPAL POSITION FISCAL YEAR AWARDS
----------------------------------------------------------
NUMBER OF SHARES, UNITS PERFORMANCE OR OTHER PERIOD
OR OTHER RIGHTS(#) UNTIL MATURATION OR PAYOUT
- ------------------------------------ ------------ ------------------------- --------------------------------

John P. Gorst, President, Chief 2001 75,355 Vested upon grant
Executive Officer and Director

M. Carroll Benton, Secretary, 2001 74,555 Vested upon grant
Treasurer; Chief Administrative
Officer and Director

James R. Leigh, III 2001 21,453 Vested upon grant
Chief Technical Officer (1)

- ------------------------------------ ------------ ------------------------- --------------------------------

(1) Mr. Leigh served as our president from September 22, 2000 to April 4, 2001
and as chief technical officer from February 2000 to April 4, 2001.
Effective April 4, 2001, Mr. Leigh resigned his position as an officer and
assumed the position of general manager of technical operations.
Subsequently, in November 2001, Mr. Leigh resigned his position with us.

OPTIONS GRANTS IN LAST FISCAL YEAR

The following table provides information related to options granted to our
named executive officers during the fiscal year ended May 31, 2001. The
information in this table reflects options granted by the board of directors
under our 2000 Executive Long Term Incentive Plan and our 2000 Long Term
Incentive Plan, which plans were approved by our stockholders on August 3, 2000.

The following table sets forth each grant of stock options made during the
fiscal year ended May 31, 2001, to the named executive officers:

% OF TOTAL
NUMBER OF SECURITIES OPTIONS GRANTED
UNDERLYING IN FISCAL 2001 EXERCISE PRICE EXPIRATION
NAME OPTIONS GRANTED (1) PER SHARE DATE (3)
---- --------------- --- --------- --------

John P. Gorst 15,000 * $1.63 9/15/10
60,355 * $0.3438 1/30/11

M. Carroll Benton 15,000 * $1.63 9/15/10
59,555 * $0.3438 1/30/11

James R. Leigh (2) 10,000 * $1.63 9/15/10
11,453 * $0.3438 1/30/11

- -------------
* Less than 1%

(1) Based on a total of 8,568,760 options granted during the fiscal year ended
May 31, 2001.

(2) Mr. Leigh served as our president from September 22, 2000 to April 4, 2001
and as chief technical officer from February 2000 to April 4, 2001.
Effective April 4, 2001, Mr. Leigh resigned as an officer and assumed the
position of general manager of technical operations. Subsequently, in
November 2001, Mr. Leigh resigned his position with us.

46
(3) Options may terminate before their expiration date upon death, disability,
or termination of employment

AGGREGATE OPTION EXERCISES IN LAST FISCAL YEAR AND
FISCAL YEAR END OPTIONS VALUES

The following table sets forth, for each of the named executive officers,
information concerning the number of shares received during fiscal 2001 upon
exercise of options and the aggregate dollar amount received from such exercise,
as well as the number and value of securities underlying unexercised options
held on May 31, 2001.

NUMBER OF SECURITIES
SHARES ACQUIRED VALUE UNDERLYING OPTIONS VALUE OF IN-THE-MONEY OPTIONS
ON EXERCISE (#) REALIZED ($)(1) AT YEAR END (#) AT YEAR-END ($)(2)
EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
NAME

John P. Gorst - - 3,075,355(3) - - -

M. Carroll Benton - - 2,074,555(3) - - -

James R. Leigh, III - - 476,731 324,722 - -

(1) Based on the difference between the option exercise price and the fair
market value of our common stock on the exercise date as determined
pursuant to the terms of the 2000 Long Term Incentive Plan and the 2000
Executive Long Term Incentive Plan.

(2) Based on the difference between the option exercise price and the closing
sale price of $0.12 of our common stock as reported on the OTC Bulletin
Board on May 31, 2001, the last trading day of our 2001 fiscal year. None
of these options are currently in-the-money.

(3) Represents options for class A common stock granted under our 2000
Executive Long Term Incentive Plan. As of April 1, 2002, these options have
been exercised and are outstanding.

EMPLOYMENT CONTRACTS AND TERMINATION OF EMPLOYMENT AGREEMENTS

In March 2000, we entered into executive employment agreements with each of
John P. Gorst and M. Carroll Benton. Our board of directors approved the
principal terms of the executive agreements on February 21, 2000, and on January
30, 2001, approved amendments to each executive agreement.

The executive agreement, as amended, with Mr. Gorst, pursuant to which Mr.
Gorst is employed as our chief executive officer, extends the initial term of
employment from three to four years and provides for an annual salary of
$225,000 during the first year; $175,000 during the second year; $200,000 during
the third year and $275,000 during the fourth year of employment. In addition,
the amended agreement provides, (a) at the end of the second year for the
payment of payroll taxes with regard to sales of stock up to $30,000 and an
option grant of 500,000 shares of common stock if our stock trades at or over
$3.00 per share in any 30-day trading period during the year; (b) at the end of
the third year a cash bonus of $30,000 and an option grant of 500,000 shares of
common stock if our stock trades at or over $6.00 per share in a 30-day trading
period during the year; (c) and at the end of the fourth year a cash bonus of
$30,000 and an option grant of 500,000 shares of common stock granted if our
stock trades at or over $12.00 per share in a 30-day trading period during the
year. All other provisions of the original employment agreement remain the same.

The executive agreement, as amended, with Ms. Benton, pursuant to which Ms.
Benton is employed as our chief administrative officer, extends the initial term
of employment from three to four years and provides for an annual salary of
$135,000 during the first year; $125,000 during the second year; $140,000 during
the third year; and $165,000 during the fourth year of employment. In addition,
the amended agreement provides, (a) at the end of the second year for an option
grant of 300,000 shares of common stock if our stock trades at or over $3.00 per
share in a 30-day trading period during the year; (b) at the end of third year
an option grant of 300,000 shares of common stock if our stock trades at or over
$6.00 per share in a 30-day trading period during the year; (c) and at the end
of the fourth year an option for 300,000 shares of common stock if our stock
trades at or over $12.00 per share in a 30-day trading period during the year.
All other provisions of the original employment agreement remain the same.

47
We entered into an employment agreement with James R. Leigh, III, effective
as of February 20, 2000, providing for his employment as our chief technical
officer. Mr. Leigh was appointed as our president on September 22, 2000. The
employment agreement provides for an initial employment term of three years and
for automatic one-year renewals thereafter unless terminated by either party in
writing on or before ninety days prior to the end of a current term of the
agreement. Under the terms of the employment agreement, Mr. Leigh will be paid
an annual salary of no less than $105,000 plus $8,000 bonus for the first year
of employment. This salary will be increased to no less than $130,000 in the
second year and no less than $150,000 in the third year. Mr. Leigh has been
granted options to purchase a total of 780,000 shares of our common stock as
follows: 50,000 vested options at an exercise price of $0.50 and 730,000 options
which will vest and are exercisable at an exercise price of $1.00 as follows:
243,332 shares vested on February 20, 2001, and thereafter in increments of 1/24
(20,278) each month beginning March 20, 2001, and continuing until 2003. The
agreement contains both non-disclosure and non-competition clauses. Effective
April 4, 2001, Mr. Leigh resigned his position as both president and chief
technical officer to become our general manager of technical operations. Mr.
Leigh retains his stock options. Subsequently, in November 2001, Mr. Leigh
resigned his position with us.

We entered into an employment agreement with Stephen C. Smith, effective as
of September 18, 2000, providing for Mr. Smith's interim employment as chief
financial officer. The initial employment agreement provided for an initial
employment term of fifteen weeks, and on each succeeding Friday thereafter, for
terms of one (1) year, on such terms and conditions set forth in the employment
agreement. Under the terms of the employment agreement, Mr. Smith will be paid a
weekly salary of no less than $100 per week plus a signing bonus of $2,500 and
an incentive stock option to purchase 60,000 shares of our common stock at an
exercise price of $0.30 per share. The agreement contains both non-disclosure
and non-competition clauses. On December 1, 2000, Mr. Smith executed Amendment
No. 1 to his employment agreement in which his base salary was increased to
$2,500 per week to be received for any week he is located at our headquarters.
All of the options granted under the original employment agreement were
terminated. On July 20, 2001, Mr. Smith executed Amendment No. 2 to his
employment agreement in which he will receive a stock option in the amount of
250,000 shares of common stock on the filing date of each Form 10-KSB and a
stock option in the amount 25,000 shares of common stock on the filing date of
each Form 10-QSB with an exercise price determined on the date of filing. In
addition, Mr. Smith will receive $2,500 for each week he is located at our
headquarters.

We entered into an employment agreement with Joanie C. Mann on February 20,
2000, providing for her employment as our vice president of operations. The
employment agreement provides for an initial employment term of three years, and
automatic one-year renewals thereafter, unless terminated by either party in
writing on or before ninety days prior to the end of a current term of the
agreement. Under the terms of the employment agreement, Ms. Mann will be paid an
annual salary of no less than $85,000 for the first year of employment. This
salary will be increased to no less than $110,000 in the second year and no less
than $125,000 in the third year. Ms. Mann has been granted options to purchase a
total of 450,000 shares of our common stock as follows: 50,000 options that are
currently exercisable at an exercise price of $0.50 and 400,000 options which
will vest and are exercisable at an exercise price of $1.00 as follows: 133,332
shares on February 20, 2001, and thereafter in increments of 1/24 (11,111) each
month beginning March 20, 2001, and continuing until 2003. The agreement
contains both non-disclosure and non-competition clauses. On September 25, 2000,
Ms. Mann executed Amendment No. 1 to her agreement in which she agreed to a
thirty percent (30%) reduction in salary until the earlier of (a) an elapse of
three months or (b) we receive $1 million in financing. Also on September 25,
2000, Ms. Mann executed Amendment No. 2 to her agreement in which she received
an increase in her base salary to $95,000 per year. In February 2001, Ms. Mann
assumed the position of vice president of strategic alliances.

William G. Hargin, our former executive vice president of sales and
marketing, resigned and his employment agreement was terminated effective as of
January 15, 2001. In connection with his resignation and the termination of his
employment agreement, Mr. Hargin had 50,000 options that were currently vested
and exercisable. Mr. Hargin has sued us regarding any additional termination
and/or compensation provisions of this agreement.

We entered into an employment agreement with Donald M. Kaplan, effective as
of December 1, 2001, providing for Mr. Kaplan's employment as president. The
employment agreement provided for an initial employment term of three years and
for automatic three-year renewals thereafter unless terminated by either party
in writing on or before ninety days prior to the end of a current term of the
agreement. Under the terms of the

48
employment agreement, Mr. Kaplan will be paid an annual salary of no less than
$180,000 and a signing bonus of $66,667. Under the terms of the agreement, Mr.
Kaplan shall defer $5,000 per month and the signing bonus until such time as our
chief executive officer deems necessary and prudent, or the date upon which we
receive $1,000,000 in additional financing. Mr. Kaplan shall receive a stock
grant of 4,000,000 shares of our common stock and a compensatory non-qualified
stock option for 1,000,000 shares of common stock. The initial option shall be
vested on the effective date of the agreement. The agreement contains both
non-disclosure and non-competition clauses.

We may enter into other employment agreements from time to time with other
executives and key employees.

CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

Interactive is a company wholly owned by M. Carroll Benton, our chief
administrative officer, secretary and treasurer. John P. Gorst, our chief
executive officer, was also vice president and general manager of Interactive.
During their time at Interactive, Ms. Benton and Mr. Gorst began developing the
"Insynq Project," which later developed into our current business. On September
16, 1998, Interactive transferred to Charles Benton, husband of Ms. Benton and
then a creditor of Interactive, all of Interactive's title and interest in and
to (1) certain equipment and other tangible personal property, and (2) the
intellectual properties, computer software, trademarks, copyrights, ideas,
work-in-progress, and other tangible and intangible property comprising the
system known as the "Insynq Project" to retire a $200,000 debt obligation owed
by Interactive to Charles Benton. These assets later developed into Insynq's IQ
Delivery System. Mr. Benton contributed all of the "Insynq Project" intellectual
property assets to Insynq-WA in exchange for the initial 5,500,000 shares of
common stock issued by Insynq-WA at the time of its formation. On the same date,
Mr. Benton sold the equipment and other tangible property to the newly formed
Insynq-WA, in exchange for a $70,000 promissory note. Mr. Benton then sold
2,750,000 shares to each of Ms. Benton and Mr. Gorst in exchange for a $65,000
note from each of them secured by the shares. During the start-up operations of
Insynq-WA, the business contacts of Interactive were utilized in the purchase of
supplies and other items for Insynq-WA. As of September 30, 1999, Insynq-WA owed
Interactive $117,024 related to these purchases, and on November 12, 1999, the
board of Insynq-WA approved the issuance of 118,000 shares of its common stock
in full payment of this debt, after a board determination that the shares of
Insynq-WA should be valued at $1.00 per share.

On September 22, 2000, we executed a Release Agreement with M. Carroll
Benton, our chief administrative officer, secretary and treasurer, John Gorst,
our chief executive officer, Charles Benton, the husband of Ms. Benton,
Interactive Information Systems, an entity owned by Ms. Benton, and entities
controlled by Mr. Benton, which, with certain exceptions, releases the parties
from any and all claims, if any, arising from the parties' prior relationships
and dealings prior to the release date. Among the consideration given for the
Release Agreement, we granted Mr. Benton registration rights to register his
shares of common stock. In addition, Mr. Gorst, Mr. Benton and Ms. Benton
executed a Release Agreement (the Gorst Release) to fully and finally release
Mr. Gorst personally of any obligations arising under the $65,000 promissory
note he owed to Mr. Benton secured by shares of our stock he originally
purchased from Mr. Benton, as well as a general release of Mr. Gorst, with
certain exceptions, by Mr. and Mrs. Benton and certain entities affiliated with
them. In consideration of the Gorst Release, Mr. Gorst agreed to transfer
150,000 shares of our common stock held by him to Mr. Benton, and Ms. Benton
transferred approximately 98,000 shares of common stock held by her to Mr.
Benton.

On October 17, 2000, we executed a Lock-Up and Waiver Agreement with Mr.
Benton with respect to the 496,466 shares of our common stock owned by him.
Under the agreement, he waived any rights he may have to exercise any
registration right for a period of 180 trading days after a contemplated
registration statement is filed with the SEC. This agreement was amended on
November 30, 2000, to allow Mr. Benton to sell 50,000 shares per calendar
quarter during the term of the lock up agreement.

On October 31, 2000, we executed a Consulting Agreement with CFB
Associates, Inc., and specifically Charles F. Benton, CPA, for him to provide
consulting services on general operational issues for a period of three (3)
months. We have agreed to compensate CFB in the amount of $350 per hour. For
previous consulting services performed by Mr. Benton, we have agreed to
guarantee Mr. Benton a minimum of eighty-six (86) hours at this rate.
Additionally, we agree to pay to CFB $5,000 per month for eight (8) consecutive
months beginning November 30, 2000. On November 1, 2001, we amended the term of
the agreement effective August 1, 2001 through November

49
30, 2002.

On June 1, 2000, we entered into a Master Licensing Agreement with My
Partner Online, Inc. (MPO), a company two-thirds owned by M. Carroll Benton and
Charles Benton. The agreement is for a term of five (5) years with an automatic
one-year extension unless either party notifies the other of termination within
ninety (90) days. Either party for breach or insolvency may terminate the
agreement at any time. Under the agreement, MPO has a non-exclusive, worldwide
license to promote, market, distribute and sublicense application hosting
services, bundled or unbundled with MPO products. MPO must use reasonable
commercial efforts to market, promote, and distribute our services by marketing
them through their sales activity. We have agreed to charge MPO a below-market
rate for subscription pricing and to forgive the $5,000 monthly maintenance fee
in exchange for the right to exercise an option to purchase a five percent (5%)
equity position in MPO. On November 29, 2000, this agreement was amended to
specifically detail the services MPO is to provide, and also requires that MPO
purchase 100 of our seats at $50.00 per seat for a period of twelve (12) months,
beginning on December 1, 2000. On November 1, 2001, we amended the agreement
through December 1, 2002.

On November 28, 2000, we executed an Independent Consultant Agreement with
MPO and Summer J. Mathews, MPO's president. The Consultant Agreement is for a
term of three (3) months beginning December 1, 2000, and is automatically
renewable for additional three (3) month terms unless terminated by either party
upon thirty (30) days notice. For consulting services, we have agreed to pay a
consulting fee of $15,000 in the form of shares of our common stock at $0.9675
per share. We also agreed to register these shares within 45 days of their
issuance.

On June 21, 2001, in exchange for the waiver of certain registration rights
by One Click Investments, LLC, John P. Gorst gifted to One Click 1,000,000
shares of common stock with voting rights retained by Gorst and agreed that One
Click's securities dated August 2000 and January 2001 will be included in the
next SB-2 Registration that we file and the February 2000 warrants will be
re-priced at an exercise price of $0.25 per share of common stock with an
exercise date extending to December 31, 2004, with a cashless provision.
Subsequently, in exchange for a waiver of registration rights previously
granted, One Click's February 2000 warrants were re-priced at an exercise price
of $0.05 per share of common stock.

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The following table sets forth information regarding the beneficial
ownership of our common stock as of April 1, 2002, for:

o Each person or group who is known by us to beneficially own more than 5% of
the outstanding

shares of our common stock:

o Each of our directors;

o Each of our named executive officers; and

o All of our directors and executive officers as a group.

The percentage of shares owned provided in the table is based on 54,610,766
shares outstanding as of April 1, 2002. Beneficial ownership is determined in
accordance with the rules of the Securities and Exchange Commission and
generally includes voting or investment power with respect to securities. Except
as indicated by footnote, the persons named in the table have sole voting and
investment power with respect to all shares of common stock shown as
beneficially owned by them. The determination of whether these persons have sole
voting and investment power is based on information provided by them. In
computing an individual's beneficial ownership, the number of shares of common
stock subject to options held by that individual that are exercisable within 60
days of April 1, 2002 are also deemed outstanding. These shares, however,
are not deemed outstanding for the purpose of computing the beneficial ownership
of any other person.

SHARES BENEFICIALLY
OWNED(6)

NAME NUMBER PERCENT

Directors and Officers:

John P. Gorst (1) 14,360,747 22.4%
M. Carroll Benton (2) 9,272,556 15.0%
David D. Selmon 320,144 *
James R. Leigh, III (3) 570,003 1.0%
Stephen C. Smith 400,000 *
Joanie C. Mann (4) 469,078 *
All executive officers and 25,392,498 36.2%
directors as a group (6 persons)(5)

* Less than 1%

(1) This includes (a) 1,100,000 shares of common stock held by One Click
Investments, LLC, (b) 1,150,000 shares of common stock held by Kathleen
McHenry, and (c) 350,000 shares of common stock held by Hagens Berman LLP
to which Mr. Gorst holds a voting proxy and as to which Mr. Gorst disclaims
beneficial ownership. Also includes 3,000,000 shares of class A common
stock and 4,294,904 shares of common stock issuable upon the exercise of
outstanding stock options that are presently exercisable or will become
exercisable within 60 days of April 1, 2002.

(2) Includes 446,466 shares of common stock held by Charles Benton, the husband
of Ms. Benton, as to which Ms. Benton disclaims beneficial ownership. Also
includes 2,000,000 shares of class A common stock and 3,105,221 shares of
common stock issuable upon the exercise of outstanding stock options that
are presently exercisable or will become exercisable within 60 days of
April 1, 2002.

(3) Includes 570,003 shares of common stock issuable upon the exercise of
outstanding stock options that are presently exercisable or will become
exercisable within 60 days of April 1, 2002. In April 2001, Mr. Leigh
resigned as president and chief technology officer to become general
manager. Subsequently, in November 2001, Mr. Leigh resigned his position
with us.

(4) Includes 433,794 shares of common stock issuable upon exercise of
outstanding stock options that are presently exercisable or will become
exercisable within 60 days of April 1, 2002.

(5) Includes 8,321,313 shares of common stock issuable upon exercise of
outstanding stock options held by our executive officers that are presently
exercisable or will become exercisable within 60 days of April 1, 2002.

(6) Adjusted for the two-for-one stock split effected on August 3, 2000.

DESCRIPTION OF CAPITAL STOCK

Our authorized capital stock consists of 250,000,000 shares of common
stock, $0.001 par value per share, 10,000,000 shares of class A common stock,
$0.001 par value per share, and 10,000,000 shares of preferred stock, $0.001 par
value per share. On November 19, 2001, by majority vote of the shareholders, the
Company authorized an additional 150,000,000 shares of common stock, increasing
the total number to 250,000,000 of authorized shares of common stock.

COMMON STOCK

There were 56,686,373 shares of our common stock outstanding and held of
record by approximately 1008 stockholders as of April 1, 2002.

Holders of our common stock are entitled to one vote per share on all
matters to be voted upon by the stockholders. Because the shares of common stock
do not have cumulative voting rights, the holders of more than 50 percent of the
shares voting for the election of directors can elect all the directors if they
choose to do so and, in such

51
event, the holders of the remaining shares will not be able to elect any person
to the board of directors. Subject to preferences that may be applicable to the
holders of outstanding shares of preferred stock, if any, the holders of our
common stock are entitled to receive ratably such dividends, if any, as may be
declared from time to time by the board of directors out of funds legally
available therefor. In the event of liquidation, dissolution or winding-up, and
subject to the prior distribution rights of the holders of outstanding shares of
preferred stock, if any, the holders of shares of our common stock shall be
entitled to receive pro rata all the remaining assets available for distribution
to our stockholders. Our common stock has no preemptive or conversion rights or
other subscription rights.

Our board of directors is authorized to issue additional shares of common
stock, not to exceed the amount authorized by our Certificate of Incorporation,
and to issue options and warrants for the purchase of such shares, on such terms
and conditions and for such consideration as the board may deem appropriate
without further stockholder action.

CLASS A COMMON STOCK

There were 5,000,000 shares of our class A common stock outstanding and
held of record by two of our officers as of April 1, 2002.

Holders of our class A common stock are entitled to three votes per share
on all matters to be voted upon by the stockholders. Because the shares of
common stock do not have cumulative voting rights, the holders of more than 50
percent of the shares voting for the election of directors can elect all the
directors if they choose to do so and, in such event, the holders of the
remaining shares will not be able to elect any person to the board of directors.
Holders of our class A common stock are not entitled to receive cash dividends,
if any, as may be declared from time to time by the board of directors. In the
event of liquidation, dissolution or winding-up, and subject to the prior
distribution rights of the holders of outstanding shares of preferred stock, if
any, the holders of shares of our class A common stock shall be entitled to
receive pro rata all the remaining assets available for distribution to our
stockholders. Our class A common stock has no preemptive rights. Holders of
class A common stock may at any time or from time to time, at their discretion,
convert any whole number or all of the class A common stock held into fully paid
and non-assessable common stock at the rate (subject to adjustment) of one share
of common stock for each share of class A common stock. There are no redemption
or sinking fund provisions applicable to our class A common stock.

Our board of directors is authorized to issue additional shares of class A
common stock, not to exceed the amount authorized by our Certificate of
Incorporation, and to issue options and warrants for the purchase of such
shares, on such terms and conditions and for such consideration as the board may
deem appropriate without further stockholder action.

PREFERRED STOCK

We currently have no outstanding shares of preferred stock. The board of
directors has the authority, without further action by our stockholders, to
issue up to ten million shares of preferred stock in one or more series and to
fix the rights, preferences and privileges thereof, including dividend rates and
preferences, conversion rights, voting rights, terms of redemption, redemption
prices, liquidation preferences and the number of shares constituting any series
or the designation of such series, without further vote or action by the
stockholders. The board of directors, without stockholder approval, could issue
preferred stock with voting and conversion rights, which could adversely affect
the voting power of the holders of common stock. The issuance of preferred stock
may also have the effect of delaying or preventing a change of control of us.

