AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JANUARY 16, 2002

REGISTRATION NO.
------------
================================================================================

SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM S-1

REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933

WORLD WIRELESS COMMUNICATIONS, INC.
(Exact name of registrant as specified in charter)

NEVADA 87-0549700
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)

5670 GREENWOOD PLAZA BOULEVARD
PENTHOUSE
GREENWOOD VILLAGE, COLORADO 80111
303-221-1944
(Address, including zip code, and telephone number, including area
code, of registrant's principal executive offices)

----------

DAVID D. SINGER
PRESIDENT AND CHIEF EXECUTIVE OFFICER
WORLD WIRELESS COMMUNICATIONS, INC.
5670 GREENWOOD PLAZA BOULEVARD
PENTHOUSE
GREENWOOD VILLAGE, COLORADO 80111
303-221-1944
(name and address, including zip code and telephone number,
including area code of agent for service)

----------

Copies to:

STEPHEN R. FIELD, ESQ.
LAW OFFICES OF STEPHEN R. FIELD
240 MADISON AVENUE, 3RD FLOOR
NEW YORK, NEW YORK 10016
(212) 681-0870

APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
---------------

If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act,
check the following box. [ ]

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

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

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

If delivery of the prospectus is expected to be made pursuant to Rule 434,
check for following box. [ ]

CALCULATION OF REGISTRATION FEE

<Table>
<Caption>
PROPOSED PROPOSED
TITLE OF EACH CLASS OF AMOUNT TO MAXIMUM MAXIMUM AMOUNT OF
SECURITIES TO BE BE OFFERING PRICE AGGREGATE REGISTRATION
REGISTERED REGISTERED PER UNIT(1) OFFERING PRICE(1) FEE(2)

Common Stock, $0.001
par value per share 19,857,773 $0.73 $14,496,174 $3,464.59
</Table>

(1) Estimated solely for the purposes of computing the registration fee pursuant
to Rule 457(c) under the Securities Act on the basis of the average of the high
and low reported sale prices of the Registrant's Common Stock on the American
Stock Exchange on December 12, 2001.

(2) Calculated by multiplying the aggregate offering amount by .000239.

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

================================================================================
PROSPECTUS

WORLD WIRELESS COMMUNICATIONS, INC.
19,857,773 Shares
Common Stock, $.001 Par Value

This Prospectus relates to the public offering of 19,857,773 outstanding
shares of our Common Stock (the "Outstanding Shares or Shares") of World
Wireless Communications, Inc. (referred to as "we" or "us") by certain of our
shareholders (the "Selling Shareholders").

The Shares may be offered and sold by the Selling Shareholders from time to
time as market conditions permit in transactions on the American Stock Exchange,
in negotiated transactions, or a combination of such methods of sale, at fixed
prices which may be changed, at market prices prevailing at the time of sale, at
prices relating to prevailing market prices or at negotiated prices. The Selling
Shareholders may effect such transactions to or through broker/dealers, and such
broker/dealers may receive compensation in the form of discounts, concessions or
commissions from the Selling Shareholders and/or the purchasers of the Shares
for whom such broker/dealers may act as agents or to whom they sell as
principals, or both (which compensation as to a particular broker/dealer might
be in excess of customary commissions). To the extent required, information
regarding the Shares to be offered and sold, the names of the Selling
Shareholders, the public offering price, the names of any such broker/dealer or
agent and any applicable commissions or discount with respect to any particular
offer is set forth herein or will be set forth in an accompanying Prospectus
supplement. See "Plan of Distribution".

We will not receive any of the proceeds from the sale of the Outstanding
Shares by the Selling Shareholders. We will bear the expenses of registering all
Shares, which we estimate to be approximately $175,000.

NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY OTHER REGULATORY
BODY HAS APPROVED OR DISAPPROVED THESE SECURITIES OR PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.

THE SHARES ARE SPECULATIVE AND INVOLVE A HIGH DEGREE OF RISK. PURCHASERS OF
SHARES SHOULD CAREFULLY CONSIDER THE MATTERS DESCRIBED UNDER "RISK
FACTORS" BEGINNING AT PAGE 11, AND "DILUTION".

The shares of our Common Stock are traded on the American Stock Exchange
under the symbol "XWC". On December 12, 2001, the average of the high and low
price for a share of our Common Stock was $0.73. The high and low closing prices
of our shares of Common Stock during the last 52-week period ended December 12,
2001 was $2.1875 and $0.15, respectively. See "Market Information".

The date of this Prospectus is ___________, 2002.

WORLD WIRELESS

COMMUNICATIONS, INC.

19,857,773 SHARES

Common Stock, $.001 Par Value

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

PROSPECTUS

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

[ ], 2002
------------

NO DEALER, SALES PERSON OR OTHER PERSON IS AUTHORIZED TO GIVE ANY INFORMATION OR
TO REPRESENT ANYTHING NOT CONTAINED IN THIS PROSPECTUS. YOU MUST NOT RELY ON ANY
UNAUTHORIZED INFORMATION OR REPRESENTATIONS. THIS PROSPECTUS IS AN OFFER TO SELL
OR TO BUY ONLY THE SHARES OFFERED HEREBY, BUT ONLY UNDER CIRCUMSTANCES WHERE IT
IS LAWFUL TO DO SO. THE INFORMATION CONTAINED IN THIS PROSPECTUS IS CURRENT ONLY
AS OF ITS DATE.

SUMMARY

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

This Prospectus includes "forward-looking statements" within the
meaning of Section 27A of the Securities Act of 1933, as amended (the "Act" or
the "Securities Act") and Section 21E of the Securities Exchange Act of 1934, as
amended (the "Exchange Act") which represent our expectations or beliefs
concerning future events that involve risks and uncertainties, including,
without limitation, (i) those associated with our ability to obtain financing
for our current and future operations, to manufacture (or arrange for the
manufacturing of) our products, to market and sell our products, and our ability
to establish and maintain our sales of X-traWeb(TM) products, (ii) general
economic conditions and (iii) technological developments by us, our competitors
and others. All statements other than statements of historical facts included in
this Report including, without limitation, the statements under "Management's
Discussion and Analysis of Results of Operations and Financial Condition" and
"Business" and elsewhere herein, are forward-looking statements. When used in
this Prospectus, the words "believe," "expect," "anticipate," "estimate" and
similar expressions are intended to identify forward-looking statements. Such
statements are subject to certain risks, uncertainties and assumptions, which
are identified and described in the "Risk Factors" section below. We caution you
not to place undue reliance on any such forward-looking statements, all of which
speak as of the date made. Although we believe that the expectations reflected
in such forward-looking statements are reasonable, we cannot assure you that
such expectations will prove to have been correct. Important factors that could
cause actual results to differ materially from our expectations ("Cautionary
Statements") are disclosed in this Prospectus, including, without limitation, in
connection with the forward-looking statements included in this Prospectus. All
subsequent written and oral forward-looking statements attributable to us or
persons acting on our behalf are expressly qualified in their entirety by the
Cautionary Statements.

PROSPECTUS SUMMARY

This summary is qualified in its entirety by, and should be read in
conjunction with, the more detailed information and financial statements
appearing elsewhere in this Prospectus. Unless otherwise indicated, all
references to and information concerning "we" or "us" includes World Wireless
Communications, Inc. and its wholly-owned subsidiaries, and historical
information, except for the financial statements, presents the operations of
World Wireless Communications, Inc. and its subsidiaries on a combined basis,
unless otherwise indicated.

OVERVIEW

World Wireless Communications, Inc. (the "Company", "we" or "us") is a
developer of wired and wireless telemetry and remote control systems, where
telemetry is the monitoring, collection and transmission of data by wire or
radio from remote sources. By leveraging our experience developing low-cost,
reliable communications systems, we have created the latest generation of
technology to monitor and control various remote devises through the internet.

Our products and services allow data from remote devices to be accessed
via a secure, encrypted Internet connection using a standard web browser located
anywhere where there is internet access. Our technology has applications across
a broad range of industries, for which it can substantially improve the
efficiency and cost of access and manipulation of important data from widely
dispersed equipment. For example, we are currently deploying our technology in
the automatic meter reading field, whereby utility companies can read natural
gas, electric, and water usage on commercial and residential meters on an
immediate basis in order to better balance their energy loads, monitor usage,
predict requirements, and ultimately improve service and

reduce costs. Another example is remotely monitoring industrial restaurant
equipment, such as a fast food restaurant grill, ice machine, fryers, and
coolers, to ensure that the particular piece of equipment is functioning within
desired parameters. In this example, our technology can provide maintenance
notification so as to avoid malfunction during a peak time in the business day,
or ensure a grill or fryer is cooking at the proper temperature.

Since January 1999, we have successfully combined all of our
technologies into a functional package that not only collects data, but also
transmits it and provides control from remote locations. It also enables our
customers to use an ordinary browser to access the data-gathering and remote
control functions from anywhere in the world through the internet, where there
is internet access. Our management has been engaged principally in developing
product positioning strategies, strategic planning and final development and
testing of our integrated technology.

CURRENT STATUS

We have completed development and testing of the core systems and
sub-systems comprising our internet technology, and are currently engaged in
implementing the first phase of our near-term plan - the introduction of our
products and services to selected customers in major target markets to establish
test installations for a variety of commercial and industrial applications. We
have capitalized on the successful test sites and commenced sales of the actual
products and services.

While our products and services have a wide range of diverse
applications, we originally targeted four principal areas to focus our sales:
(a) vending machines; (b) facilities management and automatic meter reading; (c)
security systems; and (d) fast food services equipment. However, as a result of
the slower receipt of revenues from the sale of our products, we decided in
July, 2001 to focus our activities principally on the sale of such products in
the automatic meter reading and facilities management fields (in part due to the
current energy crisis experienced in parts of the United States), although we
will continue to market our products in the areas of (i) vending machines, (ii)
security systems and (iii) food services equipment.

Our customers include FreedomPay.com (which sells cashless vending
machines), Enodis Chains PLC (the largest manufacturer of equipment for fast
food vendors), a subsidiary of the U.K.-based Enodis, National Gas Automation
Inc. (a developer of a liquid propane gas monitoring systems), RealTime Data (a
vending machine operator) and Midwest United Energy (which provides natural gas
to the agricultural irrigation market). Our current and former alliance partners
include Texaco Natural Gas Inc. (for marketing to the natural gas industry),
Co-operative ConNEXTions, LLC (a provider of products and services to rural
distribution cooperatives in the western United States), Novar Controls Corp. (
a supplier of advanced building automation control systems), Fracarro
Radioindustrie S.p.A.( a supplier of satellite-based video distribution
systems), and Audiotel S.p.A. (which is marketing certain of our
X-traWeb(TM)products in Italy). We also had relationships with Kyushu Matsushita
Electric Co. Ltd. ("Panasonic"), Motorola, Inc. and Williams Wireless Inc. dba
Williams Telemetry Services, a subsidiary of the Williams Company ("Williams").

INDUSTRY

We expect that investment in technology using the internet will
continue to grow both in the United States and abroad for the foreseeable future
despite the recent reduction of anticipated growth in the telecommunication
sector and the economy in general.

OUR TECHNOLOGY

At the heart of our strategy is the promotion of our communication
system designed to provide supervisory control of, and obtain data from
equipment or devices in remote locations via the internet.

Our proprietary technology consists of three parts, the first of which
is our "X-Node(TM)". The X-Node(TM) is a miniature web server compacted into a
one square inch circuit board, which often requiring less than 2 kilobytes of
memory. This miniature web server collects information from a remote piece of
equipment (e.g., vending machine, gas meter, and the like) and makes that
information available via the Internet.

The second part of the technology is our product for large-scale
installations, the "X-Gate(TM)". The X-Gate(TM) is an Internet gateway that can
collect information over a wired or wireless network from a substantial number
of X-Nodes(TM) (e.g., an array of vending machines), and transmit the
information to an information repository via the Internet. This transmission
device provides the connection to the Internet and translates the data between
the connected devices and formats it for use on the Internet. The X-Gate(TM)
offers distinct advantages over the more commonly used gateway - the personal
computer - in that it requires no human intervention and incorporates advanced
technologies to ensure performance and reliability.

Completing our technology is our business-to-business web site, located
in the Denver Colorado area. This database-driven site collects the operations
and transactional data which has been transmitted from a customer's remote
equipment, then stores it securely for delivery to authorized customer personnel
in raw form, or processed and formatted into standard or customized reports
using software we employ.

Following is an illustration of a typical design for our
communication systems:

[CHART]

COMPETITIVE ADVANTAGES

Our technologies offer customers a number of advantages, including:

o Open architecture solutions that do not use proprietary
protocols, and components that are fully compatible with the
most important Internet protocols;

o Use of a standard web browser and Internet tools (such as
Java) to monitor and control remote equipment and functions
from any Internet-accessible location;

o Wireless technology option that eliminates the need for
additional (and generally costly) electrical, telephone or
other hardwired systems at remote locations;

o Highly durable components that can operate in a wide range of
environmental conditions;

o Ease of installing, configuring, bringing online and
maintaining or replacing components;

o Software program embedded in a chip that allows customized
configuration of equipment already possessing embedded
micro-controllers, which collect, process and transmit
information like a standard computer; and

o Software embedded in a chip that allows automatic updating of
micro-controller functions from a remote location to reflect
changes in customer needs and specifications.

PRODUCT AND SERVICES

Our product strategy is to find ways to utilize our existing
technologies to develop innovative solutions that enable users of telemetry
technologies to leverage the power of the Internet in order to greatly enhance
the efficiency and cost of controlling and monitoring remotely located
equipment.

Our products and services include:

o X-Node(TM) - a small fully functional embedded micro-
controller providing web services;

o X-Gate(TM) - a small rugged proprietary internet gateway
collecting and transmitting device;

o Wireless radios - spread spectrum radios;

o Antennae; and

o Customer support and services.

SALES AND MARKETING

We believe we are positioned to penetrate a variety of targeted
segments of the telemetry market (including, without limitation, automatic meter
reading, fast food service equipment, facilities management, asset management
and security systems) through our ability to penetrate and establish a market
presence with products and services designed to meet industry-specific needs.
Our marketing strategy hinges on our establishing a strong reputation as a
provider of reliable and technologically superior wireless Internet-based
telemetry services to a diverse customer base. To achieve our goals of
substantial growth and penetration of our target markets, we have developed a
strategic marketing plan that provides for the development and expansion of
long-term sales channels through which we can sell our X-traWeb(TM) solutions
into the future.

As an integral part of our marketing program, we are establishing
strategic marketing alliances with outside companies that have strong influence
within the respective target markets for our X-traWeb(TM) products and services.
We continue to seek to align ourself with partners that are capable of
substantially accelerating our penetration of a target market or of adding
material value to our marketing program through the reduction of costs,
managerial infrastructure, and other economic advantages

HISTORY

We were incorporated on November 15, 1995 under the laws of the State
of Nevada as Data Security Corporation. We changed our name on January 15, 1997
to World Wireless Communications, Inc. Our corporate offices are located in the
Denver Technology Center at 5670 Greenwood Plaza Boulevard, Penthouse, Greenwood
Village, Colorado 80111. We moved our operations from Salt Lake City, Utah in
March 2000.

Our shares of Common Stock began trading on the American Stock Exchange
on May 5, 2000 under the symbol "XWC".

THE OFFERING

The Shares being offered hereby consist of 19,857,773 Outstanding Shares
which were acquired by the Selling Shareholders or their predecessors in
interest either in direct private placements by us, or upon the exercise of
warrants we issued in connection with certain private placement sales of
securities we made in 1998, 1999 and 2000. The Outstanding Shares are being
offered and will be sold for the accounts of Selling Shareholders, and we will
not receive any proceeds from sales of the Outstanding Shares. We will bear all
of the expenses of registering the Shares. See "Plan of Distribution".

SUMMARY CONSOLIDATED HISTORICAL FINANCIAL INFORMATION

The following table sets forth our summary historical consolidated
financial data for the periods set forth, including the restatement of the
periods ended December 31, 1997, December 31, 1990, December 31, 1999 and
December 31, 2000. This information should be read in conjunction with our
consolidated financial statements and notes thereto contained elsewhere in this
Prospectus.

