SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange
Act of 1934 (Amendment No. __)

|X| Filed by the Registrant
|_| Filed by a party other than the Registrant

Check the appropriate box:
|X| Preliminary Proxy Statement
|_| Confidential, for Use of the Commission only (as permitted by Rule
14a-6(e)(2))
|_| Definitive Proxy Statement |_| Definitive Additional Materials
|_| Soliciting Material Pursuant to Section 240.14a-11(c)
or Section 240.14a-12

DBS INDUSTRIES, INC.
(Name of Registrant as Specified in Its Charter)

(Name of Person(s) Filing Proxy Statement, if other than the Registrant)

Payment of Filing Fee (Check the appropriate box):

|X| No fee required
|_| Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11

1) Title of each class of securities to which transaction
applies:_______________________________________________
2) Aggregate number of securities to which transaction
applies:_______________________________________________
3) Per unit price or other underlying value of transaction
computed pursuant to Exchange Act Rule 0-11 (set forth the
amount on which the filing fee is calculated and state how it
was determined):__________________________
4) Proposed maximum aggregate value of transaction:_______
5) Total fee paid:________________________________________

|_| Fee paid previously with preliminary materials.

|_| Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration
statement number, or the Form or Schedule and the date of its filing.

1) Amount Previously Paid: ________________________________
2) Form, Schedule or Registration Statement No.: __________
3) Filing Party: __________________________________________
4) Date Filed: ___________________________________________

DBS INDUSTRIES, INC.

100 Shoreline Highway, Suite 190A
Mill Valley, California 94941
Telephone: (415) 380-8055
Facsimile: (415) 380-8199
Website: http://www.dbsindustries.com

To the Stockholders of DBS Industries, Inc.:

You are invited to attend the Annual Meeting of the Stockholders of DBS
Industries, Inc. ("DBSI" or the "Company") which will be held on July 23, 2002,
at 1:00 p.m. (PDT) at the Acqua Hotel, 555 Redwood Highway, Mill Valley,
California 94941.

The accompanying Notice of the Annual Meeting of the Stockholders and
Proxy Statement contain the matters to be considered and acted upon, and you
should read such material carefully.

At the meeting, you will be asked to (i) elect two nominees for
election to the Board of Directors, (ii) approve an amendment to the Company's
Certificate of Incorporation to increase the number of authorized shares of
Common Stock, (iii) approve an amendment to the 2000 Stock Option Plan to
increase the number of authorized shares of Common Stock under the plan, (iv)
approve an amendment to the 1999 Employee Stock Purchase Plan to increase the
number of authorized shares of Common Stock under the plan, and (v) other maters
that properly come before the meeting, including adjournment of the meeting.

We hope you will be able to attend the stockholders' meeting. However,
in order that we may be assured of a quorum, we urge you to mark, sign, date and
return the enclosed proxy promptly, whether or not you plan to attend the
meeting in person. Alternatively, you may vote your shares by phone or over the
Internet as instructed in these materials as promptly as possible in order to
ensure your representation at the Annual Meeting. You may, of course, withdraw
your proxy if you attend the meeting and choose to vote in person.

Sincerely,

Fred W. Thompson
President

June 24, 2002

DBS INDUSTRIES, INC.

100 Shoreline Highway, Suite 190A
Mill Valley, California 94941
Telephone: (415) 380-8055
Facsimile: (415) 380-8199
Website: http://www.dbsindustries.com

NOTICE OF THE ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON JULY 23, 2002

NOTICE IS HEREBY GIVEN that the Annual Meeting of the Stockholders of DBS
Industries, Inc., a Delaware corporation ("DBSI" or the "Company"), will be held
on Tuesday, July 23, 2002, at 1:00 p.m. (PDT) at the Acqua Hotel, 555 Redwood
Highway, Mill Valley, California 94941, consider and act upon the following:

1. Re-Elect two Class III directors to hold office for a three-year term
ending at the Annual Meeting of Stockholders in 2005 until their
successors are elected and qualified;

2. Approve an amendment to the Company's Certificate of Incorporation
to increase the number of authorized shares of Common Stock from
One Hundred Million (100,000,000) to One Hundred Fifty Million
(150,000,000);

3. Approve an amendment to the 2000 Stock Option Plan to increase the
number of shares available under the plan;

4. Approve an amendment to the 1999 Employee Stock Purchase Plan to
increase the number of shares available under the plan; and

5. To transact such other business as may properly come before the meeting
or any adjournments thereof.

Only stockholders of record at the close of business on June 4, 2002, are
entitled to notice of and to vote at the Annual Meeting of the Stockholders.
Stockholders are invited to attend the meeting in person.

By Order of the Board of Directors

Fred W. Thompson
President

June 24, 2002

You are cordially invited to attend the Annual Meeting in person. Whether or not
you expect to attend the Annual Meeting, please complete, date, sign and return
the enclosed proxy or vote over the telephone or the Internet as instructed in
these materials as promptly as possible in order to ensure your representation
at the Annual Meeting. A return envelope (which is postage prepaid if mailed in
the United States) is enclosed for your convenience. Even if you have voted by
proxy, you may still vote in person if you attend the Annual Meeting. Please
note, however, that, if your shares are held of record by a broker, bank or
other nominee and you wish to vote at the Annual Meeting, you must obtain a
proxy issued in your name from that record holder.

DBS Industries, Inc.
100 Shoreline Highway, Suite 190A
Mill Valley, California 94941
Telephone: (415) 380-8055

PROXY STATEMENT
FOR
ANNUAL MEETING OF STOCKHOLDERS

Introduction

We are furnishing this Proxy Statement to you in connection with our Annual
Meeting of Stockholders (the "Meeting") to be held on July 23, 2002, at 1:00
p.m. (PDT), at the Acqua Hotel, 555 Redwood Highway, Mill Valley, California
94941, and at any and all adjournments thereof.

The enclosed proxy is solicited on behalf of our Board of Directors and may
be revocable by you at any time prior to voting of such proxy. Only stockholders
of record on June 4, 2002, will be entitled to notice of and to vote at the
Meeting.

The proxy solicited hereby, if properly signed and returned to the Company
and not revoked prior to its use, will be voted at the Meeting in accordance
with the instructions contained therein. If no contrary instructions are given,
each signed proxy received will be voted "FOR" each nominee for the Board of
Directors, "FOR" the amendment to the Certificate of Incorporation, "FOR" the
amendment to the Company's 2000 Stock Option Plan, "FOR" the amendment to the
Company's 1999 Employee Stock Purchase Plan and, at the proxy holders'
discretion, on such other matters, if any, which may come before the Meeting
(including any proposal to adjourn the Meeting).

This Proxy Statement and form of proxy were first mailed to stockholders on
or about June 24, 2002.

Revocability of Proxies

Any stockholder giving a proxy has the power to revoke it at any time
before it is exercised by (i) filing with DBS Industries, Inc. written notice of
its revocation addressed to: Secretary, DBS Industries, Inc., 100 Shoreline
Highway, Suite 190A, Mill Valley, California 94941, (ii) submitting a duly
executed proxy bearing a later date, or (iii) appearing in person at the Meeting
and giving the Secretary notice of his or her intention to vote in person.

Persons Making the Solicitation

THIS SOLICITATION OF PROXIES IS BEING MADE BY DBSI'S BOARD OF DIRECTORS.
The expense of preparing, assembling, printing and mailing proxy materials
furnished by the Board of Directors to stockholders will be paid by the Company.
Copies of proxy materials will be furnished to brokerage houses, fiduciaries and
custodians to be forwarded to beneficial owners of the Common Stock. In addition
to the solicitation of proxies by use of the mail, some of the officers,
directors, employees and agents of the Company may, without additional
compensation, solicit proxies by telephone or personal interview, the cost of
which the Company will also bear.

Record Date and Voting Rights

The Company is currently authorized to issue up to 100,000,000 shares of
Common Stock, par value $0.0004, and 10,000,000 shares of Preferred stock, par
value $0.0004. As of June 4, 2002, 33,465,653 shares of Common Stock were issued
and outstanding, 23,899 shares of Series A Preferred stock were issued and
outstanding and 296 shares of Series B Preferred stock were issued and
outstanding. Each share of Common Stock shall be entitled to one vote on all
matters submitted for stockholder approval, including the election of a
director. Each share of Series A Preferred stock is entitled to vote on each
matter submitted for stockholders approval in a number equal to the number of
full shares of Common Stock in to which each share of Series A Preferred stock
is convertible. As of June 4, 2002, the outstanding shares of Series A Preferred
stock were convertible into 415,600 shares of Common Stock in the aggregate. The
Series B Preferred stock is not entitled to vote upon any matters submitted to
stockholders. The record date for determination of stockholders entitled to
notice of, and to vote at the Meeting, is June 4, 2002. The Company's
Certificate of Incorporation does not provide for cumulative voting.

One-third (1/3) of the outstanding shares of Common Stock and Series A
Preferred of the Company, voting as a group, must be represented in person or by
proxy at the Meeting to constitute a quorum for the transaction of business.
Directors shall be elected by a plurality of the votes of Common Shares and
Series A Preferred Shares, voting as a group, present in person or represented
by proxy at the Meeting and entitled to vote on the election of directors. The
amendment to the Certificate of Incorporation must be approved by the
affirmative vote of a majority of the outstanding shares of Common Stock and
Series A Preferred Shares, voting as a group, present in person or represented
by proxy at the Meeting. The amendments to both the 2000 Stock Option Plan and
the 1999 Employee Stock Purchase Plan must be approved by the affirmative vote
of a majority of the shares present in person or represented proxy at the
meeting. Under Delaware law, abstentions and broker non-votes shall be counted
for purposes of determining quorum. Broker non-votes, however, will not be
counted for purposes of calculating voting power, but abstentions will be
counted towards calculating voting power.

Principal Stockholders

The following table sets forth certain information as of June 4, 2002, with
respect to the beneficial ownership of our Common Stock for each director, all
directors and officers of the Company as a group, and each person known to us to
own beneficially five percent (5%) or more of the outstanding shares of our
Common Stock.

Name and Address of Beneficially and
Beneficial Owner(2) Record Owned (1) Percent of Class

Fred W. Thompson 6,599,487 (3) 17.9%

Randy Stratt 956,250 (4) 2.8%

Michael T. Schieber 520,147 (5) 1.5%

Jerome W. Carlson 387,207 (6) 1.1%

Jessie J. Knight, Jr. 256,960 (7) *

Roy T. Grant 552,336 (8) 1.6%

Michael J. Apatoff 19,423,386 (9) 40.4%

Officers and Directors as a Group 28,695,773 52.0%
(7 Persons)

Bradley N. Rotter 2,272,754 6.6%
1700 Montgomery Street #250
San Francisco, CA 94111

* Less than 1%.

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

(2) Except for Bradley N. Rotter, the address for each of these persons is:
c/o DBS Industries, Inc., 100 Shoreline Highway
#190A, Mill Valley CA 94941.

(3) Includes (i) 31,593 shares of Common Stock held by Mr. Thompson; (ii)
174,558 shares of Common Stock held in Thompson 1996 Revocable Trust;
(iii) 2,916,666 shares held by Mr. Thompson through an affiliated
business entity; (iv) options to purchase 312,500 shares of Common
stock at $0.531 per share expiring January 1, 2006, 185,000 shares of
Common Stock exercisable at $0.584 per share and expiring December 31,
2002, 1,000,000 shares of Common Stock exercisable at $1.3496 per share
expiring September 1, 2009, 208,332 shares of Common Stock exercisable
at $0.49 per share expiring February 6, 2011, and 937,505 shares of
Common Stock exercisable at $0.77 per share expiring August 7, 2011;
and (v) warrants to purchase 166,667 shares of Common Stock exercisable
at $0.12 per share which expires September 4, 2002, warrants to
purchase 249,999 shares of Common Stock exercisable at $0.12 per share
expiring October 15, 2002, and warrants to purchase 416,667 shares of
Common Stock exercisable at $0.12 per share expiring October 15, 2002.