LONG TERM INCENTIVE PLANS

On March 31, 2000, the Company's Board of Directors adopted two long-term
incentive plans, described as follows:

INSYNQ, INC. 2000 LONG TERM INCENTIVE PLAN

The Insynq, Inc. 2000 Long Term Incentive Plan provides for the issuance of
incentive and non-qualified stock options, stock appreciation rights and
restricted stock to directors, officers, employees and consultants. At the
adoption of this plan, we set aside 16,675,300 shares of common stock, which may
be issued upon the exercise of

52
options granted. On November 19, 2001 the shareholders approved an amendment to
the LTIP which would set aside an additional 15,000,000 shares of common stock
for a total of 31,675,300 shares of common stock, which may be issued upon the
exercise of options granted. As of April 1, 2002, options available for issuance
are 8,892,462.

INSYNQ, INC. 2000 EXECUTIVE LONG TERM INCENTIVE PLAN

The Insynq, Inc. 2000 Executive Long Term Incentive Plan provides for the
issuance of incentive and non-qualified stock options, stock appreciation rights
and restricted stock to our executive officers. We have set aside 5,400,000
shares of class A common stock under this plan at its adoption. On December 10,
2001, the board of directors was authorized to re-price the granted options to
purchase 5,000,000 share of class A common stock from $0.50 per share to $0.018
per share.

As of April 1, 2002, two of our corporate officers who have been granted
options to purchase a total of 5,000,000 shares of class A common stock have
exercised their options.

Our board of directors administers the plans and the board may amend or
terminate the plans if it does not cause any adverse effect on any then
outstanding options or unexercised portion thereof. All options generally have
an exercise price equal the fair value of the underlying common stock on the
date of grant, vest immediately and expire in ten years.

DELAWARE LAW AND CERTAIN CHARTER PROVISIONS

Our Certificate of Incorporation states that we will not be subject to the
provisions of Section 203 of the Delaware General Corporation law and
anti-takeover law. In general, the statute prohibits a publicly held Delaware
corporation from engaging in a "business combination" with an "interested
stockholder" for a period of three years after the date of the transaction in
which the person became an interested stockholder, unless either (a) prior to
the date at which the person becomes an interested stockholder, the board of
directors approves such transaction or business combination, (b) the stockholder
acquires more than 85% of the outstanding voting stock of the corporation
(excluding shares held by directors who are officers or held in some employee
stock plans) upon consummation of such transaction, or (c) the business
combination is approved by the board of directors and by two-thirds of the
outstanding voting stock of the corporation (excluding shares held by the
interested stockholder) at a meeting of stockholders (and not by written
consent). A "business combination" includes a merger, asset sale or other
transaction resulting in a financial benefit to such interested stockholder. For
purposes of Section 203, "interested stockholder" is a person who, together with
affiliates and associates, owns (or within three years prior, did own) 15% or
more of the corporation's voting stock.

Our Certificate of Incorporation includes a provision that allows the board
of directors to issue preferred stock in one or more series with such voting
rights and other provisions as the board of directors may determine. This
provision may be deemed to have a potential anti-takeover effect and the
issuance of preferred stock in accordance with such provisions may delay or
prevent a change of control of us.

LIMITATION OF LIABILITY AND INDEMNIFICATION MATTERS

As permitted by the Delaware General Corporation Law, our certificate of
incorporation contains a provision eliminating the monetary liability of a
director for breach of fiduciary duty, subject to certain exceptions. The
provision does not eliminate a director's liability for (a) breaches of the
director's duty of loyalty to us or our shareholders, (b) acts or omissions not
in good faith or involving intentional misconduct or a knowing violation of law,
(c) the payment of unlawful dividends or unlawful stock repurchases or
redemptions, or (d) any transaction from which the director derived an improper
personal benefit. Furthermore, the provision does not limit equitable remedies,
such as an injunction or rescission for breach of a director's fiduciary duty of
care.

The Delaware General Corporation Law permits, and in some cases requires, a
corporation to indemnify directors and officers who are or have been a party or
are threatened to be made a party to litigation against certain expenses,
judgments, fines, settlements, and other amounts under certain circumstances.

Article IX of our Bylaws provides for indemnification of and advancement of
expenses to directors, officers,

53
employees, and agents to the fullest extent authorized or permitted by the
Delaware General Corporation Law.

We are currently operating without officers and director's insurance, as
well as, general liability insurance. It is uncertain when coverage will be
renewed.

SECURITIES AND EXCHANGE COMMISSION'S POSITION ON INDEMNIFICATION

Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers and controlling persons pursuant to the
Delaware General Corporation Law, our Certificate of Incorporation and our
Bylaws, or otherwise, we have been advised that in the opinion of the Securities
and Exchange Commission such indemnification is against public policy as
expressed in the Securities Act, and is, therefore, unenforceable. In the event
that a claim for indemnification against such liabilities (other than the
payment by us of expenses incurred or paid by a director, officer or controlling
person in the successful defense of any action, suit or proceeding) is asserted
by such director, officer or controlling person in connection with the
securities being registered hereunder, we will, unless in the opinion of our
counsel the matter has been settled by controlling precedent, submit to a court
of appropriate jurisdiction the question of whether such indemnification by us
is against public policy as expressed in the Securities Act and will be governed
by the final adjudication of such issue.

STOCK TRANSFER AGENT AND REGISTRAR

The stock transfer agent and registrar for our common stock is Colonial
Stock Transfer Co., 455 E. 400 South #100, Salt Lake City, Utah, 84111, (801)
355-5740.

CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE

On April 3, 2000, our board of directors decided to terminate our
accountants, Jones, Jensen & Company, and engage G. Brad Beckstead, CPA, as our
auditor for the year ended May 31, 2000. The firm of Jones, Jensen & Co. served
as our auditors for the fiscal year ended May 31, 1999. In February 2000
Beckstead was engaged as the independent auditor of Insynq-WA to audit its
financial statements for the years ended December 31, 1998 and 1999. Because of
Beckstead's familiarity with the accountings and business operations of
Insynq-WA, the assets of which we acquired on February 18, 2000, our board of
directors believed Beckstead was in the best position to undertake the audit of
our financial statements for the fiscal year ending May 31, 2000. Beckstead's
office is located at 330 East Warm Springs, Las Vegas, Nevada 89119.

During the year ended May 31, 1999, and up to and including the present,
there have been no disagreements between Jones, Jensen & Co. and us on any
matter of accounting principles or practices, financial statement disclosure or
auditing scope or procedures. Jones, Jensen & Co.'s report on our financial
statements for the fiscal year ended May 31, 1999, indicated there was
substantial doubt regarding our ability to continue as a going concern. The
appointment of Beckstead was ratified at the special meeting of shareholders
held on August 3, 2000.

On October 11, 2000, our board of directors decided to terminate our
auditor for the quarter ended August 31, 2000. Grant Thornton LLP was appointed
to be our auditor. Grant Thornton's office is located in at 701 Pike Street,
Suite 1500, Seattle, Washington 98101. On November 19, 2001, a majority of our
stockholders ratified the selection of Grant Thornton LLP for our fiscal year
ending 2002.

During the year ended May 31, 2000, and up to and including the present,
there have been no disagreements between Beckstead and us on any matter of
accounting principles or practices, financial statement disclosure, or auditing
scope or procedures. Beckstead's report on our financial statements for the
fiscal year ended May 31, 2000, indicated that substantial doubt existed
regarding our ability to continue as a going concern.

LEGAL MATTERS

Seth A. Farbman, PC has passed upon the validity of the shares offered
hereby for us.

54
EXPERTS

Our audited financial statements as of May 31, 2001 have been included in
the registration statement in reliance upon the report of Grant Thornton, LLP,
as independent auditor, given upon its authority as an expert in accounting and
auditing.

Our audited financial statements as of May 31, 2000 have been included in
the registration statement in reliance upon the report of G. Brad Beckstead,
CPA, an independent auditor, given upon his authority as an expert in accounting
and auditing.

ABOUT THIS PROSPECTUS AND WHERE YOU CAN FIND MORE INFORMATION

Unless the context otherwise requires, "Insynq," "we," "our," "us" and
similar expressions refer to Insynq, Inc., a Delaware corporation, and its
predecessors, but not to the selling stockholders identified under the caption
"Selling Stockholders."

We file annual, quarterly and special reports, proxy statements and other
information with the Securities Exchange Commission, or the SEC. You may inspect
and copy these materials at the public reference facilities maintained by the
SEC at:

Judiciary Plaza Citicorp Center Seven
Room 1024 500 West Madison Street
450 Fifth Street, N.W. Suite 1400
Washington, D.C. 20549 Chicago, Illinois 60661

You also may obtain copies of these materials from the SEC at prescribed
rates by writing to the Public Reference Section of the SEC, 450 Fifth Street,
N.W., Washington, D.C. 20549. Please call the SEC at 1-800-SEC-0330 for more
information on the operation of the public reference rooms. You also can find
our SEC filings at the SEC's website at HTTP://WWW.SEC.GOV.

We have filed with the SEC a registration statement on Form SB-2 under the
Securities Act of 1933, as amended, or the Securities Act, with respect to the
shares of common stock offered in this prospectus. This prospectus is part of
that registration statement and, as permitted by the SEC's rules, does not
contain all of the information set forth in the registration statement. For
further information about our common stock, and us we refer you to those copies
of contracts or other documents that have been filed as exhibits to the
registration statement, and statements relating to such documents are qualified
in all respects by such reference. You can review and copy the registration
statement and its exhibits and schedules from the SEC at the address listed
above or from its Internet site.

Our World Wide Web site is located at HTTP://WWW.INSYNQ.COM. Information
contained on our Web site does not constitute, and shall not be deemed to
constitute, part of this prospectus.

F-1

PAGE
INDEX TO FINANCIAL STATEMENTS

Index to Financial Statements F-1

Interim Financial Statements for the Three Months
and Six Months Ended November 30, 2001 - Restated
(unaudited)

Balance Sheets - Restated F-2

Statements of Operations - Restated F-3

Statement of Stockholders' Deficit - Restated F-4

Statements of Cash Flows - Restated F-6

Notes to Financial Statements - Restated F-7

Financial Statements for the Year Ended May 31, 2001
and May 31, 2000

Report of Independent Certified Public Accountants F-11

Balance Sheets F-13

Statements of Operations F-14

Statement of Stockholder' Deficit F-15

Statements of Cash Flows F-21

Notes to Financial Statements F-22

F-2
Insynq, Inc.

Balance Sheets - Restated

-----------------------------
November 30, May 31,
2001 2001
-----------------------------
(unaudited) (a development
stage company)
-----------------------------

ASSETS
Current assets
Cash ................................................... $ 135,366 $ 26,900
Accounts receivable, net of allowance for doubtful ..... 45,723 27,469
accounts of $25,000
Related party receivables .............................. 64,304 98,990
Prepaid expenses ....................................... 51,170 61,962
------------ ------------
Total current assets ....................................... 296,563 215,321

Property and equipment, net ................................ 596,148 756,493

Other assets
Intangible assets, net ................................. 39,585 52,585
Deposits ............................................... 7,345 72,000
------------ ------------
Total assets ................................. $ 939,641 $ 1,096,399
============ ============

LIABILITIES AND STOCKHOLDERS' DEFICIT

Current liabilities
Notes payable .......................................... $ 14,574 $ 27,973
Related party notes payable ............................ 1,375,033 1,318,251
Accounts payable ....................................... 1,076,736 1,001,395
Accrued liabilities .................................... 1,241,023 1,129,695
Customer deposits ...................................... 38,972 49,684
Deferred compensation .................................. 118,363 107,175
Current portion of capital lease obligations ........... 753,385 692,208
------------ ------------

Total current liabilities .................................. 4,618,086 4,326,381

Capital lease obligations, net of current portion .......... 15,787 29,256
Convertible debentures, net of discount of $810,890 ........ 352,360 -

Commitments and contingencies .............................. - -

Stockholders' deficit
Preferred stock, $0.001 par value, 10,000,000 shares ... - -
authorized, no shares issued and outstanding
Class A common stock, $0.001 par value, 10,000,000 ..... - -
shares authorized, no shares issued and outstanding
Common stock, $0.001 par value, 250,000,000 shares ..... 43,985 33,532
authorized, 43,984,044 and 33,531,094 shares issued
and outstanding as of November 30, 2001 and May 31,
2001, respectively
Additional paid-in capital ............................. 17,107,599 15,430,507
Unearned compensation and services ..................... (336,440) (725,717)
Accumulated deficit .................................... (20,861,736) (17,997,560)
------------ ------------
Total stockholders' deficit ................................ (4,046,592) (3,259,238)
------------ ------------
Total liabilities and stockholders' deficit ..... $ 939,641 $ 1,096,399
============ ============

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

F-3

Insynq, Inc.

Statements of Operations - Restated
(unaudited)

Three months ended Six months ended
November 30, November 30,
-------------------------- --------------------------
2001 2000 2001 2000
(a development (a development
stage company) stage company)
----------- ----------- ----------- -----------

REVENUES .................... $ 227,729 $ 106,171 $ 422,294 $ 173,933

COSTS AND EXPENSES
Direct cost of services .. 338,534 270,228 658,401 616,966
Network and infrastructure
costs .................. 3,458 41,767 32,785 79,182
Selling, general and
administrative
Non-cash compensation .. 261,974 535,802 778,642 1,183,602
Other .................. 538,409 1,839,992 1,264,407 3,377,891
Research and development . 36,250 71,824 95,231 142,508
------ ------ ------ -------
1,178,625 2,759,613 2,829,466 5,400,149
--------- --------- --------- ---------

Loss from operations ........ (950,896) (2,653,442) (2,407,172) (5,226,216)

OTHER EXPENSE (INCOME)
Other income (expense) ...... 79,857 - 116,634 566
Gain (loss) from disposal of
assets .................... 1,285 - (45,612) -
Interest expense
Non-cash .................. (243,416) (3,166,570) (347,394) (3,692,747)
Other ..................... (94,168) (21,812) (180,632) (56,925)
------- ------- -------- -------
(256,442) (3,188,382) (457,004 (3,749,106)
-------- ---------- -------- ----------

NET LOSS .................... $ (1,207,338) $ (5,841,824) $ (2,864,176) $ (8,975,322)
============ ============ ============ ============

Net loss per share, basic and
diluted ................... $ (0.03) $ (0.29) $ (0.08) $ (0.42)
============ ============ ============ ============

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

F-4
Insynq, Inc.

Statement of Stockholders' Deficit - Restated
(unaudited)

Additional Unearned Total
Common Stock Paid-In Compensation Accumulated Stockholders'
Shares Amount Capital and Services Deficit Deficit
---------- ---------- ------------ ------------- ------------- -------------

Balance, May 31, 2001 (a development 33,531,094 $33,532 $15,430,507 $(725,717) $(17,997,560) $(3,259,238)
stage company)

Issuance of common stock at $0.10 per 20,000 20 1,980 - - 2,000
share through the exercise of stock
options in June 2001 in lieu of
accounts payable

Issuance of common stock at $0.09 per 399,354 399 35,543 - - 35,942
share through the exercise of stock
options in June 2001 in lieu of
employee compensation and accrued
liabilities

Issuance of common stock at $0.09 per 355,556 356 31,644 - - 32,000
share through the exercise of stock
options in June 2001 for cash

Issuance of common stock at $0.09 per 2,125,000 2,125 189,125 (180,000) - 11,250
share to non-employees for services
in July 2001

Issuance of common stock at $0.18 per 50,000 50 8,950 - - 9,000
share through exercise of stock
options to non-employee in lieu of
cash payment of accrued liabilities
in July 2001

Issuance of common stock at $0.07 per 250,000 250 17,250 - - 17,500
share through exercise of stock
options in July 2001 in lieu of
employee compensation

Issuance of common stock at $0.06 per 633,926 634 37,401 - - 38,035
share through exercise of stock
options in August 2001 in lieu of
employee compensation

Adjustment as a result of re-pricing - - 107,803 - - 107,803
of warrants in June 2001

Allocation of discount on convertible - - 650,000 - - 650,000
debentures with warrants and
beneficial conversion feature

Amortization of unearned compensation - - - 356,493 - 356,493
for three month period ended August
31, 2001

Net loss for the three month period - - - - (1,656,838) (1,656,838)
ended August 31, 2001
---------- ------- ------------ ---------- ------------- ------------
Balance, August 31, 2001 37,364,930 $37,366 $ 16,510,203 $(549,224) $(19,654,398) $(3,656,053)
========== ======= ============ ========== ============= ============

Continued

F-5
Insynq, Inc.

Statement of Stockholders' Deficit - Restated - Continued
(unaudited)

Balance, August 31, 2001 37,364,930 $37,366 $16,510,203 $(549,224) $(19,654,398) $(3,656,053)

Options issued in September 2001 with - - 17,500 - - 17,500
exercise price of $0.07 per share in
lieu of payment of note payable and
accrued liabilities

Issuance of common stock at $0.02 per 468,750 469 8,906 - - 9,375
share in October 2001 through
conversion of debentures

Issuance of common stock at $0.125 per 14,104 14 1,749 - - 1,763
share in October 2001 through
exercise of warrants

Issuance of common stock at $0.01 per 937,500 937 8,438 - - 9,375
share in October 2001 through
conversion of debentures

Issuance of common stock at $0.05 per 380,650 381 18,652 - - 19,033
share through exercise of stock
options in September and October
2001 in lieu of employee compensation

Issuance of common stock at $0.02 per 25,000 25 475 - - 500
share through exercise of stock
options in October in lieu of
employee compensation

Issuance of common stock at $0.005 per 3,600,000 3,600 14,400 - - 18,000
share in November 2001 through
conversion of debentures

Issuance of common stock at $0.028 to 300,000 300 14,000 - - 14,300
$0.065 per share from September
through November 2001 for non-
employee services

Issuance of common stock at $0.125 per 14,104 14 1,749 - - 1,763
share in November 2001 through the
exercise of warrants

Issuance of common stock at $0.025 per 614,300 614 14,743 - - 15,357
share in November 2001 through
exercise of stock options
in lieu of employee compensation

Issuance of common stock at $0.017 per 264,706 265 4,235 - - 4,500
share in November 2001 through
exercise of stock options in lieu
of payment of accrued liabilities

Allocation of discount on convertible - - 492,549 - - 492,549
debentures with warrants and
beneficial conversion feature

Amortization of unearned compensation - - - 212,784 - 212,784
for the three-months ended November
30, 2001

Net loss for the three-months ended - - - - (1,207,338) (1,207,338)
November 30, 2001
---------- ------- ----------- ---------- ------------ -----------
Balance, November 30, 2001 43,984,044 $43,985 $17,107,599 $(336,440) $(20,861,736) $(4,046,592)
========== ======= =========== ========== ============ ===========

The accompany notes are an integral part of this financial statement.

F-6
Insynq, Inc.

Statements of Cash Flows - Restated
(unaudited)

Six Months Ended
November 30,
--------------------
2001 2000
---- ----
(a development
stage company)
---------------

Increase (Decrease) in Cash

Cash flows from operating activities

Net loss ..................................................... $ (2,864,176) $ (8,975,322)
Adjustments to reconcile net loss to net cash used in
operating activities:
Depreciation and amortization ............................ 122,697 136,638
Loss on disposal of assets ............................... 121,648 -
Forgiveness of debts ..................................... (113,610) -
Issuance of common stock for services .................... 96,381 489,746
Issuance of options and warrants for services, and
amortization ........................................... 569,277 1,163,572
of unearned compensation
Issuance of options to employees under fair market value . - 230,284
Warrants issued with debt and capital leases ............. 15,733 244,734
Warrants and beneficial conversion features of debentures 439,462 3,415,294
Interest capitalized ..................................... 43,245 -
Changes in assets and liabilities:
Accounts receivable and related party receivables .... 16,433 25,450
Inventories .......................................... - 17,639
Prepaid expenses ..................................... 10,792 14,598
Deposits and other assets ............................ (6,345) 104,912
Accounts payable ..................................... 190,951 506,790
Accrued liabilities .................................. 183,864 363,711
Customer deposits .................................... (10,712) 14,067
Deferred compensation ................................ 11,188 -
------------ ------------
Net cash used in operating activities ............. (1,173,172) (2,247,887)
------------ ------------
Cash flows from investing activities
Purchase of equipment ........................................ - (157,743)
Deposit on future acquisition ................................ - (35,000)
------------ ------------
Net cash used in investing activities ............. -- (192,743)
------------ ------------
Cash flows from financing activities
Proceeds from notes payable and related party notes payable .. 80,076 1,144,000
Proceeds from issuance of common stock and exercise of options 35,526 474,160
and warrants
Proceeds from convertible debentures ......................... 1,200,000 800,000
Payments on short term notes payable ......................... (22,694) (5,837)
Payments on capital lease obligations ........................ (11,270) (7,150)
----------- -----------
Net cash provided by financing activities ......... 1,281,638 2,405,173
----------- -----------

Net increase (decrease) in cash .................................. 108,466 (35,457)

Cash at beginning of period ...................................... 26,900 106,806
------------ ------------
Cash at end of period ............................................ $ 135,366 $ 71,349
============ ============

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

F-7

Insynq, Inc.

Notes to Financial Statements - Restated
November 30, 2001

(unaudited)

Note 1 - Financial Statements

The unaudited financial statements of Insynq, Inc. (Company) have been prepared
by the Company pursuant to the rules and regulations of the Securities and
Exchange Commission. Certain information and footnote disclosures normally
included in financial statements prepared in accordance with generally accepted
accounting principles (GAAP) have been condensed or omitted pursuant to such
rules and regulations. The results of operations for interim periods are not
necessarily indicative of the results to be expected for the entire fiscal year
ending May 31, 2002. The accompanying unaudited financial statements as of
November 30, 2001 and 2000, and the related notes should be read in conjunction
with the Company's audited financial statements and notes, thereto, and Form
10-KSB/A for its fiscal year ended May 31, 2001.

Note 2 - Basis of Presentation

The November 30, 2001 financial statements have been restated. The Company
discovered a material error in its financial statements as reported in its
original filing. The Company was a development stage company as defined under
Statement of Financial Accounting Standards No. 7 through May 31, 2001. Although
the Company is still devoting substantially all of its present efforts to
establishing its core business, its planned operations have commenced, and,
operating revenues are being generated. As a result, the Company is no longer
considered a development stage company beginning in the fiscal year 2002.

Note 3 - Management Plans

The Company has incurred recurring losses from operations and has a total
accumulated deficit of $20,861,736 at November 30, 2001. As discussed in Note 8,
the Company is in default on a capitalized lease obligation. The underlying
leased assets are critical to the Company's operations. The Company has
initiated contact to restructure the lease obligation. In the meantime, the
Company has signed an additional lease agreement for equipment to support its
customer base. The development of the Company's technology and products will
continue to require a commitment of substantial funds. Pursuant to Item
303(b)(1) and (3) of Regulation SB, the Company has no material capital
commitments. However, should the Company be forced to seek other equipment in
the open market based on its inability to restructure its capital lease
obligation, the Company would attempt to raise the necessary finances. These
amounts are currently not quantifiable.

The Company is devoting its efforts into establishing a business in the new
emerging Managed Services Provider industry. Insynq is establishing alliances
with Independent Software Vendors to provide access to their applications for
customers and building new channels for marketing products to customers. The
Company is further developing new products to enable the deployment and on going
management of Insynq services. As a result of these new alliances and products,
the Company will be able to provide additional and enhanced services to
customers. In addition, the Company has recently completed negotiations with a
national corporation to provide hosting and application services.

The Company has implemented cost restructuring strategies, cost-cutting
measures, and, in addition, the Company initiated vendor negotiations resulting
in improved payment terms or reductions in the total amounts due.

The rate at which the Company expends its resources is variable and depends on
many factors. The Company will need to raise substantial additional capital to
fund its operations and may seek such additional funding through public or
private equity or debt financing. There can be no assurance that such additional
funding will be available on acceptable terms, if at all. The Company's
continued existence as a going concern is ultimately dependent upon its ability
to secure additional funding for completing and marketing its technology and the
success of its future operations.