OPERATING DATA:

<Table>
<Caption>
FOR THE YEARS ENDED DECEMBER 31,
NINE MONTHS
ENDED
SEPTEMBER 30, 2001 2000 1999 1998 1997 1996
------------------ ---- ---- ---- ---- ----
As restated As restated As restated As restated As restated
----------- ----------- ----------- ----------- -----------

SALES $ 863,315 $ 1,714,833 $ 3,566,307 $ 4,309,691 $ 2,913,429 $ 618,505

GROSS PROFIT
(LOSS) 178,966 501,406 234,382 558,084 796,495 (43,679)

NET LOSS
APPLICABLE TO
COMMON SHARES $ (5,667,180) $ (4,580,904) $(13,859,674) $(12,466,059) $ (9,051,875) $ (3,236,657)

BASIC AND
DILUTED LOSS PER
COMMON SHARE $ (0.18) $ (0.16) $ (0.80) $ (1.11) $ (0.98) $ (1.03)

WEIGHTED AVERAGE
NUMBER OF COMMON
SHARES USED IN PER
SHARE CALCULATION 31,273,990 29,447,488 17,308,258 11,189,603 9,217,158 3,141,613
</Table>

BALANCE SHEET DATA:

<Table>
<Caption>
SEPTEMBER 30, DECEMBER 31,
--------------------------------------------------------------------------------------------------------------
2001 2000 1999 1998 1997 1996
---- ---- ---- ---- ---- ----

CURRENT ASSETS $ 1,139,194 $ 4,151,263 $ 1,960,930 $ 1,725,770 $ 1,529,804 $ 328,551

NET EQUIPMENT 543,860 575,476 192,252 1,038,645 1,133,263 327,022

TOTAL ASSETS 1,792,630 4,969,887 2,578,214 4,136,590 10,133,024 663,042

CURRENT LIABILITIES 3,008,808 944,499 6,087,067 5,053,628 1,815,903 203,351

LONG-TERM LIABILITIES 7,509 9,633 21,459 84,968 24,275 44,808

STOCKHOLDERS' EQUITY
(DEFICIT) $ (1,253,686) $ 4,015,755 $ (4,480,312) $ (1,002,006) $ 8,292,846 $ 414,883
</Table>

RISK FACTORS

Purchase of the shares of our Common Stock involves a high degree of
risk. Persons considering a purchase of Shares should carefully consider all of
the information contained in this Prospectus and, in particular, the facts set
forth under the caption "Risk Factors" below.

The following risk factors include, among other things, cautionary
statements with respect to certain forward-looking statements, including
statements of certain risks and uncertainties that could cause actual results to
vary materially from the future results referred to in such forward-looking
statements. See "CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS" at
p.6 of the Prospectus.

WE HAVE A LIMITED OPERATING HISTORY AND A HISTORY OF OPERATING LOSSES

We have an extremely limited operating history and a history of net
losses and there is no assurance we will report net income in the future. Since
we have a limited operating history an investor must consider the risks,
expenses and difficulties frequently encountered by such companies, particularly
in the new and rapidly evolving market for wireless communications products and
services and Internet products, content and services. We cannot assure you that
we will be successful in addressing such risks. Also, we cannot assure you that
our revenue will continue at its current level.

We incurred significant net losses in the past, $9,051,875 in 1997,
$12,466,059 in 1998, $13,859,674 for 1999, $4,580,904 for 2000 and $5,667,180
for the first nine months of 2001. For more information regarding these net
losses, see "Selected Consolidated Historical Financial Data" and "Consolidated
Financial Statements" in this Prospectus. We cannot assure you that we will
report net income in the future.

As a new enterprise, we are likely to remain subject to risks which we
are unable to predict, and for which we are unable to fully prepare. While we
expect our revenues to increase as new products are introduced, we will incur
significant additional expenses in developing and marketing our products and
services. As our business grows, we expect strains on our administrative,
financial and operating resources. Our ability to manage growth effectively will
require us to continue to expand and improve our operational, financial and
management controls, and to train, motivate and manage our employees. We cannot
assure you that we will be successful in overcoming problems associated with
unforeseen costs and competition, technical problems associated with new
products and technology, and other risks which all business ventures face and
which could be especially acute for a relatively new company attempting to
establish and expand its business in a highly competitive industry characterized
by rapid technological development and change.

For all of the foregoing reasons, as well as the factors described
below, any purchase of shares should be considered a speculative investment
involving a significant risk of loss.

WE NEED ADDITIONAL CAPITAL IMMEDIATELY AND MAY NOT BE ABLE TO CONTINUE AS A
GOING CONCERN

We have to depend on equity and/or debt funding from outside investors
to conduct our operations, and we require additional funding now. Based on our
current cash positions and our plans for 2001, we believe that additional
capital will be required by the end of February, 2002. We obtained a financing
commitment from Lancer Offshore, Inc. and Lancer Partners L.P., affiliates of
our largest stockholder, which management believes is adequate to fund our
operations at least through January 31, 2002. Our agreement with Lancer
Offshore, Inc. and Lancer Partners L.P. also allows for such loan to be
increased to a total of $5,000,000 from its present outstanding principal
balance of $3,210,000 (or by an additional $1,790,000), provided that we and
such parties agree to do so, although we cannot assure you of such mutual
agreement. See " DESCRIPTION OF CAPITAL STOCK AND OTHER SECURITIES - - Senior
Secured Indebtedness". We previously obtained a financing commitment letter
totaling $4,000,000, to be provided as private equity placements on or before
May 31, 2001, which management believed was adequate to fund our operations in
2001. The funding party did not provide the financing within the terms of the
commitment, and to date, no funds have been received thereunder. Upon the lapse
of the commitment deadline, management believed our best interests would be
served by accommodating the funding party's interest in seeking to arrange
substitute financing with other accredited investors on a best efforts basis,
and waiving the funder's prior unconditional commitment therefor. We and the
funding party have agreed to allow the funding party to seek substitute
financing through February 28, 2002.

As the result of the foregoing events, we are currently seeking funding
from other accredited investors. We cannot assure you that we will be able to
obtain the additional financing we need in the future. In this regard,
prospective purchasers of shares should note that as recently as November 14,
2001, we sold securities which are convertible (with, among other things, prior
shareholder approval) into "restricted" (i.e., unregistered) shares of our
Common Stock at a price of $0.05 per share, which was far below the high and low
and prices of our shares of Common Stock on the American Stock Exchange at the
time of such sale. See "DESCRIPTION OF CAPITAL STOCK AND OTHER SECURITIES -
Senior Secured Indebtedness."

If we cannot successfully sell our securities to raise sufficient
proceeds, or realize revenues from sales with adequate margins or from license
agreements, to fund our operations, our liquid resources will be depleted before
the end of February, 2002.

We have sustained recurring losses from operations, have a working
capital deficiency, a stockholders' deficit and do not have the necessary funds
to repay our secured debt, which is all due on February 28, 2002. As operations
have not generated sufficient amounts of cash, we have relied upon financing
from outside investors to fund the current period operations. Debtholders are
affiliates of our largest shareholder and have extended the due dates of the
2001 Notes several times during 2001. There is no guarantee that such
debtholders will continue to do so in the future. Our attainment of profitable
operations and sufficient additional financing cannot be determined at this
time. These uncertainties raise substantial doubt about our ability to continue
as a going concern.

OUR DEFAULT UNDER OUR SENIOR SECURED INDEBTEDNESS WOULD HAVE A MATERIAL ADVERSE
IMPACT ON OUR BUSINESS.

We recently financed our operations through the sale of 15% Senior
Secured Convertible Notes (the "2001 Notes") and warrants which raised the
principal amount of $ 3,210,000 during the period from May 17, 2001 through
November 14, 2001 from Lancer Offshore, Inc. (which provided $2,650,000 of such
loan) and Lancer Partners L.P. (which provided $660,000 of such loan),
affiliates of our largest shareholder. In addition, Lancer Offshore, Inc. and
Lancer Partners L.P. can also increase such loan by an additional $1,790,000 to
a total of $5,000,000, provided that we and such parties agree to so, although
we cannot assure you of such result. The 2001 Notes are secured by a first
security interest in substantially all of our assets, including our machinery,
equipment, automobiles, fixtures, furniture, accounts receivable and general
intangibles, including patents, patent applications and any stock in any
subsidiary. The existing tranches of the 2001 Notes totaling $3,210,000 now have
a maturity date of February 28, 2002, but are mandatorily convertible into
shares of our Common Stock at the rate of $0.05 per share on or before February
28, 2002 upon (i) our receipt of approval of our shareholders to such conversion
at the next annual meeting of the shareholders and (ii) our receipt of
$3,210,000 of equity from persons other than a group consisting of Michael
Lauer, Lancer Offshore, Inc., Lancer Partners L.P. and The Orbiter Fund Ltd on
or before February 28, 2002.

While we anticipate that our shareholders will approve such mandatory
conversion of the 2001 Notes into our shares of Common Stock and the exercise of
the warrants to purchase shares of our Common Stock issued in connection
therewith to such purchasers, "SEE DESCRIPTION OF CAPITAL STOCK AND OTHER
SECURITIES - Senior Secured Indebtedness", we cannot assure you of such result.
In addition, we cannot assure you that we will raise $3,210,000 in additional
equity from non-Lancer sources on or before February 28, 2002. Moreover, we
cannot assure you that we will not commit a default under the 2001 Notes in the
future when the existing tranches of the 2001 Notes totaling $3,210,000 in
principal amount mature on February 28, 2002 or on a later maturity date in the
case of additional tranches of the 2001 Notes. In the event that the holders of
the 2001 Notes sell our assets securing the 2001 Notes following a future
default, a remedy available under the 2001 Notes, such sale would materially and
adversely affect our business and financial condition.

OUR FINANCING AGREEMENT SUBSTANTIALLY CURTAILS THE SCOPE OF OUR OPERATIONS

Our loan agreement with Lancer Offshore, Inc. and Lancer Partners L.P.
substantially restricts the monthly amounts we can spend in any one month,
commencing with September, 2001. Such agreement provides that we cannot incur a
monthly burn-rate (i.e., the excess of our revenues over our expenditures in a
month, each determined on a cash basis) greater than $250,000 during September,
2001 and $375,000 during October 2001 and each month thereafter while the 2001
Notes remain unpaid. As a result, we reduced the number of our employees as of
November 30, 2001 to 30 (from 48 as of April 30, 2001), reduced our research and
development efforts, focused instead on engineering applications of our products
and eliminated certain expenditures for marketing and other purposes. While we
will continue to market our products actively, we will do so with less personnel
while the 2001 Notes remain unpaid and, hence, we will focus our marketing
efforts primarily in the automatic meter reading and facilities management
fields and to a lesser degree in the areas of vending machines, security and
fast food services equipment.

WE CANNOT ACCURATELY PREDICT OUR FUTURE REVENUE

As a result of the evolving nature of the wireless technology industry
and the Internet and our limited operating history, we cannot accurately
forecast our revenue. Current and future expense levels are based principally on
estimated future revenue and are to a large extent fixed. Accordingly, we may be
unable to adjust spending to compensate for any unexpected revenue shortfall. If
our actual revenue

is less than our estimated revenue, this could have an immediate material
adverse effect on our profits and liquidity.

WE DEPEND ON NEW PRODUCTS AND TECHNOLOGY WHICH MAY NOT BE ACCEPTED IN THE
INDUSTRY

We have begun to offer our proprietary X-traWeb(TM) products for sale
and have had only $450,604 of revenues in 2000 from such sales, and revenue from
such sales represented only 26.3% of our total revenues during 2000. During the
first nine months of 2001, we had $233,012 of sales of X-traWeb(TM) products,
which represented 26.9% of our total revenues during such period. Similarly, we
have begun to offer our proprietary low-speed digital radio products (LSDRs) for
sale, and had revenues from such sales of $1,147,571 during 2000, which
represented approximately 67% of our total revenues during 2000. During the
first nine months of 2001, we had $612,763 of sales of our radio products, which
represented 70.9% of our total revenues during such period. Because we have had
only limited sales of our X-traWeb(TM) products and only limited sales of our
radio products to date, we do not know whether any of these products will be
commercially acceptable, or, if so, the degree of commercial acceptance. While
we believe our X-traWeb(TM) and radio products will be sold in significant
quantities, we cannot assure such results or that we will achieve profitability.

WE MAY NOT BE ABLE TO ADEQUATELY RESPOND TO TECHNOLOGICAL CHANGE

The market for Internet products and services is characterized by rapid
technological developments, frequent new product introductions and evolving
industry standards. We will be required to improve continually the performance,
features and reliability of our X-traWeb(TM) products for use in the Internet,
particularly in response to competition and changing customer demands. We cannot
assure you that we will be successful in responding rapidly, cost effectively or
adequately to such developments.

OUR FUTURE REVENUE IS DEPENDENT SIGNIFICANTLY ON THE GROWTH OF INTERNET USE AND
THE ACCEPTANCE OF THE INTERNET AS A COMMERCE MEDIUM

Our future revenue will depend significantly on the widespread
acceptance and use of the Internet as an information source and as a commerce
vehicle. Rapid growth in Internet use is a recent trend and market acceptance of
the Internet as an commercial medium is highly uncertain. The Internet may not
be accepted as a viable commerce medium for distribution of information and
engaging in commerce for a number of reasons, including, without limitation:

o inadequate development of the network infrastructure,

o inadequate development of enabling technologies,

o concerns about privacy and security among users and

o lack of widely accepted standards for measuring the
effectiveness of advertising on the Internet.

SLOWDOWN IN ECONOMIC GROWTH MAY ADVERSELY IMPACT OUR MARKETS

There has been a recent slowdown in economic growth in the United
States and certain foreign countries. Such slowdown has adversely affected a
broad spectrum of companies, including those in the telecommunications industry,
such as Lucent Technologies Inc., Intel Corp. and Cisco Systems Inc. Such
downturn may adversely affect our operations as well. However, we remain

optimistic that there will be an increase in use of web-enabling technology in
the future (such as in the energy industry), although we cannot assure you of
such result.

INCREASED GOVERNMENT REGULATION OF THE INTERNET COULD HAVE A MATERIAL ADVERSE
EFFECT ON US

Increased government regulation, or the application of existing laws to
online activities, could inhibit Internet growth, expose us and other sellers of
products for use on the Internet to additional liabilities and increase the cost
of doing business. This could have a material adverse effect on our profits and
liquidity. The increasing popularity and use of the Internet and other online
services may lead to the adoption of new laws and regulations in the United
States or elsewhere covering issues such as online privacy, copyright and
trademark, sales taxes and fair business practices or which require
qualification to do business as a foreign corporation in certain jurisdictions.

OUR BUSINESS IS HEAVILY DEPENDENT ON SEVERAL CUSTOMERS; WE HAVE NON-RECURRING
SALES

In 2000, we received 56% of our revenues, or $964,998 , from two
customers, each of which accounted for 10% or more of our total sales. During
2000, $457,194 or 26.7% of our revenue was from Panasonic for royalty payments
due under a license agreement, which is a non-recurring item since such license
agreement expired in September, 2000 and does not apply to products sold after
September 30, 2000. See "BUSINESS - Contract Design and Development". If we fail
to replace our revenues from such sources, our business could suffer a material
and adverse impact. In addition, we could experience a serious financial risk if
our customers fail to pay the amounts due us timely. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations."

WE MAY BE SUBJECT TO INCREASES IN OPERATING COSTS AND SUPPLIES MAY NOT BE
AVAILABLE

An increase in operating costs could adversely affect our ability to
achieve profitability. Factors such as inflation, increased labor and employee
benefit costs and the availability of qualified management and other employees
may adversely affect operation costs. Many of these costs are beyond our
control. In addition, our suppliers' dependence on frequent deliveries of
materials, such as electronic component pieces, could subject us to shortages or
interruptions in shipments of our products, which could adversely affect our
business.