(4) Includes (i) 15,000 shares of Common Stock held by Mr. Stratt; and (ii)
options to purchase 160,000 shares of Common Stock exercisable at
$1.0797 per share expiring October 18, 2009, 68,750 shares of Common
Stock exercisable at $0.49 per share expiring February 6, 2011, 412,500
shares of Common Stock exercisable at $0.77 per share expiring August
7, 2011, and 300,000 shares of Common Stock exercisable at $0.12 per
share expiring February 5, 2012.

(5) Includes (i) 220,000 shares of Common Stock held by Mr. Schieber
jointly with spouse, Arlene Schieber, (ii) 10,005 shares of Common
Stock held solely by Mr. Schieber, (iii) 4,075 shares of Common Stock
held solely by Ms. Schieber, of which shares Mr. Schieber disclaims
beneficial ownership, (iv) options to purchase 13,750, 12,534 and
37,500 shares of Common Stock all exercisable at $1.4375 per share
which expire on February 15, 2005, February 15, 2006 and April 30,
2006, respectively, 22,500 shares of Common Stock exercisable at
$2.1875 per share which expire on May 12, 2008, 10,000 shares of Common
Stock exercisable at $0.7235 per share expiring September 1, 2009,
4,391 shares of Common Stock exercisable at $2.8625 per share expiring
December 31, 2009, 10,000 shares of Common Stock exercisable at $1.1953
per share expiring May 22, 2010, 5,625 shares of Common Stock
exercisable at $2.5875 per share expiring June 30, 2010, 7,591 shares
of Common Stock exercisable at $1.5687 expiring December 31, 2010,
10,000 shares of Common Stock exercisable at $0.22 per share expiring
June 5, 2011, 71,202 shares of Common Stock exercisable at $0.4156 per
share expiring June 30, 2011, 30,974 shares of Common Stock exercisable
at $0.46 per share expiring December 31, 2011; and (v) a warrant to
purchase 50,000 shares of Common Stock exercisable at $0.25 per share
expiring May 1, 2003.

(6) Includes (i) 85,000 shares of Common Stock held by Mr. Carlson, (ii)
options to purchase 37,500 shares of Common Stock at $2.1875 per share
which expire May 12, 2008, 4,391 shares of Common Stock exercisable at
$2.8625 per share expiring December 31, 2009, 10,000 shares of Common
Stock exercisable at $1.1953 per share expiring May 22, 2010, 6,137
shares of Common Stock exercisable at $2.5875 expiring June 30, 2010,
6,748 shares of Common Stock exercisable at $1.5687 per share expiring
December 31, 2010, 10,000 shares of Common Stock exercisable at $0.22
per share expiring June 5, 2011, 73,840 shares of Common Stock
exercisable at $0.4156 per share expiring June 30, 2011, 28,591 shares

of Common Stock exercisable at $0.46 per share expiring December 31,
2011; and (iii) a warrant to purchase 125,000 shares of Common Stock
exercisable at $0.45 per share expiring June 29, 2003.

(7) Includes (i) 53,191 shares of Common Stock held by Mr. Knight, (ii)
options to purchase 37,500 shares of Common Stock exercisable at $5.50
per share which expire February 19, 2009, 12,500 shares of Common Stock
exercisable at $2.8125 per share expiring August 25, 2009, 4,160 shares
of Common Stock exercisable at $2.8625 expiring December 31, 2009,
10,000 shares of Common Stock exercisable at $0.7235 per share expiring
September 1, 2009, 10,000 shares of Common Stock exercisable at $1.1953
per share expiring May 22, 2010, 4,347 shares of Common Stock
exercisable at $2.5875 expiring June 30, 2010, 8,013 shares of Common
Stock exercisable at $1.5687 per share expiring December 31, 2010,
10,000 shares of Common Stock exercisable at $0.22 per share expiring
June 5, 2011, 68,565 shares of Common Stock exercisable at $0.4156 per
share expiring June 30, 2011, 33,365 shares of Common Stock exercisable
at $0.46 per share expiring December 31, 2011; and (iii) a warrant to
purchase 5,319 shares of Common Stock exercisable at $0.47 per share
expiring August 16, 2005.

(8) Includes (i) 60,767 shares of Common Stock held by Mr. Grant, and (ii)
options to purchase 10,000 shares of Common Stock at $0.3897 per share
expiring September 1, 2009, 3,236 shares of Common Stock exercisable at
$2.8625 which expire December 31, 2009, 8,333 shares of Common Stock
exercisable at $0.7235 per share expiring September 1, 2009, 10,000
shares of Common Stock exercisable at $1.1953 per share expiring
December 31, 2010, 10,000 shares of Common Stock exercisable at $0.22
per share expiring June 5, 2011, and 450,000 shares of Common Stock
exercisable at $0.12 per share expiring March 1, 2012.

(9) Includes (i) 4,778,371 shares of Common Stock held by Mr. Apatoff, and
(ii) options to purchase 36,250 shares of Common Stock at $0.70 per
share expiring January 18, 2005, 25,000 shares of Common Stock
exercisable at $0.60 per share expiring July 27, 2005, 50,000 shares of
Common Stock exercisable at $0.62 per share expiring September 9, 2005,
53,191 shares of Common Stock exercisable at $0.47 per share expiring
August 16, 2005, 50,000 shares of Common Stock exercisable at $0.50 per
share expiring August 20, 2005, 250,000 shares of Common Stock
exercisable at $0.50 per share expiring August 20, 2005, 17,241 shares
of Common Stock exercisable at $0.29 per share expiring November 19,
2005, 1,100,000 shares of Common Stock exercisable at $0.10 per share
expiring June 15, 2002, 1,100,000 shares of Common Stock exercisable at
$0.10 per share expiring July 15, 2002, 1,150,000 shares of Common
Stock exercisable at $0.10 per share expiring August 15, 2002,
1,250,000 shares of Common Stock exercisable at $0.12 per share
expiring September 15, 2002, 1,250,000 shares of Common Stock
exercisable at $0.12 per share expiring October 15, 2002, 1,250,000
shares of Common Stock exercisable at $0.12 per share expiring November
15, 2002, 1,250,000 shares of Common Stock exercisable at $0.12 per
share expiring December 15, 2002, 1,250,000 shares of Common Stock
exercisable at $0.12 per share expiring January 15, 2003, 1,250,000
shares of Common Stock exercisable at $0.12 per share expiring February
15, 2003, 1,100,000 shares of Common Stock exercisable at $0.10 per
share expiring September 7, 2002, 50,000 shares of Common Stock
exercisable at $0.10 per share expiring September 25, 2002, 1,050,000
shares of Common Stock exercisable at $0.10 per share expiring October
15, 2002, 1,100,000 shares of Common Stock at $0.10 per share expiring
November 15, 2002, and 13,333 shares of Common Stock exercisable at
$0.10 per share expiring February 5, 2012.

PROPOSAL ONE

ELECTION OF DIRECTORS

General Information

The Company adopted staggered terms for its Board of Directors at the 1996
Annual Stockholders' Meeting. At the Meeting, stockholders will be asked to
re-elect Messrs. Fred W. Thompson, and Jessie J. Knight, Jr., as Class III
directors to serve until the 2005 Annual Meeting of Stockholders. Mr. Fred W.
Thompson has been a director since December 1992, and Mr. Knight has been a
director since February 1999.

Nominees for Director

The nominees for director have consented to being named as nominees in this
Proxy Statement and have agreed to serve as director if elected at the Annual
Meeting. In the event that any nominee is unable to serve, the person named in

the Proxy has discretion to vote for other persons if such other persons are
designated by the Board of Directors. The Board of Directors has no reason to
believe that any of the nominees will be unavailable for election. The nominees
who are elected as Class III directors shall hold office for three years, as set
forth under Article VIII of the Company's Restated Certificate of Incorporation,
or until their successors are elected and qualified.

The following sets forth the persons nominated by the Board of Directors
for election as director and certain information with respect to that person.

Nominee Age Term

Fred W. Thompson 59 2002-2005
Jessie J. Knight, Jr. 51 2002-2005

Background of Nominees

Fred W. Thompson has served as Chairman of the Board, President and CEO
since 1992. Mr. Thompson has also served as Chief Financial Officer from 1992 to
1999 and since February 2002. Mr. Thompson has over 30 years of senior
management experience in the telecommunications industry, including more than 20
years with AT&T Bell Labs, Western Electric Co. and the Long Lines Dept. As
founder and Chief Executive Officer of Inter Exchange Consultants, Inc., Mr.
Thompson was responsible for the successful management, design and engineering
of the pioneering cellular telephone operations in major world markets,
including New York, San Francisco, London and Tokyo. Mr. Thompson utilized his
skills and experience in bringing new communications technologies to market by
founding DBS Industries, Inc. and steering it through the FCC licensing process
toward the operational phase. Mr. Thompson received a BS degree in Electrical
Engineering from California Polytechnic.

Jessie J. Knight, Jr., a Director appointed in February 1999, is President
and Chief Executive Officer of the San Diego Regional Chamber of Commerce. He
was a Commissioner of the California Public Utilities Commission from 1993
through December 1998. Appointed by former Governor Peter Wilson, he was one of
five individuals responsible for economic and regulatory oversight of
California's telecommunications, utility, trucking and rail industries. Before
his appointment to the Commission, he was Executive Vice President of the San
Francisco Chamber of Commerce, responsible for international operations,
economic development and attracting businesses to San Francisco. He also served
as Vice President, Marketing for the San Francisco Newspaper Agency, a
publishing operation encompassing the San Francisco Chronicle and the San
Francisco Examiner. Mr. Knight serves on the board of directors of Avista, Inc.
Mr. Knight holds a BA degree from St. Louis University and an MBA from the
University of Wisconsin.

Vote Required

The plurality of votes of shares of Common Stock present in person or
represented by proxy and entitled to vote on the election of directors is
required to elect the nominees.

THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS VOTING FOR
BOTH NOMINEES LISTED ABOVE

PROPOSAL TWO

AMENDMENT TO CERTIFICATE OF INCORPORATION
INCREASING THE NUMBER OF AUTHORIZED COMMON STOCK

The Board of Directors has concluded that it would be advisable to amend
the Company's Certificate of Incorporation to increase the authorized number of
shares of Common Stock from 100,000,000 to 150,000,000.

The additional shares of Common Stock is needed to provide the Company with
a sufficient number of share of Common Stock that may be issued upon the
exercise of outstanding options, warrants, convertible securities and other
obligations and that may be used to raise capital for the construction and
operations of its system to fulfill its contract with the California Power
Authority and its E-SAT system.

Authorized Stock

Common Stock

The Company is currently authorized to issue up to 100,000,000 shares of
Common Stock, par value $0.0004, of which 33,465,653 were issued and outstanding
as of June 4, 2002.

Preferred Stock

The Company is currently authorized to issue up to 10,000,000 shares of
Preferred Stock, par value $0.0004. A total of 35,897 shares of Series A
preferred stock were issued, and, as of June 4, 2002, 23,899 shares were
outstanding. A total of 440 shares of Series B preferred stock were issued and,
as of June 4, 2002, 296 shares were outstanding.

Commitments to Issue Common Stock

Common Stock

As of June 4, 2002, the Company has outstanding options, warrants or other
commitments to issue 33,556,433 shares of Common Stock. In addition to those
outstanding commitments, pursuant to an investment by Mr. Apatoff on March 7,
2002, the Company is required to issue reload warrants for 3,750,000 shares of
Common Stock if certain warrants are exercised during 2002. Also, pursuant to
the terms of this March 7, 2002 investment, Mr. Apatoff has 33% anti-dilution
protection through March 8, 2003, if he invests an additional $1.4 million in
the Company prior to that date. Such anti-dilution protection is limited to the
authorized outstanding shares of Common Stock of the Company.

We have also incurred liquidated damages related to three issuances of
Common Stock and warrants to purchase Common Stock pursuant to private
placements. With respect to two of these issuances, for each month that the
effective date of registration is delayed beyond May 1, 2001, liquidated damages
have accrued at the rate of 10% of the securities purchased. As of December 31,
2001, the total liquidated damages amounted to approximately 976,000 shares of
our Common Stock and warrants to purchase 244,000 shares of our Common Stock at
an exercise price of $0.50.