Note 4 - Loss Per Common Share

Basic loss per share is computed by dividing the net loss by the weighted
average number of common shares
F-8
outstanding available to common stockholders during the period. The weighted
average number of common shares outstanding was 39,028,821 and 21,401,654 for
the three months ended November 30, 2001 and 2000; 37,336,786 and 21,197,545 for
the six months ended November 30, 2001 and 2000, respectively. The computation
for loss per common share, assuming dilution, for the three months and six
months ended November 30, 2001 and 2000, was anti-dilutive, and therefore, is
not included. Outstanding warrants and options as of November 30, 2001 totaled
26,272,175.

Note 5 - Accrued Liabilities

As of November 30, 2001, the Company was delinquent of approximately $724,500 of
its payroll and business taxes, and related penalties and interest. The majority
of the past due amount, or approximately $567,000, is for payroll taxes,
penalties and interest due to the Internal Revenue Service. The Company is
currently negotiating with the Internal Revenue Service about a payment plan for
the past due taxes. The IRS has imposed certain conditions on the Company in
order to proceed with negotiations, one of which requires the Company to remain
current on all future payroll tax deposits. The Company has been in contact with
other respective taxing authorities to initiate payment plans in settlement of
their respective past due taxes.

The Company has an outstanding tax lien in an amount of approximately $28,000 to
a State for prior year's income taxes assessed to the predecessor company of
Insynq, Inc. This amount, included in the above past due taxes, is in dispute.
Amended returns to correct the assessed deficiency have been filed by the
Company.

Note 6 - Related Party Notes Payable

During the six month period ended November 30, 2001, the Company entered into
three additional short-term promissory notes, totaling $80,076. Each note is
unsecured and bears interest ranging from ten percent (10%) to twelve percent
(12%) per annum. Total related party notes payable, all with similar terms, as
of November 30, 2001 aggregate $1,375,033.

Note 7 - Convertible Debentures

On June 29, 2001, the Company entered into a private financing transaction with
three investors for a total of $1,200,000, 12% convertible debentures. The
debentures are convertible into shares of common stock at the lesser of (i)
$0.18 or (ii) the average of the lowest three trading prices in the twenty-day
trading period immediately preceding the notice to convert, divided by two. The
convertible debentures carry attached warrants that allow the investor, under
the terms of the warrants, to purchase up to 2,400,000 shares of common stock at
$0.04 per share. Terms of the debentures provide for full payment on or before
one year from the date of issuance, plus accrued interest at 12% per annum.
Pursuant to the agreement, the Company may not, without consent, (i) engage in
any future equity financing involving the issuance of common stock for a period
of six months from the date of closing, and (ii) may not engage in such
transactions for a period of two years without first giving the investors the
opportunity to purchase shares on a pro-rata basis.

As of November 30, 2001, the investors purchased $1,200,000 of convertible
debentures, and converted $36,750 of debentures into 5,006,250 shares of common
stock.

For the six months ended November 30, 2001, the Company recorded discounts on
the convertible debentures totaling $1,142,549, equal to the fair market value
of the warrants and the intrinsic value of the beneficial conversion features.
The Company recognized $331,659 of interest expense on the discounts for the six
months ended November 30, 2001.

Between December 1, 2001 and January 11, 2002, the Company converted $30,000 of
debentures into an additional 4,012,716 shares of common stock.

Note 8 - Capital Lease Obligation

The Company is in default on a capital lease obligation as of November 30, 2001;
accordingly, the lease has been classified as a current obligation.

Note 9 - Common Stock

On November 19, 2001, by majority vote of the shareholders, the Company
authorized an additional 150,000,000 shares of common stock, increasing the
total number to 250,000,000 of authorized shares of common stock.

F-9
Note 10 - Stock Options

On March 31, 2000, the Company's Board of Directors adopted two long-term
incentive plans (Plans), described as follows:

2000 Long Term Incentive Plan (LTIP)

The LTIP provides for the issuance of incentive and non-qualified stock options,
stock appreciation rights and restricted stock to directors, officers, employees
and consultants. At the adoption of this plan, the Company set aside 16,675,300
shares of common stock, which may be issued upon the exercise of options
granted. On November 19, 2001 the shareholders approved an amendment to the
LTIP, which would set aside an additional 15,000,000 shares of common stock for
a total of 31,675,300 shares of common stock, which may be issued upon the
exercise of options granted. As of November 30, 2001, options available for
issuance are 18,331,962.

2000 Executive Long Term Incentive Plan (Executive LTIP)

The Executive LTIP provides for the issuance of incentive and non-qualified
stock options, stock appreciation rights and restricted stock to executive
officers of the Company. The Company set aside 5,400,000 shares of class A
common stock under this plan at its adoption. As of November 30, 2001, two
corporate officers have been granted options to purchase a total of 5,000,000
shares of class A common stock at an exercise price of $0.50 per share. On
December 10, 2001 the Company was authorized by the Board of Directors to
re-price all stock options to an exercise price of $0.018 per share, which was
the fair market value on December 10, 2001. See also Note 13.

Note 11 - Contingencies and Commitments

The Company has an agreement with a consulting group providing for financial
advisory services from January 1, 2002 through March 2002. Consideration for
these services are three monthly payments starting January 1, 2002 of $13,500 in
cash and 215,000 shares of common stock.

On September 6, 2001, the Company was served with a summons and complaint by its
former landlords, asserting: (a.) a breach of a settlement agreement entered
into in May 2001 to register 500,000 shares of common stock, valued at $80,000,
in partial settlement of its then existing lease, and, (b.) a default by the
Company on two new long-term lease obligations. Terms of the first lease call
for base monthly payments of $12,046 for the period of August 1, 2001 to July
31, 2006, plus estimated triple net charges currently at $3,038 per month and
beginning in year two, annual consumer price index with a minimum annual
increase of 3%. Minimum aggregate lease payments and triple net charges
approximate $954,500 over the term of the lease, excluding late fees, interest
and other charges. Terms of the second lease call for monthly payments,
beginning in June 2001 of approximately $4,000 per month, or a total of $80,000
for the remaining term of the lease from August 1, 2001 to May 31, 2003.

On October 4, 2001, the Company's former landlords filed a summons and complaint
with the Superior Court of Washington for Pierce County for a summary judgment
motion on all claims. All claims under this motion were denied.

The Company denies the allegations under this claim and believes it is without
merit. It is the opinion of management and its legal counsel that the settlement
agreement signed in May 2001 that required the signing of the new leases were
entered into under economic duress, based on misrepresentation and fraud and
were signed in bad faith on the part of the former landlords. As such, it is
management's opinion that the settlement agreement and the lease agreement are
void.

Because management believes that the ultimate outcome of this litigation will be
that the former landlords will not be successful in their assertions under their
claim, the Company has not recorded a liability for payments under the leases or
for other claims under this dispute in the accompanying financial statements.
The Company intends to continue to vigorously defend against this lawsuit.

F-10
Note 12 - Non-Cash Investing and Financing Activities

Non-cash investing and financing activities included the following for the six
months ended November 30:

2001 2000
---- ----

Discount on convertible notes payable ......... $1,142,549 $ 900,000
Note payable converted into warrants .......... 14,000 --
Accrued liabilities converted into warrants ... 3,500 --
Debentures converted into common stock ........ 36,750 932,720
Accrued liabilities converted into common stock 69,036 --
Accounts payable converted into common stock .. 2,000 --
Discount on short-term notes payable .......... -- 229,000
Equipment purchased under capitalized leases .. -- 17,762
Capitalized lease obligations incurred ........ -- (17,762)
Notes payable converted to common stock ....... -- 755,000

Note 13 - Subsequent Events

On December 10, 2001, the Company's board of directors approved the re-pricing
of outstanding stock options under the Company's 2000 Executive Long Term
Incentive Plan with an exercise prices above $0.018. The exercise prices of all
such stock options were re-priced to $0.018, which was the fair market value of
the Company's stock on December 10, 2001. The Company re-priced 5 million
options. Under applicable accounting rules, the Company will have to account for
future variations in the price of its common stock above $0.018 per share as
compensation expense until the re-priced options are either exercised, cancelled
or expire. This calculation will be made each quarter based upon the performance
of the Company's common stock in that quarter. Accordingly, operating results
and earnings per share will be subjected to potentially significant fluctuations
based upon changes in the market price of the Company's common stock. On January
31, 2002, non-qualified stock options totaling 5,000,000 shares were exercised
into class A common stock.

On January 24, 2002, the Company entered into a second private financing
transaction of 12% convertible debentures totaling $550,000. Terms of this
agreement substantially call for converting the debentures into common stock
within one year from date of investment at the lower of a fixed conversion price
of $0.008 per share or the average of the lowest three inter-trading days of the
price twenty days immediately preceding the date of exercise, discounted by
fifty percent. Upon issuance of each one dollar ($1.00) investment, the Company
will issue warrants to purchase four (4) shares of common stock. The warrant is
exercisable from time to time up to two (2) years from the date of issuance at
an exercise price equal to the lesser of $0.007 per share or the average per
share price of the three lowest inter-trading day prices during the twenty days
immediately preceding the exercise.

F-11
Board of Directors
Insynq, Inc.

We have audited the accompanying balance sheet of Insynq, Inc. (a development
stage company) as of May 31, 2001, and the related statements of operations,
stockholders' deficit, and cash flows for the year 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 audit. The financial statements of Insynq, Inc. as of May 31, 2000 and for
the year then ended, including cumulative results of operations, statement of
stockholders' deficit and cash flows from inception (August 31, 1998) through
May 31, 2000, were audited by another auditor whose report dated December 5,
2000, expressed an unqualified opinion with an explanatory paragraph addressing
a substantial doubt about the Company's ability to continue as a going concern.
Our opinion, insofar as it relates to the cumulative amounts through May 31,
2000, is based solely on the report of the other auditor.

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

In our opinion, the 2001 financial statements referred to above present fairly,
in all material respects, the financial position of Insynq, Inc. as of May 31,
2001, and the results of its operations and its cash flows for the year then
ended and the period from inception through May 31, 2001, in conformity with
accounting principles generally accepted in the United States of America.

The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As shown in the financial statements,
the Company incurred a net loss of $14,075,218 during the year ended May 31,
2001, and at that date had deficits in working capital and stockholders' equity.
These factors, among others, as discussed in note D to the financial statements,
raise substantial doubt about the Company's ability to continue as a going
concern. Management's plans in regard to these matters are also described in
note D. The financial statements do not include any adjustments that might
result from the outcome of this uncertainty.

/s/GRANT THORNTON LLP

Seattle, Washington
July 26, 2001

F-12

G. BRAD BECKSTEAD
Certified Public Accountant
330 E. Warm Springs
Las Vegas, NV 89119
702.257.1984
702.362.0540 fax

INDEPENDENT AUDITOR'S REPORT

Board of Directors
Insynq, Inc.
(A Development Stage Company)
Tacoma, WA 98405

I have audited the Balance Sheet of Insynq, Inc. (formerly Xcel Management,
Inc.) (the "Company") (A Development Stage Company) as of May 31, 2000, and the
related Statements of Income, Stockholders' Equity, and Cash Flows for the year
then ended. These financial statements are the responsibility of the Company's
management. My responsibility is to express an opinion on these financial
statements based on my audit.

I conducted my audit in accordance with generally accepted auditing standards.
Those standards require that I 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 statement presentation. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. I believe that my audit provides a reasonable basis for my
opinion.

In my opinion, the financial statements referred to above present fairly, in all
material respects, the financial position of Insynq, Inc. (A Development Stage
Company) as of May 31, 2000, and the results of its operations, changes in
stockholders' equity, and cashflows for the year then ended, in conformity with
generally accepted accounting principles.

The accompanying financial statements have been prepared assuming the Company
will continue as a going concern. As discussed in Note 14 to the financial
statements, the Company has had limited operations. This raises substantial
doubt about its ability to continue as a going concern. Management's plans in
regard to these matters are also described in Note D. The financial statements
do not include any adjustments that might result from the outcome of this
uncertainty.

/s/ G. Brad Beckstead
September 13, 2001

F-13

Insynq, Inc.
(a development stage company)

Balance Sheets

ASSETS

May 31,
------------------------------------------------
2001 2000
--------------------- ---------------------

Current assets
Cash $ 26,900 $ 106,806
Accounts receivable, net of allowance for doubtful accounts
of $25,000 and $1,469 at May 31, 2001 and 2000 27,469 63,405
Related party receivables 98,990 -
Inventories - 29,512
Prepaid expenses 61,962 46,098
------ ------
Total current assets 215,321 245,821

Property and equipment, net 756,493 1,031,675

Other assets
Intangible assets, net 52,585 87,824
Deposits 72,000 165,584
------ -------
Total assets $ 1,096,399 $ 1,530,904
================= =================

LIABILITIES AND STOCKHOLDERS' DEFICIT

Current liabilities
Current portion of capital lease obligations $ 692,208 $ 166,869
Notes payable 27,973 14,470
Related party notes payable 1,318,251 25,000
Accounts payable 1,001,395 296,946
Accrued liabilities 1,129,695 134,279
Customer deposits 49,684 49,286
Deferred compensation 107,175 -
------- ------
Total current liabilities 4,326,381 686,850

Advances from stockholder - 100,000
Capital lease obligations, net of current portion 29,256 442,087
Commitments and contingencies - -
Put option obligation - 1,071,785

Stockholders' deficit
Preferred stock, $0.001 par value, 10,000,000 shares
authorized, no shares issued and outstanding - -
Class A common stock, $0.001 par value, 10,000,000
shares authorized, no shares issued and outstanding - -
Common stock, $0.001 par value, 100,000,000 shares 33,532 19,621
authorized
Additional paid-in capital 15,430,507 3,132,903
Unearned compensation and services (725,717) -
Accumulated development stage deficit (17,997,560) (3,922,342)
----------- ----------

Total stockholders' deficit (3,259,238) (769,818)
---------- --------
Total liabilities and stockholders' deficit $ 1,096,399 $ 1,530,904
================= ================

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

F-14
Insynq, Inc.
(a development stage company)

Statements of Operations

Cumulative results of
operations since
Year ended May 31, inception
--------------------------------------
2001 2000 (August 31, 1998)
---------------- ---------------- -----------------------

Revenues $ 493,008 $ 235,808 $ 742,432

Costs and expenses
Direct cost of services 1,258,932 789,907 2,102,102
Selling, general and administrative
Non-cash compensation 4,242,072 1,116,666 5,363,995
Other 4,572,004 1,856,222 6,513,291
Network and infrastructure costs 154,445 94,303 255,786
Research and development 296,703 105,752 402,455
------- ------- -------
10,524,156 3,962,850 14,637,629
---------- --------- ----------
Loss from operations (10,031,148) (3,727,042) (13,895,197)

Other income (expense)
Other income 11,569 46,786 58,355
Loss on disposal of equipment (114,464) - (114,464)
Interest expense
Non-cash (3,680,583) (23,600) (3,704,183)
Other (260,592) (75,011) (342,071)
-------- ------- --------
(4,044,070) (51,825) (4,102,363)
---------- ------- ----------

Net loss $(14,075,218) $ (3,778,867) $ (17,997,560)
============ ============= =====================

Net loss per common share - basic and diluted $ (0.57) $ (0.27) $ (1.05)
============ ============= =====================

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

F-15
Insynq, Inc.
(a development stage company)

Statement of Stockholders' deficit
Inception (August 31, 1998) through May 31, 2001

Unearned Accumulated
Common Stock Additional Compensation Development Total
--------------- Paid-in and Stage Stockholders'
Shares Amount Capital Services Deficit Deficit
------------------- ----------- ------------ ------------ -----------

Issuance to founders, August 31, 11,284,479 $11,284 $123,716 $ - $ 257 $ 135,257
1998

Net loss, year ended May 31, 1999 - - - - (143,732) (143,732)
---------- --------- --------- ------------ ------- -------

Balance, May 31, 1999 11,284,479 11,284 123,716 - (143,475) (8,475)

Common stock warrants issued for - - 782,844 - - 782,844
fair value of services rendered
in 1999

Issuance of common stock for 700,000 700 50,050 - - 50,750
services performed in 1999
valued at$0.07 per share

Allocation of discount on lease - - 118,000 - - 118,000
obligation with attached
warrants in September 1999

Issuance of common stock at $0.71 373,798 374 264,626 - - 265,000
per share in August 1999

Issuance of common stock for 59,000 59 58,941 - - 59,000
services valued at $1.00 per
share in September 1999

Issuance of common stock for 59,000 59 58,941 - - 59,000
services valued at $1.00 per
share in November 1999

Issuance of common stock for 76,735 77 54,323 - - 54,400
services valued at $0.71
per share in December 1999

Issuance of units of common stock 1,311,821 1,312 928,688 - - 930,000
with one A warrant and one B
warrant at $0.71 in January
2000

Issuance of common stock in 3,600,090 3,600 (2,359) - - 1,241
reverse merger transaction
with Xcel Management

Issuance of common stock at $0.50 1,300,000 1,300 648,700 - - 650,000
per share in February 2000

Continued

F-16
Insynq, Inc.
(a development stage company)

Statement of Stockholders' deficit - Continued
Inception (August 31, 1998) through May 31, 2001

Unearned Accumulated
Common Stock Additional Compensation Development Total
-------------------- Paid-in and Stage Stockholders'
Shares Amount Capital Services Deficit Deficit
---------------------- ------------ ------------ ------------ ------------

Issuance of common stock for 43,265 43 30,629 - - 30,672
services valued at $0.71
per share in February 2000

Issuance of common stock at $0.50 300,000 300 149,700 - - 150,000
per share in February 2000

Issuance of common stock at $1.75 61,944 62 108,340 - - 108,402
per share in April 2000

Issuance of common stock at $1.75 285,714 286 499,714 - - 500,000
per share in April 2000 with
repurchase agreement and
record put option obligation

Record put option obligation - - (1,071,785) - - (1,071,785)

Issuance of common stock at $2.00 125,000 125 249,875 - - 250,000
per share in May 2000

Issuance of common stock for 40,000 40 79,960 - - 80,000
services valued at $2.00 per
share in May 2000

Net loss, May 31, 2000 - - - - (3,778,867) (3,778,867)
---------- ------ --------- ------ --------- ---------
Balance, May 31, 2000 19,620,846 19,621 3,132,903 - (3,922,342) (769,818)

Issuance of common stock for 250,000 250 812,250 (33,858) - 778,642
services valued at $3.25
per share in June 2000 and
record unearned compensation
over service period

Issuance of common stock at $0.60 200,000 200 119,800 - - 120,000
per share in August 2000

Issuance of common stock at 135,000 135 39,865 - - 40,000
$0.2963 per share in August
2000

Issuance of common stock for 3,500 3 22,932 - - 22,935
services valued at $1.32 per
share in August 2000

Issuance of common stock for 250,000 250 327,250 (18,193) - 309,307
services valued at $1.32 per
share in September 2000 and
record unearned compensation
over service period

Continued

F-17
Insynq, Inc.
(a development stage company)

Statement of Stockholders' deficit - Continued Inception
(August 31, 1998) through May 31, 2001

Unearned Accumulated
Common Stock Additional Compensation Development Total
----------------------- Paid-in and Stage Stockholders'
Shares Amount Capital Services Deficit Deficit
----------------------- ---------- ------------ ----------- ------------

Issuance of common stock for 600,000 600 179,400 - - 180,000
the exercise of stock options
at $0.30 in September 2000

Issuance of common stock for 8,000 8 14,152 - - 14,160
exercising of warrants at
$1.77 per share in September
2000

Forfeiture of common stock issued (35,264) (35) 35 - - -
for services

Issuance of common stock for 3,500 4 3,441 - - 3,445
services valued at $0.9843
per share in November 2000

Allocation of discount on convertible - - 900,000 - - 900,000
debentures with warrants and
beneficial conversion feature

Allocation of discount on notes - - 229,000 - - 229,000
payable with warrants

Issuance of common stock for 1,855,796 1,856 2,313,658 - - 2,315,514
conversion of debentures
and accrued interest at
$0.50 per share in November
2000

Issuance of common stock for 1,510,000 1,510 1,885,990 - - 1,887,500
conversion of notes payable
at $0.50 per share in
November 2000

Issuance of common stock for the 500,000 500 4,500 - - 5,000
exercise of stock options
at $0.01 per share in December
2000

Issuance of common stock for the 15,504 16 14,984 - - 15,000
exercise of stock options at
$0.9675 per share in December
2000

Issuance of common stock at $0.34 85,000 85 29,138 - - 29,223
per share pursuant to settlement
agreement in December 2000.

Forfeiture of common stock issued (63,170) (63) 63 - - -
for services in December 2000

Issuance and exercise of options 600,000 600 1,038,310 (203,100) - 835,810
for services at $0.4062 per
share in January 2001 and
record unearned compensation
over service period

Issuance of common stock in lieu 148,488 148 50,902 - - 51,050
of payment on note payable at
$.3438 per share in January
2001

Continued

F-18
Insynq, Inc.
(a development stage company)

Statement of Stockholders' deficit - Continued Inception
(August 31, 1998) through May 31, 2001

Issuance of common stock for 3,500 3 2,622 - - 2,625
services valued at $0.75 per
share in February 2001

Issuance of common stock for 100,000 100 44,310 - - 44,410
the exercise of warrants at
$0.50 per share in February
2001

Issuance of common stock at 135,000 135 29,227 - - 29,362
$0.25 per share in March
2001, net of stock issuance
cost

Issuance of common stock at 50,000 50 20,260 - - 20,310
$0.4062 per share through
the exercise of stock options
in March 2001 for cash and in
employee compensation payable

Issuance of common stock in 25,000 25 10,130 - - 10,155
lieu of employee compensation
at $0.4062 per share in
March 2001

Issuance of common stock at 22,000 22 3,806 - - 3,828
$0.20 per share in March 2001,
net of stock issuance cost

Issuance of common stock at 425,000 425 145,690 (105,936) - 40,179
$0.3438 per share in March 2001,
for services and record unearned
compensation over service period

Issuance of common stock at 10,908 11 3,739 - - 3,750
$0.3438 per share in lieu of
accounts payable in March 2001

Issuance of common stock at 125,000 125 24,875 - - 25,00
$0.20 per share for the
exercise of stock warrants
in March 2001

Issuance of common stock at 92,000 92 30,093 (27,669) - 2,516
$0.3281 per share in March 2001,
for services and record unearned
compensation over service period

Issuance of common stock at $0.3281 125,000 125 40,888 - - 41,013
per share in April 2001 for
services

Issuance of common stock at $0.18 300,000 300 53,700 (33,387) - 20,613
per share in March 2001 for
services and record unearned
compensation over service period

Issuance of common stock in return 1,733,016 1,733 1,070,052 - - 1,071,785
of put shares during January 2001
through May 17, 2001

Continued

F-19
Insynq, Inc.
(a development stage company)

Statement of Stockholders' deficit - Continued Inception
(August 31, 1998) through May 31, 2001

Total
Common Stock Additional Unearned Accumulated Stockholders'
------------------------ Paid-in Compensation Development Stage
Shares Amount Capital and Services Deficit Deficit
------------------------ ------------ ------------- ------------- -------------

Issuance of common stock at 540,000 540 91,260 - - 91,800
$0.17 per share in lieu of
employee compensation in April
2001

Issuance of common stock at 315,000 315 21,735 - - 22,050
$0.07 per share for the exercise
of stock options in April 2001

Issuance of common stock at 25,000 25 1,725 - - 1,750
$0.07 per share in lieu of
employee compensation in April
2001

Issuance of common stock at 600,275 600 41,419 - - 42,019
$0.07 per share in lieu of
employee compensation in April
2001 through the exercise of
stock options

Issuance of common stock at 125,000 125 21,125 - - 21,250
$0.3281 per share in April
2001 for services

Issuance of common stock at 290,000 290 46,110 (42,533) - 3,867
$0.16 per share for services
in May 2001

Issuance of common stock at 22,028 22 10,997 - - 11,019
$0.50 per share in lieu of
accounts payable in May 2001
through the exercise of stock
warrants

Issuance of common stock at 75,000 75 32,265 - - 32,340
$0.4312 per share in lieu of
accounts payable in May 2001
through the exercise of stock
warrants

Issuance of common stock at 66,667 67 9,933 - - 10,000
$0.15 per share for services
in May 2001

Issuance of common stock at 1,360,000 1,360 93,840 - - 95,200
$0.07 per share for the
exercise of stock options
in May 2001