OUR COMPETITION IS INTENSE AND IS EXPECTED TO INCREASE SIGNIFICANTLY

The market for wireless communications products is intensely
competitive, with many providers who have greater technical, financial and
marketing resources than us, and certain of whom are among the premier, "high
tech" leaders of the industrial world. Our strategy includes entering into
license agreements or other forms of "strategic partnership" arrangements with
larger companies in order to exploit their strengths, rather than to confront
them in the marketplace. We cannot assure you that this strategy will succeed,
or that we will be able to overcome the competitive disadvantages we face as a
small company with limited capital and without a history of successfully
developing and marketing proprietary wireless technology devices or products or
Internet products. In addition to present "mainstream" competitors, we expect
that numerous potential competitors with high levels of technical and financial
resources are, like us, constantly searching for market niches and specialty
products in the communications industry. See "BUSINESS - Competition."

OUR COMPETITIVE POSITION DEPENDS ON OUR ABILITY TO ATTRACT AND RETAIN KEY
PERSONNEL

Our potential failure to attract and retain qualified personnel could
diminish our competitive position. Our performance is substantially dependent on
the continued services and performance of our senior executive officers and
other key personnel. We do not have long-term employment agreements with any of
our key personnel and maintain no "key person" life insurance policies. None of
our key personnel is subject to any restrictive covenant that could stop any of
them from joining a competitor after leaving our employment. Our future success
also depends on our ability to identify, attract, retain and motivate highly
skilled managerial, sales, engineering, marketing and customer service
personnel. Competition for such persons is intense. We cannot assure you that we
will be able to attract or retain such personnel.

OUR PATENTS AND INTELLECTUAL PROPERTY RIGHTS MAY NOT PROTECT US ADEQUATELY

We presently have two United States patents covering antenna technology
and one United States patent which covers technology relating to, among other
technical matters, a method and apparatus for de-modulating "spread spectrum"
wireless signals, and two patent applications relating to two separate software
codes. We also have four United States patent applications pending on various
operating aspects of our X-traWeb(TM) system. See "BUSINESS -- Patents and
Intellectual Property." At the present time, we have no other patents or patent
applications pending in the United States or in foreign countries. The spread
spectrum de-modulation technology patent application was the subject of
litigation in the State of Utah, Salt Lake County Court, in which a former joint
venturer with us claimed, among other things, an ownership interest in the
technology. We settled this lawsuit in November 1997. Under the settlement
agreement, we agreed, among other things, to share co-ownership of the
technology covered by the patent application with our former joint venture
partner. See "BUSINESS -- Patents and Intellectual Property."

We also use confidentiality agreements with our customers and other
parties to protect trade secrets and other proprietary data. We claim copyrights
on the circuit boards and software used in our products. We cannot assure you
that we protect sensitive information and prevent other persons from obtaining
and using our technology or developing other technology which embodies our
technology.

In cases where we do not have patents on our products, we cannot assure
you that another company will not replicate one or more of our products.
Furthermore, we cannot assure you that any patents we obtain will give us
meaningful protection or provide us with any significant competitive advantages
over competing products. Also, we cannot assure you that patent rights that we
have or may obtain in the future will give us any competitive advantage or will
not be challenged by other companies or individuals. Furthermore, we cannot
assure you that other companies or individuals will not independently develop
similar products, duplicate our products or design products around any of our
patents.

We also presently hold a number of trademarks and/or services marks
relating to our X-traWeb(TM) product line and our radio product line. We intend
to pursue registration of trademarks associated with our key products as they
are developed and become available for general commercial use, and to protect
our legal rights concerning the use of our trademarks. We intend to rely upon
common law trademark rights to protect any unregistered trademarks, which do not
provide us with

the same level of protection afforded by a United States federal registration of
a trademark. For example, unlike a registered trademark, common law trademark
rights are limited to the geographic area in which the trademark is actually
used.

WE MAY HAVE PRODUCT LIABILITY AND OTHER POSSIBLE FUTURE CLAIMS MADE AGAINST US

We may be subject to substantial product liability costs if claims
arise out of problems associated with the products which we manufacture. We are
insured against such contingencies, but we cannot assure you that the coverage
provided by such policies ($1 million per occurrence, $2 million total) would be
adequate to cover all potential product liability claims and costs in the
future.

In addition, when we provide contract design and development services,
we typically are required to agree that the technology that we develop under
contract will not infringe upon the intellectual property rights of third
parties, and to indemnify our customers from any loss or exposure arising from
any such infringement. Since the technology developed under design and
development contracts could be incorporated into products which are mass
produced and distributed, our loss from an infringement could be very high, and
we have no insurance which would cover any such loss or damages. We have not had
an indemnification claim made against us under any of these contracts. We cannot
assure you that such a claim will not be made in the future.

WE ARE A DEFENDANT IN A LAWSUIT WHICH COULD MATERIALLY AND ADVERSELY AFFECT OUR
BUSINESS AND OPERATIONS

We have been named as a defendant in a pending lawsuit and three of our
directors, one former officer-director and one former officer have recently been
named as well. While we believe there are substantial defenses to all of the
claims in such lawsuit, we cannot assure you that we or the individual
defendants will prevail. Defense costs and/or settlement costs relating to this
action could be substantial, and the defense of the action may divert
management's attention and resources. If the plaintiffs prevail in this action,
any judgment awarded by the court could have a material adverse effect on our
liquidity and business. For more information regarding such lawsuit, see
"BUSINESS - Legal Proceedings."

GOVERNMENT REGULATIONS MAY ADVERSELY AFFECT US

Our wireless communications products are subject to compliance with
regulations pertaining to transmission as adopted by the Federal Communications
Commission ("FCC"). Currently, our product line operates under Part 15 of the
FCC Telecommunications Code, which allows companies to transmit data without a
license in certain radio frequencies, or an exemption granted by the FCC. We
presently do not offer any product and are not developing any products which
would require a user of the product to obtain a license from the FCC. The
availability of Part 15 to wireless communications products requires that the
product undergo testing by an independent laboratory for such criteria as
non-interference with other communications products, physical antennae hook-up,
non-intentional radiation and transmission power, a process that can be expected
to take 30 to 60 days and cost approximately $20,000. At the present time, all
of the Company's radios have been tested by an independent laboratory for
compliance with Part 15 successfully, and all have FCC approval.

OUR COMMON STOCK HAS LIMITED LIQUIDITY

At the present time, our Common Stock is listed on the American Stock
Exchange, but the average daily trading volume during the 60-day period ended
December 14, 2001 is only approximately 25,500 shares.

In addition, we cannot assure you that the public market for shares of
our Common Stock will become more active or liquid in the future, or that we
will continue to meet the maintenance standards for continued listing of our
shares of Common Stock on the American Stock Exchange which we currently fail to
satisfy.

As a result, an investor could find it more difficult to dispose of
the shares of our Common Stock owned by such investor. In that regard,
prospective purchasers of the Shares should consider that this offering is being
made without underwriting arrangements typically found in an initial public
offering of securities. Such arrangements generally provide for the issuer of
the securities to sell the securities to an underwriter which, in turn, sells
the securities to its customers and other members of the public at a fixed
offering price, with the result that the underwriter has a continuing interest
in the market for such securities following the offering.

THE QUOTED TRADING PRICE OF SHARES OF OUR COMMON STOCK COULD BE ADVERSELY
AFFECTED BY THE POTENTIAL ENTRY INTO TRADING OF A SUBSTANTIAL NUMBER OF
ADDITIONAL SHARES OF OUR COMMON STOCK

As of November 30, 2001, we had 31,387,087 shares of Common Stock
outstanding, of which approximately 21,288,027 shares or approximately 67.8% of
the total outstanding were "restricted securities" which had not been registered
with the Securities and Exchange Commission or any state securities agency and
as to which future sales were restricted. The remaining shares of our
outstanding Common Stock are not restricted and are immediately saleable by
their owners, although persons who are deemed "affiliates" of us are required to
comply with certain numerical and "manner of sale" limitations in sales of their
shares. See "BUSINESS - Future Sale of Eligible Shares." The sale of the Shares
offered hereby will increase, and if all the Shares were sold would increase
dramatically (i.e., from 10,352,522 shares to 30,210,295 shares), the number of
shares of our Common Stock available for immediate public resale (except that no
more than 15% of 8,310,963 Shares of such total can be sold in any one calender
month after the registration statement of which this Prospectus forms a part
becomes effective). Such increase could have a substantial negative impact on
the market price for the shares of our Common Stock.

In addition to the possible sale of the Shares in this offering, a minor
portion of our restricted securities is saleable under Rule 144, promulgated by
the Securities and Exchange Commission under the Securities Act of 1933, upon
the seller's compliance with the holding period, manner of sale and other
conditions and limitations of that Rule. Rule 144 also requires that specified
information concerning us must be available at the time any such sale is made.
Since we have been subject to the reporting requirements of the Securities
Exchange Act of 1934, our compliance with such rules also will satisfy Rule 144
"public information" requirements. See "Market Information -- Shares Saleable
Under Rule 144".

LIMITED LIABILITY OF OFFICERS AND DIRECTORS

Our Articles of Incorporation and our Bylaws limit a director's
personal liability to us or our shareholders for monetary damages for any
actions taken or any failure to take action to the fullest extent permitted by
Nevada law or any other applicable law as now in effect or as it may hereafter
be amended. Furthermore, Nevada law permits us to indemnify our directors,
officers, employees, agents or fiduciaries to the fullest extent permitted or
required thereunder. Each of these provisions could reduce the legal remedies
available to us and our shareholders against such individuals. See "Disclosure
of Commission Position on Indemnification for Securities Act Liabilities".

FUTURE ISSUANCE OF STOCK BY US

We have 50,000,000 shares of Common Stock authorized, of which
31,387,087 shares were issued and outstanding at November 30, 2001, and an
additional 5,502,185 shares have been reserved for issuance upon the exercise of
outstanding options or warrants as of such date. We also have authorized
1,000,000 shares of Preferred Stock, none of which was issued and outstanding at
November 30, 2001. However, our Board of Directors has the authority, without
action by the shareholders, to issue authorized and unissued shares of Common
Stock or one or more series of Preferred Stock, and resolved in June, 2001 to
issue a series of senior convertible preferred stock of up to 1,000 shares of
such stock as a means of raising financing for us, although no such shares of
preferred stock have been issued as of the date hereof. Such series of senior
convertible preferred stock would have, when issued, rights superior to shares
of our Common Stock, particularly in regard to voting, the payment of dividends
and upon our liquidation. Other series of our Preferred Stock, if and when
issued, could also have rights superior to shares of our Common Stock,
particularly in regard to voting, the payment of dividends and upon liquidation
of us. See "DESCRIPTION OF CAPITAL STOCK AND OTHER SECURITIES".

WE HAVE CERTAIN LEGAL PROTECTIONS THAT MAY INHIBIT A TAKEOVER OF US

Certain provisions of our Articles of Incorporation and the Nevada
General Corporation Law may be deemed to have "anti-takeover" effects in that
they could delay, defer or prevent a takeover attempt that a shareholder might
consider to be in our or the shareholder's best interests. For example, the
power of our Board of Directors to designate a series of Preferred Stock without
any vote or any action by our stockholders could be considered an
"anti-takeover" device, since the shares of the Preferred Stock which might be
issued could contain terms which could contain special voting rights or increase
the costs of acquiring us. See "DESCRIPTION OF CAPITAL STOCK AND OTHER
SECURITIES -- Anti-Takeover Provisions".

ONE STOCKHOLDER MAY INCREASE HIS CONTROL OF US

Michael Lauer and his affiliates currently own 7,295,853 shares of our
Common Stock. In addition, he and his affiliates potentially will increase their
ownership in us by at least by 65,805,000 shares of our Common Stock (a) through
the mandatory conversion of the $3,210,000 in principal amount of the 2001 Notes
if (i) our stockholders approve the mandatory conversion thereof at a
stockholders meeting and (ii) we receive $3,210,000 in equity from sources other
than Michael Lauer, Lancer Offshore, Inc., Lancer Partners L.P., and the Orbiter
Fund Ltd. on or before February 28, 2002 and (b) if the warrants to purchase
1,605,000 shares of our Common Stock granted to them are exercised after
stockholder approval thereof at a stockholders meeting. If such additional
shares of our Common Stock are issued, then Michael Lauer would control
approximately 75% of our then issued and outstanding shares of Common Stock
(excluding the issuance by us of any other shares prior to such time, including
the shares issued for the equity investment needed to convert the note) which
represents an increase of 51.1 percentage points from the Lancer group's current
ownership of 23.4%. However, we cannot actually determine the Lancer group's
actual percentage ownership of the shares of our Common Stock without knowing
the final terms of any new equity infusion of $3,210,000. In any event as a
result of the $3,210,000 in loans made to us, Mr. Lauer will be able, in all
likelihood, to determine effectively the vote on any matter being voted on by
our stockholders, including the election of directors and any merger, sale of
assets or other change in control of the Company.

DILUTION

At September 30, 2001, the net tangible book value of our Common Stock
was approximately $(0.043) per share. Net tangible book value per share
equivalent at any date

represents the amount of our total tangible assets minus total liabilities
divided by the total number of our shares of Common Stock. To the extent that a
purchaser pays more than $(0.043) per share for our Common Stock, without giving
effect to any capital transactions or results of operations of us after
September 30, 2001, the purchaser will incur dilution in the net tangible book
value of his/her investment equal to the difference between the price paid for
the shares and $(0.043). For example, if shares were purchased at the average of
the high and the low price for a share of our Company's Common Stock on December
12, 2001 (i.e., $ 0.73), the dilution in the purchaser's investment would be
approximately $073 or approximately 100%.

SELECTED CONSOLIDATED HISTORICAL FINANCIAL DATA

The following tables set forth our selected consolidated historical
financial data for the years ended December 31, 1996, December 31, 1997,
December 31,1998, December 31, 1999 and December 31, 2000, including a
restatement thereof for the years ended December 31, 1997, December 31, 1998,
December 31, 1999 and December 31, 2000. The historical data for the nine months
ended September 30, 2001 is derived from our unaudited financial statements and
include, in the opinion of management, all adjustments (consisting only of
normal recurring adjustments) necessary to present fairly the data for the
period. The results of operations for the nine months ended September 30, 2001
are not necessarily indicative of the results to be expected for the entire
year. This data should be read in conjunction with the consolidated financial
statements and notes thereto and other financial information which are included
elsewhere in this Prospectus.