With respect to the third issuance, for each month that the effective date
of registration is delayed beyond November 1, 2001, liquidated damages have
accrued at the rate of 10% of the securities purchased. As of December 31, 2001,
the total liquidated damages amounted to approximately 160,000 shares of our
Common Stock and warrants to purchase 40,000 shares of our Common Stock at an
exercise price of $0.50.

We have also incurred liquidated damages related to our Convertible
Debenture F in the amount equal to 3% of the purchase price for each month that
we have failed to register the underlying shares of Common Stock. As of December
31, 2001, we have incurred $1,000 in liquidated damages.

Until we have an effective registration statement registering the shares of
Common Stock, we will continue to incur these liquidated damages, which will
further increase our liabilities and dilute our stockholders.

The Company also has agreed to issue approximately $5,000,000 of shares of
Common Stock to Alcatel Space Industries should the Company bring into effect a
prime construction contract with Alcatel.

In June 2000, the Company entered into an agreement permitting it to sell,
under certain conditions, up to 4,500,000 shares of its Common Stock to Torneaux
Ltd., a corporation organized in the Bahamas. In connection with this
transaction, as of June 4, 2002, 2,819,169 shares of Common Stock and warrants
to purchase 73,791 shares of Common Stock remain reserved for Torneaux, Ltd.

Further, the Company may issue Common Stock or Preferred Stock, or a
combination thereof to finance the operations of the Company, implementation of
the Company's Demand Reserves Provider Agreement with the State of California,
and construction of the E-SAT System.

Series A Preferred Stock

During 2000, the Company received proceeds of $1,076,910 from the sale of
an aggregate of 35,897 shares of Series A preferred stock in a private
placement. As of June 4, 2002, 23,899 shares of Series A preferred stock were
outstanding, and are convertible at the option of the holder into 415,600 shares
of Common Stock. Holders of Series A preferred stock are entitled to receive,
out of funds legally available, cumulative dividends of $1.50 per share. As of
December 31, 2001, accrued dividends on Series A preferred stock totaled
$70,898. The Company has the right to redeem the Series A preferred stock if the
average trading price for the Common Stock is $6.00 or more for 20 consecutive
days. The holders of Series A preferred stock may choose to convert their shares
within 20 days of notice of the Company's intention to redeem the Series A
stock. The redemption price is $30 per share, plus any unpaid dividends.

Series B Preferred Stock

On October 6, 2000, the Company received proceeds of $400,000 from the sale
in a private placement of (1) 400 shares of Series B preferred stock, (2)
warrants to purchase 83,660 shares of Common Stock with an exercise price of
$1.052 per share and (3) warrants to purchase 83,660 shares of Common Stock with
an exercise price of $1.434 per share. Each share of Series B preferred stock is
convertible into Common Stock at a conversion rate equal to the lesser of (1)
approximately $.96 per share which was the closing bid price at the time of the
purchase or (2) 80% of the average of the three lowest closing bid prices of the
Common Stock for the 20-day trading period prior to the conversion date. The
Company also has the obligation to register the Common Stock underlying the
warrants and, after 180 days, Common Stock underlying any redeemed Series B
preferred stock.

On June 26, 2001, the holders of the Series B preferred stock amended
certain terms of their preferred stock agreement with the Company. In
conjunction with the amendment, the Company agreed to reprice the exercise price
on warrants to purchase 287,320 shares of Common Stock issued on October 6, 2000
to the Series B preferred stockholders which ranged from $1.0126 to $1.1342 per
to share to $0.17 per share. In addition, the Company issued to the Series B
preferred stockholders warrants to purchase 500,000 shares of the Company's
Common Stock at an exercise price of $0.17 per share. All of these warrants are
subject to a floating rate feature that reduces the exercise price when other
shares, options or warrants are issued with a purchase or exercise price of less
than $0.17 per share.

As of June 4, 2002, 296 shares of Series B preferred stock remain
outstanding, which are convertible at the option of the holders into
approximately 825,000 shares of Common Stock in the aggregate.

Purpose and Effect of Amendment

The proposed amendment, if adopted, will allow the Company to issue
additional shares of Common Stock to meet its obligations and allow it to issue
additional shares for financing. The proposed amendment will authorize
sufficient additional shares of Common Stock to provide the Company the
flexibility to make such issuances as may be necessary in order to complete
financings, acquisitions or other corporate transactions and to issue shares in
connection with the Company's stock option, stock purchase and other existing
employee benefit plans.

We intend to seek financing through the issuance of Common Stock or
Preferred Stock, or a combination thereof, to continue to operate the Company,
to implement the Company's Demand Reserves Provider Agreement with the State of
California and to reduce outstanding liabilities. We may also seek to raise
capital to build the E-SAT system and for other purposes. The proposed amendment
to the Certificate of Incorporation would facilitate the Company's ability to
accomplish these goals and other business and financial objectives in the future
without the necessity of delaying such activities for further stockholder
approval, except as may be required in particular cases by the Company's charter
documents, applicable law or the rules of any stock exchange or other system on
which the Company's securities may then be listed. Future issuances of
additional shares of Common Stock or securities convertible into Common Stock,
whether pursuant to an acquisition or other corporate transaction, would have
the effect of diluting the voting rights and could have the effect of diluting
earnings per share and book value per share of existing stockholders. The
availability for issuance of additional shares of Common Stock could discourage
or make more difficult efforts to obtain control of the Company.

Amended Certificate of Incorporation

Article V, Section 5.01(a) of the Company's Certificate of Incorporation
presently reads as follows:

The aggregate number of shares which the Company shall have authority
to issue is One Hundred Ten Million (110,000,000). One Hundred Million
(100,000,000) shares shall be designated "Common Stock" and shall have
a par value of $0.0004. Ten Million (10,000,000) shall be designated
"Preferred stock" and shall have a par value of $0.0004. All shares of
the Company shall be issued for such consideration, expressed in
dollars, as the Board of Directors may, from time to time, determine.

If the amendment as proposed to the stockholders is approved, Article V,
Section 5.01(a) of the Certificate of Incorporation will be amended to read as
follows:

The aggregate number of shares which the Company shall have authority
to issue is One Hundred Sixty-five Million (160,000,000). One Hundred
Fifty Million (150,000,000) shares shall be designated "Common Stock"
and shall have a par value of $0.0004. Ten Million (10,000,000) shares
shall be designated "Preferred Stock" and shall have a par value of
$0.0004. All shares of the Company shall be issued for such
consideration, expressed in dollars, as the Board of Directors may,
from time to time, determine.

The foregoing proposed amendment to the Certificate of Incorporation was
unanimously adopted by the Board of Directors on May 15, 2002, which directed
that it would be submitted for stockholder approval at the Annual Meeting. The
amendment will not result in any changes to the issued and outstanding shares of
Common Stock and Preferred Stock of the Company and will only affect the number
of shares that may be issued by the Company in the future. The terms of the
shares of Common Stock and Series A and Series B preferred stock before and
after the proposed amendment will be the same.

Potential Anti-Take over Aspects

The issuance of Common Stock may have the effect of acting as an
anti-takeover device. For example, shares of common stock may be privately
placed with purchasers who support the Board of Directors in opposing a tender
offer or other or other hostile takeover bid, or can be issued to dilute the
stock ownership and voting power of a third party seeking a merger or other
extraordinary corporate transaction. Further, and more commonly, the Board of
Directors may issue preferred stock that may be convertible into common stock
based on conversion rates determined by the Board. The Board is seeking to
increase the number of authorized shares of common stock to ensure it has a
sufficient number of shares of common stock in the event the Company issues
convertible preferred stock. Under these and similar circumstances, the common
stock may serve to perpetuate incumbent management and can adversely affect
shareholders who may want to participate in the tender offer or other
transaction. At this time, the Company has no plan, commitment or understanding
to issue the common stock except as previously disclosed. The issuance of Common
Stock either directly or upon conversion of Preferred Stock will dilute the
ownership of existing shareholders.

Delaware Franchise Tax

If Proposal Two is adopted, the Company's authorized capital will increase
and the Company will be subject to an increase in the Delaware Franchise Tax.
However, the Company believes the increase in the number of authorized shares
will not materially increase the Delaware Franchise Tax of the Company.

The approval of the amendment to the Certificate of Incorporation requires
the affirmative vote of a majority of the outstanding shares of Common Stock,
and Series A Preferred Stock voting as a class.

The Board of Directors recommends a vote "FOR" the amendment of the
Certificate of Incorporation. Proxies solicited by the Board of Directors will
be so voted unless stockholders specify otherwise.

THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS VOTING FOR THE AMENDMENT
TO THE CERTIFICATE OF INCORPORATION.

PROPOSAL THREE

AMENDMENT TO 2000 STOCK OPTION PLAN
INCREASING THE NUMBER OF AUTHORIZED SHARES

On February 29, 2000, the Board of Directors adopted the 2000 Stock Option
Plan (herein the "Plan"), which was subsequently approved by a shareholders, to
serve as a vehicle to attract and retain the services of key employees and to
help such key employees realize a direct proprietary interest in the Company.
The Plan is a "dual plan" which provides for the grant of both Non-Qualified
Options and Incentive Stock Options.

On May 15, 2002, the Board amended the Plan, subject to stockholder
approval, to increase the number of shares of Common Stock authorized for
issuance under the Plan from a total of 1,750,000 shares to a total of 3,500,000
shares, an increase of 1,750,000 shares. The Board adopted this amendment in
order to ensure that the Company can continue to grant stock options at levels
determined appropriate by the Board.

As of June 4, 2002, options to purchase 1,439,019 shares of Common Stock
were outstanding under the Plan and 310,981 shares of Common Stock remain
available for future grants.

Stockholders are requested to approve Proposal Three to amend the Plan to
increase the number of shares of Common Stock by an additional 1,750,000.

Description of the Plan

Adoption of the Amendment to the Plan will not affect options previously
granted under prior plans. The Plan is intended to attract, retain and motivate
officers, employees, consultants and directors of the Company, or a subsidiary
of the Company, by giving them the opportunity to acquire stock ownership in the
Company.

The Plan currently covers 1,750,000 shares of the Company's Common Stock.
The following is a summary of the provisions of the Plan. The summary is not
intended to be a complete description of all terms and provisions of the Plan.

Eligibility. The Plan provides for the grant of options to employees,
directors, officers, consultants or other persons who the Board determines are
rendering valuable services to the Company or subsiding (the "participants").
The Committee (as defined below) determines which participants are to be granted
options under the Plan.

Administration. The Plan will be administered by the Board or the Board may
delegate the administration to the Compensation Committee, consisting of two or
more disinterested Board members (herein the "Committee"). The Board or the
Committee will be responsible for the operation of the Plan and, subject to the
terms thereof, will make all determinations regarding (i) participation in the
Plan by eligible persons, and (ii) the nature and extent of participation. The
interpretation and construction of any provisions of the Plan by the Board or
Committee shall be final. The Board may at any time remove a Committee member
and appoint a successor, provided the successor is a disinterested Board member.

Other than the ability to receive compensation individually as directors or
employees of the Company, Committee members shall serve without compensation,
unless otherwise determined by the Board, provided that the Company shall pay
the expenses of such members incurred in the administration of the Plan, subject
to approval of the Board.

Terms of Options. Each option will be evidenced by a stock option agreement
between the Company and the participants to whom such options may be granted.
Options granted shall have a term of up to 10 years, as determined by the
Committee, and shall be subject to the following additional terms and
conditions. In the case of a participant who owns more than 10% of the Company's
Common Stock, the term of any Incentive Stock Option shall not be more than five
years from the date of grant.

Number of Shares of Common Stock Subject to Any One Option. The
Committee shall determine the number of shares subject to an option grant.
However, the fair market value of the Common Stock to any Incentive Stock
Options granted to an employee in any calendar year may not exceed $100,000.