Issuance of common stock at 500,000 500 46,974 - - 47,474
$0.0949 per share in lieu of
employee compensation in
May 2001

Continued

F-20
Insynq, Inc.
(a development stage company)

Statement of Stockholders' deficit - Continued Inception
(August 31, 1998) through May 31, 2001

Accumulated
Common Stock Additional Unearned Development Total
--------------------- Paid-in Compensation Stage Stockholders'
Shares Amount Capital and Services Deficit Deficit
--------------------- ---------- ------------ ----------- ------------

Issuance of common stock at $0.07 140,000 140 9,660 - - 9,800
per share in lieu of employee
compensation through exercise of
options in May 2001

Issuance of common stock at $0.17 435,000 435 73,515 (44,370) - 29,580
per share for services in May 2001
and record unearned compensation
over service period

Issuance of common stock at $0.12 3,500 4 416 - - 420
per share for services in May 2001

Issuance of warrants to non- - - 991,952 (13,205) - 978,747
employees for services and
record unearned compensation
over the service period
during May 2001

Issuance of stock options to non- - - 352,006 (203,466) - 148,540
employees for services and
record unearned compensation
over service period during
May 2001

Issuance of stock options to - - 867,810 - - 867,810
employees with exercise price
below fairmarket on date of
grant during May 2001

Net loss for the year - - - - (14,075,218) (14,075,218)
---------- ------- ----------- --------- ------------ -----------
Balance, May 31, 2001 33,531,094 $33,532 $15,430,507 $(725,717) $(17,997,560) $ (3,259,238)
========== ======= =========== ========= ============ =============

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

F-21

Insynq, Inc.
(a development stage company)

Statements of Cash Flows

Cumulative cash
flows
Year ended May 31, since inception
------------------ ---------------
2001 2000 (August 31, 1998)
---- ---- ---------------

Increase (Decrease) in Cash

Net loss .......................................................... $(14,075,218) $ (3,778,867) $(17,997,560)
Adjustment to reconcile net loss to cash used in
operating activities:
Depreciation and amortization .............................. 279,329 195,610 484,586
Loss on disposal of equipment .............................. 114,464 -- 114,464
Issuance of common stock for services ...................... 2,246,975 333,822 2,586,054
Issuance of options and warrants for services .............. 1,127,287 782,844 1,910,131
Issuance of options to employees under fair market value ... 867,810 -- 867,810
Warrants issued with debt and capital leases ............... 1,392,967 23,600 1,416,567
Warrants and beneficial conversion features of debentures .. 2,287,616 -- 2,287,616
Change in assets and liabilities:
Accounts receivable and related party receivables (63,054) (59,981) (126,459)
Inventories ..................................... 29,512 (27,266) --
Prepaid expenses ................................ (14,705) (9,726) (73,973)
Deposits ........................................ 93,584 (165,583) (72,000)
Accounts payable ................................ 795,282 268,247 1,092,228
Accrued liabilities ............................. 1,167,466 11,061 1,351,031
Customer deposits .................................... 398 49,286 49,684
Deferred compensation ................................ 107,175 -- 107,175
------- ------- -------

Net cash used in operating activities ........ (3,643,112) (2,376,953) (6,002,646)
---------- ---------- ----------

Cash flows from investing activities
Purchase of equipment ............................................. (68,862) (397,544) (481,776)
Acquisition of intellectual property .............................. -- -- (1,548)
Deposit on future acquisition ..................................... -- (35,000) (35,000)
Cash received from Xcel acquisition ............................... -- 257 257
---- --- ---

Net cash used in investing activities ........ (68,862) (432,287) (518,067)
------- -------- --------

Cash flows from financing activities
Proceeds from notes payable and related party notes payable ....... 2,129,887 -- 2,129,887
Proceeds from issuance of common stock ............................ 734,320 2,853,402 3,587,722
Proceeds from on convertible debentures ........................... 800,000 -- 800,000
Payments on short term notes payable .............................. (18,133) (30,530) (48,663)
Payments on capital lease obligations ............................. (14,006) (7,327) (21,333)
Advances from stockholder ......................................... -- 100,000 100,000
------ ------- -------

Net cash provided by financing activities .... 3,632,068 2,915,545 6,547,613
--------- --------- ---------
Net increase (decrease) in cash ........................................... (79,906) 106,305 26,900
Cash at beginning of period ............................................... 106,806 501 --
------- ---
Cash at end of period ..................................................... $ 26,900 $ 106,806 $ 26,900
========== ========== ==========

Supplemental non-cash investing and financing activities - see note Q

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

F-22
Insynq, Inc.
(a development stage company)

NOTES TO FINANCIAL STATEMENTS
May 31, 2001

NOTE A - NATURE OF BUSINESS

Insynq, Inc. (the Company or Insynq) is a Delaware corporation headquartered in
Tacoma, Washington USA. The Company is an application hosting and managed
software service provider that provides server-based computing access and
services to customers who decide to augment all or part of their information
technology requirements. Customers pay a monthly fee for their services and
connect to Insynq's server farm primarily through either the Internet, wireless
or DSL connection. During the year ended May 31, 2001, the Company's planned
principal operations began however, there has been no significant revenues
generated. In accordance with Statement of Financial Accounting Standard No. 7
(SFAS 7), it is management's position that it has been devoting most of its
efforts to raising capital as evidenced by the number of financing and equity
transactions. In addition, the Company is continuing the practice of offering
discounted services in an effort to establish new market segments and
acceptance. Accordingly, the Company is considered to be a development stage
company.

NOTE B - BASIS OF PRESENTATION

On February 18, 2000, the Company closed an asset purchase transaction
(Acquisition) in which Xcel Management, Inc. (Xcel), a non-operating public
shell company, acquired substantially all of the assets of Insynq. Under
accounting principles generally accepted in the United States of America, the
Acquisition is considered to be a capital transaction in substance, rather than
a business combination. That is, the Acquisition is equivalent to the issuance
of stock by Insynq for the net monetary assets of Xcel accompanied by a
recapitalization, and is accounted for as a change in capital structure.
Accordingly, the accounting for the Acquisition is identical to that resulting
from a reverse acquisition, except that no goodwill is recorded. Under reverse
takeover accounting, the post-reverse-acquisition financial statements of the
"legal acquirer" Xcel, are those of the "legal acquiree" Insynq (the accounting
acquirer).

On August 3, 2000, Xcel completed a re-incorporation as a Delaware corporation
and changed its' name to Insynq, Inc. In connection with the re-incorporation of
the Company in the State of Delaware, the shareholders unanimously voted for the
adoption of a plan of recapitalization pursuant to which the issued and
outstanding shares of the Company's common stock, would forward split,
two-for-one, so that holders of common stock would receive two shares of the
Company's $0.001 par value common stock for each share held. The 9,915,424
shares of common stock outstanding immediately prior to the reorganization were
converted to 19,830,848 shares of common stock, and outstanding options and
warrants to purchase shares were converted into options and warrants entitling
the holders to purchase twice as many shares upon exercise of such options and
warrants. Loss per share calculations includes the Company's change in capital
structure for all periods presented.

NOTE C - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

A summary of the significant accounting policies consistently applied in the
preparation of the accompanying financial statements is as follows.

REVENUE RECOGNITION

The Company's principal source of revenue is generated from application hosting,
managed software and related type services. Payments received in advance of the
service, even if non-refundable, are recorded as customer deposits. Generally,
any prepaid amount is an advance payment and is applied to the last month
service fee. Revenues are recognized over the service period. Revenue from the
sale of computer hardware is recorded upon delivery, or upon installation when
specified under contact terms.

F-23
Insynq, Inc.
(a development stage company)

NOTES TO FINANCIAL STATEMENTS
May 31, 2001

NOTE C - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Continued

INVENTORIES

Inventories consist of computer hardware and equipment held for resale and is
recorded at the lower of cost (first in, first out) or market.

PROPERTY AND EQUIPMENT

Property and equipment is stated at cost less accumulated depreciation and
amortization. Depreciation and amortization is calculated using the
straight-line method over the estimated useful lives of the assets ranging
between three to seven years. Leasehold improvements are depreciated over the
lesser of the useful lives of the improvements or the term of the lease.

INTANGIBLE ASSETS

Intangible assets consist of the rights to a proprietary data utility services
system acquired by the Company. The cost is being amortized over sixty months.
Accumulated amortization totaled $77,415 and $43,724 as of May 31, 2001 and
2000, respectively.

LONG-LIVED ASSETS

Long-lived assets, including, but not limited to, property and equipment and
identifiable intangibles held and used by the Company are reviewed for
impairment whenever events or changes in circumstances indicate that the
carrying amount of the asset may not be recoverable. The Company believes that
no impairment of the carrying amount of its long-lived assets existed at May 31,
2001 and 2000.

CLASS A COMMON STOCK

The Board of Directors is authorized to issue of up to 10,000,000 shares of
Class A common stock pursuant to which the holders of such stock are entitled to
three votes for each share held, on all matters submitted to stockholders, which
voting power may be used by the holders of such stock to create voting
impediments or otherwise delay or prevent a change in control or to modify the
rights of holders of the Company's common stock. As of May 31, 2001, 5,000,000
options to purchase Class A common stock at $0.50 per share were granted to two
officers and were outstanding. These options are included in the employee stock
options referenced in Notes L and M.

LOSS PER SHARE

Basic loss per share is based on the weighted average number of common shares
outstanding during the period. The weighted average number of common shares
outstanding was 24,808,590 and 14,050,928 for the years ended May 31, 2001 and
2000, respectively, and 17,201,296 since inception (August 31, 1998) through May
31, 2001. Diluted loss per share includes the effect of all potentially dilutive
common stock issuances. Diluted loss per share is not presented because the
effect would be anti-dilutive. At May 31, 2001 and 2000, there were 21,447,545
and 8,572,248 shares of potentially issuable common stock, respectively.

RESEARCH AND DEVELOPMENT COSTS

Research and development costs are charged to expense in the period when
incurred.

F-24
Insynq, Inc.
(a development stage company)

NOTES TO FINANCIAL STATEMENTS
May 31, 2001

NOTE C - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Continued

ADVERTISING EXPENSE

Advertising costs are expensed in the period incurred. For the years ended May
31, 2001 and 2000, advertising costs totaled $198,726 and $97,715, respectively.

CONCENTRATIONS OF CREDIT RISK

The Company sells the majority of its services throughout North America. The
majority of the Company's sales are made to customers who are billed monthly on
an open account and no collateral is required. For the year ended May 31, 2001,
approximately thirty percent (30%) of revenues were to four customers, one of
which is a related party comprising eight percent (8%) of the total revenues.

Insynq has established four vendor relationships that are critical to the
day-to-day operations of the Company. The vendors are in the software, hardware,
systems and communications industries. These vendors supply software and
hardware to run the programs and systems, and provide the means through which
the Company connects and communicates with its customers.

FAIR VALUE OF FINANCIAL INSTRUMENTS

Financial instruments, consisting principally of cash, accounts receivable,
payables, accrued liabilities, short and long-term obligations, and their
carrying amounts in the accompanying balance sheets, approximate their fair
values. It is management's opinion that the Company is not exposed to
significant currency or credit risks arising from these financial instruments.

USE OF ESTIMATES

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

RECLASSIFICATIONS

Certain reclassifications have been made to the 2001 presentation in order to
conform to the 2000 presentation.

NEW AUTHORITATIVE ACCOUNTING PRONOUNCEMENTS

In December 1999, the Securities and Exchange Commission issued Staff Accounting
Bulletin No. 101 (SAB 101), Revenue Recognition in Financial Statements. SAB 101
provides guidance on applying accounting principles generally accepted in the
United States to revenue recognition in financial statements and is effective in
the fourth quarter of all fiscal years beginning after December 15, 1999. During
fiscal year 2001, the Company had recorded revenues in accordance with SAB 101,
so the implementation of SAB 101 did not have an impact on the Company's
operating results.

F-25
Insynq, Inc.
(a development stage company)

NOTES TO FINANCIAL STATEMENTS
May 31, 2001

NOTE C - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Continued

In April 2000, the Financial Accounting Standards Board issued FASB
Interpretation No. 44 (FIN 44), Accounting for Certain Transactions Involving
Stock Compensation, an interpretation of APB Opinion No. 25. FIN 44 is effective
for transactions occurring after July 1, 2000. During fiscal year 2001, the
Company had been applying FIN 44.

In June 2001, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 141 (SFAS 141), Business Combinations. SFAS
141 applies to all business combinations initiated after June 30, 2001. The
Statement also applies to all business combinations accounted for using the
purchase method for which the date of acquisition is July 1, 2001, or later. The
adoption of SFAS 141 will not have an impact on the Company's financial
statements.

In June 2001, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards (SFAS) No. 142, Goodwill and Other Intangible
Assets. The provisions of SFAS 142 are required to be applied starting with
fiscal years beginning after December 15, 2001 with earlier application
permitted for entities with fiscal years beginning after March 15, 2001 provided
that the first interim financial statements have previously been issued. The
statement is required to be applied at the beginning of the entity's fiscal year
and to be applied to all goodwill and other intangible assets recognized in its
financial statements to that date. The initial application of the SFAS 142 will
have no impact on the Company's financial statements.

NOTE D - MANAGEMENT PLANS

The Company is a development stage company as defined under Statement of
Financial Accounting Standards No. 7. The Company is devoting substantially all
of its present efforts to establishing a new business and its planned operations
have recently commenced. However, no significant operating revenues have been
derived to date. The Company has incurred recurring losses from operations and
has a total accumulated development stage deficit of $17,997,560 at May 31,
2001. As discussed in Note J, the Company is in default on a capitalized lease
obligation. The underlying leased assets are critical to the Company's
operations. The Company has initiated contact to restructure the lease
obligation and, due to the current economic climate and current market for the
equipment, the Company anticipates that it can successfully restructure this
obligation. The development of the Company's technology and products will
continue to require a commitment of substantial funds. Currently, the Company
has no material capital commitments. However, should the Company be forced to
seek other equipment in the open market based on its inability to restructure
its capital lease obligation, the Company would attempt to raise the necessary
finances. These amounts, however, are currently unquantifiable.

The Company has implemented cost restructuring strategies, cost-cutting
measures, and continues to devote significant efforts to develop markets. In
addition, the Company initiated vendor negotiations resulting in improved
payment terms or reductions in the total amounts due.

However, the rate at which the Company expends its resources is variable, may be
accelerated, and will depend on many factors. The Company will need to raise
substantial additional capital to fund its operations and may seek such
additional funding through public or private equity or debt financing. There can
be no assurance that such additional funding will be available on acceptable
terms, if at all. The Company's continued existence as a going concern is
ultimately dependent upon its ability to secure additional funding for
completing and marketing its technology and the success of its future
operations.

F-26
Insynq, Inc.
(a development stage company)

NOTES TO FINANCIAL STATEMENTS
May 31, 2001

NOTE D - MANAGEMENT PLANS - Continued

In addition, on June 29, 2001, the Company entered into a private financing
transaction with three investors under which the investors initially purchased
$550,000 from a total of $1,200,000 12% convertible debentures. The Company
anticipates receiving the remaining $650,000, less certain fees, upon successful
registration of certain shares of the common stock.

NOTE E - PROPERTY AND EQUIPMENT

Property and equipment consist of the following as of May 31:

2001 2000
---- ----

Computer hardware ............................ $ 86,820 $ 144,621
Software ..................................... 97,550 105,536
Equipment .................................... 149,715 217,468
Furniture and fixtures ....................... 43,990 86,650
Capitalized leased equipment ................. 668,959 587,517
Leasehold improvements ....................... 58,036 51,365
------ ------
1,105,070 1,193,157

Less accumulated depreciation and amortization 348,577 161,482
------- -------
$ 756,493 $1,031,675
========== ==========

Accumulated depreciation on capital lease equipment totaled $216,264 and $83,686
as of May 31, 2001 and 2000, respectively.

NOTE F - ACCRUED LIABILITIES

Accrued liabilities consist of the following as of May 31:

2001 2000
---- ----
Salaries and benefits $254,285 $ 62,309
Payroll taxes ........ 448,061 37,779
Interest and penalties 102,565 --
Other taxes .......... 45,082 --
Interest ............. 50,247 --
Consulting and other . 229,455 34,191
------- ------
$ 1,129,695 $134,279
=========== ========

As of May 31, 2001, the Company was delinquent on its payroll and business
taxes. The majority of the past due amount is for payroll taxes which are due to
the Internal Revenue Service. The Company and the Internal Revenue Service have
informally agreed to a payment plan for the past due taxes, subject to the
Company remaining current on all future payroll tax deposits. The Company has
been in contact with other respective taxing authorities to initiate payment
plans in settlement of their respective past due taxes.

F-27
Insynq, Inc.
(a development stage company)

NOTES TO FINANCIAL STATEMENTS
May 31, 2001

NOTE F - ACCRUED LIABILITIES - Continued

Additionally, two liens have been filed by two different States for past due
taxes, plus accrued penalties and interest. One lien, for approximately $28,000,
is to a State for prior year's income taxes assessed to the predecessor company
of Insynq, Inc. This amount is in dispute and amended returns to correct this
deficiency have been filed.

NOTE G - RELATED PARTY NOTES PAYABLE

The Company has entered into short-term promissory notes with stockholders, a
corporate officer, a prior employee and two vendors. All notes, plus accrued
interest, are due within one year of issuance and consist of the following at
May 31:

2001 2000
---- ----

Note payable to stockholder, due November 2, 2001, plus accrued
interest; bears interest at 10% per annum and is unsecured $1,162,000 $ --

Various notes payable to related parties, due on demand to dates
ranging through April 20, 2002; bearing interest ranging from 10% to 12% 146,402 25,000

Two notes payable to related party vendors, installment payment of
$1,692 due monthly through August 15, 2001 and final payment due March 9,849 --
2002; bearing interest ranging from 10% to 12% --------- -------
$1,318,251 $25,000
========= =======

On July 17, 2000, the Company entered into two stockholder promissory note
agreements totaling $255,000. In addition, the stockholders were granted
warrants to purchase a total of 325,000 shares of common stock at a price of
$2.00 per share. The Company recorded a discount on the loans totaling $229,000
for the fair value of warrants granted. The Company recognized $229,000 of
interest expense on the discount for the year ended May 31, 2001. In November
2000, the loans were converted into 510,000 shares of common stock at $0.50 per
share.

In October 2000, the Company entered into three additional shareholder loans
totaling $500,000. These notes were also converted in November 2000 into
1,000,000 shares of common stock at $0.50 per share. As an inducement to the
holders to convert the loans, the Company agreed to convert the loans into
common stock at a price below the fair market value of the common stock at the
time of conversion. This resulted in additional interest expense totaling
$1,132,500 for the year ended May 31, 2001.

On December 1, 2000, the Company entered into a promissory note agreement with a
stockholder for $50,000 with accrued interest of prime, plus 3%. The principal
and accrued interest was converted to 148,488 shares of common stock on January
30, 2001.

F-28
Insynq, Inc.
(a development stage company)

NOTES TO FINANCIAL STATEMENTS
May 31, 2001

NOTE H - NOTES PAYABLE

The Company has a $15,000 revolving line of credit. As of May 31, 2001 and 2000,
the balance was $13,973 and $10,200, respectively. As of May 31, 2001, the
Company has an additional payable totaling $14,000 due on demand.

NOTE I - CONVERTIBLE DEBENTURES

On June 16, 2000, the Company entered into two loan agreements for a total of
$650,000, in the form of convertible debentures. The principal balance of the
loans and accrued interest were convertible into common stock at $1.42 and $0.71
per share, respectively. In addition, the Company granted 915,492 warrants to
purchase common stock at $2.00 per share. On September 16, 2000, the Company
entered into two additional convertible debenture agreements totaling $250,000.
The loans and accrued interest was convertible into common stock at $1.00 per
share. In addition, the Company granted 250,000 warrants to purchase common
stock at $1.00 per share to the holders of the debentures.

The Company recorded a discount on the convertible debentures totaling $900,000,
equal to the fair value of the warrants received and the intrinsic value of the
beneficial conversion feature. The Company has recognized $900,000 of interest
expense on the discount for the year ended May 31, 2001. As an inducement to
convert the balance of principal and related accrued interest of the debentures,
the Company reduced the original conversion share prices to $0.50. This resulted
in an additional interest charge in the amount of $1,387,616 for the year ended
May 31, 2001.

In November 2000, the Company converted the debentures totaling $900,000, plus
accrued interest of $55,796, into common stock at $0.50.

NOTE J - CAPITAL LEASE OBLIGATIONS

The Company leases equipment under capital leases expiring in 2003. As of May
31, 2001, the Company's principal capital lease (for computer hardware, printers
and related infrastructure) obligation is in default; accordingly, the entire
lease obligation plus imputed interest net of the discount, is classified as a
current obligation on the accompanying financial statements. Total net
obligation due this lessor is $668,136, net of a discount of $62,933.

F-29
Insynq, Inc.
(a development stage company)

NOTES TO FINANCIAL STATEMENTS
May 31, 2001

NOTE J - CAPITAL LEASE OBLIGATIONS - Continued

The following is a schedule by years of future minimum lease payments together
with the present value of the minimum payments under capital lease obligations,
net of discount, as of May 31, 2001:

Years ending May 31,
--------------------------------------------------------------------------
2002 $828,598
2003 33,040
-------
Future minimum lease payments 861,638
Less amount representing interest and discount 140,174
-------
Present value of minimum lease payments $721,464
=======
Current portion $692,208
Long-term portion 29,256
-------
$721,464
=======

NOTE K - PUT OPTION OBLIGATION

Pursuant to conversion agreements with four investors (stockholders), the
Company exchanged 1,733,016 of the investors' put shares for 1,733,016 shares of
common stock. The recorded amount of the converted put shares was $1,071,785 at
May 31, 2001.

NOTE L - COMMITMENTS AND CONTINGENCIES

OPERATING LEASES

The Company conducts a substantial portion of its operations utilizing leased
facilities for its corporate headquarters and for its server farm racks.

Effective August 1, 2001, the Company entered into two separate facility leases
for its corporate operations. The first lease is with the Company's existing
landlord and was amended pursuant to a settlement agreement between each party
on May 17, 2001. Terms of this lease call for base rent plus charges for a
portion of the Company's share of taxes and utilities over the next sixty
months. The second facility lease commences on August 1, 2001, and terminates on
July 31, 2002. Rent per month is $1,600 for the first twelve months.

A server farm racking agreement is for a term of twenty-four months, expiring on
May 31, 2003. The first year of the agreement calls for a monthly fee of $500
per rack, with a minimum of seven racks, or $3,500. The second year of the
agreement calls for a minimum fee of $550 per rack or $3,850. As of May 31,
2001, the Company has nine racks at the server farm.

F-30
Insynq, Inc.
(a development stage company)

NOTES TO FINANCIAL STATEMENTS
May 31, 2001

NOTE L - COMMITMENTS AND CONTINGENCIES - Continued

The following is a schedule of approximate future minimum operating lease
payments as of May 31, 2001:

Years ending May 31,
- ---------------------------------------------------------

2002 $ 235,500
2003 236,500
2004 189,800
2005 194,400
2006 199,200
Thereafter 34,000
-------
$1,089,400
=========

For the years ended May 31, 2001 and 2000, rent expense for facilities and
racking, including forfeited lease deposits as a result of amendments to the
lease terms during 2001, were approximately $375,000 and $179,000, respectively.

LAWSUIT

The Company is party to one lawsuit filed by a prior employee. The lawsuit claim
is for approximately $115,000 (plus accrued interest) for unpaid wages,
severance, bonuses, benefits and expenses. The Company's management believes the
claim is without merit and intends to vigorously defend its position of no
liability.

The Company has settled a lawsuit filed by a prior employee and has issued to
such employee $10,000 and 85,000 shares of common stock as of May 31, 2001.