HISTORICAL OPERATING DATA:

<Table>
<Caption>
NINE MONTHS
ENDED FOR THE YEARS ENDED DECEMBER 31,
SEPTEMBER 30, 2001 2000 1999 1998 1997 1996
------------------ ---- ---- ---- ---- ----
As restated As restated As restated As restated As restated
----------- ----------- ----------- ----------- -----------

SALES $ 863,315 $ 1,714,833 $ 3,566,307 $ 4,309,691 $ 2,913,429 $ 618,505

COST OF SALES 684,349 1,213,427 3,331,925 3,751,607 2,116,934 662,184

GROSS PROFIT (LOSS) 178,966 501,406 234,382 558,084 796,495 (43,679)

OPERATING EXPENSES
RESEARCH AND DEVELOPMENT 406,155 1,483,365 1,318,963 3,179,557 2,943,404 92,932

SELLING, GENERAL AND
ADMINISTRATIVE 4,966,192 5,614,732 5,192,901 2,397,995 5,486,164 1,789,904

MANUFACTURING
ACTIVITY EXIT COST -0- (1,677,668) 2,210,023 -- -- --

IMPAIRMENT OF GOODWILL
AND PATENTS -0- -- 641,679 4,722,425 -- --

AMORTIZATION OF GOODWILL 128,574 171,432 200,397 1,254,583 1,384,715 --

TOTAL OPERATING EXPENSES $ 5,500,921 5,591,861 $ 9,563,963 $ 11,554,560 $ 9,814,283 $ 1,882,836

NET LOSS FROM OPERATIONS $ (5,321,955) (5,090,455) $ (9,329,581) $(10,996,476) $ (9,017,788) $ (1,926,515)

OTHER INCOME (EXPENSE)
INTEREST EXPENSE $ (375,340) (132,586) (3,556,097) (1,813,208) (43,779) (1,310,142)
OTHER INCOME 30,115 648,537 26,662 343,625 9,692 --

NET LOSS $ (5,667,180) (4,574,504) $(12,859,016) $(12,466,059) $ (9,051,875) $ (3,236,657)

PREFERRED DIVIDENDS -- (6,400) (1,000,658) -- -- --

LOSS APPLICABLE TO $ (5,667,180) $ (4,580,904) $(13,859,674) $(12,466,059) $ (9,051,875) $ (3,236,657)
COMMON SHARES

BASIC AND DILUTED
LOSS PER COMMON SHARE $ (0.18) $ (0.16) $ (0.80) $ (1.11) $ (0.98) $ (1.03)

WEIGHTED AVERAGE
NUMBER OF COMMON
SHARES USED IN PER
SHARE CALCULATION 31,273,990 29,447,488 17,308,258 11,189,603 9,217,158 3,141,613
</Table>

BALANCE SHEET DATA:

<Table>
<Caption>
SEPTEMBER 30, DECEMBER 31,
------------ ------------------------------------------------------------------------------
2001 2000 1999 1998 1997 1996
------------ ------------ ------------ ------------ ------------ ------------

CURRENT ASSETS $ 1,139,194 $ 4,151,263 $ 1,960,930 $ 1,725,770 $ 1,529,804 $ 328,551

NET EQUIPMENT 543,860 575,476 192,252 1,038,645 1,133,263 327,022

TOTAL ASSETS 1,792,630 4,969,887 2,578,214 4,136,590 10,133,024 663,042

CURRENT LIABILITIES 3,008,808 944,499 6,087,067 5,053,628 1,815,903 203,351

LONG-TERM LIABILITIES 7,509 9,633 21,459 84,968 24,275 44,808

STOCKHOLDERS' EQUITY
(DEFICIT) $ (1,253,686) $ 4,015,755 $ (4,480,312) $ (1,002,006) $ 8,292,846 $ 414,883
</Table>

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

When used in this discussion, the words "expect(s)", "feel(s)",
"believe(s)", "will", "may", "anticipate(s)" and similar expressions are
intended to identify forward-looking statements. Such statements are subject to
certain risks and uncertainties, which could cause actual results to differ
materially from those projected. Readers are cautioned not to place undue
reliance on these forward-looking statements, and are urged to carefully review
and consider the various disclosures elsewhere in this Prospectus which discuss
factors which affect our business, including the discussion under the caption
"Risk Factors".

GENERAL

We are a developer of wired and wireless telemetry and remote control
systems where telemetry is the monitoring, collection and transmission of data
by wire or radio from remote sources. Based on our experience during the last
several years in developing low cost reliable communication systems, we have
developed the latest generation of technology to monitor and control various
remote devices through the Internet. Our technology has applications across a
broad range of industries, including the automatic meter field, vending
machines, facilities management, security systems and food services equipment.
Moreover, such technology may be applied to more traditional telemetry
applications such as pipeline monitoring and water and waste management. During
the last two years, we have focused on implementing our new business direction
of promoting the sale of our Xtra-Web(TM) products and our branded radio
products.

We were incorporated in November 1995. In March 1996, we completed the
acquisition of the assets of a limited liability company, which related to a
computer hardware device used to prevent unauthorized duplication or use of
software. This device, the SecuriKey(R), and related software products accounted
for substantially all of our sales before October 1996, and the results of our
operations prior to March 1996 include the results of operations of the limited
liability company from which we acquired the SecuriKey(R) assets.

In October 1996, we commenced contract manufacturing operations and, in
February 1997, acquired Digital Radio Communications Corporation ("DRCC"). Our
results of operations for the year ended December 31, 1997 includes purchased
research and development costs and amortization of goodwill incurred in
connection with the acquisition of DRCC, and the results of contract
manufacturing and DRCC operations (from February 12, 1997, in the case of DRCC
operations), while prior periods do not.

In November 1997, we acquired certain business assets of Austin
Antenna, Ltd. and acquired a related corporation, and we presently operate those
assets in our wholly-owned subsidiary, TWC Ltd. under the name Austin Antenna.
Purchased research and development costs incurred in connection with such
acquisition are reflected in our results of operations for the fourth quarter of
1997, and operations of Austin Antenna, Ltd. are included in our consolidated
results of operations from the date of the acquisition.

On November 11, 1997, we acquired all of the issued and outstanding
stock of XARC Corporation, a Kansas corporation primarily engaged in development
and sales of wireless technology, by issuing 10,000 restricted shares of our
Common Stock valued at $103,000.

Our shares of Common Stock began trading on the American Stock Exchange
on May 5, 2000 under the symbol "XWC".

The following discussion should be read in conjunction with our
Consolidated Financial Statements and respective notes thereto and Selected
Consolidated Historical Financial Data, which are set forth elsewhere in this
Prospectus.

RESULTS OF OPERATIONS

NINE MONTHS ENDED SEPTEMBER 30, 2001 AND NINE MONTHS ENDED SEPTEMBER 30, 2000

We incurred a net loss of $5,667,180 for the nine months ended
September 30, 2001, or $0.18 loss per share, compared to a net loss of
$3,073,343, or $0.11 loss per share, for the nine months ended September 30,
2000. This represents an increase in 2001 of $2,593,837, or 84.4%, over the 2000
year-to- date financial results. However, the increase of the loss in 2001 would
be $916,165 if the non-recurring reversal of manufacturing exit costs of
approximately $1,677,668 were excluded from the 2000 result.

Sales for the nine month period ended September 30, 2001 totaled
$863,315 compared to $1,343,124 during the nine month period ended September 30,
2000, a decrease of $479,809 or 35.7%. During the comparative three quarters of
2001 and 2000, the Company derived its revenue as follows:

<Table>
<Caption>
FOR THE NINE MONTHS ENDED SEPTEMBER 30,

SUMMARY OF REVENUE BY PRODUCT 2001 2000
------------ ------------

X-traWeb(TM) $ 233,012 $ 272,946
Radio Products 612,763 496,619
Corporate 17,540 573,559
------------ ------------
Total Revenue $ 863,315 $ 1,343,124
============ ============
</Table>

During the first three quarters of 2001, we continued to implement our
strategic plan to focus our efforts on the X-traWeb(TM) product line and
proprietary radio products. Our sales of branded products, including radio and
antenna sales, increased by $116,144, or 23.4%, during the first three quarters
of 2001. We recognized total revenues from the X-traWeb(TM) product line of
$233,012 during the first nine months of 2001, of which $104,493 was
attributable to engineering design services contracted by customers for the
custom development of such products.

Finally, royalties contributed $17,540 in revenue during the nine
months ended September 30, 2001 compared to $459,986 during the nine months
ended September 30, 2000, a decrease of $442,446, or 96.2%.

We realized only marginal revenues, about $700, from our operating
subsidiary, X-traWeb Europe S.p.A., based in Milan, Italy, which is in charge of
our marketing efforts in Europe.

Cost of sales for the nine months ended September 30, 2001 declined to
$684,349 from a total of $962,026 in 2000, or a reduction of $277,677 or 28.9%.
The resulting gross profit was $178,966 or 20.7% of sales, for the nine months
ended September 30, 2001 compared to $381,098, or 28.4%, for the nine months
ended September 30, 2000. During the third quarter of 2001, we marked a portion
of our inventory down to reflect its fair value. As a result we recognized
$198,000 in expense as cost of sales during the third quarter of 2001. Excluding
the adjustment to the value of our inventory, we realized a gross profit of
$377,090, or 43.7% of sales.

Research and development expenses declined from $1,060,762 to $406,155
or a decrease of $654,607 or 61.7% for the comparable nine month periods ended
September 30, 2001 versus September 30, 2000. This decrease is consistent with
the increasing maturity of our X-traWeb(TM) product line, and the shift in
resources from research and development to applications engineering. These costs
continue to relate to the ongoing development of the X-traWeb(TM) proprietary
technology in 2001.

Total selling, general, and administrative expenses amounted to
$4,966,192 for the nine months ended September 30, 2001 compared to $4,190,564
for the nine months ended September 30, 2000, representing an increase of
$775,628, or 18.5%. Selling and marketing expenses decreased by $312,107, or
26.9%, during the nine months ended September 30, 2001 over 2000 and represents
a reduction in staffing levels for our full-time permanent sales force and a
reduced investment in media consulting. Total general and administrative
expenses for the comparable nine month periods ended September 30, 2001 and 2000
increased by $1,087,735, or 35.9%, and resulted from (1) an increase in
operating expenses for the X-traWeb Europe offices of $417,000 for promotion of
X-traWeb(TM) products, and other international business opportunities, and (2)
an increase in expenses related to applications engineering representing the
allocation of resources away from research and development.

Interest and other income for the nine months ended September 30, 2001
was $30,115 compared to $364,910 for the nine months ended September 30, 2000,
with the decrease directly attributable to decreased available funds in
overnight interest bearing accounts provided by the $13.6 million private
placement securities issued in the first quarter of 2000. Interest expense
increased to $375,340 during the nine months ended September 30, 2001 compared
to $117,119 for the nine months ended September 30, 2000, and represents a
$258,221 increase, or 220.5% increase. This increase is directly related to our
issuance of the 2001 Notes and warrants, and represents the amortization of
discount and accrued interest.

2000 TO 1999

We incurred a net loss applicable to shares of our Common Stock of
$4,580,904 for 2000, or a $.16 loss per share, compared to a net loss of
$13,859,674 or a $0.80 loss per share, for 1999. This represents an improvement
in 2000 of $9,278,770, or 66.9%, over 1999 financial results.

Sales for 2000 totaled $1,714,833 compared to $3,566,307 during 1999,
or a decrease of $1,851,474 or 52%. During the comparative years of 2000 and
1999, we derived our revenue as follows:

<Table>
<Caption>
For the Year Ended December 31,
----------------------------------
Summary of Revenue by Segment: 2000 1999
------------ ------------

X-traWeb(TM) $ 450,604 $ --
Radio products 690,377 789,167
Corporate 573,852 2,777,140
------------ ------------
Total Revenue $ 1,714,833 $ 3,566,307
============ ============
</Table>

During 2000, we continued to implement our strategic plan to focus our
efforts on the X-traWeb(TM) product line, and abandoned our contract and
in-house manufacturing activities. Of the $450,604 in revenue derived from the
X-traWeb(TM) product line, $243,730 resulted from engineering revenue related to
proof-of-concept and similar development activities. In addition, contract
manufacturing revenue decreased by $2,120,407 or 94.8% as the result of our exit
from this activity.

Our business strategy continues to include revenue from the production
of radio products, which totaled $690,377 for 2000, compared to $789,167 for
1999, a decrease of $98,790 or 12.5%. Finally, royalties contributed $457,194 of
the $1,147,571 in radio product revenue during 2000, compared to $540,075 for
1999, a decrease of $82,881 or 15%. Since the license agreement with our primary
customer expired by its terms in September, 2000, royalty income dropped sharply
during the fourth quarter of 2000.

During June, 2000, we formed a new operating subsidiary, X-traWeb
Europe S.p.A., based in Milan, Italy. This subsidiary is responsible for the
development and sale of X-traWeb(TM) products through European markets,
commencing with the country of Italy. Only $9,574 in sales had been realized
from the European operation as of December 31, 2000. In addition, we formed two
additional operating subsidiaries, X-traWeb Services Corp. and X-traWeb
Financial Corp. in June 2000, which are designed to offer various services of
X-traWeb(TM) products and to provide financing capability of sales of
X-traWeb(TM) products or services, respectively, although neither entity derived
any revenues as of December 31, 2000.

Our cost of sales for 2000 compared to 1999 declined to $1,213,427 in
2000 from a total of $3,331,925 in 1999, or a reduction of $2,118,498 or 63.6%.
The resulting gross profit was $501,406, or 29% of sales, for 2000 compared to
$234,382, or 6.6%, for 1999. This represents an improvement of 22.6% in gross
profit margin percentage for the comparable periods. This improvement is
expected to continue to increase as we shift towards higher profit margin
business.

Our research and development expenses increased to $1,483,365 from
$1,318,963, or by $164,402, or 12.5%, for the comparable twelve month periods
ended December 31, 2000 versus December 31, 1999. These costs continue to relate
to the ongoing application development of the X-traWeb(TM) propriety technology
in 2000.

Our total selling, general, and administrative expenses amounted to
$5,614,732 for 2000 compared to $5,192,902 for 1999, representing an increase of
$421,830, or 8.1%. Selling and marketing expenses increased by $877,960, or 74%,
during 2000 over 1999 and represents a significant increase in advertising,
promotion, and sales related travel to market our X-traWeb(TM)

products as discussed above. Total general and administrative expenses for the
comparable December 31, 2000 and December 31, 1999 period decreased by $456,130,
or 11.3%, and resulted from (1) a decrease in compensation expense related to
stock options accrued for as variable options totaling $1,113,775, (2) a
decrease in depreciation of $445,472, or 77.7%, and (3) a savings of $183,000,or
53.7%, in facilities rent due to the termination of the Salt Lake City lease.
These expense savings were substantially offset by (1) an increase in corporate
travel related expenses of $366,460 for promotion of X-traWeb(TM) products, the
opening of the X-traWeb Europe offices, and other international business
opportunities, and (2) increases of $865,864 in compensation and benefits, new
stock exchange fees expense for the American Stock Exchange of $35,167, and an
increase in the provision for doubtful accounts receivable of $84,339.

Expenses for 2000 were reduced by $1,677,668 as the result of the
reversal of previously accrued manufacturing exit costs. The favorable
settlement of the lease obligation on our Salt Lake City, Utah manufacturing and
office facilities resulted in a recovery of $1,598,342. An additional $79,326
was recovered as the result of the sale of manufacturing equipment to a third
party. Total manufacturing exit costs recognized in 1999 were $2,210,023.

Our interest income for 2000 was $337,618 compared to $33,748 for 1999,
with the increase directly attributable to increased available funds in
overnight interest bearing accounts provided by the $13.6 million private
placement of shares of our Common Stock we sold in the first quarter of 2000.
Interest expense declined to $132,586 during 2000 compared to $3,556,097 for
1999, and represents a decrease of $3,423,511, or 96.3%. This expense reduction
is directly related to our retirement of substantially all of our debt, and
related debt discount amortization, in the first quarter of 2000.

1999 COMPARED TO 1998

We incurred a net loss applicable to the shares of our Common Stock of
$13,859,674 for 1999 or $0.80 loss per share, compared to a net loss applicable
to the shares of our Common Stock of $12,466,059 or a $1.11 loss per share, for
1998.

Sales for 1999 totaled $3,566,307 compared to $4,309,691 of sales
during 1998, or a decrease of $743,384 or 17.2%. During the comparative years
for 1999 and 1998, we derived our revenue as follows:

<Table>
<Caption>
For the Year Ended December 31,
----------------------------------
Summary of Revenue by Segment: 1999 1998
------------ ------------

Radio products $ 789,167 $ 586,000
Contract and Cable Manufacturing 2,777,140 3,723,691
------------ ------------
Total Revenue $ 3,566,307 $ 4,309,691
============ ============
</Table>

In 1999, our principal source of resources was from our contract and
cable manufacturing activities, while in 1998 our principal source of resources
was a design and development contract with Williams Telemetry, a Williams
company, in the amount of $2,664,000.

Gross profit in 1999 was $234,382 compared to $558,084 during the
comparable period during 1998, which represents 6.6% and 13% of sales
respectively.

We reduced our research and development costs by $1,860,594 from
$3,179,557 in 1998 to $1,318,963 in 1999, primarily by reducing the number of
our employees and related expenses. Our general and administrative expenses,
including sales and marketing, increased from $2,397,995 in 1998 to $5,192,901
in 1999, as a result of compensation expense adjustments recognized on various
stock options accounted for as variable options granted to employees, which were
partially offset by a reduction in the number of our employees and related
expenses.