Exercise of the Option. Options shall become exercisable during a period or
during such periods as the Committee shall determine and may be specifically
conditioned upon achieving specified performance goals. An option may be
exercised by giving written notice of exercise to the Company specifying the
number of full shares of Common Stock to be purchased and tendering payment of
the purchase price to the Company. Payment of the option price upon exercise of
a stock option may be made in cash, by check, by the delivery of shares of
Common Stock (valued at their fair market value as of the date of the exercise
of an option), by the optionee's or purchaser's promissory note in a form and on

terms acceptable to the Administrator, by the cancellation of indebtedness of
the Company to the optionee or purchaser, by the waiver of compensation due or
accrued to the optionee or purchaser for services rendered, or by any
combination of the foregoing methods of payment. In addition, the option price
for options granted under the Plan may be made by a "same day sale" commitment
from the optionee and a broker-dealer that is a member of the National
Association of Securities Dealers, Inc. ("NASD Dealer") whereby the optionee
irrevocably elects to exercise his or her options and to sell a portion of the
shares so purchased to pay for the exercise price and whereby the NASD Dealer
irrevocably commits upon receipt of such shares to forward the Exercise Price
directly to the Company, by a "margin" commitment from the optionee and an NASD
Dealer whereby the optionee irrevocably elects to exercise his or her option and
to pledge the shares so purchased to the NASD Dealer in a margin account as
security for a loan from the NASD Dealer in the amount of the exercise price,
and whereby the NASD Dealer irrevocably commits upon receipt of such shares to
forward the exercise price directly to the Company, or any combination of the
foregoing methods of payment.

Reload Option. The Administrator of the Plan may, in its discretion, grant
a participant a Reload Option. A participant with a Reload Option, who pays for
his or her stock in whole or in part, with stock owned by the participant may be
granted another option to purchase the number of shares tendered at a price no
less than the fair market value of the shares at the date the additional option
is granted. The purpose of a Reload Option is to incentive insiders to own stock
in the Company.

Option Price. The option price of an Incentive Stock Option will be
determined by the Committee and shall be the fair market value of the Company's
Common Stock on the date of grant. In the case of an Incentive Stock Option
granted to a participant who owns more than 10% of the Common Stock, the
exercise price will be 110% of the fair market value.

Employment Agreement. The Committee may include in an option agreement a
condition that the participant shall agree to remain in the employ of the
Company for a specified period of time following the date of grant.

Termination of Status as an Employee. In the case of an Incentive Stock
Option, if the participant ceases to serve as an employee of the Company, other
than for permanent and total disability or death, all or part of the shares that
the optionee was entitled to exercise at the date of such termination may be
exercised within three months after the date employment ceases. After such
three-month period, all unexercised options shall terminate. Non-Qualified Stock
Options are not limited to such three-month exercise period. Notwithstanding the
foregoing, in no event may an option be exercised after its term has expired.

Termination of Status as a Director or Consultant. If an optionee ceases to
serve as a director or consultant of the Company, any Non-Qualified Stock Option
held at the date of such termination may be exercised, in whole or in part, at
any time during the term of the option as set forth in the option agreement and
after such period of time all unexercised options shall terminate.
Notwithstanding the foregoing, in no event may an option be exercised after its
term has expired.

Death or Permanent Disability. If an optionee should die or become
permanently or totally disabled while serving as an employee, officer,
consultant or director of the Company, Incentive Stock Options held by the
participant may be exercised by the participant, the participant's estate, or
descendant at any time within 12 months after the death or permanent disability
and shall terminate thereafter. If a participant should die within one month
after ceasing to serve as an employee or officer of the Company, the options may
be exercised within 12 months after the death to the extent the option was
exercisable on the date of such death. Non-Qualified Stock Options shall not be
limited to such 12-month exercise period, and such options may be exercised
within the time specified in the option agreement. Notwithstanding the
foregoing, in no event may an option be exercised after its term has expired.

Suspension or Termination of Options. No option shall be exercisable by any
person after its expiration date. If the Committee reasonably believes that a
participant has committed an act of misconduct, the Committee may suspend the
participant's right to exercise any option pending a final determination by the
Committee. If the Committee determines a participant has committed an act of
embezzlement, fraud, dishonesty, nonpayment of an obligation owed to the
Company, breach of fiduciary duty or deliberate disregard of the Company's
rules, or if a participant makes an unauthorized disclosure of any Company trade
secret or confidential information, engages in any conduct constituting unfair
competition, induces any of the Company's customers or contracting parties to
breach a contract with the Company, or induces any principal for whom the
Company acts as an agent to terminate such agency relationship, neither the
participant nor his or her estate shall be entitled to exercise any option
whatsoever. In making such determination, the Committee shall act fairly and in
good faith and shall give the participant an opportunity to appear and present
evidence on the participant's behalf at a hearing before the Committee. The
determination of the Committee shall be final and conclusive unless overruled by
the Board of Directors.

Transferability of Options. An Incentive Stock Option is non-transferable,
other than by will or the laws of descent and distribution, and is exercisable
only by the participant, his or her guardian or legal representative during his

or her lifetime, or, in the event of death, by the executors, administrators,
designated beneficiary, legatees or heirs of his or her estate during the time
period provided above. The Administrator may provide for transfer of an option
(other than an Incentive Stock Option), without payment of consideration, to the
following family members of the optionee, including adoptive relationships: a
child, stepchild, grandchild, parent, stepparent, grandparent, spouse, sibling,
mother-in-law, father-in-law, son-in-law, daughter-in-law, brother-in-law,
sister-in-law, niece, nephew, former spouse (whether by gift or pursuant to a
domestic relations order), any person sharing the employee's household (other
than a tenant or employee), a family-controlled partnership, corporation,
limited liability company and trust, or a foundation in which family members
heretofore described control the management of assets. The assigned portion may
only be exercised by the person or persons who acquire a proprietary interest in
the option pursuant to the assignment. The terms applicable to the assigned
portion shall be the same as those in effect for the option immediately prior to
such assignment and shall be set forth in such documents issued to the assignee
as the Administrator may deem appropriate.

Compliance with Securities Laws. It is the intent of the Company that the
Plan will comply with Rule 16b-3 of the Securities Exchange Act of 1934, as
amended.

Other Provisions. The option agreement may contain such other terms,
provisions and conditions not inconsistent with the Plan as may be determined by
the Board or Committee.

U.S. Federal Tax Aspects

Options granted under the Plan may be either Incentive Stock Options which
satisfy the requirements of Section 422 of the Internal Revenue Code or
Non-Qualified Options which are not intended to meet such requirements. The
federal income tax treatment for the two types of options differs as follows:

Incentive Options. No taxable income is recognized by the optionee at the
time of the option grant, and no taxable income is generally recognized at the
time the option is exercised. The optionee will, however, recognize taxable
income in the year in which the purchased shares are sold or otherwise made the
subject of a taxable disposition. For federal tax purposes, dispositions are
divided into two categories: (i) qualifying, and (ii) disqualifying. A
qualifying disposition occurs if the sale or other disposition is made after the
optionee has held the shares for more than two years after the option grant date
and more than one year after the exercise date. If either of these two holding
periods is not satisfied, then a disqualifying disposition will result.

Upon a qualifying disposition of the shares, the optionee will recognize
long-term capital gain in an amount equal to the excess of (i) the amount
realized upon the sale or other disposition of the purchased shares over (ii)
the exercise price paid for those shares. If there is a disqualifying
disposition of the shares, then the excess of (i) the fair market value of the
shares on the exercise date over (ii) the exercise price paid for those shares
will be taxable as ordinary income to the optionee. Any additional gain or loss
recognized upon the disposition will be taxable as a capital gain or loss.

If the optionee makes a disqualifying disposition of the purchased shares,
then the Company will be entitled to an income tax deduction for the taxable
year in which such disposition occurs, equal to the excess of (i) the fair
market value of such shares on the option exercise date over (ii) the exercise
price paid for the shares. In no other instance will the Company be allowed a
deduction with respect to the optionee's disposition of the purchased shares.

Non-Qualified Options. No taxable income is recognized by an optionee upon
the grant of a Non-Qualified Option. The optionee will in general recognize
ordinary income, in the year in which the option is exercised, equal to the
excess of the fair market value of the purchased shares on the exercise date
over the exercise price paid for the shares, and the optionee will be required
to satisfy the tax withholding requirements applicable to such income.

If the shares acquired upon exercise of the Non-Qualified Option are
unvested and subject to repurchase by the Company in the event of the optionee's
termination of service prior to vesting in those shares, then the optionee will
not recognize any taxable income at the time of exercise but will have to report
as ordinary income, as and when the Company's repurchase right lapses, an amount
equal to the excess of (i) the fair market value of the shares on the date the
repurchase right lapses over (ii) the exercise price paid for the shares. The
optionee may, however, elect under Section 83(b) of the Internal Revenue Code to
include as ordinary income in the year of exercise of the option an amount equal
to the excess of (i) the fair market value of the purchased shares on the
exercise date over (ii) the exercise price paid for such shares. If the Section
83(b) election is made, the optionee will not recognize any additional income as
and when the repurchase right lapses.

The Company will be entitled to an income tax deduction equal to the amount
of ordinary income recognized by the optionee with respect to the exercised
Non-Qualified Option. The deduction will in general be allowed for the taxable
year of the Company in which such ordinary income is recognized by the optionee.

Special Tax Election. The Administrator may, in its discretion, provide one
or more holders of Non-Qualified Options with the right to have the Company
withhold a portion of the shares otherwise issuable to such individuals in
satisfaction of the tax liability incurred by such individuals in connection
with the exercise of those options. Alternatively, the Administrator may allow
such individuals to deliver previously acquired shares of Common Stock in
payment of such tax liability.

Withholding Taxes. The Company is entitled to take appropriate measures to
withhold from the shares of Common Stock, or to otherwise obtain from the
recipients, sufficient sums in cash, check or shares of stock as the Company
deems necessary to satisfy any applicable federal, state and local withholding
taxes, including FICA taxes, before the delivery of the Common Stock to the
recipient.

Adjustment Upon Changes in Capitalization. In the event any change, such as
a stock split, is made in the Company's capitalization which results in an
exchange of Common Stock for a greater or lesser number of shares, an
appropriate adjustment shall be made in the option price and in the number of
shares subject to the option. In the event of the proposed dissolution or
liquidation of the Company, all outstanding options shall automatically
terminate, provided that the participant shall have the right, immediately prior
to the dissolution or liquidation, to exercise his or her options. In the event
of the sale of all or substantially all of the Company's assets or the merger of
the Company with or into another corporation, (i) if the Company is the
surviving corporation following a merger or consolidation each option shall,
upon exercise, entitle the holder to the issuance of securities to which a
holder of the number of shares of Common Stock subject to the option would be
entitled after the merger or consolidation, or (ii) all options shall otherwise
terminate, provided that the participant shall have the right, immediately prior
to the merger, consolidation, dissolution or liquidation to exercise his or her
options.

Amendment and Termination. The Board of Directors may amend the Plan to
materially increase the benefits accruing to the option holder without
stockholder approval, except to the extent that stockholder approval is required
to maintain the status of the Plan as an Incentive Stock Option Plan.
Notwithstanding the foregoing, no action by the Board of Directors or
stockholders may alter or impair any option previously granted under the Plan
without the consent of the participant.

Accounting Treatment

Option grants with an exercise price per share equal to 100% of the fair
market value of the shares at the time of grant will not result in any direct
charge to the Company's earnings. However, the fair value of those options must
be disclosed in the notes to the Company's financial statements, in the form of
proforma statements to those financial statements, the impact those options
would have upon the Company's reported earnings were the value of those options
at the time of grant treated as compensation expense. In addition, the number of
outstanding options may be a factor in determining the Company's earnings per
share on a diluted basis.