CONSULTING AGREEMENTS

During the year ended May 31, 2001, the Company has several on-going agreements
with investor relation consultants, financial advisory, advertising and
marketing consultants, and sales persons. Terms of these agreements range from
six months to three years and most have automatic renewable provisions.
Compensation for these agreements may be in the form of cash or cash plus common
stock or options. Certain agreements contain provisions that are performance
based only, whereby an individual representing the Company must consummate an
acceptable transaction before the common stock or stock options will be issued.
Short-term (six months or less) monthly cash fees for consultants approximate
$18,500 and one long-term agreement (three years) is $10,000 per month. In
addition, a consulting group was paid its final $25,000 installment of a
three-month agreement in June 2001.

On July 1, 2001, the Company entered into a six-month agreement with an
independent consultant/advisor, in which the consultant will provide expertise
in financing, mergers and acquisitions. Terms of the agreement call for the sum
total of $67,000 paid over the contract, $7,500 at effective date of the
agreement and $60,000 paid in equal installments over the next six months. The
consultant will also receive 2,000,000 shares of common stock in July 2001. An
additional 500,000 shares of common stock will be issued to the consultant if
there is an acquisition of another company or its assets.

F-31
Insynq, Inc.
(a development stage company)

NOTES TO FINANCIAL STATEMENTS
May 31, 2001

NOTE L - COMMITMENTS AND CONTINGENCIES - Continued

EMPLOYMENT CONTRACTS

As of May 31, 2001, the Company has six employment contracts with its key
officers and employees. Each agreement calls for a base annual compensation,
currently ranging between $96,000 and $180,000. Five agreements contain wage
escalation clauses effective on the anniversary date of the agreement. The
agreements generally are written for three to fours years in duration. Each
agreement has an incentive clause with rights to exercise vested stock options
agreements at a predetermined price, generally granted at market value, and
range between $.50 and $2.00 per share. A total 6,560,000 options have been
granted under these agreements.

NOTE M - STOCK OPTIONS

On March 31, 2000, the Company's Board of Directors adopted two long-term
incentive plans (Plans), described as follows:

2000 LONG TERM INCENTIVE PLAN (LTIP)

2000 EXECUTIVE LONG TERM INCENTIVE PLAN (EXECUTIVE LTIP)

The Company's Board of Directors administers the Plans and the Board may amend
or terminate the Plans if it does not cause any adverse effect on any then
outstanding options or unexercised portion thereof. All options generally have
an exercise price equal the fair value of the underlying common stock on the
date of grant, vest immediately and expire in ten years.

The Company's stock option plan is subject to the provisions of SFAS No 123,
Accounting for Stock-Based Compensation. Under the provisions of this standard,
employee and director stock-based compensation expense is measured using either
the intrinsic-value method as prescribed by Accounting Principles Board (APB)
Opinion No. 25, Accounting for Stock Issued to Employees and related
Interpretations, or the fair value method described in SFAS No. 123. The Company
has elected to account for its employee and director stock-based awards under
the provisions of APB Opinion No. 25. Under APB Opinion No. 25, compensation
cost for stock options is measured as the excess, if any, of the fair value of
the underlying common stock on the date of grant over the exercise price of the
stock option.

F-32
Insynq, Inc.
(a development stage company)

NOTES TO FINANCIAL STATEMENTS
May 31, 2001

NOTE M - STOCK OPTIONS - Continued

The Company is required to implement the provisions of SFAS No. 123 for
stock-based awards to those other than employees and directors. Stock-based
compensation expense for all equity instruments is recognized on an accelerated
basis based on the related service or vesting periods. Companies choosing the
intrinsic-value method are required to disclose the pro forma impact of the fair
value method on net income. The pro forma effect on net loss and loss per share
are as follows for the years ended May 31:

2001 2000
---- ----
Net loss as reported $ (14,075,218) $ (3,778,867)
Pro Forma net loss (17,054,018) (5,700,015)

Loss per share as reported (0.57) (0.27)
Pro Forma loss per share (0.69) (0.33)

The fair value of options granted under the Company's stock option plans during
the years ended May 31, 2001 and 2000 was estimated on the date of grant, using
the Black-Scholes pricing model with the following assumptions:

Weighted average of expected risk-free interest rates 6.50%
Expected years from vest date to exercise date 2-10
Expected stock volatility 90%
Expected dividend yield 0%

A summary of the Company's LTIP and Executive LTIP stock option activity is as
follows:

Weighted Average
Activity Number of Exercise Price
Shares
Balance at May 31, 1999 -
Options granted 7,011,802 0.51
Option exercised -
Options forfeited -
---------
Balance at May 31, 2000 7,011,802 0.51
Options granted 8,568,760 0.41
Options exercised (2,816,229) 0.11
Options forfeited (1,851,802) 1.78
---------
Balance at May 31, 2001 10,912,531 0.65
==========
Exercisable options at May 31, 2001 8,695,028 0.63
========= ====

F-33
Insynq, Inc.
(a development stage company)

NOTES TO FINANCIAL STATEMENTS
May 31, 2001

NOTE M - STOCK OPTIONS - Continued

The weighted average remaining contractual life, in years, and weighted average
exercise price of options outstanding as of May 31, 2001 were as follows:

Weighted
Weighted Average Options Weighed
Range of Average Remaining Exercisable at Average
Exercise Options Exercise Contractual May 31, Exercise
Price Outstanding Price Life 2001 Price
- ----------------------------------------------------------------------------

0.18 - 0.19 400,000 $ 0.19 9.95 50,000 $ 0.18
0.34 - 0.71 7,794,153 0.46 8.75 6,864,153 0.47
0.81 - 1.03 1,700,000 0.97 8.95 1,040,830 0.94
1.63 - 2.31 1,018,378 1.79 4.29 740,045 1.70

The weighted average fair value of the options granted during the year ended May
31, 2001 and 2000 were $0.66 and $0.39, respectively.

During the year ended May 31, 2001, the Company recorded $1,249,476 of
additional employee compensation expense for the difference between the exercise
price of stock options and the fair value of the underlying common stock on the
date of grant. The unearned compensation of $381,666 has been presented as a
reduction of stockholders' equity in the accompanying financial statements and
is being amortized ratably over the vesting period of the applicable options.
The Company amortized an aggregate of $867,810 of compensation for the year
ended May 31, 2001.

NOTE N - WARRANTS

Warrants shares to purchase common stock outstanding as of May 31, 2001 totaled
12,752,112. Warrant exercise prices range between $0.13 to $3.75 per share of
common stock and substantially all warrants will expire on or before July 17,
2005. Since May 31, 2001, the Company has set aside an additional 2,871,280
warrants in connection with the pending acquisition of a Canadian company and
has rescinded 2,145,000 of previously issued warrants to two consulting groups.

During the year ended May 31, 2001, the Company recorded unearned services
totaling $344,051 for the fair value of warrants granted to consultants as a
reduction of stockholders' equity in the accompanying financial statements. Such
amount is being amortized ratably over the service period. Warrants issued by
the Company are valued on the date of grant using the Black-Scholes valuation
model using the following assumptions: weighted average risk free interest rate
of 6.5%; terms ranging from three months to five years; volatility of 90%; and,
0% dividend yield.

F-34
Insynq, Inc.
(a development stage company)

NOTES TO FINANCIAL STATEMENTS
May 31, 2001

NOTE O - INCOME TAXES

The Company utilizes the liability method of accounting for income taxes as set
forth in Statement of Financial Accounting Standards (SFAS) No. 109, Accounting
for Income Taxes. Under this method, deferred tax assets and liabilities are
recognized based on the anticipated future tax effects arising from the
differences between the financial statement carrying amounts of assets and
liabilities and their respective tax bases of assets and liabilities using
enacted tax rates.

The income tax provision reconciled to the tax computed at the statutory federal
rate is as follows for the year ended May 31:
2001 2000
---- ----

Tax benefit at federal statutory rate of 34% $(4,785,000) $(1,284,000)
Permanent differences 1,015,000 4,000
---------- ---------
(3,770,000) (1,280,000)
Increase in valuation allowance 3,770,000 1,280,000
--------- ---------
$ - $ -
========= =========

Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amounts of the assets and liabilities for financial
reporting purposes and the amounts used for income tax purposes. Significant
components of deferred Federal income tax are as follows at May 31:

2001 2000
---------------------
Deferred tax asset
Net operating loss carryforwards ..... $10,357,000 $7,557,000
Amortization ......................... 14,000 8,000
Accrued vacation ..................... 22,000 20,000
Allowance doubtful accounts .......... 8,000 -
Deferred compensation ................ 36,000 -
Employee stock options ............... 93,000 -
Warrants issued to consultants ....... 840,000 -
---------- ---------
Total deferred tax assets .... 11,370,000 7,585,000
--------- ---------
Deferred tax liability
Depreciation ......................... 70,000 55,000
------ ------
Total deferred tax liabilities 70,000 55,000
------ ------
Net deferred tax assets ...................... 11,300,000 7,530,000
Valuation allowance .......................... (11,300,000) (7,530,000)
$ - $ -
========== =========

F-35
Insynq, Inc.
(a development stage company)

NOTES TO FINANCIAL STATEMENTS
May 31, 2001

NOTE O - INCOME TAXES - Continued

The Company has recorded a valuation allowance for the full amount of the
deferred tax assets due to the uncertainty of future utilization of net
operating loss carryforwards and realization of other deferred tax assets. At
May 31, 2001, operating loss carryforwards of approximately $30,500,000,
expiring through 2021, are available to offset future taxable income.
Utilization of these carryforwards are significantly dependent on future taxable
income and any future tax benefit is further limited due to a change of control
in the Company's ownership as defined by the Internal Revenue Code, Section 382.

NOTE P - RELATED PARTY TRANSACTIONS

During the year ended May 31, 2001, the Company sold $41,400 of services and
received $37,500 of consulting services from a party related to a corporate
officer, director and stockholder.

NOTE Q - OTHER DISCLOSURES

The Company's non-cash investing and financing activities and supplemental cash
flow information were as follows for the year ended May 31:

2001 2000
-------------------

Conversion of debentures and accrued interest into common stock $2,315,514 $ --
Notes payable and interest converted to common stock .......... 1,938,550 --
Conversion of put options into common stock ................... 1,071,785 --
Discount for warrants granted and beneficial
conversion features on convertible debentures ........ 900,000 --
Discount for warrants granted with short term
notes payable and capital leases ..................... 229,000 118,000
Accounts payable converted to common stock .................... 154,557 --
Equipment purchased under capital leases ...................... 15,669 --
Purchase of assets with common stock .......................... -- 727

Cash paid for interest ........................................ $ 17,411 $ --

F-36
Insynq, Inc.
(a development stage company)

NOTES TO FINANCIAL STATEMENTS
May 31, 2001

NOTE Q - OTHER DISCLOSURES - Continued

Selling, General and Administrative Expenses consist of the following for the
year ended May 31:
2001 2000
----- ----
Salaries ......................... $2,861,649 $ 618,977
Benefits ......................... 67,663 61,774
Rent ............................. 375,641 131,521
Consulting ....................... 3,561,058 850,411
Legal, accounting and professional 854,283 793,081
Telephone and utilities .......... 105,442 41,232
Taxes ............................ 212,917 63,013
Supplies ......................... 78,226 40,399
Travel and entertainment ......... 158,927 140,677
Insurance ........................ 117,563 104,484
Other ............................ 420,707 29,574
------- ------
Total: ........................... $8,814,076 $2,875,143
========== ==========

Non-cash compensation $4,242,072 $1,116,666
Other ............... 4,572,004 1,856,222
--------- ---------

Total: .............. $8,814,076 $2,972,888
========== ==========

NOTE R - SUBSEQUENT EVENTS

FINANCING AGREEMENT

On June 29, 2001, the Company entered into a private financing transaction with
three investors under which the investors initially purchased $550,000 from a
total of $1,200,000 12% convertible debentures. The debentures are convertible
into shares of common stock at the lesser of (i) $0.18 or (ii) the average of
the lowest three trading prices in the twenty day trading period immediately
preceding the notice to convert, divided by two. The common stock carry attached
warrants that allow the investor, under the terms of the warrants, to purchase
up to 2,400,000 shares of common stock at $0.04 per share. Terms of the
debentures provide for full payment on or before June 29, 2002 (maturity date),
with accrued interest of 12% per annum. Proceeds from this initial transaction,
net of fees, were $465,000. The Company anticipates receiving $650,000, less
certain fees, upon successful registration of certain shares of the common
stock. Pursuant to the agreement, the Company may not, without consent, (i)
engage in any future equity financing involving the issuance of common stock for
a period of six months from the date of closing, and (ii) may not engage in such
transactions for a period of two years without first giving the investors the
opportunity to purchase shares on a pro-rata basis.

121,157,143 SHARES

INSYNQ, INC.

COMMON STOCK

PROSPECTUS

April 11, 2002

You should rely only on information contained in this prospectus. We have
not authorized anyone to give any information or make any representations in
connection with this offering other than those contained in this prospectus. If
anyone gives you any such information or makes any such representations, you
should not rely on it or them as having been authorized by us. This prospectus
is not an offer to sell common stock and it is not soliciting an offer to buy
common stock in any state where the offer and sale is not permitted. The
information contained in this prospectus is accurate only as of the date of this
prospectus, regardless of the time of delivery of this prospectus or of any sale
of our common stock.

II-1
PART II

ITEM 24. INDEMNIFICATION OF DIRECTORS AND OFFICERS.

The Delaware General Corporation Law authorizes a court to award, or a
corporation's board of directors to grant, indemnity to directors and officers
in terms sufficiently broad to permit such indemnification under certain
circumstances (including reimbursement for expenses incurred) arising under the
Securities Act of 1933, as amended. Our Certificate of Incorporation and Bylaws
provide that we will indemnify our directors and officers to the fullest extent
permitted by Delaware law and include a provision limiting director liability to
us or our shareholders for monetary damages arising from certain acts or
omissions in the director's capacity as a director.

Certain of our registration rights agreements or arrangements contain
reciprocal agreements of indemnity between us and certain of the selling
stockholders as to certain liabilities, including liabilities under the
Securities Act and in certain circumstances could provide for indemnification of
our directors and officers.

Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers and controlling persons of the small
business issuer pursuant to the foregoing provisions, or otherwise, we have been
advised that in the opinion of the Securities and Exchange Commission, this type
of indemnification is against public policy as expressed in the Securities Act
and is, therefore, unenforceable.

We are currently operating without officers and director's insurance, as
well as, general liability insurance. It is uncertain when coverage will be
renewed.

ITEM 25. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.

The following table indicates the estimated expenses that have been or will
be incurred in connection with this offering, all of which will be paid by us.

SEC registration fee $ 454.34
Accounting fees and expenses 5,000.00
Legal fees and expenses 5,000.00
Printing and shipping 500.00
Blue Sky fees and expenses 2,500.00
Miscellaneous expenses 0.00
Total $18,454.34
==========

ITEM 26. RECENT SALES OF UNREGISTERED SECURITIES.

The following sets forth information regarding all sales of our
unregistered securities during the past three years. All of these shares were
exempt from registration under the Securities Act by reason of Section 4(2) of
the Securities Act, or Regulation D promulgated thereunder, as transactions by
an issuer not involving a public offering, or were exempt by reason of the
application of Regulation S. The recipients of securities in each of these
transactions represented their intentions to acquire the securities for
investment only and not with a view to or for sale in connection with any
distribution of the securities, and appropriate legends were affixed to the
share certificates and warrants issued in such transactions. All recipients had
adequate access, through their relationships with us or otherwise, to
information about us. Unless otherwise indicated, the issuances of the
securities described below were affected without the involvement of
underwriters. Where applicable, each of the disclosures has been adjusted to
account for the 1.41056 to 1 stock split of Insynq-WA, the 1 for 2 stock split
of Xcel effective on January 24, 2000, and the 2 for 1 stock split of
Insynq-Delaware effective on August 3, 2000.

1. We assumed a business services contract dated November 18, 1999, with
Consulting & Strategy International, LLC, or CSI, under which we granted to
CSI options to purchase a total of 600,000 shares at a price of $1.00 per
share, and warrants to purchase up to a total of 2,000,000 shares,
exercisable at any time after May 1, 2001 and before February 20, 2003, in
increments of 500,000 shares, at exercise prices of

II-2

$1.25, $1.50, $2.00 and $2.25. These warrants have a "cashless" exercise
provision allowing CSI to exercise the warrants for a reduced number of
shares pursuant to a formula set forth in the warrants. On January 31,
2001, we entered into an amendment under which $80,000 of accrued services
fees were abated in exchange for the re-pricing of the warrants to purchase
2,000,000 shares of common stock at an exercise price of $0.50 per share
each.

2. We assumed an equipment financing arrangement dated June 1, 1999, with
Hewlett-Packard under which we granted to Hewlett-Packard an option to
purchase a total of 282,112 shares of common stock at any time prior to
June 1, 2002, at a price of $0.35 per share.

3. We assumed a financial public relations consulting agreement dated
September 20, 1999, with One Click Investments, L.L.C., or One Click, under
which we issued One Click 700,000 restricted shares of common stock and
granted One Click warrants to purchase a total of 1,500,000 shares of
common stock, exercisable at any time after February 28, 2001, and prior to
December 31, 2003, in one-third increments of 500,000 shares, at exercise
prices of $2.00, $4.00 and $7.50 per share. On June 21, 2001, in exchange
for the waiver of certain registration rights by One Click Investments,
LLC, John P. Gorst gifted to One Click 1,000,000 shares of common stock
with voting rights retained by Gorst and agreed that One Click's securities
dated August 2000 and January 2001 will be included in the next SB-2
Registration we file (excluding the filed by September 27, 2001), and the
February 2000 warrants were re-priced at an exercise price of $0.25 per
share of common stock with an exercise date extending to December 31, 2004,
with a cashless provision. On February 15, 2002, in exchange for a waiver
of registration rights previously granted, One Click's February 2000
warrants were re-priced at an exercise price of $0.05 per share of common
stock.

4. We assumed a Consulting Agreement dated October 28, 1999, with Robert J.
Torres and Lowell Cooper. In consideration of consulting services rendered
we granted options to each of Mssrs. Torres and Cooper entitling them to
purchase a total of 218,637 shares and 134,003 shares, respectively, at any
time prior to November 2, 2003, at an exercise price of $2.13 per share.

5. We assumed the obligations under a bridge financing with CSI, dated
December 14, 1999, pursuant to which 1,300,000 common shares were issued to
nine investors at a price of $0.50 per share.

6. In January of 2000, Insynq-WA completed a private offering of a total of
1,311,821 shares of common stock at an offering price of approximately
$0.71 per share. Each purchaser in the private offering was issued one
Series A Warrant and one Series B Warrant for each share of common stock
purchased by such purchaser. The Series A Warrants and Series B Warrants
entitle the purchasers to purchase a share of common stock at any time on
or before December 31, 2001, at a price of $1.77 and $2.84, respectively.

7. In January 2000, Timothy Horan, as trustee on behalf of certain parties
named below, advanced to Insynq-WA the sum of $150,000 to provide Insynq-WA
with capital to secure the leased facility at 1101 Broadway Plaza, Tacoma,
Washington. In consideration of this financing, and pursuant to an
agreement, Mr. Horan, as trustee, was issued a total of 300,000 shares of
restricted common stock, as follows: 150,000 shares to Timothy Horan;
75,000 shares to Travin Partners, L.L.L.P. and 75,000 shares to
International Fluid Dynamics, Inc.

8. On February 20, 2000, we entered into a consulting agreement with Vijay
Alimchandani (VJ), under the terms of which we engaged VJ to provide us
with general consulting services for which we granted options to VJ as
follows: (a) 500,000 shares, exercisable at any time prior to February 21,
2005, at a price of $0.25 per share; and (b) 400,000 shares, exercisable
one year from the commencement date of the contract, for a period of five
years, at an exercise price of $0.50 per share. We also agreed to grant to
VJ (a) an additional option, entitling him to purchase a total of 180,000
shares for a five-year period beginning at the end of 24 months from the
date of the agreement, if such agreement is extended by us, at price of
$0.75 per share; and (b) bonus options of between 50,000 to 100,000 shares
to be granted at the discretion of the board of directors at an exercise
price of not more than $1.50 per share. On July 10, 2001, we entered into
an agreement to provide professional services with Central Software
Services Inc. (Central Software). Under the terms of the agreement, the
previous agreement with VJ, dated February 20, 2000, was cancelled in its

II-3
entirety. For a term of six months, Central Software will provide
professional services in the form of identifying and negotiating
acquisition opportunities and other merger consulting as appropriate. Under
the terms of the agreement, Central Software received 2,000,000 shares of
restricted common stock at $0.07 per share and monthly payments of $10,000.
In addition, we will issue an additional 500,000 shares of restricted
shares of common stock upon the successful completion of each acquisition.

9. On or about April 6, 2000, we sold a total of 61,944 shares of common stock
to two investors, The Perry Family Trust and John Anderson, under the terms
of which the Perry Trust and Mr. Anderson were granted a total of 61,944
warrants to purchase shares of common stock at an exercise price of $3.25
per share.

10. On or about April 26, 2000, we sold a total of 285,714 shares of common
stock to Plazacorp Investors Limited, an Ontario corporation, at a price of
$1.75 per share. In connection with this sale, Plazacorp was granted
warrants to purchase an additional 571,428 shares of common stock,
exercisable at any time for a five (5) year period, at a price of $2.75 per
share with respect to 285,714 shares, and $3.75 per share with respect to
the remaining 285,714 shares. In connection with this transaction,
Plazacorp was granted registration rights under a Registration and
Repurchase Agreement (the "Agreement") requiring us to file a registration
statement by October 31, 2000 and to cause the registration statement to be
effective on or before January 31, 2001. In the event we did not file a
registration statement by October 31, 2000, or the registration statement
was not declared effective by December 13, 2000, Plazacorp had the right,
but not the obligation, to require us to repurchase the shares (but not
shares issuable on exercise of the warrants), at a price of $2.50 per
share. On November 1, 2000, we entered into an Agreement with Plazacorp
under which Plazacorp agreed to relinquish its right to require us to
repurchase the 285,714 shares at $2.50 in exchange for the conversion of
those shares into the right to receive 1,428,730 shares with an agreed
value of $0.50 per share.

11. On or about May 17, 2000, we sold a total of 125,000 shares of common stock
at a price of $2.00 per share to the following investors: Raymond Betz -
25,000 shares; Timothy Horan - 50,000 shares; and International Fluid
Dynamics, Inc. (IFD) - 50,000 shares. In connection with this transaction,
the purchasers were granted warrants to purchase an equivalent number of
additional shares (or a total of 125,000 shares), at any time on or before
May 17, 2005, at an exercise price of $3.00 per share. In connection with
this transaction, the purchasers were granted registration rights under a
Registration and Repurchase Agreement (the "Agreement") requiring us to
file a registration statement by October 31, 2000, and to cause the
registration statement to be effective on or before January 31, 2001. In
the event we did not file a registration statement by October 31, 2000, or
the registration statement was not declared effective by January 31, 2001,
the purchasers had the right, but not the obligation, to require us to
repurchase the shares (but not shares issuable on exercise of warrants), at
a price of $2.86 per share. On November 1, 2000, we entered into an
Agreement with each of Betz, Horan and IFD under which each agreed to
relinquish the right to require us to repurchase their respective number of
shares at $2.86 in exchange for the conversion of those shares into the
right to receive an aggregate of 715,000 shares with an agreed value of at
$0.50 per share.

12. On May 26, 2000, we entered into a consulting agreement with MQ Holdings,
Inc. (MQ), under the terms of which we issued a total of 40,000 shares of
restricted common stock to two individuals - Mark DeStefano and T J Jesky -
for services to be rendered in assisting us in our corporate and securities
filings, and other consulting services. Under the terms of the consulting
agreement, we filed an S-8 registration statement for the registration of
the shares issued on October 4, 2000. In December 2000, MQ Holding,
rescinded 20,000 shares of common stock with no future claims.

13. On or about June 15, 2000, we entered into a non-exclusive financial
advisory agreement with Sunstate Equity Trading, Inc., a Florida
corporation, which is a member of the NASD, under the terms of which we
have engaged Sunstate, on a non-exclusive basis, to provide financial
advisory services and advice. In consideration of the services undertaken
by Sunstate, we issued to Sunstate a total of 125,000 shares of restricted
common stock. This agreement was amended on September 22, 2000, to include
the provision of additional services by Sunstate, including, but not
limited to, sponsoring us in conferences with various investments groups.
In consideration of these additional services, we issued to Sunstate an
additional 250,000 shares of restricted common stock.