During the fourth quarter of 1999, we executed a plan to focus our
efforts on the X-traWeb(TM) product line and abandon our contract and in-house
manufacturing activities. As a result of this decision, we recognized $2,210,023
in manufacturing activity exit costs. These costs consisted of the impairment of
all assets used in the manufacturing process and the remaining rent obligation
of the abandoned Salt Lake City facility. In addition, the related patents and
goodwill associated with our manufacturing activities were impaired. We
terminated our liability for the Salt Lake City facility in the first quarter of
2000, as discussed above.

The amortization of goodwill decreased from $5,977,008 for 1998 to
$842,076 for 1999. The decrease was due to the $4,722,425 impairment of goodwill
related to our February 1997 acquisition of Digital Radio Communications
Corporation recognized in the third quarter of 1998, compared to $641,679
impairment of goodwill related to the October 1997 acquisition of TWC Ltd.,
recognized in the fourth quarter of 1999.

Our increased interest expense in 1999 was due primarily to the
issuance of the warrants and common stock in connection with our obtaining the
waivers of defaults on the notes payable we issued in 1999.

Our interest income resulted from our investing available cash in
overnight interest bearing accounts.

During 1999, we issued 950 shares of senior liquidating mandatorily
redeemable 10% preferred stock with a liquidation preference of $1,000 per share
and detachable five-year warrants to purchase 4,750,000 common shares at $0.25
per share. The issuance of preferred stock with warrants was accounted for as
the granting of a favorable conversion feature to the preferred stockholders.
The value assigned to the warrants was based on the their intrinsic value but
limited to the cash proceeds and the amount of the notes converted. Since the
warrants were immediately exercisable, the resulting discount to the preferred
stock of $950,000 was immediately recognized as a preferred divided.
Additionally, we accrued dividends in the amount of $50,658 as of December 31,
1999.

LIQUIDITY AND CAPITAL RESOURCES

Our liquidity at September 30, 2001 consisting of cash and cash
equivalents was $83,456, which represents a decrease of $3,014,168 over our cash
and cash equivalents of $3,097,624 as of December 31, 2000. Our current assets
were $1,139,194 as of September 30, 2001, a decrease of $3,012,069 from our
current assets of $4,151,263 as of December 31, 2000. As of September 30, 2001,
our total liabilities were $3,046,317, which was an increase of $2,092,185 from
our total liabilities of $954,132 as of December 31, 2000.

Our liquidity decreased significantly due to our net loss and due to
changes in operating assets and liabilities during the nine-month period ended
September 30, 2001. For the period ended September 30, 2001, the net change in
operating assets and liabilities generated a increase of net cash flow of
$227,899 compared to a net decrease of cash for the nine months ended September
30, 2000 of $277,208, exclusive of the change in accrued manufacturing exit
costs.

On May 17, 2001, we issued $1,125,000 of our 15% Senior Secured
Convertible Notes to an affiliate of our largest stockholder, which mature on
September 15, 2001 (unless mandatorily converted into shares of our Common Stock
before such date) (the 2001 Notes). The 2001 Notes are secured by a first
security interest in substantially all of our assets. For a further description
of this financing, see Senior Secured Indebtedness Financing in Item 2 of Part
II of this Report. We also issued warrants to purchase 562,500 shares of our
Common Stock at $0.50 per share.

During the quarter ended September 30, 2001, we received an additional
$625,000 in loans from Lancer Partners L.P., an affiliate of our largest
stockholder, comprising part of the 2001 Notes. In October, 2001, we received an
additional $25,000 as a loan from Lancer Partners L.P. and an additional
$435,000 as loans from Lancer Offshore, Inc. comprising part of the 2001 Notes.
On November 14, 2001, Lancer Offshore Inc. loaned us an additional $1,000,000
comprising part of the 2001 Notes. We also issued detachable five-year warrants
to purchase 1,042,500 shares of our Common Stock as a result of these additional
loans, of which total warrants to purchase 312,500 shares of our Common Stock
were issued with respect to the quarter ended September 30, 2001. For a further
description of this financing, see "DESCRIPTION OF CAPITAL STOCK AND OTHER
SECURITIES - Senior Secured Indebtedness". Also, the parties made certain
amendments to the terms of the May 17, 2001 financing, as further described
"DESCRIPTION OF CAPITAL STOCK AND OTHER SECURITIES - Senior Secured
Indebtedness".

Based on our current cash position, we believe that additional capital
will be required in February, 2002. We recently obtained financing proceeds from
Lancer Offshore, Inc. and Lancer Partners L.P., affiliates of our largest
stockholder, which management believes is adequate to fund our operations at
least through January 31, 2002. Our agreement with Lancer Offshore, Inc. and
Lancer Partners L.P. also allows for such loan to be increased to a total of
$5,000,000 from its current outstanding principal amount of $3,210,000, provided
that both parties agree to do so, although we cannot assure you of such mutual
agreement. See "DESCRIPTION OF CAPITAL STOCK AND OTHER SECURITIES - Senior
Secured Indebtedness Financing". We previously obtained a financing commitment
letter totaling $4,000,000 from a third party, to be provided as private equity
placements on or before May 31, 2001, which management believed was adequate to
fund our operations in 2001. The funding party did not provide the financing
within the terms of the commitment, and to date, no funds have been received
thereunder. Upon the lapse of the commitment deadline, management believed our
best interests would be served by accommodating the funding party's interest in
seeking to arrange substitute financing with other accredited investors on a
best efforts basis, and waiving the funder's prior unconditional commitment
therefor. We and the funding party have agreed to allow the funding party to
seek substitute financing through February 28, 2002. As the result of the
foregoing events and since the $3,210,000 loan from the Lancer entities matures
on February 28, 2002, we are currently seeking funding from other sources.

SUMMARY

During 2000, we implemented our redirection efforts to focus on the
growth of our X-traWeb(TM) business segment and proprietary radio products. We
raised $13,646,000 in new equity capital, paid off substantially all outstanding
debt, redeemed all mandatorily redeemable preferred stock outstanding, relocated
our corporate headquarters to the Denver, Colorado area, and exited from all
in-house manufacturing activities, including termination of our lease obligation
for facilities in Utah. Also, we realized revenues from the sales of our
X-traWeb products for the first time during 2000 and signed various marketing
alliance agreements during the year.

During the first nine months of 2001, we continued to focus on our
sales of X-traWeb(TM) products and services. We continued to receive revenues
from the sale of our X-traWeb(TM) products, albeit at a slower pace than
anticipated, and also signed additional marketing alliance agreements during the
year.

While we believe that (i) a number of our pending proposals for
projects or products will be accepted in whole or in part, (ii) we will develop
additional sources of sales in the United States, Italy and other foreign
countries and (iii) will derive substantial revenues therefrom in 2002 and
thereafter, we cannot assure you that any such sales will be made or the amount
thereof, although we anticipate that X-traWeb(TM) product sales will constitute
the bulk of our revenues during the year 2002 and thereafter. We also believe
that we will derive significant revenues from the sale of our proprietary radio
products in the future, but we cannot assure you as to the amount of such sales
or when such sales will occur. We do not expect the sales of our antenna
products to contribute materially to our consolidated net sales or income in the
foreseeable future.

As a result of the slower receipt of revenues from the sale of our
X-traWeb(TM) products, we decided in July, 2001 to focus our activities
principally on the sale of such products in the automatic meter reading and
facilities management fields (in part due to the current energy crisis
experienced in parts of the United States), although we will continue to market
our products in the areas of (i) vending machines, (ii) security systems and
(iii) food services equipment. We also decided to reduce the number of our
employees, particularly in the engineering and administrative areas, ceased the
operations of our Italian subsidiaries, X-tra Web Europe, S.p.A., and also
closed our office in Kansas City, Kansas. Thus, as of November, 2001, we had a
total of 30 employees, a reduction of 18 from the total of 48 employees we had
as of April 1, 2001.

In summary, we are fully aware that anticipated revenue increases from
sales of our X-traWeb(TM) products and our proprietary radios are by no means
assured, and that our requirements for capital are substantial.

BUSINESS

OVERVIEW

We are a developer of wired and wireless telemetry and remote control
systems, where telemetry is the monitoring, collection and transmission of data
by wire or radio from remote sources. By leveraging our experience developing
low-cost, reliable communications systems we have created the latest generation
of technology to monitor and control various remote devices through the
internet.

Our products and services allow data from remote devices to be accessed
via a secure, encrypted Internet connection using a standard web browser located
anywhere where there is Internet access. Our technology has applications across
a broad range of industries, for which it can substantially improve the
efficiency and cost of access and manipulation of important data from widely
dispersed equipment. For example, we are currently deploying our technology in
the automatic meter reading field, whereby utility companies can read natural
gas, electric, and water usage on commercial and residential meters on an
immediate basis in order to better balance their energy loads, monitor usage,
predict requirements, and ultimately improve service and reduce costs. Another
example is remotely monitoring industrial restaurant equipment, such as a fast
food restaurant grill, ice machine, fryers, and coolers, to ensure that the
particular piece of equipment is functioning within desired parameters. In this
example, our technology can provide maintenance notification so as to avoid
malfunction during a peak time in the business day, or ensure a grill or fryer
is cooking at the proper temperature.

Since January 1999, we have successfully combined all of our
technologies into a functional package that not only collects data, but also
transmits it and provides control from remote locations. It also enables our
customers to use an ordinary browser to access the data-gathering and remote
control functions from anywhere in the world through the Internet, where there
is Internet access. Our management has been engaged principally in developing
product positioning strategies, strategic planning and final development and
testing of our integrated technology.

CURRENT STATUS

We have completed development and testing of the core systems and
sub-systems comprising our Internet technology, and are currently engaged in
implementing the first phase of our near-term plan - the introduction of our
products and services to selected customers in major target markets to establish
test installations for a variety of commercial and industrial applications. We
have capitalized on the successful test sites and commenced sales of the actual
products and services.

While our X-traWeb(TM) technology has a wide range of diverse
applications, we originally targeted four principal areas to focus our sales:
(a) vending machines; (b) facilities management and automatic meter reading;(c)
security systems; and (d) food services equipment. As a result of the slower
receipt of revenues from the sale of our X-traWeb(TM) products, we decided in
July, 2001 to focus our activities principally on the sale of such products in
the automatic meter reading and facilities management fields (in part due to the
current energy crisis experienced in parts of the United States), although we
will continue to market our products in the areas of (i) vending machines, (ii)
security systems and (iii) food services equipment. We also decided to reduce
the number of our employees, particularly in the engineering and administrative
areas, ceased the operations of our Italian subsidiary and also closed our
office in Kansas City, Kansas. Thus, as of November 30, 2001, we had a total of
30 employees, a reduction of 18 from the total of 48

employees we has as of April 1, 2001. We will continue to market our products in
Italy through our wholly-owned Delaware subsidiary, X-traWeb, Inc.

Our current and former customers include FreedomPay.com (which sells
cashless vending machines), Enodis Chains PLC (the largest manufacturer of
equipment for fast food vendors), a subsidiary of the U.K.-based Enodis,
National Gas Automation Inc. (a developer of a liquid propane gas monitoring
system), RealTime Data (a vending machine operator) and Midwest United Energy
(which provides natural gas to the agricultural irrigation market). Our current
and former alliance partners include Texaco Natural Gas Inc. (for marketing to
the natural gas industry), Co-operative ConNEXTions, LLC, (a provider of
products and services to rural distribution cooperatives in the Western United
States), Novar Controls Corp. ( a supplier of advanced building automation
control systems), Fracarro Radioindustrie S.p.A. (a supplier of satellite-based
video distribution), and Audiotel S.p.A. (which is marketing certain of our
X-traWeb(TM)products in Italy). We also had relationships with Kyushu Matsushita
Electric Co. Ltd. ("Panasonic"), Motorola, Inc. and Williams Wireless Inc. dba
Williams Telemetry Services, a subsidiary of the Williams Company ("Williams").

As of November 30, 2001, our backlog of X-traWeb(TM) orders was
approximately $25,000 and of our radio products was approximately $86,394,
compared to $64,312 and approximately $120,429, respectively, as of November 30,
2000.

INDUSTRY

Commercialization of the Internet began in the mid-1980s, with e-mail
providing the primary means of communication. However, it was the Internet's
World Wide Web, which provided a means to link text and pictures, which led to
the blossoming of e-commerce and sparked the explosive growth of the Internet in
the 1990s. Today, millions of people around the world send and receive
information, and purchase products and services through the Internet. We believe
that the potential of such a large and still-growing market makes e-commerce an
excellent business opportunity.

The enormous growth of the Internet is being driven by:

o The increasing familiarity, acceptance, and use of the
Internet by governments, businesses, and consumers;

o The large and growing number of personal computers ("PCS")
installed in homes and offices;

o The decreasing cost of PCS and related peripherals;

o The growth and development of technologies that use the
internet to report information about the use or maintenance of
various devises;

o The proliferation of Internet content;

o Easier, faster, and less expensive access to the Internet; and

o Significant improvements in network infrastructure and
bandwidth.

We expect that corporate investment in technology using the internet
will to continue to grow both in the U.S. and abroad over the long term future,
despite the recent economic downturn and the recent reduction of anticipated
growth in the telecommunications sector (as reflected in the

operating results of Lucent Technologies Inc., Intel Corp. and Cisco Systems
Inc., among others). For example, various members of the utility industry in
California and other states have expressed an interest in obtaining real time
data readings as a way of managing the flow of energy supply.

OUR TECHNOLOGY

We are a leading developer of wired and wireless telemetry
communications and remote control systems and products. We also develop digital
radios in the 900 megahertz ("MHZ")and 2.4 gigahertz ("GHZ") bands. We have
extensive experience in developing low-cost, reliable communications systems. By
leveraging this experience, we have developed the latest generation of
technology to monitor and control various devices through the internet.

At the heart of our strategy is the promotion of our communication
systems designed to provide supervisory control of, and obtain data from,
equipment or devices in remote locations via the internet.

Our proprietary technology consists of three parts, the first of which
is our "X-Node(TM)". The X-Node(TM) is a miniature web server compacted into a
one square inch circuit board, which often requires less than 2 kilobytes of
memory. This miniature web server collects information from a remote piece of
equipment (e.g., vending machine, natural gas meter, and the like) and makes
that information available via the internet.

The second part of the technology is our product for large-scale
installations, the "X-Gate(TM)". The X-Gate(TM) is an Internet gateway that can
collect information over a wired or wireless network from a substantial number
of X-Nodes(TM) (e.g., an array of vending machines), and transmit the
information to an information repository via the internet. This transmission
device provides the connection to the Internet and translates the data between
the connected devices and formats it for use on the Internet. The X-Gate(TM)
offers distinct advantages over the more commonly used gateway - the personal
computer - in that it requires no human intervention and incorporates advanced
technologies to ensure performance and reliability.

An illustration of a typical design for our communication systems is
included on page 8 of this Prospectus.

COMPETITIVE ADVANTAGES

Our technologies offer customers a number of advantages, including,
without limitation,

o Open architecture solutions that do not use proprietary
protocols, and components that are fully compatible with most
important internet protocols;

o Use of a standard web browser and internet tools (such as
Java) to monitor and control remote equipment and functions
from any internet-accessible location;

o Wireless technology option that eliminates the need for
additional (and generally costly) electrical, telephone, or
other "hardwired" systems at remote locations;

o Highly durable components that can operate in a wide range of
environmental conditions;

o Ease of installing, configuring, bringing online, and
maintaining or replacing components;

o Software program embedded in a chip that allows automatic
updating of micro-controller functions from a remote location
to reflect changes in customer needs and specifications.

COMPETITIVE ADAPTABILITY

Since we utilize the standard language of the internet, our products are
capable of communicating with any Internet web browser and meet current and
emerging international Internet communications standards, which provide
important benefits when compared to closed, proprietary solutions.

Based on our development and engineering experience, we are positioned to
provide up-to-date technical solutions to customers with remote monitoring and
control needs.

STRATEGIC GROWTH PLAN

We plan to develop and sell our products and services in three
separate, but at times overlapping phases.