On March 31, 2000, the Financial Accounting Standards Board issued
Interpretation No. 44, clarifying APB Opinion 25 ("FIN 44"),"Accounting for
Stock Issued to Employees." FIN 44 provides and interpretation of APB Opinion 25
on accounting for employee stock compensation and describes its application to
certain transactions. It applies on a prospective basis to events occurring
after July 1, 2000, except for certain transaction involving options granted to
nonemployees, repriced fixed options, and modifications to add reload option
features, which apply to options granted after December 31, 1998. FIN 44
clarifies the following:

- the definition of an employee for purposes of applying APB Opinion No. 25;
- the criteria for determining whether a plan qualifies as a noncompensatory
plan;
- the accounting consequences of various modifications to the terms of
the previously fixed stock options; and - the accounting for an
exchange of stock options in a business combination.

The following is an example of the application of FIN 44, option grants
made to non-employee consultants (but not non-employee board members) will
result in a direct charge to the Company's reported earnings based upon the fair
value of the option measured initially as of the grant date and then
subsequently on the vesting date of each installment of the underlying option
shares (if vesting applies). Such charge will accordingly include the
appreciation in the value of the option shares over the period between the grant
date of the option and the vesting date of each installment of the option shares
(if vesting applies).

THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS VOTING FOR THE AMENDMENT
TO THE 2000 STOCK OPTION PLAN.

PROPOSAL FOUR

AMENDMENT TO 1999 EMPLOYEE STOCK PURCHASE PLAN
INCREASING THE NUMBER OF AUTHORIZED SHARES

On April 26, 1999, the Board of Directors adopted the 1999 Employee Stock
Purchase Plan (herein the "Purchase Plan") which was subsequently approved by
the shareholders to provide a method whereby all eligible employees of the
Company may acquire a proprietary interest in the Company through the purchase
of Common Stock. Under the Purchase Plan, payroll deductions are used to
purchase the Company's Common Stock. The Board of Directors believes that the
Purchase Plan serves as an incentive for the Company to retain highly
experienced and trained employees, to encourage the sense of proprietorship of
such persons, and to stimulate the active interest of such persons in the
development and financial success of the Company.

In accordance with the provisions of the Purchase Plan, on June 5, 2001,
the Board extended the effectiveness of the Purchase Plan for two years through
June 30, 2003. On May 15, 2002, the Board amended the Purchase Plan, subject to
stockholder approval, to increase the number of shares of Common Stock
authorized for issuance under the Purchase Plan from a total of 50,000 shares to
a total of 100,000 shares, an increase of 50,000 shares. The Board adopted this
amendment in order to ensure that employees of the Company can continue to
purchase Common Stock in accordance with the Purchase Plan.

Since the inception of the Purchase Plan, shares of Common Stock were
purchased in the amounts and at the prices per share under the Purchase Plan as
follows: (i) for the purchase period ending December 31, 1999, 490 shares were
purchased at $1.83 per share; (ii) for the purchase period ending June 30, 2000,
6,961 shares were purchased at $1.43 per share; (iii) for the purchase period
ending December 31, 2000, 9,844 shares were purchased at $0.32 per share; (iv)
for the purchase period ending June 30, 2001, 12,083 shares were purchased at
$0.36 per share; and (v) for the purchase period ending December 31, 2001, no
shares were purchased.

As of June 4, 2002, an aggregate of 29,378 shares of Common Stock had been
purchased under the Purchase Plan, and 20,622 shares remain available for future
purchases.

Stockholders are requested in this Proposal Four to approve the amendment
to the 1999 Employee Stock Purchase Plan.

Description of the Purchase Plan

The purpose of the Purchase Plan is to provide a method whereby all
eligible employees of the Company may acquire a proprietary interest in the
Company through the purchase of Common Stock. Under the Purchase Plan, payroll
deductions are used to purchase the Company's Common Stock. The Board of
Directors believes that the Purchase Plan will serve as an incentive for the
Company to retain highly experienced and trained employees, to encourage the
sense of proprietorship of such persons, and to stimulate the active interest of
such persons in the development and financial success of the Company.

Reservation of Shares. Currently an aggregate of 50,000 shares of Common
Stock of the Company was reserved for issuance under the Purchase Plan following
approval of the stockholders in 1999. In the event of corporate changes
affecting the Company's Common Stock, such as reorganizations, share splits,
mergers, consolidations or otherwise, the Company will make appropriate
adjustments in the number of shares reserved under the Purchase Plan.

Administration. The Plan is administered by the Company's compensation
committee (the "Compensation Committee"). All determinations by the Compensation
Committee are final and conclusive.

Eligibility. All employees, including officers, who are employed on a full
time or part-time basis by the Company and are regularly scheduled to work more
than 20 hours per week and more than five months per year will be eligible to
participate in the Purchase Plan. Eligible employees of the Company as of the
commencement of any Offering Period under the Purchase Plan can participate in
the Purchase Plan. The employee must enroll in the Plan prior to the
commencement of any such offering periods. No employee shall be eligible to
enroll under the Purchase Plan who, at the time of enrollment, owns stock
possessing 5% or more of the total combined voting power of the Company.

Further, no participant may be granted rights to purchase more than $25,000
worth of Common Stock (valued at the time the purchase right is granted) for
each calendar year in which such purchase rights are outstanding under any other
Purchase Plans. The Company estimates that approximately 80% of employees will
be eligible to participate in the Purchase Plan.

Purchase Terms. An employee electing to participate in the Purchase Plan
must authorize a whole percentage (not less than 1% nor more than 10%) of the
employee's compensation to be deducted by the Company from the employee's pay
during each pay period included within the offering periods (the Offering
Periods"). Unless otherwise determined by the Compensation Committee, the
semi-annual Offering Periods commence on the first day of July and January, and
terminate on the 31st day of December and on the 30th day of June, respectively,
with the last Offering Period commencing on January 1, 2001. On the first
business day of each of the Offering Periods, the Company will grant to each
participant an option to purchase shares of Common Stock of the Company. On the
last day of each of the Offering Periods, the employee will be deemed to have
exercised this option, at the option price, to the extent of such employee's
accumulated payroll deductions. The option price under the Purchase Plan is
equal to 85% of the closing price of the Common Stock on either the first
business day or last business day of the applicable Offering Period (or the
nearest prior business day thereto), whichever is lower. No interest will be
paid on amounts deducted from an employee's pay and used to purchase Common
Stock under the Purchase Plan. The maximum number of shares of Common Stock to
be issued in each Offering Period shall be 12,500, plus unissued shares from any
prior Offering Periods, whether offered or not.

A participant may voluntarily withdraw from the Purchase Plan at any time
by giving at least 5 days' notice to the Company prior to the end of the
Offering Period and shall receive on withdrawal the cash balance (with interest)
then held in the participant's account. Upon termination of employment for any
reason, including resignation, discharge, disability or retirement, or upon the
death of participant, the balance of the participant's account (with interest)
shall be paid to the participant or his or her designated beneficiary.

Amendment or Termination. The Board of Directors may at any time amend,
suspend or discontinue the Purchase Plan provided no such suspension or
discontinuance may adversely affect any outstanding options. The Purchase Plan
provides that, without shareholder approval, no amendment may (i) increase the
maximum number of shares issuable under the Purchase Plan (except for
adjustments as a result of corporate changes affecting the Company's Common
Stock specifically authorized in the Purchase Plan), (ii) increase the benefits
accruing to participants under the Purchase Plan or (iii) modify the
requirements as to eligibility for participation in the Plan. The Purchase Plan
would have terminated by its own terms on June 30, 2001. In accordance with the
provisions of the Purchase Plan, on June 5, 2001, the Board extended the
effectiveness of the Purchase Plan for two years through June 30, 2003.

Miscellaneous. The proceeds received by the Company from the sale of Common
Stock pursuant to the Purchase Plan will be used for general corporate purposes.
The Company is not obligated to hold the accrued payroll deductions in a
segregated account.

Certain Federal Income Tax Consequences

The following general description of federal tax consequences is based on
current statutes, regulations and interpretations, and does not include possible
state or local income tax consequences. The Purchase Plan is intended to qualify
as an "Employee Purchase Plan" within the meaning of Section 423 of the Code
with the following principal tax consequences. Amounts deducted from a
participant's pay under the Purchase Plan are included in the participant's
compensation subject to federal income and employment taxes. The Company will
withhold taxes on these amounts.

The purchase of shares of Common Stock under the Purchase Plan will not
result in an employee's realization of the bargain element of the purchase (15%
discount), thus permitting employees to acquire stock in the company without
immediate tax consequences. An employee who does not dispose of the Common Stock
so purchased until at least two years after the date of enrollment in the
Offering Period in which employee's shares are purchased and 1 year after the
date of purchase will include as ordinary income at the time of such employee's
disposition of such employee's Common Stock the lesser of (i) the excess of its
fair market value over the price at the time enrollment is effective or (ii) the
excess of its fair market value at the time of disposition over the amount such
employee actually paid for such shares. Any additional gain will be long-term
capital gain. If an employee sells such employee's Common Stock under such
circumstances for less than such employee paid for such shares, there is no

ordinary income and such employee will realize a long-term capital loss on that
difference. Any ordinary income realized by an employee will increase the basis
of such employee's Common Stock for purposes of determining the amount of any
gain or loss realized upon its disposition.

With limited exceptions, an employee who fails to retain Common Stock
purchased under the Purchase Plan until at lease two years after the effective
date of enrollment in the Offering Period in which employee's shares are
purchased and 1 year after the date of purchase is considered to have made a
"disqualifying disposition" and forfeits the special tax treatment extended
under Section 423 of the Code. In general, such an employee recognizes ordinary
income at the time of such disposition equal to the excess of the fair market
value of the Common Stock at the exercise date over the purchase price paid.
Such fair market value as of the exercise date becomes the tax basis for
determining any further gain or loss at the time of disposition of the Common
Stock.

The Company is entitled to a deduction equal to the amount of ordinary
income realized by an employee who makes a disqualifying disposition. Otherwise,
the Company is not entitled to any deduction on account of the purchase of
Common Stock under the Purchase Plan or the subsequent sale by employees of
Common Stock purchased pursuant to the Purchase Plan.

The affirmative vote of the holders of a majority of the shares present in
person or represented by proxy and entitled to vote at the Annual Meeting will
be required to approve the amendment to the Purchase Plan.

THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS VOTING FOR THE AMENDMENT
TO THE 1999 EMPLOYEE STOCK PURCHASE PLAN.

DIRECTORS AND EXECUTIVE OFFICERS

Identification of the Company's Directors and Executive Officers

The directors and executive officers of the Company, their ages, positions
held, and duration as such, are as follows:

Name Position Age Period

Fred W. Thompson Chairman of the Board, President, Chief 59 December 1992 - present
Executive Officer, and November 1993 - present
Chief Financial Officer February 2002 - present

Randy Stratt Director, Chief Operating Officer, 45 February 2002 - present
General Counsel and Secretary November 1999 - present

Michael T. Schieber Director 62 December 1992 - present

Jerome W. Carlson Director 65 May 1997 - present

Roy T. Grant Director 45 August 1999 - present

Jessie J. Knight, Jr. Director 51 February 1999 - present

Michael J. Apatoff Director 47 February 2002 - present

Background of Present Directors and Executive Officers

Randy Stratt, Chief Operating Officer, General Counsel and Secretary,
joined the Company in November 1999 and was appointed to the Board in February
2002. Mr. Stratt has over 20 years of management, business development, and
corporate/securities counsel experience with both public and private firms in
the finance and high technology industries. Prior to joining the Company, Mr.
Stratt was Director of Strategic Development and Communications with Dresdner
RCM Global Investors, an international investment firm that at the time held
over $65 billion of assets under management. From 1987 to 1993, Mr. Stratt was
Senior Vice President and General Counsel of Spear Financial Services, Inc., a
California-based NASDAQ NMS financial services firm with traditional and on-line
broker-dealer operations. Prior to that, Mr. Stratt was an executive with Source
Telecomputing Corporation, one of the first on-line consumer services, which was
eventually acquired by CompuServe and ultimately acquired by America On-line.
Mr. Stratt is a licensed attorney in California and three other states. He holds
a BA from Cornell University and received a JD from George Washington University
law school and an MS in Information Systems from George Washington University
Business School.