II-4
14. On June 16, 2000, we entered into a private financing transaction with two
investors, Travin Partners, L.L.L.P. (TPL) and TCA Investments, Inc. (TCA),
under the terms of which TPL and TCA each loaned us the sum of $325,000
(the loans), and were sold convertible debentures and granted warrants,
described below. The loans are payable pursuant to the terms of identical
convertible debentures, providing for full payment on or before June 16,
2002 (the due date), with interest at the current Bank of America prime
rate, plus 1/2%. All accrued interest under each Debenture is payable only
in shares of our common stock at a price of $0.71 per share. In addition to
the Debentures, TPL and TCA were granted warrants entitling each of them to
purchase a total of 457,746 shares of our common stock at a price of $1.00
per share, at any time after November 15, 2000 and before June 15, 2005. On
November 1, 2000, we entered into an Agreement with each of TPL and TCA
under which each agreed to relinquish its right to convert the debentures
into shares of common stock at $0.71 per share in exchange for the
conversion of those debentures into the right to receive an aggregate of
1,300,000 shares with an agreed value of $0.50 per share.

15. On July 17, 2000, we entered into a private financing transaction with two
investors, International Fluid Dynamics, Inc. (IFD) and Garnier Holdings,
Inc. (Garnier), under the terms of which IFD and Garnier each loaned us the
sum of $127,500 (the loans), and were granted warrants described below. The
loans are payable pursuant to the terms of a promissory note (the note),
providing for full payment on or before August 1, 2000 (the due date), with
interest compounded annually at the Chase Manhattan Bank, N.A. rate quoted
as its prime. The warrants entitle each of IFD and Garnier to purchase a
total of 325,000 shares of our common stock at a price of $2.00 per share
at any time after December 28, 2000 and before July 17, 2005. If the notes
were not paid by 5:00 p.m. CST on August 17, 2000, the exercise price would
have decreased by one-half, or $1.00, and on and after each additional ten
(10) day period that the notes remain unpaid, the exercise price would have
decreased by an additional ten percent (10%). On November 1, 2000, we
entered into an Agreement with each of Garnier and IFD under which each of
them agreed to relinquish its right to payment under the promissory notes
in exchange for the conversion of those notes into the right to receive an
aggregate of 510,000 shares with an agreed value of $0.50 per share. Under
that same agreement, each of Garnier and IFD agreed to lock in the exercise
price of the warrants under the Warrant Agreement at $0.50 per share.

16. On August 2, 2000, we entered into a private financing transaction with
five foreign investors under the terms of which the investors purchased an
aggregate of 200,000 shares of our common shares at a price of $0.60 per
share.

17. On August 4, 2000, we sold a total of 200,000 shares of common stock to One
Click Investments, LLC, at a price of $0.60 per share. In connection with
this sale, One Click was granted warrants to purchase an additional 200,000
shares of common stock, exercisable at any time for a five (5) year period,
at a price of $2.00 per share.

18. On August 24, 2000, we entered into a private financing transaction with
certain foreign investors under the terms of which the investors purchased
an aggregate of 135,000 of our common shares at a price of $0.2963 per
share.

19. On September 11, 2000, we entered into a private financing transaction with
two investors, Travin Partners, L.L.L.P. (TPL) and TCA Investments, Inc.
(TCA), under the terms of which Travin and TCA each loaned us the sum of
$125,000 (the loans), and we issued the convertible debentures and granted
warrants, described below. The loans were payable pursuant to the terms of
identical convertible debentures providing for full payment on or before
October 11, 2000 (the due date), with interest at the current Bank of
America prime rate, plus1/2%. All principal and accrued interest under each
debenture was convertible into shares of our common stock at a conversion
price of (a) $1.00 per share or (b) sixty percent (60%) of the average of
the bid price, whichever is lower on the date of conversion. In addition to
the debentures, TPL and TCA were granted warrants entitling each of them to
purchase a total of 125,000 shares of our common stock at a price of $1.00
per share, at any time after September 11, 2000 and before September 11,
2005. These warrants have a "cashless" exercise provision allowing TPL
and/or TCA to exercise the warrants for a reduced number of shares pursuant
to a formula set forth in the warrants. On November 1, 2000, we entered
into an Agreement with each of TPL and TCA under which each agreed to
relinquish its right to

II-5
convert the debentures into shares of common stock in exchange for the
conversion of those debentures into the right to receive an aggregate of
500,000 shares with an agreed value of $0.50 per share.

20. On October 20, 2000, we entered into a private financing transaction with
three investors, International Fluid Dynamics, Inc. (IFD), Plazacorp
Investments Limited (Plazacorp) and Travin Partners, L.L.L.P. (TPL), under
the terms of which IFD and TPL each loaned us the sum of $125,000 and
Plazacorp loaned us the sum of $250,000 (the loans). The loans are payable
pursuant to the terms of a promissory note (the note), providing for full
payment on or before November 3, 2000 (the maturity date), with interest
payable on the maturity date of ten percent (10%) per annum based on a
365-day year. On November 1, 2000, we entered into an Agreement with each
of IFD, Plazacorp and TPL under which each of them agreed to relinquish its
right to payment under the promissory notes in exchange for the conversion
of those notes into the right to receive an aggregate of 1,000,000 shares
with an agreed value of $0.50 per share.

21. On November 1, 2000, we entered into a private financing transaction with
Plazacorp Investments Limited (Plazacorp) under the terms of which
Plazacorp agreed to loan us up to $1,120,000 (the loan). The loan is
payable pursuant to the terms of a promissory note (the note), providing
for full payment on or before November 2, 2001 (the maturity date), with
interest payable on the maturity date of ten percent (10%) per annum based
on a 365-day year. Under the terms of the note, upon our written request
Plazacorp shall advance to us up to $300,000.00 under this note in each
calendar month during which advances can be requested thereunder (a monthly
advance). An advance can be requested during each of November 2000,
December 2000 and January 2001 at any time after the 10th day of each
month. During the term of the note and after the effective date of a
registration statement filed with the SEC registering the shares of our
common stock held by Plazacorp, we can request in writing, and Plazacorp
shall pay within 10 business days of the written request, an advance of up
to an additional $220,000.00 (an additional advance) for the payment of
certain obligations of ours that are currently due and owing.
Notwithstanding the foregoing, if we raise funds in a financing of either
our debt or equity securities during the term of the note (a new
financing), and (a) the new financing is up to, but does not exceed,
$220,000.00, Plazacorp's obligation to advance the additional advance
amount, if it has not already done so, shall be reduced dollar for dollar
by the amount of the new financing, or (b) the new financing exceeds
$220,000.00, Plazacorp shall not be obligated to advance the additional
advance amount, if it has not already done so, and in addition, the
obligation of Plazacorp to advance the monthly advances remaining to be
advanced thereunder, if any, shall be reduced dollar for dollar by the
amount of the funds raised in the new financing.

22. On November 11, 2000, we entered into an agreement with Bridge 21, Inc., a
Wyoming corporation, under the terms of which we have formed a relationship
to provide seats to Bridge 21's members. In consideration of the
relationship, we granted to Bridge 21 a total of 30,000 options to purchase
our common stock at a price to be determined on the date of exercise based
on certain performance goals.

23. On December 7, 2000, for services rendered, we granted to Locke Liddell &
Sapp LLP warrants to purchase 100,000 shares of common stock, exercisable
at any time for a five (5) year period, at an exercise price of $0.50 per
share.

24. On February 19, 2001, we entered into a business advisory and consulting
services agreement with Tarshish Capital Markets, Ltd., an Israel
corporation, under the terms of which we have engaged Tarshish, on a best
efforts basis, to seek funding sources for a private offering exempt from
registration requirements. In consideration of the services undertaken by
Tarshish, we will compensate Tarshish in the form of a success fee equal to
13% of funds so invested and warrants equal to 10% of the funds raised at
an exercise price of 110% of the sales price of each transaction. In
connection with the agreement, on March 2, 2001, four foreign investors
purchased 135,000 shares of restricted stock at $0.25 per share and March
15, 2001, two foreign investors purchased 22,000 shares of restricted stock
at $0.20 per share. In addition we issued to Tarshish warrants to purchase
13,500 shares at an exercise price of $0.275 per share and 2,200 shares at
an exercise price of $0.22 per share.

25. On March 5, 2001, for services rendered, we granted to Americom Technology,
Inc., specifically Patrick Berkil, Ronald Richter and Patrick Richter
(collectively, Americom), warrants to purchase an aggregate of 75,000
shares of restricted common stock, exercisable at any time for a one year
period, at an exercise price

II-6
of $0.432 per share.

26. On March 26, 2001, we entered into a consulting agreement with Internet PR
Group under the terms of which we have engaged Internet PR Group, on a
non-exclusive basis, to provide investor relations and related advisory
services and advice. The agreement is for an initial term of one year, and
may be extended for additional terms as agreed upon by the parties. In
consideration of the services undertaken by Internet PR Group, we issued to
Internet PR Group a total of 225,000 shares of restricted common stock at
$0.3438 per share. In connection with this transaction, Internet PR Group
was granted registration rights granting Internet PR Group (a) one demand
registration right on or after November 1, 2001, and (b) "piggyback"
registration rights.

27. On March 22, 2001, we entered into a consulting agreement with Metromedia
Research Group, LLC under the terms of which we have engaged Metromedia, on
a non-exclusive basis, to provide investor relations and related advisory
services and advice. The agreement is for an initial term of ninety days
and must be renewed in writing by both parties. In consideration of the
services undertaken by Metromedia, we issued a total 200,000 shares of
restricted stock at $0.3438 per share. In connection with this transaction,
Metromedia was granted registrations rights granting Metromedia (a) one
demand registration right on or after April 30, 2001, and (b) "piggyback"
registration rights. On April 9, 2001 the consulting agreement was amended
to include an additional issuance of 300,000 shares of restricted common
stock, with a fair market value of $0.18 per share, as compensation for a
designated consultant specializing in the small and micro-cap markets. All
other provisions of the consulting agreement remain the same.

28. On March 22, 2001, for services rendered, we granted to Ward and
Associates, specifically William Collins, Stephen Ward, Cheryl Ward and
Lucia Churches (collectively, Ward), warrants to purchase an aggregate of
22,028 shares of restricted common stock, exercisable at any time for a one
year period, at an exercise price of $0.50 per share.

29. On April 1, 2001, we entered into a consulting agreement with The N.I.R.
Group, LLC for a term of three months. Under the terms of the agreement, in
consideration of the services undertaken by NIR, we shall issue monthly,
through the term of the agreement, (a) 125,000 shares of our common stock
and (b) $25,000. The fair market value for each issuance of common stock
was $0.3281, $0.17 and $0.10, respectively.

30. On April 1, 2001, we entered into a letter agreement with Barretto Pacific
Corporation under the terms of which we have engaged Barretto, on a
non-exclusive basis, to provide investor relations and related advisory
services and advice. The agreement is for an initial term of one year and
may be extended for such periods of time and upon such terms and conditions
as may be mutually agreed upon, in writing, by the parties, and may be
cancelled by either party giving the other party written notice received by
the end of each three month period ending on July 1, 2001, October 1, 2001,
and January 1, 2002. In consideration of the services undertaken by
Barretto, we issued an initial payment of 92,000 shares of restricted stock
with a fair market value of $0.3281 per share, and, subsequent payments of
$27,500, whether in cash or stock equivalents, payable quarterly through
the term of the agreement, providing the agreement has not been terminated
by either party. In connection with this transaction we have granted
Barretto a warrant to purchase 100,000 shares of restricted common stock
with an exercise price of $0.30 per share, of which 25,000 shares vest
immediately and the remainder vest quarterly, provided the agreement has
not been terminated, and are exercisable through November 1, 2002.

31. On April 4, 2001, in consideration of past consulting services rendered to
us, we granted a warrant to Robert J. Torres entitling him to purchase a
total of 43,360 shares of restricted common stock at any time prior to
April 4, 2002, at an exercise price of $0.25 per share.

32. On April 12, 2001, we granted 20,000 shares of restricted common stock to
each of our then 27 employees located at the Broadway Plaza, Tacoma
Washington facility. The fair market value on the date of grant was $0.17
per share. Subsequently, the stock grants were rescinded on December 27,
2001.

33. On or about April 25, 2001 we sold a total of 315,000 shares of common
stock at a price of $0.07 per share

II-7
to International Fluid Dynamics (IFD). In connection with this transaction,
IFD was granted warrants to purchase an equivalent number of additional
shares, at any time on or before the fifth anniversary date of the
registration rate, of such securities, at an exercise price of $0.07 per
share. In connection with this transaction, IFD was granted registration
rights granting IFD one demand registration right on or after June 30,
2001.

34. On or about May 3, 2001, we entered into a consulting agreement with
DiabloStocks, Inc. under the terms of which we have engaged DiabloStocks,
on a non-exclusive basis, to provide investor relations and related
advisory services and advice. The agreement is for a term of one year. In
consideration for the services undertaken by DiabloStocks, we issued to
them a total of 290,000 shares of restricted common stock at $0.16 per
share.

35. On May 3, 2001, we entered into a consulting agreement with Eugene R.
Zachman for a term of two years. Under the terms of the agreement, and in
consideration of the services undertaken by Zachman, we issued a stock
option for 750,000 shares of common stock under our 2000 Long Term
Incentive Plan with a fair market value of $0.3438, which will vest upon
performance. On May 30, 2001 we amended the agreement to include a grant of
500,000 shares of our common stock upon the signing of certain contracts.
In addition, we have agreed to register the grant on Form S-8.

36. On or about May 4, 2001, for services rendered, we issued to Internet
Solutions Partners, Inc. 66,667 shares of restricted stock at $0.15 per
share.

37. On May 17, 2001, we entered into a settlement agreement with our landlord
Howe/Horizon Holdings, LLC, owner of the facilities located at 1101
Broadway Plaza, Tacoma WA and Horizon Holdings I, Inc. owner and landlord
of the facilities located 1401 Court C, Tacoma WA. In connection with the
settlement, we issued the following: (a) 290,000 shares of common stock and
a warrant to purchase 800,000 shares of restricted common stock with an
exercise price per share of $0.50 to Howe/Horizon Holdings and (b) 210,000
shares of restricted common stock and a warrant to purchase 200,000 shares
of common stock with an exercise price of $0.50 per share to Horizon
Holdings I. In connection with this transaction, we granted each of
Howe/Horizon Holdings and Horizon Holdings I registration rights granting
both one demand registration right on or after September 17, 2001.

38. On May 17 2001, we entered into a consulting agreement with James Zachman
for a term of six months. Under the terms of the agreement and in
consideration of the services undertaken by Zachman, we will issue monthly
payments of $4,500 and a stock option for 350,000 shares of common stock
issued under our 2000 Long Term Incentive Plan with a fair market value of
$0.19, which will vest upon performance. On May 30, 2001 we amended the
agreement to include a grant of 500,000 shares of our common stock upon the
signing of certain contracts. In addition, we have agreed to register the
grant on Form S-8.

39. On or about May 28, 2001, we entered into a selling agreement with Taconic
Capital Partners, LP, Internet Solutions Partners, Inc, and Salvani
Investments, Inc., specifically Joseph Salvani and Rene Jimenez, under the
terms of which we agreed to issue an aggregate of 435,000 shares of common
stock to the parties for entering into this agreement. In addition,
pursuant to the agreement, if total sales during the campaign reach certain
amounts, we will issue up to 1.5 million additional shares as follows: (a)
$750,000, we will issue an additional 435,000 shares; (b) $1.25 million we
will issue an additional 290,000 shares; and (c) $2 million we will issue
an additional 335,000 shares. We also agreed to file an S-8 registration
statement within one month of signing of this agreement. The term of the
selling agreement is for one year unless terminated with thirty (30) days
written notice. On July 16, 2001 we terminated the selling agreement for
non-performance.

40. On June 29, 2001, we entered into a private financing transaction with
three investors, AJW Partners LLC, New Millennium Capital Partners II, LLC,
and AJW/New Millennium Offshore, Ltd. (collectively, the Buyers), under the
terms of which the Buyers will purchase; (a) 12% convertible debentures in
the aggregate principal amount of up to $1,200,000, and, (b) warrants to
purchase up to 2,400,000 shares of our common stock, each as described
below. Terms of this agreement substantially call for converting the
debentures into common stock within one year from date of investment at the
lower of a fixed conversion

II-8
price of $0.18 per share or the average of the lowest three inter-trading
days of the price twenty days immediately preceding the date of exercise,
discounted by 50%. The terms of debentures provide for full payment on or
before June 29, 2002, plus accrued interest of 12% per annum. Upon issuance
of each one dollar ($1.00) investment, the Company will issue warrants to
purchase four (4) shares of common stock. The warrants are exercisable any
time before the second anniversary date of issuance at a price equal to the
lesser of $0.04 per share or a variable exercise price based upon the
trading price of the common stock at the time of exercise, which price may
be adjusted from time to time under certain anti-dilution provisions.

41. On September 1, 2001, we entered into a consulting agreement with The
N.I.R. Group, LLC for a term of three months. Under the terms of the
agreement, in consideration of the services undertaken by NIR, we shall
issue monthly, through the term of the agreement, (a) 100,000 shares of our
common stock and (b) $21,500. The fair market value for each issuance is
$0.065, $0.05 and $0.028, respectively.

42. On September 3, 2001, in settlement of a loan dispute, we entered into a
settlement agreement with Martin E. Darrah. In connection with the
settlement, we issued the following: (a) 200,000 options to purchase shares
of common stock with an exercise price per share of $0.07 to Mr. Darrah,
and (b) 50,000 options to purchase shares of common stock with an exercise
price of $0.07 per share to John Spencer, legal counsel to Mr. Darrah, as
consideration for legal fees.

43. On September 13, 2001, we offered a temporary re-pricing to the holders of
our A and B warrants. Beginning September 15, 2001 and ending October 31,
2001, warrant holders could exercise the A warrant and the B warrant for
$0.125 per share, which warrants are currently priced at $1.77 and $2.84,
respectively. The warrant holder could exercise all or any part of their
total holdings until October 31, 2001. A total of 28,208 shares of common
stock were exercised as a result and the remaining A and B warrants to
purchase 2,595,432 shares of common stock expired December 31, 2001.

44. On January 1, 2002, we entered into a consulting agreement with The N.I.R.
Group, LLC for a term or three months. Under the terms of the agreement, in
consideration of the services undertaken by NIR, we shall issue monthly,
through the term of the agreement, (a) 215,000 shares of our common stock,
and (b) $13,500. The fair market value for each issuance is the first
business of the month through the term of the agreement.

45. On January 24, 2002, we entered into a private financing transaction with
four investors, AJW Partners LLC, New Millennium Capital Partners II, LLC,
Pegasus Capital Partners, LLC, and AJW/New Millennium Offshore, Ltd.
(collectively, the Buyers), under the terms of which the Buyers will
purchase; (a) 12% convertible debentures in the aggregate principal amount
of up to $550,000, and, (b) warrants to purchase up to 2,200,000 shares of
our common stock, each as described below. Terms of this agreement
substantially call for converting the debentures into common stock within
one year from date of investment at the lower of a fixed conversion price
of $0.008 per share or the average of the lowest three inter-trading days
of the price twenty days immediately preceding the date of exercise,
discounted by 50%. The terms of debentures provide for full payment on or
before January 24, 2003, with interest of 12% per annum. Upon issuance of
each one dollar ($1.00) investment, the Company will issue warrants to
purchase four (4) shares of common stock. The warrants are exercisable any
time before the second anniversary date of issuance at a price equal to the
lesser of $0.007 per share or the average per share price of the three
lowest inter-trading day prices during the twenty days immediately
preceding the exercise, which price may be adjusted from time to time under
certain anti-dilution provisions.

II-9
ITEM 27 EXHIBITS

EXHIBIT DESCRIPTION
NUMBER

2.1 Asset Purchase Agreement, dated as of February 18, 2000, by and
between Xcel Management, Inc. and Insynq, Inc. (Incorporated by
reference to Exhibit 2 to the Company's Current Report on Form 8-K,
filed March 3, 2000).

3.1 Certificate of Incorporation of Insynq, Inc. (Incorporated by
reference to Exhibit 2 to the Company's Current Report on Form 8-K
filed August 17, 2000).

3.2 Certificate of Incorporation of Insynq, Inc. as amended by Amendment
No 1 dated November 21, 2001. (Incorporated by reference to Exhibit
3.1 to the Company's Amended Quarterly Report on Form 10-QSB/A filed
February 25, 2002).

3.3 By-Laws of Insynq, Inc. (Incorporated by reference to Exhibit 3 to the
Company's Current Report on Form 8-K filed August 17, 2000).

4.1 Form of Specimen Common Stock Certificate. (Incorporated by reference
to Exhibit 4.1 to the Company's Annual Report on Form 10-KSB filed
September 13, 2000).

4.2 Form of Warrant Agreement issued to Consulting & Strategy
International, LLC on February 24, 2000, as amended by Amendment No. 1
dated June 9, 2000, Amendment No. 2 dated July 31, 2000, Amendment No.
3 dated August 31, 2000, Amendment No. 4 dated October 1, 2000,
Amendment No. 5 dated October 28, 2000 and Amendment No. 6 dated
December 1, 2000 (Incorporated by reference to Exhibit 4.2 to the
Company's Registration Statement on Form SB-2 filed December 14,
2000).

4.3 Amendment No. 7 dated February 1, 2001 and Amendment No. 8 dated
February 27, 2001, to Warrant Agreement issued to Consulting &
Strategy International, LLC on February 24, 2000. (Incorporated by
reference to Exhibit 4.2 to the Company's Quarterly Report on Form
10-QSB filed April 20, 2001).

4.4 Letter Agreement dated January 31, 2001 between Consulting & Strategy
International, LLC and Insynq, Inc. (Incorporated by reference to
Exhibit 4.4 to the Company's Annual Report on Form 10-KSB filed July
31, 2001).

4.5 Form of Warrant Agreement issued to International Fluid Dynamics, Inc.
on May 17, 2000. (Incorporated by reference to Exhibit 4.3 to the
Company's Annual Report on Form 10-KSB filed September 13, 2000).

4.6 Form of Registration and Repurchase Agreement issued to International
Fluid Dynamics, Inc. on May 17, 2000, as amended. (Incorporated by
reference to Exhibit 4.4 to the Company's Annual Report on Form 10-KSB
filed September 13, 2000).

4.7 Form of Warrant Agreement issued to Plazacorp Investors Limited on
April 26, 2000. (Incorporated by reference to Exhibit 4.5 to the
Company's Annual Report on Form 10-KSB filed September 13, 2000).

4.8 Form of Registration and Repurchase Agreement issued to Plazacorp
Investors Limited on April 26, 2000, as amended. (Incorporated by
reference to Exhibit 4.6 to the Company's Annual Report on Form 10-KSB
filed September 13, 2000).

4.9 Form of Warrant Agreement issued to TCA Investments, Inc. on June 16,
2000, as amended by Amendment No. 1 dated August 31, 2000, Extension
dated September 5, 2000, Amendment No. 2 dated September 14, 2000,
Amendment No. 3 dated October 1, 2000, Amendment No. 4 dated October
28, 2000 and Amendment No. 5 dated December 1, 2000 (Incorporated by
reference to Exhibit 4.7 to the Company's Registration Statement on
Form SB-2 filed December 14, 2000).

4.10 Amendment No. 6 dated February 28, 2001, to Warrant Agreement issued
to TCA Investments, Inc. on June 16, 2000 (Incorporated by reference
to Exhibit 4.7 to the Company's Quarterly Report on Form10-QSB filed
April 20, 2001).

4.11 Form of Convertible Debenture issued to TCA Investments, Inc. on June
16, 2000, as amended by Amendment No. 1 dated August 31, 2000,
Extension dated September 5, 2000, Amendment No. 2 dated September 14,
2000, Amendment No. 3 dated October 1, 2000 and Amendment No. 4 dated
October 28, 2000. (Incorporated by reference to Exhibit to Exhibit 4.2
to the Company's Registration Statement on Form SB-2 filed December
14, 2000).