Phase One. During Phase One, in which we are currently engaged, we are
debuting our unique combination of telemetry technologies by providing them to
selected Fortune 1000 and other customers. During this phase, we are focused on
selling the wide-ranging capabilities of our unique technological approach by
working with our customers to design and configure our products and services
that address their specific industrial, internet communication needs, while
building a database of standardized technology configurations that can be used
or easily adapted for a variety of applications. Throughout the process, we will
seek to establish ourselves as a recognized "brand" for innovative,
technologically advanced products and services. This phase will continue for
each industry application until the related products reach maturity.

Phase Two. During Phase Two, which we are currently implementing, we are
leveraging our brand recognition and the contents of our database to expand our
market for products and services by offering mix-and-match packages for
applications in a variety of industries as described in "Current Status" above.
The basic products will be designed to plug in and be ready for use or, if
necessary, they can be readily configured - even by customers. During this
phase, we plan to develop new applications for our technologies, along with a
selection of value-added web-based services, to strengthen our ties with our
established customers and extend our reach into new markets.

Phase Three. During Phase Three, we expect to evolve into an
industry-specialized, customer-only Internet Application Service Provider,
whereby our customer data can be accessed through our business-to-business
website, that will focus on customer web and data hosting. We

envision such a step as a natural and necessary extension of our technology
products and services package in order to ensure uninterrupted 24-hour access to
operations-critical remote data by our customers. During 2001, we have begun
hosting customer data on a limited basis for restaurant equipment in the Denver
Colorado area and in Oklahoma City, Oklahoma. We offer such hosting services to
customers upon sale of our products and services to such customer. We expect to
commence such phase in 2001 on a limited basis.

PRODUCTS AND SERVICES

X-traWeb Products and Services

Our product strategy is to utilize our existing technologies to develop
innovative solutions that enable users of telemetry technologies to leverage the
power of the internet in order to greatly enhance the efficiency and cost of
controlling and monitoring remotely located equipment.

Our products and services allow standard web browsers, rather than
customized host system software packages, to monitor and control equipment from
anywhere in the world where there is internet access using industry-standard
Internet tools. The result is that, from any Internet-accessible location,
customers in a variety of industries have real-time comprehensive,
cost-efficient information available that helps them better manage their
telemetry requirements.

Our existing X-traWeb(TM) products which are available for sale are
listed below. These typically are sold as part of a specially-designed
installation for any particular customer.

The X-Node(TM)

The X-Node(TM) is a small (approximately 1 inch by 1 inch printed
circuit board and possesses less than 2 kilobytes of memory), fully functional
micro-controller, which collects, processes and transmits information and which
can provide wired or wireless internet access. X-Nodes(TM) are extremely durable
in most environmental conditions, have low manufacturing costs, and can be
attached easily to a wide variety of existing equipment for the purposes of
remotely monitoring and controlling the equipment over the Internet.

Each X-Node(TM) has various input and output capabilities, and allows
flexible programming and extremely rapid execution speed.

The circuit board permits the installation of our flexible software
programs to be done automatically during the manufacturing process. The embedded
software program is also designed to allow us, from a remote location, to
quickly, easily, and inexpensively update the functions of an X-Node(TM) to
respond to changes in customer needs.

An X-Node(TM) can be used singly by connecting one to a piece of
equipment and adding a modem for Internet connection. In situations with
multiple devices, where more than one X-Node(TM) is required, customers can use
our X-Gate(TM) to link the X-Nodes(TM) into a self-contained communications
network and manage the network. A substantial number of X-Nodes may be linked on
a wired or wireless basis to a single X-Gate(TM).

The X-Node(TM) is illustrated below:

[ILLUSTRATION]

The X-Gate(TM)

Our X-Gate(TM) is an approximately 4 inches by 7 inches printed circuit
board with a flexible range of onboard memory reaching as much as eight
megabytes. It serves as a data collecting and transmitting system, collecting
data sent by one or more X-Nodes(TM) and transmitting such data on a wired or
wireless basis through the internet to a web and data hosting server maintained
by us or our customer

Each X-Gate(TM) has a micro-controller and various input and output
capabilities. The X-Gate(TM) is our proprietary communication system that serves
as an alternative to the personal computer. Each is typically installed near
telephone lines, network connections, or other communication lines. In the event
of a power outage or brownout, the unit will automatically reboot and continue
operation without human interference.

Our current X-Gate(TM) models incorporate a modem interface, an
ethernet interface, and wireless interfaces. Equipment that is concentrated in a
single location can be hardwired directly to the X-Gate(TM). In situations where
the equipment is impractical to hardwire or spread over a wide area, X-Nodes(TM)
can be linked together in substantial numbers to an X-Gate(TM) through our
wireless technologies. We have developed three different versions of our
X-Gate(TM) which provide different levels of functionality depending on a
customer's specific needs. Two such versions are geared toward industrial
applications and a third supports energy management systems, including
commercial and residential sites

The X-Gate(TM) is illustrated below:

[ILLUSTRATION]

Web Hosting Services

We offer our customers the option to use our web servers to host their
data in a secure co-location in the Denver, Colorado area.

Radios

Spread spectrum radio technology has been used since the 1940s, limited
mostly to military applications. Recently, an increased interest in spread
spectrum modulation and its advantages has emerged, particularly concerning
low-power, high-density personal communication devices. Because they are
unlicenced, spread spectrum systems usually cost much less to install and
troubleshoot than narrow band systems. In addition, spread spectrum modulation
has the advantages of low probability of intercept, low probability of
detection, low probability of interference and resistance to jamming.

There are two methods for employing spread spectrum, frequency hopping
and direct sequence. In frequency-hopping systems, the carrier frequency of the
transmitter abruptly changes (or "hops") in accordance with an apparently random
pattern. This pattern is in fact a pseudo-random code sequence, with the order
of the frequencies taken from a predetermined set as dictated by the code
sequence. The receiver employs the same pseudo-random code sequence and, once
the transmitter and receiver are synchronized, the communication is essentially
narrow-band on each frequency in the sequence.

In direct sequence systems, the carrier phase of the transmitter
abruptly changes in accordance with a pseudo-random code sequence. This process
is generally achieved by multiplying the digital information signal with a
spreading code, also known as a chip sequence. The chip sequence has a much
faster data rate than the information signal and so expands or spreads the
signal bandwidth beyond the original bandwidth occupied by just the information
signal. The term chips are used to distinguish the shorter coded bits from the
longer uncoded bits of the information signal. At the receiver, the information
signal is recovered by remultiplying with a locally generated replica of the
spreading code. By doing so, the receiver effectively compresses the spread
signal back to its original unspread bandwidth.

We currently offer three radios for sale. These products represent our
Legacy product line, which we have offered continuously over the past several
years.

Our line of 900 MHZ spread spectrum radios includes the 900 SS Hopper,
a frequency- hopping spread spectrum radio that offers reliable communications
in a variety of environments. The Hopper features transmission speeds of up to
56 kilobytes per second and a range of up to 25 miles, line of sight, depending
upon conditions and antenna selection. This radio received an award as the "best
of show" in 1999 at a trade show in Baltimore, Maryland.

In addition, the 900 SS MicroHopper - a miniature version of the Hopper
- - offers a smaller form-factor and lower power-consumption for short range
applications. Measuring just 2.2 inches by 1 3/4 inches, the MicroHopper is
suited for applications where size and cost are important considerations.

Both frequency-hopping spread spectrum radios employ our proprietary
encrypting technology. This coding technology is a major innovation in wireless
communications, which substantially reduces the overhead inherent in other
coding methods. It adds security, increases throughput efficiency and provides
faster effective communications speeds at a much lower cost.

We also offer the 900 SS Direct - either as a direct sequence or
frequency-hopping combined receiver and transmitter (i.e., a transceiver - -
capable of transmitting data up to 40 kilometers, line of sight).

Antennas

We also manufacture and sell antennas. Our Gonic, New Hampshire based
subsidiary, TWC Ltd., maintains approximately 80 different design executions of
specialty antennae for use in law enforcement, marine, and custom applications.

Customer Support and Services

We support our customers with a range of services designed to help
integrate our products into our customers' systems. This support includes
engineering consultation with every developer kit purchase, customer
satisfaction and quality control programs, and in some cases complete turn-key
solutions for large projects.

SALES AND MARKETING

We believe we are positioned to capitalize on trends in many targeted
segments of the telemetry market (including, without limitation, automatic meter
reading, fast food service equipment, facilities management, asset management
and security systems) through our ability to penetrate and establish a market
presence with products and services designed to meet industry-specific needs.
Our marketing strategy hinges on our establishing a strong reputation as a
provider of reliable and technologically superior wireless internet-based
telemetry services to a diverse customer base. To achieve our goals of
substantial growth and penetration of our target markets, we have developed a
strategic marketing plan that provides for the development and expansion of
long-term sales channels through which we can sell our X-traWeb(TM) products
into the future.

Our marketing strategy involves a combination of in-house sales and
marketing personnel, independent authorized agents, strategic marketing
alliances, joint ventures and direct sales. These will be enhanced and supported
by secondary direct marketing, advertising, promotions and public relations
efforts.

By virtue of the monthly burn-rate ceiling of $250,000 effective for
September, 2001 and of $375,000 for October, 2001 and thereafter set forth in
our recent secured financing, we are severely limiting our marketing activities
while the 2001 Notes remain outstanding.

Direct Sales Organization

During the early launch stages of our marketing program, our senior
management is managing and conducting our marketing activities for our
X-traWeb(TM) products and services. A target market-oriented, direct sales
organization has been established that has responsibility for specific
geographic regions, and coordinates the activities of outside marketing
partners, including value-added resellers and information technology consultants
within those regions. Currently, there are three employees focused on direct
sales in the United States, and one in Italy. We also engage independent
commission agents to market our products in the energy and other targeted
markets.

If we expand our operations, we plan to hire additional sales personnel
or engage additional independent sales agents to cover new markets and augment
the service of sales and marketing personnel in certain larger markets.

Strategic Marketing Alliances

capable of substantially accelerating our penetration of a target market or of
adding material value to our marketing program through the reduction of costs,
managerial infrastructure, and other economic advantages. We have implemented a
sales plan targeting and pursuing prospective customers through organizations,
such as management consulting firms, computer networking consultants and
value-added resellers.

We have formed several such alliances to date in the energy and natural
gas sectors and control systems sector. Our staff formerly worked with Texaco
Natural Gas Inc. to market our X-traWeb(TM) products and services to
customers in the natural gas field - - and currently work with Novar to market
our product in the automated building control arena. We are also working with
ConNEXTions to market our X-traWeb(TM) products and services to rural electrical
utilities operating in approximately 16 states west of the Mississippi River,
with Fracarro to market our X-traWeb(TM) products and services in the video
distribution market in Italy and with Audiotel in other markets in Italy.

Our technology offers these co-marketing partners a value-added
component to the services already being provided to their existing customers.
These co-marketing partners provide us with a credible avenue of introduction to
other potential customers for our products and services.

Advertising and Promotions

An integral part of our long-term marketing plan is the generation of
awareness within the target markets for our products and services. We previously
spent a significant amount toward ongoing advertising, promotions, and public
relations activities, including direct mail, trade print media advertising,
trade show participation and sales personnel incentives. To reach an even wider
audience as we continue to develop widespread awareness of our portal and
proprietary telemetry solutions, we began implementing an advertising and
promotional support program designed to:

o Establish X-traWeb(TM) as a recognized "brand name" that is
especially familiar to decision-makers within our target
markets, and synonymous with premier-quality technology and
products, highly effective services and tangible cost
efficiencies.

o Enhance our branding efforts through the use of industry
experts to promote our products and services.

o Position our technological capabilities, management, products,
services and level of support as an industry standard.

We also plan to implement advertising in trade publications on a regular basis.

However, our budget constraints have significantly curtailed these
advertising plans.

We have appointed a public relations firm, with substantial expertise
in the information technology industry, to assist us in the development and
execution of periodic public relations campaigns, including campaigns
coordinated with new product introductions in existing markets and expanded
introductions to new markets. We have also highlighted our activities through
occasional articles in trade publications and national business newspapers.

We have participated in regional, national and international trade
shows that are conducted for industries that comprise our target markets,
including telemetry and Internet technology industry trade shows (such as the
annual trade show Cibet in Hannover, Germany and Comdex in Las Vegas, Nevada).
We intend to maintain a regular presence at key trade shows throughout our
development, and use our presence at such events to not only attract customers,
but also generate follow-on marketing opportunities, subject to budget
constraints imposed by the terms of the 2001 Notes. We spent approximately
$370,000 to execute the marketing and promotion plans during 2001.

RESEARCH AND DEVELOPMENT

We invest significantly in research and development activities. We plan
to do so in the future, subject, however, to the limitation that we cannot incur
a monthly burn-rate greater than $250,000 effective for September, 2001 and
$375,000 effective for October, 2001 and each month thereafter while the 2001
Notes are outstanding. Thus, our research efforts will be significantly
curtailed during such period. These activities consist of proprietary
development on our spread spectrum radios and X-traWeb(TM) products and
services.

We will continue to engage in research and development activities for
our own products, on a limited basis as discussed above. Current and future
projects include new spread spectrum transceivers in the 2.4GHz band, improving
X-traWeb(TM) products to enable plug-and-play developer kits, improved
X-traWeb(TM) components such as the X-traCam(TM), a camera that captures video
images and transmits them to the internet without the use of a personal computer
where they can be viewed using a standard browser, and similar projects.

MANUFACTURING

Until December 31, 1999, we also performed manufacturing services for
other manufacturers and vendors of medical, communications, computer graphics
and consumer electronic products at our Salt Lake City leased manufacturing
facility, and sold antennas from our Gonic, New Hampshire facility.

We discontinued our direct manufacturing operations effective as of
December 31, 1999, and now conduct our manufacturing activities for our own
products through third parties (except antennas which we manufacture directly).
These third party manufacturers include a Taiwan-based company, and several
domestic manufacturers.

CONTRACT DESIGN AND DEVELOPMENT

General

At the present time, we are not seeking design and development service
contracts except in "partnering" situation in which we would have an ownership
interest in the products and/or technology which are the subject of the contract
and which promote the sale of our proprietary products. For example, we
typically provide certain engineering services for the application of our
products for use in a specific application or applications desired by a utility
providing gas or electric services, a vending machine manufacturer or a security
systems manufacturer or for installation in

the monitoring of a gas pipeline or the control system in a refrigeration
storage unit or office management system.

Formerly, we were engaged in providing engineering design and
development services to client specifications on a fee for services basis. Under
one significant contract, we developed a low-cost spread spectrum technology for
use in certain products sold by Kyushu Matsushita Electric Co., Ltd. ("KME,"
which is also known as Panasonic) which is more fully described below. We also
developed devices for use in the automatic meter reading field for Williams
Wireless, Inc., a wholly owned subsidiary of the Williams Companies. During
1999, we also engaged in development work on an asset tracking system for Eagle
Eye Technologies, a privately-held California based corporation, a point-of-sale
device for supermarkets for Klever Marketing, Inc., a Salt Lake City based
publicly held corporation, and a remote-controlled spa for Len Gordon, Inc.

Kyushu Matsushita Electric Co. Ltd. (Panasonic) Contract

In April 1997, we acquired a corporation (by merger in 1997), which
entered into a contract with Kyushu Matsushita Electric Co., Ltd. to develop low
cost spread spectrum radio technology for use in certain Panasonic products. As
part of our development contract with KME, we granted KME a world-wide,
non-exclusive license to use or authorize the use of any patents, copyrights,
technical know-how and other intellectual property rights embodied in our low
cost spread spectrum radio technology in the manufacture of KME products, and
agreed not to license others to use technology which is developed under our
contract with KME in connection with any telephone-related products for a period
of two years from the first shipment of KME products using the technology. In
consideration for these rights and our services, KME agreed to pay royalties to
us on sales of KME products using the technology above a prescribed minimum
amount of sales for a period of two years from the initial shipments of any such
products. No royalty was to be paid on sales of the first 600,000 units of
product using the technology. A royalty of $1.00 per unit of product sold was to
be payable on sales of units 600,001 through 1,000,000. Thereafter, the royalty
was to be $.50 per unit on all units sold until the December anniversary of the
date of the first sale of products using the technology.