California's telecommunications, utility, trucking and rail industries. Before
his appointment to the Commission, he was Executive Vice President of the San
Francisco Chamber of Commerce, responsible for international operations,
economic development and attracting businesses to San Francisco. He also served
as Vice President, Marketing for the San Francisco Newspaper Agency, a
publishing operation encompassing the San Francisco Chronicle and the San
Francisco Examiner. Mr. Knight serves on the board of directors of Avista, Inc.
Mr. Knight holds a BA degree from St. Louis University and an MBA from the
University of Wisconsin.

Roy T. Grant has served as a Director since August 1999. Mr. Grant is
currently an independent consultant. From January 2000 to April 2001, Mr. Grant
was Chief Financial Officer of Wayport, Inc. Prior thereto from November 1996
through April 1999, Mr. Grant was employed by Iridium, LLC, most recently as
Vice President and Chief Financial Officer. Subsequent to Mr. Grant's departure,
Iridium, LLC filed for protection under the bankruptcy laws in 1999. From 1992
to 1996, Mr. Grant served as Finance Director for Edison Mission Energy, the
largest independent power developer in the United States. Mr. Grant is a
director of e-tel Corporation and Pritest. Mr. Grant holds a BS in
Administration and Management Science, Mathematics and Economics from Carnegie
Mellon University and an MBA in Finance from the University of Chicago.

Michael J. Apatoff, Director, was appointed to the Board in February 2002.
Mr. Apatoff is currently an entrepreneur. From 1991 to 1998, Mr. Apatoff was
employed by Dresdner RCM Global Investors, most recently as its President.
Previously from 1986 to 1990, Mr. Apatoff was Executive Vice President and Chief
Operating Officer of the Chicago Mercantile Exchange. From 1981 to 1985, he was
Special Assistant to Congressman Tom Foley, Speaker of the U.S. House of
Representatives. Mr. Apatoff earned his BA from Reed College.

Jerome W. Carlson, a Director appointed in May 1997, is currently President
of Raljer, Inc., a management consulting firm, and has held that position since
January 1995. Previously, from 1984 to 1995, Mr. Carlson was the Chief Financial
Officer, Vice President of Finance and Corporate Secretary for Triad Systems
Corporation in Livermore, California. Mr. Carlson has over twenty years
experience in both finance and general management positions with Hewlett
Packard. Since 1995 he has assisted a number of businesses in developing and
achieving certain strategic and tactical goals in their industries. Mr. Carlson
is a director of Valley Community Bank. He holds a BS degree from the University
of California at Davis and an MBA from the Stanford Graduate School of Business.

Michael T. Schieber has served as a Director of the Company since December
1992. From 1987 to December 1992, Mr. Schieber was the Managing Partner of
Amador Telecommunications and since 1990 has been a partner in Columbia
Communications, both investors in nation-wide paging licenses. He retired from
the Department of Fisheries with the State of Washington in May 1993 where he
had served as a civil engineer since 1984. He is also a retired Air Force Major
and Command Pilot with service in Vietnam where he was awarded the Distinguished
Flying Cross, Air Medal with 2 oak leaves and the Vietnamese Cross of Gallantry.
Mr. Schieber received an MA degree in International Relations and Government
from the University of Notre Dame, a BS in Engineering from the Air Force
Academy, and a BA in Business from The Evergreen State College.

Board of Directors

The Board of Directors held five meetings during the year ending December
31, 2001. All current members of the Board of Directors attended more than 75%
of all meetings, during their term of office.

Committees of the Board

The Board has a Compensation Committee, an Audit Committee and a Nominating
Committee.

The Compensation Committee, consisting of Messrs. Schieber (Chairman),
Carlson, Knight and Grant, administers our various stock option plans and
approves compensation, remuneration and incentive arrangements for our officers
of the Company. The Compensation Committee held four meetings in 2001.

The primary functions of the Audit Committee, consisting of Messrs. Carlson
(Chairman), Schieber and Grant, are to review the scope and results of audits by
our independent auditors, our internal accounting controls, non-audit services
performed by the independent accountants and the cost of accounting services.
The Audit Committee held four meetings in 2001.

The Nominating Committee, consisting of Messrs. Knight (Chairman), Carlson
and Thompson, assists the Board in the process of officer and director
nominations. The Nominating Committee held one meeting in 2001.

Report of the Audit Committee

The following is the report of the Audit Committee with respect to the
Company's audited financial statements for the fiscal year ended December 31,
2001. Such report is not deemed to be filed with the Securities Exchange
Commission.

The Audit Committee has reviewed and discussed the Company's audited
financial statements with management. The Audit Committee has discussed with
PricewaterhouseCoopers LLP, the Company's independent accountants, the matters
required to be discussed by Statement of Auditing Standards No. 61,
Communication with Audit Committees which includes, among other items, matters
related to the conduct of the audit of the Company's financial statements. The
Audit Committee has also received written disclosures and the letter from
PricewaterhouseCoopers LLP required by Independence Standards Board Standard No.
1, which relates to the accountant's independence from the Company and its
related entities, and has discussed with PricewaterhouseCoopers LLP their
independence from the Company. The Audit Committee has also considered whether
the furnishing of non-audit related services by the independent accountants is
compatible with maintaining the accountant's independence.

Based on the review and discussions referred to above, the Audit Committee
recommended to the Company's Board of Directors that the Company's audited
financial statements be included in the Company's Annual Report on Form 10-KSB
for the fiscal year ended December 31, 2001.

AUDIT COMMITTEE

Jerome W. Carlson
Michael T. Schieber
Roy T. Grant
Family Relationships

There are no family relationships between any director and executive
officer.

EXECUTIVE COMPENSATION

Cash Compensation

The following table provides certain summary information concerning
compensation of the Company's Chief Executive Officer and each employee of the
Company or its subsidiaries who earned in excess of $100,000 for the year ended
December 31, 2001.

Columns regarding "Other Annual Compensation", "Restricted Stock Awards"
and "Long-Term Incentive Plan (LTIP) Payouts" are excluded because no reportable
payments were made to such executive officers for the relevant years.

SUMMARY COMPENSATION TABLE

Annual Compensation Long-Term
Compensation

Securities
Name and Underlying All Other
Principal Position Year Salary(1) Bonus Options Compensation

Fred W. Thompson 2001 $262,501 - 0 - 1,250,005 $ 7,755(2)
President, CEO 2000 $250,000 - 0 - - 0 - $ 7,386(3)
Chief Financial Officer 1999 $215,000 $45,000 1,000,000 $ 16,761(4)

Randy Stratt 2001 $190,000 - 0 - 515,625 $ 3,997(5)
Chief Operating Officer 2000 $165,000 - 0 - - 0 - $ 1,017(6)
General Counsel 1999 $ 24,433 - 0 - 160,000 - 0 -

James Stoutenberg 2001 $120,000 - 0 - 212,500 $ 8,250(7)
Vice President 2000 $ 80,000 - 0 - 120,000 - 0 -

Stanton C. Lawson* 2001 $190,417 - 0 - 562,500 $ 4,410(8)
Former Chief Financial Officer 2000 $180,000 - 0 - - 0 - $ 1,485(9)
1999 $ 37,500 - 0 - 180,000 - 0 -
Frederick R. Skillman*
Former Vice President 2001 $147,500 - 0 - 421,875 $ 13,857 (10)
2000 $135,000 - 0 -0- $ 5,044 (11)
1999 $120,415 -$54,500 150,000 $ 4,911 (12)

* Both Mr. Lawson and Mr. Skillman resigned from the Company because of the
Company's inability to pay ongoing salary obligations. Pursuant to their
employment agreements, these terminations were deemed terminations without
cause. Mr. Lawson's termination from the Company was effective February 11,
2002, and Mr. Skillman's termination from the Company was effective April 1,
2002.

(1) In order to support the Company's financing efforts, executives elected to
defer payment of salary earned in 2001 as follows: Mr. Thompson - $95,834;
Mr. Stratt - $80,000; Mr. Stoutenberg - $30,000; Mr. Lawson - $70,417; Mr.
Skillman - $57,500. Executives received during 2001 salaries which had been
deferred from 2000 as follows: Mr. Thompson - $125,000; Mr. Stratt -
$41,250; Mr. Stoutenberg - $25,000; Mr. Lawson - $45,000; Mr. Skillman -
$33,750.
(2) Includes payment of life insurance premium of $4,005 and payment of
contribution to IRA Retirement Plan of $3,750.
(3) Includes payment of life insurance premium of $2,586 and payment of
contribution to IRA Retirement Plan of $4,800.
(4) Includes payment of life insurance premium of $9,972 and payment of
contribution to IRA Retirement Plan of $6,789.
(5) Includes payment of life insurance premium of $360 and payment of
contribution to IRA Retirement Plan of $1,125.
(6) Includes payment of life insurance premium of $284 and payment of
contribution to IRA Retirement Plan of $733.
(7) Payment of contribution to IRA Retirement Plan.
(8) Includes payment of life insurance premium of $36 and payment of
contribution to IRA Retirement Plan of $4,050.
(9) Include payment of life insurance premium of $360 and payment of
contribution to IRA Retirement Plan
of $1,125.
(10) Includes payment of life insurance premium of $244 and payment of
contribution to IRA Retirement Plan of $13,613.
(11) Includes payment of life insurance premium of $244 and payment of
contribution to IRA Retirement Plan of $4,800.
(12) Includes payment of life insurance premium of $244 and payment of
contribution to IRA Retirement Plan of $4,667.

Employment Agreements

Mr. Thompson entered into an employment agreement with us on April 18,
1996, effective January 1, 1996. His annual salary under the agreement was
$180,000, and included non-qualified stock options to purchase 312,500 shares of
our Common Stock. In October 1998, we paid Mr. Thompson the amount of $208,000
related to his previously deferred compensation through December 31, 1997.
Effective July 1, 1999, Mr. Thompson's employment agreement was extended until
July 1, 2004. In connection with the extension, Mr. Thompson's annual salary was
increased to $250,000, and he was granted non-qualified options to purchase
1,000,000 shares of Common Stock at an exercise price of $1.3496 based on a
formula. Options to purchase 250,000 shares of Common Stock vest immediately and
the remaining options to purchase 750,000 shares of Common Stock vest in 250,000
increments beginning on January 1, 2000, and each year thereafter. Effective
August 1, 2001, Mr. Thompson's annual salary was increased to $280,000. If Mr.
Thompson is terminated without cause during the term of his employment
agreement, his salary will continue for 12 months following termination so long
as he does not compete with us. Upon termination without cause or in the event
of a change of control, all options granted to Mr. Thompson in connection with
his employment agreement will vest immediately. We maintained during 2001 a key
person insurance policy on Mr. Thompson's life in the face amount of $2,000,000,
for which we were the sole beneficiary of such policy, and we will seek to
reinstate this policy during 2002.

Effective November 18, 1999, we entered into a three-year employment
agreement with Mr. Randy Stratt to serve as a Senior Vice President and our
General Counsel. Mr. Stratt's starting annual salary was $165,000. Mr. Stratt
also received a non-qualified option to purchase 160,000 shares of Common Stock
at an exercise price equal to $1.0797 per share based upon a formula. Effective
August 1, 2001, Mr. Stratt's annual salary was increased to $225,000. Also, upon
his appointment as Chief Operating Officer effective February 5, 2002, Mr.
Stratt received a non-plan, non-qualified option to purchase 450,000 shares of
Common Stock of the Company exercisable for ten years at $0.12 per share. If Mr.
Stratt is terminated without cause during the term of his employment agreement,
his salary will continue for 12 months following termination so long as he does
not compete with us. Upon termination without cause, all options granted to Mr.
Stratt in connection with his employment agreement will vest immediately.