4.12 Form of Warrant Agreement issued to Garnier Holdings, Ltd. on July 17,
2000, as amended by Amendment No. 1 dated September 22, 2000,
Amendment No. 2 dated October 1, 2000, Amendment No. 3 dated October
19, 2000, Amendment No. 4 dated October 28, 2000 and Amendment No. 5
dated December 1, 2000. (Incorporated by reference to Exhibit 4.9 to
the Company's Registration Statement on Form SB-2 filed December 14,
2001).

4.13 Amendment No. 6 dated February 27, 2001, to Warrant Agreement issued
to Garnier Holdings, Ltd. on July 17, 2000 (Incorporated by reference
to Exhibit 4.9 to the Company's Quarterly Report on Form10-QSB filed
April 20, 2001).

4.14 Form of Promissory Note issued to Garnier Holdings, Ltd. on July 17,
2000, as amended by Extension No. 1 dated September 11, 2000 and
Extension No. 2 dated October 1, 2000. (Incorporated by reference to
Exhibit 4.10 to the Company's Quarterly Report on Form 10-QSB filed
October 23, 2000).

4.15 Form of Warrant Agreement issued to One Click Investments, LLC on
August 4, 2000. (Incorporated by reference to Exhibit 4.11 to the
Company's Annual Report on Form 10-KSB filed September 13, 2000).

4.16 Form of Registration Rights Agreement issued to One Click Investments,
LLC on August 4, 2000. (Incorporated by reference to Exhibit 4.12 to
the Company's Annual Report on Form 10-KSB filed September 13, 2000).

4.17 Form of Warrant Agreement issued to Series A & B warrant holders.
(Incorporated by reference to Exhibit 4.13 to the Company's Annual
Report on Form 10-KSB filed September 13, 2000).

4.18 Form of Warrant Agreement issued to One Click Investments, LLC on
September 20, 1999, as amended. (Incorporated by reference to Exhibit
4.14 to the Company's Annual Report on Form 10-KSB filed September 13,
2000).

4.19 Form of Warrant Agreement issued to Hewlett-Packard on June 1, 1999.
(Incorporated by reference to Exhibit 4.15 to the Company's Annual
Report on Form 10-KSB filed September 13, 2000).

4.20 Form of Registration Agreement issued to Hewlett-Packard on February
20, 2000. (Incorporated by reference to Exhibit 4.16 to the Company's
Amendment No. 1 to Annual Report on Form 10- KSB/A filed December 6,
2000).

4.21 Form of Subscription Agreement between TCA Investments, Inc. and
Insynq, Inc. dated June 16, 2000. (Incorporated by referenced to
Exhibit 4.17 to the Company's Quarterly Report on Form 10-QSB filed
October 23, 2000).

4.22 Form of Subscription Agreement between TCA Investments, Inc. and
Insynq, Inc. dated September 11, 2000. (Incorporated by reference to
Exhibit 4.17 to the Company's Quarterly Report on Form 10-QSB filed
October 23, 2000).

4.23 Form of Warrant Agreement issued to TCA Investments, Inc. dated
September 11, 2000, as amended by Amendment No. 1 dated December 1,
2000. (Incorporated by reference to Exhibit to Exhibit 4.19 to the
Company's Registration Statement on Form SB-2 filed December 14,
2000).

4.24 Form of Convertible Debenture issued to TCA Investments, Inc. dated
September 11, 2000, as amended by Amendment No. 1 dated October 6,
2000 and Amendment No. 2 dated October 19, 2000. (Incorporated by
reference to Exhibit 4.20 to the Company's Quarterly Report on Form
10- QSB filed October 23, 2000).

4.25 Form of Consent of Plazacorp Investors Limited to the Extension of the
filing of the Registration Statement on Form SB-2 dated September 22,
2000. (Incorporated by reference to Exhibit 4.21 to the Company's
Quarterly Report on Form 10-QSB filed October 23, 2000).

4.26 Form of Consent of Plazacorp Investors Limited to the Extension of the
filing of the Registration Statement on From SB-2 dated October 2,
2000. (Incorporated by reference to Exhibit 4.22 to the Company's
Quarterly Report on Form 10-QSB filed October 23, 2000).

4.27 Form of Consent of TCA Investments, Inc. to Extension of the filing of
the Registration Statement on From SB-2 dated September 22, 2000.
(Incorporated by reference to Exhibit 4.23 to the Company's Quarterly
Report on Form 10-QSB filed October 23, 2000).

4.28 Form of Consent of TCA Investments, Inc. to Extension of the filing of
the Registration Statement on Form SB-2 dated October 2, 2000.
(Incorporated by reference to Exhibit 4.24 to the Company's Quarterly
Report on Form 10-QSB filed October 23, 2000).

4.29 Form of Consent of International Fluid Dynamics, Inc. to Extension of
the filing of the Registration Statement on Form SB-2 dated September
22, 2000. (Incorporated by reference to Exhibit 4.25 to the Company's
Quarterly Report on Form 10-QSB filed October 23, 2000).

4.30 Form of Consent of International Fluid Dynamics, Inc. to Extension of
the filing of the Registration Statement on Form SB-2 dated October 2,
2000. (Incorporated by reference to Exhibit 4.26 to the Company's
Quarterly Report on Form 10-QSB filed October 23, 2000).

4.31 Registration Rights Agreement dated September 22, 2000 between Charles
Benton and Insynq, Inc. (Incorporated by reference to Exhibit 4.27 to
the Company's Quarterly Report on Form 10- QSB filed October 23,
2000).

4.32 Form of Promissory Note issued to International Fluid Dynamics, Inc.
on October 20, 2000. (Incorporated by reference to Exhibit 4.28 to the
Company's Quarterly Report on Form 10-QSB filed October 23, 2000).

4.33 Agreement dated November 1, 2000 between International Fluid Dynamics,
Inc. and Insynq. (Incorporated by reference to Exhibit 4.29 to the
Company's Registration Statement on Form SB- 2 filed December 14,
2000).

4.34 Agreement dated November 1, 2000 between Travin Partners, L.L.L.P. and
Insynq. (Incorporated by reference to Exhibit 4.30 to the Company's
Registration Statement on Form SB-2 filed December 14, 2000).

4.35 Agreement dated November 1, 2000 between TCA Investments, Inc. and
Insynq. (Incorporated by reference to Exhibit 4.31 to the Company's
Registration Statement on Form SB-2 filed December 14, 2000).

4.36 Agreement dated November 1, 2000 between Plazacorp Investors Limited
and Insynq. (Incorporated by reference to Exhibit 4.32 to the
Company's Registration Statement on Form SB- 2 filed December 14,
2000).

4.37 Agreement dated November 1, 2000 between Garnier Holdings, Ltd. and
Insynq. (Incorporated by reference to Exhibit 4.33 to the Company's
Registration Statement on Form SB-2 filed December 14, 2000).

4.38 Agreement dated November 1, 2000 between International Fluid Dynamics,
Inc. and Insynq. (Incorporated by reference to Exhibit 4.34 to the
Company's Registration Statement on Form SB- 2 filed December 14,
2000).

4.39 Agreement dated November 1, 2000 between Timothy Horan and Insynq.
(Incorporated by reference to Exhibit 4.35 to the Company's
Registration Statement on Form SB-2 filed December 14, 2000).

4.40 Agreement dated November 1, 2000 between Raymond Betz and Insynq.
(Incorporated by reference to Exhibit 4.36 to the Company's
Registration Statement on Form SB-2 filed December 14, 2000).

4.41 Agreement dated November 1, 2000 between Travin Partners, L.L.L.P. and
Insynq. (Incorporated by reference to Exhibit 4.37 to the Company's
Registration Statement on Form SB-2 filed December 14, 2000).

4.42 Form of Warrant Agreement dated December 7, 2000 between Locke Liddell
& Sapp LLP and Insynq. (Incorporated by reference to Exhibit 4.38 to
the Company's Registration Statement on Form SB-2 filed December 14,
2000).

4.43 Lock-Up and Waiver Agreement dated October 17, 2000, as amended by
Amendment No. 1 dated December 1, 2000, by Charles F. Benton.
(Incorporated by reference to Exhibit 4.39 to the Company's
Registration Statement on Form SB-2 filed December 14, 2000).

4.44 Lock-Up and Waiver Agreement dated October 17, 2000 by John P. Gorst.
(Incorporated by reference to Exhibit 4.40 to the Company's
Registration Statement on Form SB-2 filed December 14, 2000).

4.45 Lock-Up and Waiver Agreement dated October 17, 2000 by M. Carroll
Benton. (Incorporated by reference to Exhibit 4.41 to the Company's
Registration Statement on Form SB-2 filed December 14, 2000).

4.46 Lock-Up and Waiver Agreement dated October 15, 2000 by Vijay
Alimchandani. (Incorporated by reference to Exhibit 4.42 to the
Company's Registration Statement on Form SB-2 filed December 14,
2000).

4.47 Lock-Up and Waiver Agreement dated October 16, 2000 by One Click
Investments LLC. (Incorporated by reference to Exhibit 4.43 to the
Company's Registration Statement on Form SB- 2 filed December 14,
2000).

4.48 Promissory Note dated December 1, 2000 between One Click Investments,
LLC and Insynq, Inc. (Incorporated by reference to Exhibit 4.44 to the
Company's Quarterly Report on Form 10-QSB filed April 20, 2001).

4.49 Agreement dated January 30, 2001 between One Click Investments, LLC
and Insynq, Inc. (Incorporated by reference to Exhibit 4.45 to the
Company's Quarterly Report on Form 10-QSB filed April 20, 2001).

4.50 Registration Agreement dated January 30, 2001 between One Click
Investments, LLC and Insynq, Inc. (Incorporated by reference to
Exhibit 4.46 to the Company's Quarterly Report on Form 10- QSB filed
April 20, 2001).

4.51 Warrant Agreement dated February 20, 2001 between TCA Investments,
Inc. and Insynq, Inc. (Incorporated by reference to Exhibit 4.47 to
the Company's Quarterly Report on Form 10-QSB filed April 20, 2001).

4.52 Registration Agreement dated February 20, 2001 between TCA
Investments, Inc. and Insynq, Inc. (Incorporated by reference to
Exhibit 4.48 to the Company's Quarterly Report on Form 10-QSB filed
April 20, 2001).

4.53 Form of Warrant Agreement dated March 5, 2001 between Patrick Birkel
and Insynq, Inc. (Incorporated by reference to Exhibit 4.53 to the
Company's Annual Report on Form 10-KSB filed July 31, 2001).

4.54 Warrant Agreement dated March 5, 2001 between Bransville Limited and
Insynq, Inc. (Incorporated by reference to Exhibit 4.54 to the
Company's Annual Report on Form 10-KSB filed July 31, 2001).

4.55 Form of Warrant Agreement dated March 22, 2001 between William R.
Collins and Insynq, Inc. (Incorporated by reference to Exhibit 4.55 to
the Company's Annual Report on Form 10-KSB filed July 31, 2001).

4.56 Registration Rights Agreement dated March 26, 2001 between Internet PR
Group and Insynq, Inc. (Incorporated by reference to Exhibit 4.56 to
the Company's Annual Report on Form 10-KSB filed July 31, 2001).

4.57 Warrant Agreement dated March 25, 2001 between Bransville Limited and
Insynq, Inc. (Incorporated by reference to Exhibit 4.57 to the
Company's Annual Report on Form 10-KSB filed July 31, 2001).

4.58 Form of Warrant Agreement dated April 25, 2001 between International
Fluid Dynamics, Inc. and Insynq, Inc. (Incorporated by reference to
Exhibit 4.58 to the Company's Annual Report on Form 10-KSB filed July
31, 2001).

4.59 Form of Subscription Agreement dated April 25, 2001 between
International Fluid Dynamics, Inc. and Insynq, Inc. (Incorporated by
reference to Exhibit 4.59 to the Company's Annual Report on Form
10-KSB filed July 31, 2001).

4.60 Form of Registration Agreement dated April 25, 2001 between
International Fluid Dynamics, Inc. and Insynq, Inc. (Incorporated by
reference to Exhibit 4.60 to the Company's Annual Report on Form
10-KSB filed July 31, 2001).

4.61 Warrant Agreement dated April 1, 2001 between Barretto Pacific
Corporation and Insynq, Inc. (Incorporated by reference to Exhibit
4.61 to the Company's Annual Report on Form 10-KSB filed July 31,
2001).

4.62 Form of Warrant Agreement dated May 17, 2001 between Horizon Holdings
I, LLC and Insynq, Inc. (Incorporated by reference to Exhibit 4.62 to
the Company's Annual Report on Form 10-KSB filed July 31, 2001).

4.63 Form of Registration Agreement dated May 17, 2001 between Horizon
Holdings I, LLC and Insynq, Inc. (Incorporated by reference to Exhibit
4.63 to the Company's Annual Report on Form 10-KSB filed July 31,
2001).

4.64 Securities Purchase Agreement dated June 29, 2001 between AJW
Partners, LLC, New Millennium Capital Partners II, LLC, AJW/New
Millennium Offshore, Ltd and Insynq. Inc. (Incorporated by reference
to Exhibit 4.64 to the Company's Annual Report on Form 10-KSB filed
July 31, 2001).

4.65 Form of Stock Purchase Warrant dated June 29, 2001 between AJW
Partners, LLC and Insynq, Inc. (Incorporated by reference to Exhibit
4.65 to the Company's Annual Report on Form 10-KSB filed July 31,
2001).

4.66 Form of Secured Convertible Debenture dated June 29, 2001 between AJW
Partners, LLC and Insynq, Inc. (Incorporated by reference to Exhibit
4.66 to the Company's Annual Report on Form 10-KSB filed July 31,
2001).

4.67 Guaranty and Pledge Agreement dated June 29, 2001 between M. Carroll
Benton, AJW Partners, LLC, New Millennium Capital Partners II, LLC,
and AJW/New Millennium Offshore, Ltd. (Incorporated by reference to
Exhibit 4.67 to the Company's Annual Report on Form 10-KSB filed July
31, 2001).

4.68 Registration Rights Agreement dated June 29, 2001 between AJW
Partners, LLC, New Millennium Capital Partners II, LLC Millennium
Capital Partners II, LLC and Insynq, Inc. (Incorporated by reference
to Exhibit 4.68 to the Company's Annual Report on Form 10-KSB filed
July 31, 2001).

4.69 Form of Securities Purchase Agreement dated January 24 between AJW
Partners, LLC, New Millennium Capital Partners II, LLC, AJW/New
Millennium Offshore, LTD and Pegasus Capital Partners, LLC and Insynq,
Inc. (Incorporated by reference to Exhibit 4.1 to the Company's
Amended Quarterly Report on Form 10-QSB/Q filed February 25, 2002).

4.70 Form of Stock Purchase Warrant dated January 24, 2002 between AJW
Partners, LLC, New Millennium Capital Partners II, LLC, AJW/New
Millennium Offshore, LTD and Pegasus Capital Partners, LLC and Insynq,
Inc. (Incorporated by reference to Exhibit 4.2 to the Company's
Amended Quarterly Report on Form 10-QSB/A filed February 25, 2002).

4.71 Form of Secured Convertible Debenture dated January 24, 2002 AJW
Partners, LLC, New Millennium Capital Partners II, LLC, AJW/New
Millennium Offshore, LTD and Pegasus Capital Partners, LLC and Insynq,
Inc. (Incorporated by reference to Exhibit 4.3 to the Company's
Amended Quarterly Report on Form 10-QSB/A filed February 25, 2002).

4.72 Form of Registration Rights Agreement dated January 24, 2002 between
AJW Partners, LLC, New Millennium Capital Partners II, LLC, AJW/New
Millennium Offshore, LTD and Pegasus Capital Partners, LLC and Insynq,
Inc. (Incorporated by reference to Exhibit 4.4 to the Company's
Amended Quarterly Report on Form 10-QSB/A filed February 25, 2002).

4.73* Amendment No. 1 to Securities Purchase Agreement dated April 8, 2002
between AJW Partners, LLC, New Millenniun Capital Partners II, LLC,
AJW/New Millennium Offshore, LTD and Pegasus Capital Partners, LLC and
Insynq, Inc.

5.1* Opinion Letter of Seth A. Farbman PC

10.1 Insynq, Inc. 2000 Executive Long Term Incentive Plan. (Incorporated by
reference to Exhibit 10.1 to the Company's Annual Report on Form
10-KSB filed September 13, 2000).

10.2 Insynq, Inc. 2000 Executive Long Term Incentive Plan, as amended by
Amendment No 1 dated August 14, 2001. (Incorporated by reference to
Exhibit 10.7 to the Company's Amended Quarterly Report on Form
10-QSB/A filed February 25, 2002).

10.3 Insynq, Inc. 2000 Long Term Incentive Plan, as amended by Amendment
No. 1 dated September 1, 2000. (Incorporated by reference to Exhibit
10.2 to the Company's Quarterly Report on Form 10-QSB filed October
23, 2000).

10.4 Insynq, Inc. 2000 Long Term Incentive Plan as amended by Amendment No
3 dated November 21, 2001. (Incorporated by reference to Exhibit 10.6
to the Company's Amended Quarterly Report on Form 10-QSB/A filed
February 25, 200).

10.5 Business Services Contract with Consulting & Strategy International,
L.L.C. dated November 18, 1999, as amended by Amendment No. 1 dated
August 31, 2000, Amendment No. 2 dated September 14, 2000, Amendment
No. 3 dated October 1, 2000, Amendment No. 4 dated October 28, 2000,
Amendment dated October 31, 2000, and Amendment No. 5 dated December
1, 2000 (Incorporated by reference to Exhibit 10.3 to the Company's
Registration Statement on Form SB- 2 filed December 14, 2000).

10.6 Amendment No. 6 dated February 6, 2002, to Business Services Contract
with Consulting & Strategy International, L.L.C. dated November 18,
1999 (Incorporated by reference to Exhibit 10.3 to the Company's
Quarterly Report on Form 10-QSB filed April 20,2001).

10.7 Independent Marketing Consultant Agreement with Vijay Alimchandani
dated February 20, 2000, as amended by Amendment No. 1 dated June 30,
2000. (Incorporated by reference to Exhibit 10.4 to the Company's
Quarterly Report on Form 10-QSB filed October 23, 2000).

10.8 Financial Public Relations Consulting Agreement with One Click
Investments, LLC dated September 20, 1999, as amended by Amendment No.
1 dated June 30, 2000 and Amendment No. 2 dated October 31, 2000.
(Incorporated by reference to Exhibit 10.5 to the Company's
Registration Statement on Form SB-2 filed December 14, 2000).

10.9 Amendment No. 3 dated January 30, 2001, to Financial Public Relations
Consulting Agreement with One Click Investments, LLC dated September
20, 1999 (Incorporated by reference to Exhibit 10.5 to the Company's
Quarterly Report on Form 10-QSB filed April 20, 2001).

10.10 Form of Registration Rights Agreement upon the issuance of shares to
investors under the bridge financing dated December 14, 1999.
(Incorporated by reference to Exhibit 10.6 to the Company's Annual
Report on Form 10-KSB filed September 13, 2000).

10.11 Form of Registration Rights Agreement upon the issuance of shares to
investors under the bridge financing dated January 24, 2000.
(Incorporated by reference to Exhibit 10.7 to the Company's Annual
Report on Form 10-KSB filed September 13, 2000)

10.12 Engagement Letter with Rosenblum Partners, LLC dated July 7, 2000.
(Incorporated by reference to Exhibit 10.8 to the Company's Annual
Report on Form 10-KSB filed September 13, 2000).

10.13 Employment Agreement, dated as of February 20, 2000, between John P.
Gorst and Xcel Management, Inc., as amended by Amendment No. 1 dated
September 25, 2000. (Incorporated by reference to Exhibit 10.9 to the
Company's Registration Statement on Form SB-2 filed December 14,
2000).

10.14 Amendment No. 2 to Employment Agreement dated January 30, 2001,
between John P. Gorst and Xcel Management, Inc. (Incorporated by
reference to Exhibit 10.9 to the Company's Quarterly Report on
Form10-QSB filed April 20, 2001).

10.15 Employment Agreement, dated as of February 20, 2000, between M.
Carroll Benton and Xcel Management, Inc., as amended by Amendment No.
1 dated September 27, 2000. (Incorporated by reference to Exhibit
10.10 the Company's Registration Statement on Form SB-2 filed December
14, 2000).

10.16 Amendment No. 2 dated January 30, 2001, between M. Carroll Benton and
Xcel Management, Inc. (Incorporated by reference to Exhibit 10.10 to
the Company's Quarterly Report on Form 10- QSB filed April 20, 2001).

10.17 Employment Agreement dated as of February 20, 2000, between James R.
Leigh, III, and Xcel Management, Inc. (Incorporated by reference to
Exhibit 10.11 to the Company's Annual Report on Form 10-KSB filed
September 13, 2000).

10.18 Employment Agreement, dated as of February 20, 2000, between DJ
Johnson and Xcel Management, Inc. (Incorporated by reference to
Exhibit 10.12 to the Company's Annual Report on Form 10-KSB filed
September 13, 2000).

10.19 Employment Agreement, dated as of February 20, 2000, between Joanie C.
Mann and Xcel Management, Inc., as amended by Amendment No.1 dated
September 25, 2000 and Amendment No. 2 dated September 25, 2000.
(Incorporated by reference to Exhibit 10.13 the Company's Registration
Statement on Form SB-2 filed December 14, 2000)

10.20 Employment Agreement, dated as of February 20, 2000, between Jim
Zachman and Xcel Management, Inc., as amended by Amendment No. 1 dated
September 16, 2000 and Amendment No. 2 dated September 27, 2000.
(Incorporated by reference to Exhibit 10.14 the Company's Registration
Statement on Form SB-2 filed December 14, 2000)

10.21 Employment Agreement, dated as of July 20, 1999, between Donald L.
Manzano and Insynq, Inc.- Washington. (Incorporated by reference to
Exhibit 10.15 to the Company's Annual Report on Form 10-KSB filed
September 13, 2000).

10.22 Employment Agreement, dated as of July 20, 1999, between Carey M.
Holladay and Insynq, Inc.- Washington. (Incorporated by reference to
Exhibit 10.16 to the Company's Annual Report on Form 10-KSB filed
September 13, 2000).

10.23 Employment Agreement, dated as of June 28 2000, between William G.
Hargin and Xcel Management, Inc. (Incorporated by reference to Exhibit
10.17 to the Company's Annual Report on Form 10-KSB filed September
13, 2000).

10.24 Employment Agreement, dated as of June 5, 2000, between Barbara D.
Brown and Xcel Management, Inc., as amended by Addendum No. 1 dated
November 29, 2000. (Incorporated by reference to Exhibit 10.18 the
Company's Registration Statement on Form SB-2 filed December 14, 2000)

10.25 Employment Agreement, dated as of June 16, 2000, between Christopher
Todd and Xcel Management, Inc. (Incorporated by reference to Exhibit
10.19 to the Company's Annual Report on Form 10-KSB filed September
13, 2000).

10.26 Employment Agreement, dated as of September 1, 2000, between David
Wolfe and Insynq, Inc., as amended by Amendment No. 1 dated September
27, 2000, Amendment No. 1 dated October 19, 2000, Amendment No. 2
dated November 29, 2000 and Addendum dated December 7, 2000.
(Incorporated by reference to Exhibit 10.20 the Company's Registration
Statement on Form SB-2 filed December 14, 2000)

10.27 Lease Agreement dated January 3, 2000 between Howe/Horizon Holdings
LLC and Insynq, Inc., for 1101 Broadway Plaza, Tacoma, Washington, as
amended by Amendment No. 1 dated October 26, 2000. (Incorporated by
reference to Exhibit 10.21 the Company's Registration Statement on
Form SB-2 filed December 14, 2000)

10.28. Sublease Agreement dated November 1, 1999 between Duane and Wendy
Ashby, d/b/a Cargocare and Insynq Data Utilities for the property in
the Seafirst Plaza Building in Tacoma, Washington, at the Northwest
corner of South 9th and A Streets. (Incorporated by reference to
Exhibit 10.22 to the Company's Annual Report on Form 10-KSB filed
September 13, 2000)

10.29 Lease Termination Agreement dated April 1, 2001 between Duane and
Wendy Ashby, d/b/a Cargocare and Insynq Data Utilities. (Incorporated
by reference to Exhibit 10.27 to the Company's Annual Report on Form
10-KSB filed July 31, 2001).