During 2000, we recognized $447,049 or about 98% of $457,194 of royalty
income we recognized was earned under this contract and we will not receive any
further royalties therefrom since such contract expired in September, 2000.

In 1998, we also entered into an agreement with KME to develop a key
wireless RF transmitter/receiver utilized in KME's new 5.7GHz MicroCast(TM). The
MicroCast is a convergence appliance that allows home personal computers to
distribute and control personal computer - based interactive media and Internet
content using a standard TV set. The MicroCast enables consumers to control
their personal computer remotely using a keyboard, joystick, and/or mouse from
other rooms in the home. Two of the three-piece system use our designs for the
video and audio baseband and the 5.7GHz RF technology, the newest and highest
performance RF technology available to consumers today.

Under our MicroCast contract with KME, we received a development fee of
$50,000, of which the entire amount was paid in 1998, and will receive royalty
payments for a two-year period commencing on the first shipment, which has not
yet occurred. A royalty of $1.50 per unit of product

sold is payable on each unit sold. We do not believe any products will be
shipped pursuant to this contract and, thus, we do not expect to receive any
royalties from this source.

Williams Contract

In September 1997, we entered into a contract with Williams pursuant to
which we agreed to assist and cooperate with Williams in developing and
manufacturing telemetry radio/products, which are generally defined in the
agreement as a wireless radio for transmitting and/or receiving data as part of
the Williams Telemetry Network.

Pursuant to such contract, we developed for Williams devices called
Telemetry Interfaces Modular, or TIM(TM)s, which operate at the point of data
origin and transmit data to a data collection and forwarding point called a
WinGate(TM) unit and the WinGate(TM) unit, in turn, forwards that data to an
operating center via a wide area network. These supervisory control and data
acquisition units use some of our radio products. However, market penetration in
the automatic meter reading field did not occur as anticipated. As a result, our
contract with Williams generated a substantially lower level of revenues from
that originally anticipated therefrom, and we terminated our work for Williams
under such contract in the fall of 1999.

Thereafter, Williams raised a claim against us with respect to such
contract, which we resolved amicably with Internet Telemetry Corp. ("Internet"),
the successor-in-interest to the business conducted by Williams pursuant to a
settlement agreement dated as of August 7, 2000. See "BUSINESS - Patents and
Intellectual Property".

COMPETITION

We have a number of current competitors in all aspects of our business,
many of which have substantially greater financial, marketing and technological
resources than us, and which include such large companies as Panasonic,
Motorola, Sony, AT&T and Itron Inc. We intend to compete in our industry by
concentrating on certain product or service niches within the overall market.
However, most of the our competitors offer products which have one or more
features or functions similar to those offered by us, and many have the
resources available to develop products with features and functions, competitive
with or superior to those offered by us. We cannot assure you that such
competitors will not develop superior features or functions in their products or
that we will be able to maintain a lower cost advantage for our products.

A key element of our competitive strategy is to align ourself with
major manufacturers or market leaders by developing proprietary products or
technology that can be incorporated into its "partner manufacturers" products.
We had or have a marketing alliance with Texaco Natural Gas Inc., Novar Controls
Corp. and Cooperative ConNEXTions, LLC to market our X-traWeb(TM) products in
the United States and with Audiotel S.p.A. and Fracarro Radioindustrie S.p.A.
for marketing such products and services in Italy. We previously licensed low-
cost spread spectrum technology for use in certain products sold by Panasonic
(which agreement expired in September, 2000) and entered into a VAR Agreement
with Motorola, Inc. to sell its MOSCAD Remote Terminal Units. We also believe
that our agreements with KME (i.e., Panasonic), and Motorola, illustrate the
manner in which we can "partner" with much larger, established companies to
access mass markets for our proprietary wireless communications products and
technology.

Our management has identified four primary competitors offering either
telemetry-related products and services or similar technologies:

(1) Spyglass, Inc. which develops software and firmware (software
embedded in a chip on a circuit board), including web-enabling
firmware for embedded micro-controllers;

(2) emWare, a privately-held Salt Lake City-based provider of
distributed networking software that provides internet
connectivity for any device that scales from 8-bit
micro-controllers to 32-bit microprocessors;

(3) ConnectOne, an Israeli developer and manufacturer of internet
connectivity solutions that enable devices to connect to the
Internet without requiring a PC; and

(4) Phar Lap Software, Inc., a provider of realtime operating
systems and software development tools for applications.

While each of these companies offers products and/or services that have
some parallels to those provided by X-traWeb, Inc., none currently provides, to
our knowledge, the type of cost effective, total solution that we do. In
addition, we believe we combine successfully all of the necessary technical
elements with the additional capability for wireless system integration and
communication.

In addition, our management has identified two key competitors in the
radio products field. However, our management believes that our radios provide
better performance at a lower price for comparable radios offered by such
companies.

EMPLOYEES

As of November 30, 2001 we had 30 employees. Of these employees, 4 were
classified as executive, 11 as administrative personnel, 11 engineering and 4
sales and marketing. As a means of conserving our resources, we reduced the
number of our employees from 48 as of April 30, 2001 to 30 as of November 30,
2001. Our employees do not belong to a collective bargaining unit, and we are
not aware of any labor union organizing activity.

PATENTS AND INTELLECTUAL PROPERTY

We believe that reliance upon trade secrets, copyrights and
un-patented proprietary know-how in conjunction with the development of new
products is at least as important as patent protection in our business since
most patents provide fairly narrow protection, and are of limited value in areas
of rapid technological change. Further, patents require public disclosure of
information which may otherwise be subject to trade secret protection. We
presently own two United States patents covering antenna technology, and have a
United States patent which covers "spread spectrum" demodulation technology.
"Spread spectrum" communication is a method for transmitting and receiving coded
information which is resistant to interference due to the fact that the
transmission is spread over a large bandwidth. This method requires, however,
that both the transmitter and the receiver have the same spreading code (i.e., a
pre-determined, fixed pattern) used to spread the information over the larger
bandwidth. The purpose of the technology covered

by our spread spectrum patent is to recover and remove the spreading code from a
transmission signal, and thus obtain the original information, in a simpler,
less expensive manner.

Under the terms of a litigation settlement entered into with a former
co-venturer, Digital Scientific, Inc., we agreed that our former co-venturer is
entitled to full and equal ownership with us, of the spread spectrum
demodulation technology covered by the patent application, including the right
to incorporate, develop, utilize and exploit the technology. Any uses or
products developed or derived from such technology, however, shall be the sole
property of the party which develops or derives such uses or products. In
addition, if one of the parties elects to prosecute the patent application prior
to final acceptance or rejection by the U.S. Patent Office, failure by the other
party to contribute equally to the costs of prosecuting the application will
result in the loss of its rights to the technology. At this time, we do not have
any plans to prosecute this patent application, and are unaware of any plans by
our former co-venturer to prosecute the application.

In addition, during 1998 we filed a United States patent application
for each of two separate software codes. Furthermore, during 2000, we filed four
U.S. patent applications on various operating aspects of the X-traWeb system,
although we cannot assure you that any patents will be issued to us.

Williams Wireless, Inc. raised a claim that we violated the
non-competition provisions of their agreements by allegedly marketing
X-traWeb(TM) products in the telemetry meter reading applications. We, in turn,
claimed that Williams Wireless, Inc. failed to satisfy all of its duties under
its various agreements with us. While we believed that Williams' claim was
properly disputable, the parties orally agreed to enter into a settlement
agreement and mutual release. On March 8, 2000, before such settlement agreement
was concluded, Williams sold substantially all of its assets and business,
including its agreements with us, to an unrelated party, Internet, and
thereafter we resolved this dispute amicably.

We and Internet entered into a settlement agreement and mutual release
dated as of August 7, 2000, which contained the following key elements:

(a) each party released the other of any claims under the
Williams' agreements with us, and the parties terminated such
agreements in all respects;

(b) we agreed to grant Internet a perpetual, non-exclusive
irrevocable royalty-free worldwide license to manufacture, use
and sell our MicroHopper radio, as configured on the date of
our agreement, as a component of Internet's telemetry systems
or products, and to manufacture, use and sell such radio only
when incorporated into Internet's telemetry systems or
products;

(c) each party agreed to allow the other party to resell the
other's products pursuant to a standard resellers agreement
adopted by such party; and

(d) each party agreed to indemnify the other from any claims
arising under such agreement. We believe that this agreement
will have no material adverse effect on our business.

We have not filed any patent applications in foreign countries.

PROPERTIES - CORPORATE HEADQUARTERS AND OTHER OFFICE FACILITIES

As of November 30, 2001, our executive offices and principal
administrative offices are located at 5670 Greenwood Plaza Boulevard, Greenwood
Village, Colorado in approximately 10,441 square feet of space, which is leased
at a monthly cost of $18,594 for base rental and allocable common area
maintenance charges. We also pay for certain utility expenses. The five-year
lease for these premises expires on December 31, 2005.

We also maintain small leased offices in Gonic, New Hampshire of
approximately 5,000 square feet at a monthly rent of $1,700. We closed our
Overland Park, Kansas office of approximately 2,850 square feet in November,
2001.

We believe that our facilities are satisfactory for our present scale
of operations.

We have obligations under various equipment leases which are not
material.

LEGAL PROCEEDINGS

On February 20, 2001 the Pinnacle Fund L.P., Barry M. Kitt and Tom and
Denise Hunse filed a lawsuit against us with respect to the purchase of a total
of 230,000 shares of our common stock at $3.00 per share in a private placement
transaction in February 2000. The plaintiffs seek rescission of the transaction
and/or damages, including treble damages, which they allege arise out of our
failure to file a registration statement on or before December 31, 2000. The
lawsuit is currently pending in the United States District Court for the
District of Utah. The case is in the discovery stage, with each party having
exchanged documents and written responses to questions asked. In December, 2001,
the District Court in Utah approved the plaintiffs' motion for leave to amend
their pleadings to commence a lawsuit against five individual defendants (David
D. Singer, an officer-director, Donald I. Wallace, a former officer-director,
Malcolm Thomas, a director, Charles Taylor, a director and a former officer,
Kevin Childress) and to assert an additional cause of action against them for
the underlying state law securities claim against the Company, and new causes of
action against the Company for breach of the implied covenant of good faith and
fair dealing and promissory estoppel, and a new cause of action for fraud
against Mr. Singer.

We believe that we have meritorious defenses to such action and intend
to prosecute our defense of the action vigorously, but there can be no assurance
as to the outcome thereof. We will also vigorously contest these new additional
claims and believe we have meritorious defenses to these new claims, and it is
anticipated that the individual defendants named in the lawsuit will do the
same, although we cannot assure you of the result in such lawsuit.

MANAGEMENT

Our executive officers and directors are as follows:

<Table>
<Caption>
Name Age Position(1)
- ---- --- -----------

David D. Singer 51 Chairman of the Board of Directors,
President, Chief Executive Officer
and a Director

Charles Taylor 51 Director

Malcolm P. Thomas 50 Director

M. Robert Carr 57 Director

Robert Hathaway 33 Vice President of Finance and Chief
Financial Officer
</Table>

(1) Donald I. Wallace, who served as our Director and Executive Vice
President and as President and Chief Executive Officer of X-traWeb,
Inc., our wholly owned subsidiary, resigned as an officer and Director
of both corporations effective as of August 31, 2001 for personal
reasons.

David D. Singer - Mr. Singer was appointed our President in November
1996, and became one of our Directors in February 1997. From 1977 to 1983, Mr.
Singer was President of CSL Energy Controls, Inc., a company specializing in
third party energy conservation. From 1983 to 1985, Mr. Singer was a special
consultant to the General President of the Sheetmetal Workers Association. From
1985 to 1988, Mr. Singer was Vice President First Municipal Division, Bank One
Leasing Corporation. From 1989 to 1994, Mr. Singer was President of Highland
Energy Group. From 1991 to 1996, Mr. Singer was employed by Navtech Industries,
Inc., an electronic assembly company, as Vice President Sales and Marketing from
February 1994 to July 1995, and as President and Chief Operating Officer from
July 1995 to July 1996.

Charles Taylor - Mr. Taylor was elected one of our Directors in July,
1999 and was elected as a member of our Audit, Compensation and Stock Option
Committees on November 11, 1999. During the period from 1995 through December
31, 2000, Mr. Taylor has been a senior investment advisor with Amerindo
Investment Advisors based in New York City and is a senior member of a team that
manages approximately $4 billion in growth portfolios, including the Amerindo
Technology Fund. Prior to such period, Mr. Taylor served as a technology analyst
with several major investment banking firm. Mr. Taylor is now self-employed.

Malcolm P. Thomas - Mr. Thomas was elected one of our Directors
effective September 2, 1999 and was elected as a member of our Audit Committee
on November 11, 1999 and of our Compensation and Stock Option Committees on
January 20, 2000. During the period from 1991 to December 31, 2000, Mr. Thomas
was the Director of Operations and Marketing at Fluor Global Services, Inc., a
wholly-owned subsidiary of Fluor Corporation (a New York Stock Exchange
company), having been promoted from Manager of Marketing Services and operation
in the Western United States for his corporation. Commencing in January, 2001,
Mr Thomas has been the Executive Vice President and General Manager of Building
Technology Engineers, a joint venture subsidiary of EMCOR Group and CB Richard
Ellis.

M. Robert Carr - Mr. Carr was elected one our Directors on April 26,
2000 and was elected as a member of our Audit Committee on such date. During the
period from 1995 to the present, Mr. Carr has served as a principal of the Carr
Company, a management and policy consulting from based in Washington, D.C. Mr.
Carr's current and past clients include General Motors Corp. and United
Airlines. Previously Mr. Carr served as a United States Congressman from the
State of Michigan during the period from 1975 to 1981 and 1983 to 1995. There he
served as Chairman of the House Transportation Subcommittee. He also served on
the House Armed Services, Judiciary and Interior and Insular Affairs Committees.

Robert Hathaway - Mr. Hathaway joined us on September 19, 2000 and was
appointed our Vice President of Finance and Chief Financial Officer on February
23, 2001. During the period from April, 2000 to August, 2000, he was the
Controller for USA Capital LLC, a lease finance and servicing organization.
Prior thereto from March, 1998 to March, 2000, Mr. Hathaway served as the

Vice President and Controller of Universal Lending Corporation, where he
designed and implemented accounting practices and procedures. During the period
from May, 1993 to June, 1997 he served as accountant, and became a Vice
President and Controller From July, 1997 to January 1998, at National Mortgage
Corporation where he designed and implemented accounting practices and
procedures.

OTHER KEY EMPLOYEES

We also have one other key employee: William Richard Reynolds, whose
role in our operations and background is specified below:

William Richards - Mr. Richards joined us in February, 2001 as Vice
President of Sales. He is in charge of our sales and marketing of all of our
products. For the 10 years prior to joining us, Mr. Richards was the President
and Chief Executive Officer of IEA Corporation, which developed turn-key energy
conservation projects for commercial, industrial, and public sector entities.
Mr. Richards worked for 24 years in energy conservation. Prior to that, he had
worked at Erie Technology Products and TRW Semiconductors.

CORPORATE GOVERNANCE STANDARDS

Issuers who securities are traded on the American Stock Exchange are
required to comply with certain corporate governance standards, including a
requirement that at least three directors of the issuer be "independent"
directors, and that the issuer have an audit committee, three of the members of
which are "independent" directors and that such audit committee adopt an audit
charter. The American Stock Exchange rules also require that an issuer have a
quorum for shareholder meetings of not less that 33 1/3 % of its shares issued
and that an issuer be required to give shareholders written notice at least 10
days in advance of all shareholders meetings as set forth in its by-laws. We
believe that we are in compliance with these requirements.

COMPENSATION OF EXECUTIVE OFFICERS

The table below sets forth information concerning compensation paid in
1998, 1999 and 2000 to David D. Singer, our Chairman, President and Chief
Executive Officer and Donald I. Wallace, our now former Executive Vice President
and the President of X-traWeb, Inc. Except as set forth in the table, no
executive officer of ours received compensation of $100,000 or more in 1998,
1999 and 2000.