Effective October 18, 1999, we entered into a three-year employment
agreement with Mr. Stanton C. Lawson to serve as our Senior Vice President of
Finance. Mr. Lawson's starting annual salary was $180,000. Mr. Lawson also
received a non-qualified option to purchase 180,000 shares of Common Stock at an
exercise price equal to $1.0952 per share based upon a formula. Effective August
1, 2001, Mr. Lawson's annual salary was increased to $205,000. If Mr. Lawson is
terminated without cause during the term of his employment agreement, he will

receive a lump sum cash payment of 12 months' salary following termination so
long as he does not compete with us. Upon termination without cause, all options
granted to Mr. Lawson in connection with his employment agreement will vest
immediately. Mr. Lawson resigned from the Company because of the Company's
inability to pay ongoing salary obligations. Pursuant to his employment
agreement, this termination was deemed termination without cause and was
effective February 11, 2002.

Effective July 28, 1999, DBSI entered into a one-year employment agreement
with Mr. Frederick R. Skillman, Jr., to serve as our Vice President, Operations.
Under this employment agreement, Mr. Skillman's annual salary was established at
$135,000. He also received $13,500 upon the execution of the agreement and an
additional $13,500 in November 1999 as a bonus. Mr. Skillman also received a
non-qualified option to purchase 150,000 shares of Common Stock at an exercise
price equal to $0.7573 per share based upon a formula. Mr. Skillman's agreement
was subsequently extended one year to July 28, 2001 and, effective August 1,
2001, extended two years to July 28, 2003 with an increase in annual salary to
$165,000. If Mr. Skillman is terminated without cause during the term of his
employment agreement, he will receive a lump sum cash payment of 12 months'
salary following termination so long as he does not compete with us. Upon
termination without cause, all options granted to Mr. Skillman in connection
with his employment agreement will vest immediately. Mr. Skillman resigned from
the Company because of the Company's inability to pay ongoing salary
obligations. Pursuant to his employment agreement, this termination was deemed
termination without cause and was effective April 1, 2002.

In addition to the forgoing, Messrs. Thompson, Stratt, Lawson, Skillman and
Stoutenberg received non-plan, non-qualified stock options on August 7, 2001 to
purchase 2,287,505 shares of Common Stock of the Company in the aggregate,
exercisable for ten years at $0.77 per share.

Equity Compensation Plan Information

The following table provides aggregate information as of the end of the
year ended December 31, 2001 with respect to all compensation plans (including
individual compensation arrangements) under which equity securities are
authorized for issuance.

Plan category Number of securities to be Weighted-average exercise Number of securities
issued upon exercise of price of outstanding remaining available for
outstanding options, options, warrants and rights future issuance under
warrants and rights equity compensation plans
(excluding securities
reflected in column (a))
(a) (b) (c)
Equity compensation plans
approved by security holders 2,065,757 $0.9153 1,796,269

Equity compensation plans
not approved by security 8,767,313 $0.8583 -0-
holders
Total 10,833,070 $0.8683 1,796,269

From the Company's inception through June 4, 2002, we have issued 5,640,005
non-plan, non-qualified stock options to employees. These non-plan,
non-qualified stock options were not approved by the shareholders and are
included in the "Equity compensation plans not approved by security holders"
table. As of June 4, 2002, non-plan, non-qualified stock options to employees to
purchase 5,625,005 shares of Common Stock of the Company remain outstanding. Of
the 5,625,000 shares of Common Stock subject to options, 4,540,005 were issued
to Messrs. Thompson, Stratt, Lawson, Skillman and Stoutenberg under their
employment agreements or were issued separately as non-plan, non-qualified stock
options. For details relating the material features of individual arrangements
with the officers of the Company, please refer to the description of the equity
based compensation arrangements described in the Employment Agreements section
of this Proxy Statement. For those individual arrangements with employees of the
Company not described in the Employment Agreements section of this Proxy
Statement, the material terms of those arrangements are consistently applied
since our inception, where the Company has granted non-plan, non-qualified stock
options to employees with a term of ten years at the fair market value of the

date of grant with a vesting ranging from immediate to 3 years. In addition, the
Company has issued options and warrants to consultants, vendors, and suppliers
which are more fully described in Note 7 of the footnotes to the Financial
Statements contained in the Company's Annual Report on Form 10-KSB, filed with
the SEC on June 3, 2002. These options and warrants are included in the table.
Finally, the table does not include warrants issued to Mr. Aptoff and Mr.
Thompson which either occurred after December 31, 2001, or were issued with
respect to financing and investment activities of these individuals with the
Company. See Note 12 to the Company's financial statements for the year ended
December 31, 2001 contained in the Company's Form 10-KSB for such year end.

Stock Purchase Plan

The Company has established the Purchase Plan, which was approved by the
stockholders in June 1999 to serve as a vehicle to attract and retain the
services of key employees and to help such key employees realize a direct
proprietary interest in the Company. Under the Purchase Plan, employees,
including officers, who do not beneficially own stock and/or options totaling 5%
or more of the voting power of the Company, will be eligible to participate.
However, no participant may be granted rights to purchase more than $25,000
worth of Common Stock (valued at the time the purchase right is granted) for
each calendar year in which such purchase rights are outstanding under any other
stock purchase plans. An aggregate of 50,000 shares of Common Stock of the
Company were reserved for issuance under the Purchase Plan of which 29,378 were
issued and outstanding as of December 31, 2001. The Company is proposing to
increase the number of Common Stock by an additional 50,000 shares pursuant to
Proposal Four. Employees electing to participate in the Purchase Plan are
allowed to deduct from 1% to 10% of their compensation to purchase shares of
Common Stock. Twice a year, the employees' accumulated payroll deductions will
be used to purchase shares of Common Stock at a price equal to 85% of the
closing price of the Common Stock on either the first business day or last
business day of the offering period, whichever is lower. The Purchase Plan is
administered by the Board of Directors and its Compensation Committee. The
Purchase Plan may be amended, suspended, or terminated by the Board, but may not
increase the maximum number of shares issuable, increase the benefits accruing
to participants, or modify the eligibility requirement under the Purchase Plan
without stockholder approval.

Stock Options Plans

The Company has established the Plan that was approved by the stockholders
in May 2000 to serve as a vehicle to attract and retain the services of key
employees and to help such key employees realize a direct proprietary interest
in the Company. The Plan provides for the grant of up to 1,750,000 Non-Qualified
and Incentive Stock Options. The Company is sending shareholder approval to
increase the number of shares of Common Stock under the Plan by an additional
1,750,000 shares pursuant to Proposal Three. Under the Plan, officers,
directors, consultants and employees of the Company are eligible for
participation. The exercise price of any Incentive Stock Option granted under
the Plan may not be less than 100% of the fair market value of our Common Stock
on the date of grant. The aggregate Fair Market Value (determined as of the
Grant Date) of the shares for which Incentive Stock Options may first become
exercisable by Optionee during any calendar year under this Plan, together with
that of shares subject to Incentive Stock Options first exercisable by such
Optionee under any other of our plans, cannot exceed $100,000. Shares subject to
options under the Plan may be purchased for cash. Unless otherwise provided by
the Board, an option granted under the Plan is exercisable for a term of ten
years (or for a shorter period up to ten years). The Plan is administered by the
Board of Directors and its Compensation Committee, which has discretion to
determine optionees, the number of shares to be covered by each option, the
exercise schedule, and other terms of the options. The Plan may be amended,
suspended, or terminated by the Board, but no such action may impair rights
under a previously granted option. No option is transferable by the optionee
other than by will or the laws of descent and distribution. As of December 31,
2001, options to acquire 1,341,311 shares of Common Stock were issued and all
remain outstanding and 310,981 shares of Common Stock remain available for
future issuance.

The Company has established the 1998 Stock Option Plan (the "1998 Plan")
that was approved by the stockholders in May 1998 to serve as a vehicle to
attract and retain the services of key employees and to help such key employees
realize a direct proprietary interest in the Company. The 1998 Plan provides for
the grant of up to 500,000 Non-Qualified and Incentive Stock Options. Under the
1998 Plan, officers, directors, consultants and employees of the Company are
eligible for participation. The exercise price of any Incentive Stock Option
granted under the 1998 Plan may not be less than 100% of the fair market value
of our Common Stock on the date of grant. The aggregate Fair Market Value
(determined as of the Grant Date) of the shares for which Incentive Stock
Options may first become exercisable by an Optionee during any calendar year
under this Plan, together with that of shares subject to Incentive Stock Options
first exercisable by such Optionee under any other of our plans, cannot exceed
$100,000. Shares subject to options under the 1998 Plan may be purchased for
cash. Unless otherwise provided by the Board, an option granted under the 1998
Plan is exercisable for a term of ten years (or for a shorter period up to ten
years). The 1998 Plan is administered by the Board of Directors and its
Compensation Committee, which has discretion to determine optionees, the number

of shares to be covered by each option, the exercise schedule, and other terms
of the options. The 1998 Plan may be amended, suspended, or terminated by the
Board, but no such action may impair rights under a previously granted option.
No option is transferable by the optionee other than by will or the laws of
descent and distribution. As of December 31, 2001, options to acquire 227,011
shares of Common Stock were issued, of which 183,261 remain outstanding and
291,739 shares of Common Stock remain available for future issuance.

The Company previously established a 1996 Stock Option Plan (the "1996
Plan") to serve as a vehicle to attract and retain the services of key employees
and to help such key employees realize a direct proprietary interest in us. The
1996 Plan provided for the grant of up to 1,650,000 Non-Qualified and Incentive
Stock Options of which 1,062,528 were issued. As of December 31, 2001, options
to purchase 520,477 shares were outstanding and 844,773 shares of Common Stock
remain available for future issuance. Under the 1996 Plan, officers, directors,
consultants and employees of DBSI are eligible for participation. The exercise
price of any Incentive Stock Option granted under the 1996 Plan may not be less
than 100% of the fair market value of DBSI Common Stock on the date of grant.
The aggregate Fair Market Value (determined as of the Grant Date) of the shares
for which Incentive Stock Options may first become exercisable by Optionee
during any calendar year under this Plan, together with that of shares subject
to Incentive Stock Options first exercisable by such Optionee under any other of
our plans, cannot exceed $100,000. Shares subject to options under the 1996 Plan
may be purchased for cash. Unless otherwise provided by the Board, an option
granted under the 1996 Plan is exercisable for a term of ten years (or for a
shorter period up to ten years). The 1996 Plan is administered by the Board of
Directors and its Compensation Committee, which has discretion to determine
optionees, the number of shares to be covered by each option, the exercise
schedule, and other terms of the options. The 1996 Plan may be amended,
suspended, or terminated by the Board, but no such action may impair rights
under a previously granted option. No option is transferable by the optionee
other than by will or the laws of descent and distribution.

The Company also previously developed three stock option plans to award
certain employees, directors, and consultants with the opportunity to purchase
the Company's Common Stock. Under our 1993 Incentive Stock Option Plan ("1993
ISO Plan") options to purchase up to 69,644 shares of Common Stock were issued
to eligible employees. Under the Non-Qualified Stock Option Plan for
Non-Employee Directors ("Director's Plan") options to purchase up to 48,750
shares of Common Stock were granted to non-employee directors. Under the
Non-Qualified Stock Option Plan for Consultants ("Consultant's Plan") options to
purchase up to 14,625 shares of Common Stock were granted to certain
consultants. As of December 31, 2001, options to acquire 15,875, 42,500, and
14,625 shares of Common Stock were outstanding under the 1993 ISO Plan,
Director's Plan and Consultant's Plan, respectively and 204,029, 26,250, and
97,875 shares of Common Stock remain available for future issuance under the
1993 ISO Plan, Director's Plan and Consultant's Plan, respectively.

The following table shows for the fiscal year ended December 31, 2001
certain information regarding options granted during the fiscal year to the
executive officers of the Company named in the Summary Compensation Table under
"Executive Compensation".