10.30 Lease Agreement dated March 21, 2000 between Walaire, Inc. and Insynq,
Inc., for 3017 Douglas Boulevard, Suite 220 and 240, Roseville,
California. (Incorporated by reference to Exhibit 10.23 to the
Company's Annual Report on Form 10-KSB filed September 13, 2000).

10.31 Master Licensing Agreement dated May 19, 2000 between Macola, Inc. and
Insynq, Inc. (Incorporated by reference to Exhibit 10.24 to the
Company's Annual Report on Form 10-KSB filed September 13, 2000).

10.32 Citrix iLicense Agreement dated March 2, 2000 between Citrix and
Insynq, Inc. (Incorporated by reference to Exhibit 10.25 to the
Company's Annual Report on Form 10-KSB filed September 13, 2000).

10.33 Citrix iBusiness Application Service Provider Agreement dated March 2,
2000 between Citrix and Insynq, Inc. (Incorporated by reference to
Exhibit 10.26 to the Company's Annual Report on Form 10-KSB filed
September 13, 2000).

10.34 Master Licensing Agreement dated March 1, 2000 between Legacy
Solutions and Insynq, Inc. (Incorporated by reference to Exhibit 10.27
to the Company's Annual Report on Form 10-KSB filed September 13,
2000).

10.35 Master Licensing Agreement dated April 7, 2000 between Electronic
Registry Systems, Inc. and Insynq, Inc. (Incorporated by reference to
Exhibit 10.28 to the Company's Annual Report on Form 10-KSB filed
September 13, 2000).

10.36 Master Licensing Agreement dated March 22, 2000 between Viking
Software Services, Inc. and Insynq, Inc. (Incorporated by reference to
Exhibit 10.29 to the Company's Annual Report on Form 10-KSB filed
September 13, 2000).

10.37 Master Licensing Agreement dated June 1, 2000 between My Partner
Online and Insynq, Inc. (Incorporated by reference to Exhibit 10.30 to
the Company's Annual Report on Form 10-KSB filed September 13, 2000).

10.38 Amendment B to Master Licensing Agreement dated November 1, 2001
between My Partner Online and Insynq, Inc. (Incorporated by reference
to Exhibit 10.5 to the Company's Quarterly Report on Form 10-QSB filed
January 16, 2002).

10.39 Master Licensing Agreement dated April 24, 2000 between Veracicom and
Insynq, Inc. (Incorporated by reference to Exhibit 10.31 to the
Company's Annual Report on Form 10-KSB filed September 13, 2000).

10.40 Master Licensing Agreement dated August 21, 2000 between
CastaLink.com, Inc. and Insynq, Inc. (Incorporated by reference to
Exhibit 10.32 to the Company's Annual Report on Form 10- KSB filed
September 13, 2000).

10.41 Application Hosting Agreement dated May 12, 2000 between Remedy
Corporation and Insynq, Inc. (Incorporated by reference to Exhibit
10.33 to the Company's Annual Report on Form 10- KSB filed September
13, 2000).

10.42 Novell Internet Commercial Service Provider Agreement dated July 24,
2000 between Novell, Inc. and Insynq, Inc. (Incorporated by reference
to Exhibit 10.34 to the Company's Annual Report on Form 10-KSB filed
September 13, 2000).

10.43 Agreement to Provide Collaborative Management Services dated July 15,
1999 between Horizon Holdings I, LLC, and Insynq, Inc. (Incorporated
by reference to Exhibit 10.35 to the Company's Annual Report on Form
10-KSB filed September 13, 2000).

10.44 Referral Partner Agreement dated July 29, 1999 between Global Crossing
Telecommunications, Inc. and Insynq, Inc. (Incorporated by reference
to Exhibit 10.36 to the Company's Annual Report on Form 10-KSB filed
September 13, 2000).

10.45 Application Hosting and Delivery Agreement dated August 18, 2000
between Donor Management, Inc. and Insynq, Inc. (Incorporated by
reference to Exhibit 10.37 to the Company's Quarterly Report on Form
10-QSB dated October 23, 2000).

10.46 Application Service Provider Agreement dated August 21, 2000 between
Corel Corporation and Insynq, Inc. (Incorporated by reference to
Exhibit 10.38 to the Company's Quarterly Report on Form 10-QSB dated
October 23, 2000).

10.47 Application Services Agreement dated September 6, 2000 between
Microsoft and Insynq, Inc. (Incorporated by reference to Exhibit 10.39
to the Company's Quarterly Report on Form 10-QSB dated October 23,
2000).

10.48 Consulting Agreement dated September 20, 2000 between David D. Selmon
and Insynq, Inc. (Incorporated by reference to Exhibit 10.40 to the
Company's Quarterly Report on Form 10-QSB filed October 23, 2000).

10.49 Amendment No 1 to Consulting Agreement dated September 12, 2001
between David D. Selmon and Insynq, Inc. (Incorporated by reference to
Exhibit 10.3 to the Company's Quarterly Report on Form 10-QSB filed
January 16, 2002)

10.50 Release Agreement dated September 22, 2000 with Charles Benton.
(Incorporated by reference to Exhibit 10.41 to the Company's Quarterly
Report on Form 10-QSB filed October 23, 2000).

10.51 Release Agreement dated September 22, 2000 with Charles Benton.
(Incorporated by reference to Exhibit 10.42 to the Company's Quarterly
Report on Form 10-QSB filed October 23, 2000).

10.52 Employment Agreement dated September 18, 2000 between Stephen C. Smith
and Insynq, Inc. as amended by Amendment No. 1 dated December 1, 2000.
(Incorporated by reference to Exhibit 10.43 to the Company's Quarterly
Reported on Form 10-QSB filed October 23, 2000).

10.53 Amendment No. 2 dated July 20, 2001 to Employment Agreement between
Stephen C. Smith and Insynq, Inc. (Incorporated by reference to
Exhibit 10.49 to the Company's Annual Report on Form 10-KSB filed July
31, 2001).

10.54 Non-Exclusive Financial Advisory Agreement dated June 15, 2000 between
Sunstate Equity Trading, Inc. and Xcel Management, Inc., as amended by
Amendment No. 1 dated September 22, 2000. Incorporated by reference to
Exhibit 10.44 to the Company's Registration Statement on Form SB-2
filed December 14, 2000)

10.55 Independent Consulting Agreement dated September 16, 2000 between
Steven Tebo and Insynq, Inc. (Incorporated by reference to Exhibit
10.45 to the Company's Quarterly Report on Form 10- QSB dated October
23, 2000).

10.56 Independent Consulting Agreement dated September 16, 2000 between
Franklin C. Fisher and Insynq, Inc. (Incorporated by reference to
Exhibit 10.46 to the Company's Quarterly Report on Form 10-QSB dated
October 23, 2000).

10.57 Independent Consulting Agreement dated October 31, 2000 between
Charles F. Benton and Insynq, Inc. (Incorporated by reference to
Exhibit 10.47 to the Company's Registration Statement on Form SB-2
filed December 14, 2000)

10.58 Amendment No 1 to Consulting Agreement dated November 1, 2001 between
Charles F. Benton (CFB and Associates) and Insynq, Inc. (Incorporated
by reference to Exhibit 10.4 to the Company's Quarterly Report of Form
10-QSB filed January 16, 2002)

10.59 Independent Consulting Agreement dated November 28, 2000 between My
Partner Online, Inc. and Insynq. Inc. (Incorporated by reference to
Exhibit 10.48 to the Company's Registration Statement on Form SB-2
filed December 14, 2000)

10.60 Letter of Understanding dated November 11, 2000 and Agreement dated
November 11, 2000 between Bridge 21, Inc. and Insynq, Inc.
(Incorporated by reference to Exhibit 10.49 to the Company's
Registration Statement on Form SB-2 filed December 14, 2000)

10.61 Contract of Engagement dated September 27, 2000 between Cardinal
Securities, L.L.C. and Insynq, Inc. (Incorporated by reference to
Exhibit 10.50 to the Company's Registration Statement on Form SB-2
filed December 14, 2000)

10.62 Agreement dated November 30, 2000 between Kathleen McHenry, John P.
Gorst and Insynq, Inc. (Incorporated by reference to Exhibit 10.51 to
the Company's Registration Statement on Form SB-2 filed December 14,
2000)

10.63 Voting Agreement dated November 30, 2000 between Kathleen McHenry,
Hagens Berman LLP, John P. Gorst and Insynq, Inc. (Incorporated by
reference to Exhibit 10.52 to the Company's Registration Statement on
Form SB-2 filed December 14, 2000).

10.64 Registration Rights Agreement dated November 30, 2000 between Kathleen
McHenry, Hagens Berman LLP and Insynq, Inc. (Incorporated by reference
to Exhibit 10.53 to the Company's Registration Statement on Form SB-2
filed December 14, 2000).

10.65 Application Service Provider Reseller Agreement dated October 27, 2000
between Wireless Knowledge, Inc. and Insynq, Inc. (Incorporated by
reference to Exhibit 10.54 to the Company's Registration Statement on
Form SB-2 filed December 14, 2000).

10.66 Independent Consultant Agreement dated January 2, 2001 between One
Click Investments, LLC and Eric Estoos and Insynq, Inc. (Incorporated
by reference to Exhibit 10.55 to the Company's Quarterly Report on
Form 10-QSB dated April 20, 2001).

10.67 Independent Consultant Agreement dated January 2, 2001 between Michael
duPont and Insynq, Inc. (Incorporated by reference to Exhibit 10.56 to
the Company's Quarterly Report on Form 10- QSB dated April 20, 2001).

10.68 Non-Exclusive Financial Advisory Agreement dated January 26, 2001
between Morgan Brewer Securities, Inc. and Insynq, Inc. (Incorporated
by reference to Exhibit 10.57 to the Company's Quarterly Report on
Form 10-QSB dated April 20, 2001).

10.69 Business Advisory and Consulting Services Agreement dated February 19,
2001 between Tarshish Capital Markets, LTD. and Insynq, Inc.
(Incorporated by reference to Exhibit 10.58 to the Company's Quarterly
Report on Form 10-QSB dated April 20, 2001).

10.70 Consulting Agreement dated March 22, 2001 between Metromedia Research
Group LLC and Insynq, Inc., as amended dated April 9, 2001.
(Incorporated by reference to Exhibit 10.65 to the Company's Annual
Report on Form 10-KSB filed July 31, 2001).

10.71 Registration Rights Agreement dated March 22, 2001 between Metromedia
Research Group, LLC and Insynq, Inc. (Incorporated by reference to
Exhibit 10.66 to the Company's Annual Report on Form 10-KSB filed July
31, 2001).

10.72 Consulting Agreement dated March 23, 2002 between Internet PR Group
and Insynq, Inc. (Incorporated by reference to Exhibit 10.67 to the
Company's Annual Report on Form 10-KSB filed July 31, 2001).

10.73 Letter Agreement dated April 1, 2001 between Barretto Pacific
Corporation and Insynq, Inc. (Incorporated by reference to Exhibit
10.68 to the Company's Annual Report on Form 10-KSB filed July 31,
2001).

10.74 Consulting Agreement dated April 1, 2001 between The N.I.R. Group, LLC
and Insynq, Inc. (Incorporated by reference to Exhibit 10.69 to the
Company's Annual Report on Form 10-KSB filed July 31, 2001).

10.75 Consulting Agreement dated May 3, 2001 and Amendment dated May 30,
2001 between Eugene R. Zachman and Insynq, Inc. (Incorporated by
reference to Exhibit 10.70 to the Company's Annual Report on Form
10-KSB filed July 31, 2001).

10.76 Settlement Agreement dated May 17, 2001 between Howe/Horizon Holdings,
LLC, Horizon Holdings I, LLC and Insynq, Inc. (Incorporated by
reference to Exhibit 10.71 to the Company's Annual Report on Form
10-KSB filed July 31, 2001).

10.77 Equipment Co-Location License Agreement dated May 16, 2001 between
Horizon Holdings I, LLC and Insynq, Inc. (Incorporated by reference to
Exhibit 10.72 to the Company's Annual Report on Form 10-KSB filed July
31, 2001).

10.78 Lease Agreement dated May 10, 2001 between Howe/Horizon Holdings, LLC
and Insynq, Inc. (Incorporated by reference to Exhibit 10.73 to the
Company's Annual Report on Form 10-KSB filed July 31, 2001).

10.79 Consulting Agreement dated May 17, 2001 and Amendment dated May 30,
2001 between James Zachman and Insynq, Inc. (Incorporated by reference
to Exhibit 10.74 to the Company's Annual Report on Form 10-KSB filed
July 31, 2001).

10.80 Agreement to Provide Professional Service dated July 10, 2001 between
Central Software Services and Insynq, Inc. (Incorporated by reference
to Exhibit 10.75 to the Company's Annual Report on Form 10-KSB filed
July 31, 2001).

10.81 Consulting Agreement dated May 3, 2001 between DiabloStocks, Inc. and
Insynq, Inc. (Incorporated by reference to Exhibit 10.76 to the
Company's Annual Report on Form 10-KSB filed July 31, 2001).

10.82 Selling Agreement dated May 28, 2001 between Taconic Capital Partners,
LP, Internet Solutions Partners, Inc, Salvani Investments, Inc. and
Insynq, Inc. (Incorporated by reference to Exhibit 10.77 to the
Company's Annual Report on Form 10-KSB filed July 31, 2001).

10.83 Acquisition Purchase Agreement dated June 1, 2001 between Omnibus
Subscriber Computing, Inc. and Insynq, Inc. (Incorporated by reference
to Exhibit 10.78 to the Company's Annual Report on Form 10-KSB filed
July 31, 2001).

10.84 Settlement Agreement dated June 21, 2001 between One Click
Investments, LLC and John P. Gorst. (Incorporated by reference to
Exhibit 10.79 to the Company's Annual Report on Form 10- KSB filed
July 31, 2001).

10.85 Settlement Agreement dated February 15, 2002 between One Click
Investments, LLC and Insynq, Inc. (Incorporated by reference to
Exhibit 10.11 to the Company's Amended Quarterly Report on Form
10-QSB/A filed February 25, 2002).

10.86 Lease Agreement dated July 6, 2001 between Simon-Marten, LLC and
Insynq, Inc. for 1127 Broadway Plaza, Suite 10, Tacoma, Washington,
98402. (Incorporated by reference to Exhibit 10.80 to the Company's
Amended Registration Statement on Form SB2/A filed September 19, 2001)

10.87 Settlement Agreement dated September 6, 2001 between Martin E.
Darrah and Insynq, Inc. (Incorporated by reference to Exhibit 10.81 to
the Company's Registration Statement on Form SB-2 filed September 19,
2001.)

10.88 Consulting Agreement dated September 1, 2001 between The N.I.R Group,
LLC and Insynq, Inc. (Incorporated by reference to Exhibit 10.2 to the
Company's Amended Quarterly Report on Form 10-QSB/A filed February 25,
2002).

10.89 Consulting Agreement dated January 1, 2002 between The N.I.R. Group,
LLC and Insynq, Inc. (Incorporated by reference to Exhibit 10.8 to the
Company's Amended Quarterly Report on Form 10-QSB/A filed February 25,
2002).

10.90 Services Agreement dated December 20, 2001 between Qwest Business
Resources, Inc. and Insynq, Inc. (Incorporated by reference to Exhibit
10.9 to the Company's Amended Quarterly Report on From 10-QSB/A filed
February 25, 2002).

10.91 Employment Agreement dated December 1, 2001 between Donald M. Kaplan
and Insynq, Inc. (Incorporated by reference to Exhibit 10.10 to the
Company's Amended Quarterly Report on Form 10-QSB/A filed February 25,
2002).

16.1 Letter on Change in Certifying Accountant (Incorporated by reference
to Exhibit 1 to the Company's Current Report on Form 8- K/A filed May
23, 2000).

23.1* Consent of Grant Thornton, LLP for Financial Statements for the year
ended May 31, 2001.

23.2* Consent of Brad G. Beckstead, CPA for Financial Statements for the
year ended May 31, 2000

23.3* Consent of Seth A Farbman PC (included in Exhibit 5.1).

* Filed Herewith
+ Previously Filed

(b) Reports on Form 8-K

None

II-10

ITEM 28. UNDERTAKINGS.

Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to our directors, officers and controlling persons pursuant to
our Certificate of Incorporation, Bylaws, Delaware law or otherwise, we have
been advised that in the opinion of the Securities and Exchange Commission, such
indemnification is against public policy as expressed in the Securities Act and
is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by us of expenses incurred or
paid by any one of our directors, officers or controlling persons in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, we will, unless in the opinion of our counsel the matter has been
settled by controlling precedent, submit to a court of appropriate jurisdiction
the question whether such indemnification by it is against public policy as
expressed in the Securities Act and will be governed by the final adjudication
of such issue.

We hereby undertake that for purposes of determining any liability under
the Securities Act, the information omitted from the form of prospectus filed as
part of this registration statement in reliance upon Rule 430A and contained in
a form of prospectus filed by us pursuant to Rule 424(b)(1) or (4) or 497(h)
under the Securities Act shall be deemed to be part of this registration
statement as of the time it was declared effective by the Securities and
Exchange Commission.

We also hereby undertake:

(1) to file, during any period in which offers or sales are being made, a
post-effective amendment to this registration statement:

(i) to include any prospectus required by Section 10(a)(3) of the
Securities Act;

(ii) to reflect in the prospectus any facts or events arising after
the effective date of the registration statement (or the most
recent post- effective amendment thereof) which, individually or
in the aggregate, represent a fundamental change in the
information set forth in the registration statement.
Notwithstanding the foregoing, any increase or decrease in volume
of securities offered (if the total dollar value of securities
offered would not exceed that which was registered) and any
deviation from the low or high end of the estimated maximum
offering range may be reflected in the form of prospectus filed
with the Securities and Exchange Commission pursuant to Rule
424(b) if, in the aggregate, the changes in volume and price
represent no more than a 20% change in the maximum aggregate
offering price set forth in the "Calculation of Registration Fee"
table in the effective registration statement;

(iii) to include any material information with respect to the plan of
distribution not previously disclosed in the registration
statement or any material change to such information in the
registration statement;

2) that, for the purpose of determining any liability under the Securities
Act, each such post-effective amendment shall be deemed to be a new
registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial
bonafide offering thereof; and

3) to remove from registration by means of a post effective amendment any of
the securities being registered which remain unsold at the termination of
the offering.

II-11

SIGNATURES

In accordance with the requirements of the Securities Act of 1933, the
Registrant certifies that it has reasonable grounds to believe that it meets all
the requirements for filing on Form SB-2 and has duly caused this registration
statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Tacoma, State of Washington, on April 8, 2002.

INSYNQ, INC.

/s/ JOHN P. GORST
-----------------
John P. Gorst
Chief Executive Officer

Pursuant to the requirements of the Securities Act of 1933, as amended,
this Amendment No. 1 to registration statement on Form SB-2 has been signed
below by the following persons on behalf of the Registrant in the capacities
indicated on the date stated.

SIGNATURES TITLE DATE

/s/ John P. Gorst Chief Executive Officer, April 8, 2002
- ----------------- Chairman of the Board
John P. Gorst and Director (Principal
Executive Officer)

/s/ Stephen C. Smith Chief Financial Officer April 8, 2002
- -------------------- (Principal Financial and
Stephen C. Smith Accounting Officer)

/s/ M. Carroll Benton Chief Administrative Officer, April 8, 2002
- --------------------- Secretary, Treasurer and
M. Carroll Benton Director

/s/ David D. Selmon Director April 8, 2002
- -------------------
David D. Selmon

/s/ Donald Kaplan Director April 8, 2002
- -----------------
Donald Kaplan

INDEX TO EXHIBITS

EXHIBIT DESCRIPTION
NUMBER

3.1 Certificate of Incorporation of Insynq, Inc. (Incorporated by
reference to Exhibit 2 to the Company's Current Report on Form 8-K
filed August 17, 2000).

3.3 By-Laws of Insynq, Inc. (Incorporated by reference to Exhibit 3 to the
Company's Current Report on Form 8-K filed August 17, 2000).

4.1 Form of Specimen Common Stock Certificate. (Incorporated by reference
to Exhibit 4.1 to the Company's Annual Report on Form 10-KSB filed
September 13, 2000).

4.17 Form of Warrant Agreement issued to Series A & B warrant holders.
(Incorporated by reference to Exhibit 4.13 to the Company's Annual
Report on Form 10-KSB filed September 13, 2000).

4.19 Form of Warrant Agreement issued to Hewlett-Packard on June 1, 1999.
(Incorporated by reference to Exhibit 4.15 to the Company's Annual
Report on Form 10-KSB filed September 13, 2000).

4.39 Agreement dated November 1, 2000 between Timothy Horan and Insynq.
(Incorporated by reference to Exhibit 4.35 to the Company's
Registration Statement on Form SB-2 filed December 14, 2000)

4.40 Agreement dated November 1, 2000 between Raymond Betz and Insynq.
(Incorporated by reference to Exhibit 4.36 to the Company's
Registration Statement on Form SB-2 filed December 14, 2000)

4.44 Lock-Up and Waiver Agreement dated October 17, 2000 by John P. Gorst.
(Incorporated by reference to Exhibit 4.40 to the Company's
Registration Statement on Form SB-2 filed December 14, 2000)

4.45 Lock-Up and Waiver Agreement dated October 17, 2000 by M. Carroll
Benton. (Incorporated by reference to Exhibit 4.41 to the Company's
Registration Statement on Form SB-2 filed December 14, 2000)

4.54 Warrant Agreement dated March 5, 2001 between Bransville Limited and
Insynq, Inc. (Incorporated by reference to Exhibit 4.54 to the
Company's Annual Report on Form 10-KSB filed July 31, 2001)

4.57 Warrant Agreement dated March 25, 2001 between Bransville Limited and
Insynq, Inc. (Incorporated by reference to Exhibit 4.57 to the
Company's Annual Report on Form 10-KSB filed July 31, 2001)

4.73* Amendment No. 1 of Securities Purchase Agreement dated April 8, 2002
between AJW Partners, LLC, New Millennium Capital Partners III, LLC,
AJW/New Millennium Offshore, LTD and Pegasus Capital Partners, LLC and
Insynq, Inc.

5.1* Opinion Letter of Seth A. Farbman PC

10.1 Insynq, Inc. 2000 Executive Long Term Incentive Plan. (Incorporated by
reference to Exhibit 10.1 to the Company's Annual Report on Form
10-KSB filed September 13, 2000).

10.12 Engagement Letter with Rosenblum Partners, LLC dated July 7, 2000.
(Incorporated by reference to Exhibit 10.8 to the Company's Annual
Report on Form 10-KSB filed September 13, 2000).

10.50 Release Agreement dated September 22, 2000 with Charles Benton.
(Incorporated by reference to Exhibit 10.41 to the Company's Quarterly
Report on Form 10-QSB filed October 23, 2000).

10.51 Release Agreement dated September 22, 2000 with Charles Benton.
(Incorporated by reference to Exhibit 10.42 to the Company's Quarterly
Report on Form 10-QSB filed October 23, 2000).

10.88 Consulting Agreement dated January 1, 2002 between The N.I.R Group,
LLC and Insynq, Inc. (Incorporated by reference to Exhibit 10.1 to the
Company's Amended Quarterly Report on Form 10-QSB/A filed February 25,
2002)

16.1 Letter on Change in Certifying Accountant (Incorporated by reference
to Exhibit 1 to the Company's Current Report on Form 8- K/A filed May
23, 2000).

23.1* Consent of Grant Thornton, LLP for Financial Statements for the year
ended May 31, 2001.

23.2* Consent of Brad G. Beckstead, CPA for Financial Statements for the
year ended May 31, 2000

23.3* Consent of Seth A. Farbman (included in Exhibit 5.1).

- -------------------
* Filed Herewith