OPTION GRANTS IN THE YEAR ENDED DECEMBER 31, 2001
INDIVIDUAL GRANTS

Number of Securities % of Total Options
Underlying Options Granted to Employees
Granted 2001 in Fiscal Year 2001 Exercise or Base Expiration
Name Price($/SHARE) Date

Fred W. Thompson 312,500 10.4% $0.49 February 6, 2011
President, Chief Executive 937,505 31.1% $0.77 August 7, 2011
Officer, Chief Financial
Officer

Randy Stratt 103,125 3.4% $0.49 February 6, 2011
Chief Operating Officer, 412,500 13.7% $0.77 August 7, 2011
General Counsel

James Stoutenberg 62,500 2.9% $0.49 February 6, 2011
Vice President 150,000 4.1% $0.77 August 7, 2011

Stanton C. Lawson* 112,500 3.7% $0.49 February 6, 2011
Former Chief Financial 450,000 15.0% $0.77 August 7, 2011
Officer

Frederick R. Skillman* 84,375 2.8% $0.49 February 6, 2011
Former Vice President 337,500 11.2% $0.77 August 7, 2011

* Both Mr. Lawson and Mr. Skillman resigned from the Company because of the
Company's inability to pay ongoing salary obligations. Pursuant to their
employment agreements, these terminations were deemed terminations without
cause. Mr. Lawson's employment was terminated from the Company effective
February 11, 2002, and Mr. Skillman's employment was terminated from the Company
effective April 1, 2002.

Aggregated Option Exercises in Last Fiscal
Year and Fiscal Year-End Option Values

There were no options exercised during the year ended December 31, 2001 by
executive officers.

Ten-Year Options/SAR Repricings

There was no repricing of options for the fiscal year ended December 31,
2001.

Long-Term Incentive Plans - Awards in Last Fiscal Year

There were no awards made to the named executive officers under any
long-term incentive plan during the year ended December 31, 2001.

Compensation of Directors

On September 1, 1999, our Board of Directors adopted a directors'
compensation plan. Under the compensation plan, each non-employee director shall
receive an annual retainer of $12,000 plus a fee of $1,000 and reasonable travel
expenses for attendance at each Board meeting. Each committee chairman shall

receive $2,500 annually for each year of service as committee chairman, and each
committee member shall receive $500 for attendance at each committee meeting. In
lieu of cash compensation, non-employee directors may elect to receive either
the Company's Common Stock or stock options to purchase Common Stock, the value
of which under either election, shall not exceed $20,000 annually. If either
Common Stock or stock options are elected, the price will be determined by the
average closing price for the five trading days of the Common Stock at the
beginning of a six-month period ending either June 30 or December 31. Further,
with respect to stock options elected as compensation, the cash equivalent
number of stock options will be determined based upon a number of factors,
including but not limited to, vesting periods, estimated growth rates and
risk-free rates.

In addition, each non-employee director shall receive an annual grant of
non-qualified options to purchase 10,000 shares of Common Stock in accordance
with the Company's current Stock Option Plan. The exercise price shall be
determined by the closing price of the Common Stock of the five trading days up
to and including the date of the Annual Stockholders Meeting, subject to
discounting pursuant to a formula adopted by the Board. These options shall vest
one year from date of grant. Further, upon either the first-time appointment or
election to the Board, a new non-employee director shall receive options to
acquire 10,000 shares of Common Stock, the exercise price of which will be
determined by a formula adopted by the Board. These options shall vest
immediately.

In 2001, Michael T. Schieber was awarded options to purchase 10,000 shares
of Common Stock at $0.22 per share, options to purchase 71,202 shares of Common
Stock at $0.4156 per share, and options to purchase 30,974 shares of Common
Stock at $0.46 per share; Jerome W. Carlson was awarded options to purchase
10,000 shares of Common Stock at $0.22 per share, options to purchase 73,840
shares of Common Stock at $0.4156 per share, and options to purchase 28,591
shares of Common Stock at $0.46 per share; Jessie J. Knight, Jr., was awarded
options to purchase 10,000 shares of Common Stock at $0.22 per share, options to
purchase 68,565 shares of Common Stock at $0.4156, and options to purchase
33,365 shares of Common Stock at $0.46 per share; and Roy T. Grant was awarded
options to purchase 10,000 shares of Common Stock at $0.22 per share and 32,843
shares of Common Stock.

The directors' compensation plan was prepared following a report by an
independent compensation firm. It was recommended by the compensation committee
and adopted by the Board.

Compliance with Section 16(a) of the Exchange Act

Section 16(a) of the Securities Exchange Act of 1934, as amended, requires
the Company's executive officers and directors, and persons who own more than
10% of the Company's Common Stock, to file reports of ownership on Form 3 and
changes in ownership on Form 4 or 5 with the Securities and Exchange Commission
(the "SEC"). Such executive officers, directors and 10% stockholders are also
required by SEC rules to furnish the Company with copies of all Section 16(a)
forms they file.

Based solely upon its review of copies of such forms received by it, or on
written representations from certain reporting persons that no other filings
were required for such persons, the Company believes that, during the year ended
December 31, 2001, its executive officers, directors and 10% stockholders
complied with all applicable Section 16(a) filing requirements.

Related Party Transactions

In fiscal 2001, certain executives of the Company deferred receipt of their
salaries due to the poor financial condition of the Company. The executives
included the President ($95,000), the Chief Financial Officer ($70,000), the
Legal Counsel ($80,000), the Vice President of Operations ($45,000), and the
Vice President of Government Affairs ($30,000).

In fiscal 2001, the Company borrowed funds from three of its Directors: one
loan for $30,000 at 6.5% interest, one loan for $25,000 at 5% interest and one
loan for $50,000 bearing no interest. These loans are payable on demand.

Other Matters

Relationship With Independent Accountants. PricewaterhouseCoopers LLP has
served as the Company's independent accountant since August 1994. The Company
has had no disagreements with the accountants on accounting and financial
disclosures. For the calendar year 2002, the Board of Directors expects to
retain PricewaterhouseCoopers but may seek competitive bids for its annual
audit. A representative of PricewaterhouseCoopers may be present at the 2002
Annual Meeting of Stockholders and, if present, will have the opportunity to
make a statement if he or she desires to do so and be available to respond to
appropriate questions from stockholders.

Audit fees. The aggregate fees paid for the annual audit and/or the
review of DBSI's financial statements included in DBSI's Form 10-KSB for the
year ended December, 31, 2001, amounted to approximately $55,000.

Financial Information Systems Design and Implementation Fees. During
the year ended December 31, 2002, DBSI paid no fees to PricewaterhouseCoopers
related to the design or implementation of a hardware or software system to
compile source data underlying DBSI's financial statements or generate
information significant to DBSI's financial statements.

All Other Fees. The aggregate fees paid for other non-audit services,
including fees for tax related services, rendered by PricewaterhouseCoopers
during DBSI's most recent fiscal year ended December 31, 2001, amounted to
approximately $46,270.

Other Matters. The Board of Directors of the Company knows of no other
matters that may or are likely to be presented to the Meeting. However, if
additional matters should properly be presented at the Meeting, it is the
intention of the persons named in the enclosed proxy to vote such proxy in
accordance with their best judgment on such matters pursuant to the
discretionary authority granted to them by the terms and conditions of the
Proxy.

Shareholder Proposals. Proposals to be presented by stockholders and to be
included in the Company's Proxy Statement and Proxy for its 2003 Annual Meeting
must be received by the Company's Secretary at 100 Shoreline Highway, Suite
190A, Mill Valley, California 94941, not less than 60 days nor more than 90 days
prior to the 2003 Annual Meeting date.

If notice of a proposal intended to be presented by stockholders at the
2003 Annual Meeting is received by the Company's Secretary no less than 60 days
nor more than 90 days prior to the 2003 Annual Meeting, and if the proxy holders
wish to maintain their discretionary authority to vote on any such proposal,
then the Company must set forth in its Proxy Statement the nature of the matter
to which the proposal relates and how the proxy holders intend to exercise their
discretion to vote on the matter. If any such proposals are not received on or
before 60 days prior to the meeting date, such proposal will not be included in
the Company's Proxy Statement and the proxy holders shall use discretionary
authority in voting. Furthermore, pursuant to the Company's Bylaws, any
stockholder proposal that is not delivered to the Company's Secretary within 10
business days following the day on which Notice of the 2003 Annual Meeting is
mailed or publicly announced, will not be allowed to be presented at the
Meeting.

Additional Information. A copy of Annual Report on Form 10-KSB for the
fiscal year ended December 31, 2001, containing the Company's 2001 audited
financial statements, including the report of its independent public
accountants, accompanies this Proxy Statement. Upon receipt of a written
request, the Company will furnish to any stockholder, without charge, an
additional copy of the Company's 2001 Form 10-KSB. Stockholders should direct
any request to DBS Industries, Inc., 100 Shoreline Highway, Suite 190A, Mill
Valley, California 94941, Attention: Secretary. The Company's Form 10-KSB may
also be accessed on the Internet at http://www.dbsindustries.com.

DBS Industries, Inc.

By Order of the Board of Directors

Fred W. Thompson
Chairman and President
Chief Financial Officer
Mill Valley, California
June 24, 2002

PROXY DBS INDUSTRIES, INC. PROXY
100 Shoreline Highway, Suite 190A
Mill Valley, California 94941
This Proxy is Solicited on Behalf of the Board of Directors
For the Annual Meeting of Stockholders on July 23, 2002

The undersigned hereby appoints Fred W. Thompson and Randy Stratt, and each of
them, as proxies with the power to appoint his or their successor, and hereby
authorizes them to represent and to vote, as designated below, all the shares of
Common Stock of DBS Industries, Inc. ("DBSI"), held of record by the undersigned
on June 4, 2002, at the Annual Meeting of Stockholders, to be held on July 23,
2002, at 1:00 p.m. (PDT), at the Acqua Hotel, 555 Redwood Highway, Mill Valley,
California 94941, and at any and all adjournments thereof.

ITEM 1 ELECTION OF DIRECTORS

To elect two Class II directors to hold office for two-year terms ending at the
Annual Meeting of Stockholders in 2004 and to re-elect two Class III directors
to hold office for three-year terms ending at the Annual Meeting of Stockholders
in 2005 until their successors are elected and qualified.

Fred W. Thompson

|_| FOR |_| WITHHOLD

Jessie J. Knight, Jr.

|_| FOR |_| WITHHOLD

ITEM 2

To approve an amendment to the Company's Certificate of Incorporation to (i)
increase the number of authorized shares of Common Stock from One Hundred
Million (100,000,000) to One Hundred Fifty Million (150,000,000); and (ii)
increase the number of authorized shares of Preferred stock from Ten Million
(10,000,000) to Fifteen Million (15,000,000).

|_| FOR |_| AGAINST |_| ABSTAIN

ITEM 3

To approve an amendment to the Company's 2000 Stock Option Plan to increase the
number of authorized shares of Common Stock under the plan to 3,500,000 shares
of Common Stock.

|_| FOR |_| AGAINST |_| ABSTAIN

ITEM 4

To approve an amendment to the company's 1999 Employee Stock Purchase Plan to
increase the number of authorized shares of Common Stock under the plan to
100,000 shares of Common Stock.

|_| FOR |_| AGAINST |_| ABSTAIN

ITEM 5

To transact such other business as may properly come before the meeting or any
adjournments thereof.

|_| FOR |_| AGAINST |_| ABSTAIN

Dated: ____________________, 2002

Signature

Signature if held jointly

Please sign exactly as your name appears. When shares
are held by joint tenants, both should sign. When signing as
attorney, executor, administrator, trustee or guardian,
please give full title as such. If a corporation, please
sign in full corporate name by the president or other
authorized officer. If a partnership or limited liability
company, please sign name by an authorized person. Please
complete, date and sign this proxy card and return it
promptly in the accompanying envelope.

TO VOTE USING THE TELEPHONE: Call toll free 1-800-816-8908 from a touch tone
telephone. There is NO CHARGE for this call. Enter your 14 digit CONTROL NUMBER
and 5 digit PIN NUMBER located at the bottom of this proxy and then listen for
voting instructions.

INTERNET VOTING INSTRUCTIONS: Go to the following web site
www.computershare.com/us/proxy - Enter your 14 digit CONTROL NUMBER and 5 digit
PIN NUMBER located at the bottom of this proxy and then follow the voting
instructions on the screen. If you vote by telephone or the internet, please DO
NOT mail back this proxy card.