SUMMARY COMPENSATION TABLE

<Table>
<Caption>
ANNUAL COMPENSATION LONG-TERM COMPENSATION
---------------------------- ------------------------------------
AWARDS PAYOUTS
----------- ----------
OTHER RESTRICTED ALL
NAME AND ANNUAL STOCK OPTIONS LTIP OTHER
PRINCIPAL POSITION YEAR SALARY BONUS COMPENSATION AWARDS($) /SARS(#) PAYOUTS($) COMPENSATION
- ------------------------- ---- -------- ------------ ------------ ---------- ---------- ------------ -------------

DAVID D. SINGER(1)(2) 2000 $205,571 -- -- -- -- --
PRESIDENT 1999 151,653 -- -- -- 400,000 --
1998 143,530 -- -- -- -- --
DONALD I. WALLACE(1)(2) 2000 148,052 -- -- -- -- --
PRESIDENT, X-TRAWEB, INC. 1999 127,993 -- -- -- 220,000 --
1998 124,809 -- -- -- -- --
</Table>

- ----------
(1) Neither Mr. Singer nor Mr. Wallace received compensation reportable as
"Other Annual Compensation" which exceeded 10% of his salary in 2000.

(2) Mr. Singer is the Chairman and Mr. Wallace was the President of X-traWeb,
Inc., our wholly-owned Delaware subsidiary formed in 1999.

The following table sets forth certain information regarding options
owned by Messrs. Singer and Wallace at December 31, 2000:

AGGREGATED OPTION/SAR EXERCISES IN LAST
FISCAL YEAR AND OPTIONS\SAR VALUES

<Table>
<Caption>
Number of Securities Underlying Value of Unexercised
Unexercised Options/SARs In-The-Money Options/SARs
At Fiscal Year End (#) At Fiscal Year End ($)
------------------------------- -----------------------------
Shares Acquired Value
Name On Exercise (#) Realized Unexercisable Exercisable Unexercisable Exercisable
- --------------- --------------- ------------ ------------- ------------ ------------- ------------

David D. Singer 0 0 240,000(2) 210,000(1) $ 740,000 --
Donald Wallace 0 0 152,000(4) 68,000(3) $ 441,000 --
</Table>

For the purpose of computing the value of "in-the-money" options at
December 31, 2000 in the above table, the fair market value of a share of our
Common Stock at December 31, 2000 is deemed to be $1.91 per share, which was the
average of the high and low prices of such shares on the American Stock Exchange
on such date.

DIRECTORS COMPENSATION

Our Board of Directors adopted a Non-employee Directors Compensation
Plan on February 25, 1999. Under such plan, each director who is not an employee
(a) was granted a non-qualified option to purchase 15,000 shares of our Common
Stock for a term of five years at the fair market of a share of our Common Stock
on such date, which would become non-forfeitable as to one-third of the shares
granted in the date of grant and one-third in each of the next two successive
12-month periods and (b) became entitled to receive $1,000 for attending each
meeting of our Board of Directors (whether such director attends in person or by
telephone). Under such plan, we granted (i) to each of Messrs. Brian W.
Pettersen and George Denney additional options to purchase 15,000 shares of our
Common Stock at an exercise price of $1.9375 per share subject to the above
terms (except that 5000 shares each vested on the date of grant), (ii) on
November 11, 1999 granted to each of Messers. Taylor and Thomas options to
purchase 15,000 shares of our Common Stock at an exercise price of $2.09375 per
share (of which 5,000 shares each were vested on the date of the grant.) and
(iii) on November 22, 2000 granted to M. Robert Carr an option to purchase
15,000 shares at an exercise price of $1.625 per share (of which 5,000 shares
were vested on the date of grant).

(1) Options to purchase 50,000 shares were exercisable as of December 31,
1998 and an additional 160,000 were exercisable of December 31, 2000.

(2) The stock options are exercisable as follows: 80,000 shares on November
11, 2001, 80,000 shares on November 11, 2002, and 80,000 shares on
November 11, 2003.

(3) Options to purchase 68,000 were exercisable of December 31, 2000.

(4) One stock options is exercisable as follows: 24,000 shares on November
11, 2001, 24,000 shares on November 11, 2002, and 24,000 shares on
November 11, 2003. In addition, another stock option is exercisable as
follows: 20,000 on April 22, 2001, 20,000 on April 22, 2002, 20,000 on
April 22, 2003 and 20,000 shares on April 22, 2004.

PRINCIPAL AND SELLING SHAREHOLDERS

We had 31,387,087 shares of our Common Stock outstanding at November
30, 2001. The following table sets forth certain information regarding the
ownership of the shares of our Common Stock as of November 30, 2001 and
adjusted, assuming the sale of all Shares, to reflect such ownership by (i) each
of our executive officers and directors, (ii) all of our executive officers and
directors as a group; and (iii) each other person known to us to be the
beneficial owner of more than 5% of the outstanding shares of Common Stock:

<Table>
<Caption>
Amount and Nature of
Beneficial Ownership Adjustment for Offering
----------------------------- ---------------------------

Ownership Assuming
the Sale of All
Registered Shares

As of Shares
Name and Address of November 31, Percent Registered No. of
Beneficial Owner 2001(1) of Class(2) for Sale Shares(1) Percentage(2)
------------ ------------ ------------ ------------ ------------

(i) DIRECTORS AND EXECUTIVE OFFICERS

David D. Singer, President, Chief 519,500(3) 1.6 -0- 519,500 1.6
Executive Officer and Director
World Wireless Communications, Inc.
5670 Greenwood Plaza Boulevard, Penthouse
Greenwood Village, Colorado 80111

Charles Taylor 10,000(4) * -0- 10,000 *
World Wireless Communications, Inc.
5670 Greenwood Plaza Boulevard, Penthouse
Greenwood Village, Colorado 80111

Malcolm P. Thomas 12,000(4) * 2,000(10) 10,000 *
World Wireless Communications, Inc.
5670 Greenwood Plaza Boulevard, Penthouse
Greenwood Village, Colorado 80111

M. Robert Carr 20,000(5) * -0- 20,000 *
815 Connecticut Ave. N.W
Washington, D.C

Robert Hathaway 1,050(6) * -0- 1,050 *
World Wireless Communications, Inc.
5670 Greenwood Plaza Boulevard, Penthouse
Greenwood Village, Colorado 80111

(ii) ALL DIRECTORS AND OFFICERS 562,500 1.8 -0- 560,550 1.8
AS A GROUP(6)

(iii) OTHER 5% BENEFICIAL OWNERS

Michael Lauer 7,295,853(7)(8) 23.2 7,295,853(10) -0- -0-
c/o Lancer Group
375 Park Avenue
New York, NY 10166

Lancer Offshore Inc 4,880,662(7) 15.5 4,880,662(10) -0- -0-
c/o Lancer Group
375 Park Avenue
New York, NY 10166

Lancer Partners, LP 2,305,650(7) 7.3 2,305,650(10) -0- -0-
c/o Lancer Group
375 Park Avenue
New York, NY 10166

Orbiter Fund Ltd. 109,541(7) * 109,541(10) -0- -0-
375 Park Avenue
New York, NY

RUSP Holdings S.A 2,500,000(9) 8.0 2,500,000(10) -0- -0-
C.So. Dante, Turin, Italy

Elkron International S.p.A 650,000(9) 2.1 650,000(10) -0- -0-
Via Carducci
Turin, Italy

Tanalux S.A 350,000(9) 1.1 350,000(10) -0- -0-
5 Rue Emil
Bian L-1235
Luxembourg
</Table>

- ----------

* Less than one percent.

(1) Unless otherwise indicated, this column reflects shares owned
beneficially and of record and as to which the named party has sole
voting power and sole investment power. This column also includes
shares issuable upon the exercise of options or similar rights which
are exercisable within 60 days from November 30, 2001.

(2) In computing the percentage of shares beneficially owned by any person,
shares which the person has the right to acquire upon the exercise of
options or other rights held by such person within 60 days from
November 30, 2001 are deemed outstanding. Such shares are not deemed to
be outstanding in computing the percentage ownership of any other
person.

(3) Includes 50,000 and 240,000 shares issuable upon presently-exercisable
and fully vested options granted under our 1997 and 1998 stock option
plans, respectively, but excludes 237,500 shares transferred to his
ex-wife in 1999 as part of a divorce settlement.

(4) Includes 10,000 shares issuable upon the exercise of options granted in
January, 2000 in recognition of services as a director.

(5) Includes 10,000 shares issuable upon the exercise of options granted in
November, 2000 in recognition of services as a director.

(6) Includes 650 shares issuable upon the exercise of options granted in
October, 2000 in recognition of services.

(7) Of these shares, none is owned by Mr. Lauer in street name; 4,880,662
are held directly and of record by Lancer Offshore, Inc.; 2,305,650 are
held directly and of record by Lancer Partners, L.P.; and 109,541 are
held directly and of record by The Orbiter Fund Ltd. Mr. Lauer is
believed to control the voting and disposition of these shares by
virtue of being the investment manager for these entities. He also is
the general partner of Lancer Partners L.P. These amounts exclude any
of the 64,200,000 shares of our Common Stock issuable pursuant to the
mandatory conversion of the 2001 Notes and the detachable warrants
issued to Lancer Offshore, Inc, and Lancer Partners L.P. to purchase
1,605,000 shares of our Common Stock, which cannot be issued or
exercised without the approval of our shareholders at a meeting. See
"DESCRIPTION OF CAPITAL STOCK AND OTHER SECURITIES-Senior Secured
Indebtedness" for further details on such conversion and exercise.

(8) Michael Lauer is deemed to be an indirect beneficial owner of these
shares.

(9) Dr. Ferruccio Commetto is believed to control the voting and the
disposition of the shares owned by the three corporations by virtue of
his being the president thereof.

(10) After the registration statement of which this Prospectus forms a part
become effective, no more than 15% of the Shares registered for sale
herein by any owner may be sold in any one calendar month by such owner
by virtue of an agreement the owner made with us at the time of
purchase of the Shares in question, except that this

restriction does not apply to the shares held by Lancer Offshore Inc.
and Lancer Partners L.P. which were not subject to such restriction.

The Selling Shareholders not named above, and the number of
Shares owned by each such Selling Shareholder prior to the offering,
are set forth in the table below. Unless otherwise indicated, all
shares owned by the Selling Shareholders listed are being registered
for sale and, if sold, would reduce the Selling Shareholder's stock
ownership interest in us.

<Table>
<Caption>
Name No. of Outstanding Shares(1)
- ---------------------------------------------------------------------

Lawrence S. Black 30,000
Kathryn R. Braithwaite* 326,733
Capital Research Ltd.* 675,324
CJL Investments LLC* 163,197
Alan R. Cohen 40,000
Cooperative Holding Corporation 50,000
Bruce D. Cowen* 613,142
DPM Investment Corp.* 81,597
John A. and Maria Famiglietti 20,000
Stephen R. Field and
Robert L. Field, Trustees of the Trust
under Articles Third and Fourth of Will
of Nathaniel Field 26,667
Alan Frost 20,000
Frying Pan Partners* 81,597
Martin Garvey* 100,000
Graham Partners LP 160,000
Hare & Co. 200,000
Eric Hauser 16,000
Thomas E. Hodapp 40,000
Tom S. Hunse &
Denise Hunse 10,000
Ira Partners LP 153,333
Michael H. Joly 10,000
James T. Kelly* 347,970
Kevin Ketelsen 30,000
Barry M. Kitt 20,000
Alfred J. Lagana 10,000
John S. Lemak 40,000
Allan Lipton 10,000
Nancy Lipton 10,000
Lodestone Capital Fund LLC 100,000
Richard T. Mallen 17,692
Brian C. Manolis 20,000
Zeno F. Marcella & Renee Marcella 25,000
The Zeno & Renee Marcella
Charitable Trust 25,000
Peter A. Massaniso 20,000
The McCloskey Trust 897,573
Jonathan Merriman 20,000
Douglas and Laurie Moore
Trustees f/b/o the 1998 Moore
Family Trust dated March 9, 1989 100,000
Susan S. Oelsen 20,000
</Table>

<Table>

Warren Palitz* 21,667
Pensionskassee De Siemens 1,387,974
Gesellschaften in Der Schweiz*
The Pinnacle Fund LP 200,000
Ponte Vedra Partners LP 40,000
President and Fellow of Harvard
College 666,667
Puglisi Capital Partners L.P. 100,000
Eliane Reinhold 3,334
Peter Rettman 10,000
Riedel Invest 405,000
Rush & Co. 177,500
Scott Ryan* 21,667
Michael Seely 10,000
Steamer Capital LLC 100,000
Sterling Technology Partners LLC* 145,658
Robert L Swisher, Jr 40,000
Clinton A. Thomas Living Trust 166,667
Kermit B. Thomas Living Trust 500,000
Tiedemann Boltres Partners 386,333
Tiedeman Custom Specialized Fund 73,334
Tiedeman Select LP 3,000
Treeline Partners 100,000
F. Van Kasper 20,000
---------
Total 9,278,915
</Table>

- ----------
(1) After the registration statement of which this Prospectus forms a part
becomes effective, no more than 15% of the Shares registered for sale
herein by each owner (except in the case of the shares shown with an
asterisk (*)) may be sold in any one calendar month by such owner by
virtue of an agreement the owner made with us at the time of the
purchase of the Shares in question.

MARKET INFORMATION

Our shares of Common Stock are traded on the American Stock Exchange
under the symbol "XWC" and began trading on such exchange on May 5, 2000. Prior
thereto, our shares of Common Stock were traded on the National Association of
Securities Dealers, Inc. Electronic Bulletin Board under the Symbol "WWC". The
high and low per share price of the shares of our Common Stock and the dividends
that were paid thereon for 1998, 1999, 2000 and the first six months of 2001
were as follows:

<Table>
<Caption>
1999
----
Quarter High Low Dividend
- ------- ---- --- --------

1st 2.06 1.75 0
2nd 1.88 1.50 0
3rd 1.69 1.00 0
4th 4.31 1.44 0
</Table>

<Table>
<Caption>
2000
----
Quarter High Low Dividend
- ------- ---- --- --------

1st 7.875 2.875 $0
2nd 5.25 2.50 0
3rd 4.375 2.625 0
4th 3.75 1.375 0
</Table>

<Table>
<Caption>
2001
----
Quarter High Low Dividend
- ------- ---- --- --------

1st 2.00 0.68 0
2nd 0.97 0.40 0
3rd 0.68 0.15 0
</Table>

These quotations for the period prior to May 5, 2000 reflect
inter-dealer prices,without retail mark-up, markdown or commissions and may not
necessarily represent transactions.

At November 30, 2001 we had approximately 350 beneficial owners of
shares of our Common Stock.

We have never declared dividends or paid dividends on our existing
shares of Common Stock. For a description of our dividend policy, see
"DESCRIPTION OF CAPITAL STOCK AND OTHER SECURITIES - Dividend Policy".

OUTSTANDING OPTIONS AND WARRANTS

At November 30, 2001, there were outstanding warrants to purchase a
total of 4,732,526 shares of our Common Stock and options to purchase a total of
769,659 shares of our Common Stock or a total of 5,502,185 shares of our Common
Stock at prices ranging from $0.05 to $12 per share, and expiring between
November 2, 2001 and November 13, 2006. See"DESCRIPTION OF CAPITAL STOCK AND
OTHER SECURITIES -- Options and Warrants".

SHARES ELIGIBLE FOR FUTURE SALE

At November 31, 2001 we had 21,288,027 shares of our Common Stock
outstanding that are restricted securities (as that phrase is defined in Rule
144 issued by the SEC) and may not be resold without registration under the
Securities Act unless exempted from such registration, including, among others,
the exemption provided by Rule 144 under the Securities Act. One year after the
date of this Prospectus these shares of our Common Stock will be eligible for
sale in the public market pursuant to Rule 144, subject to the volume
limitations and other restrictions described below.

In general, under Rule 144 if a period of at least one year has elapsed
since the later of the date the restricted shares were acquired from us and the
date they were acquired from an affiliate, then the holder of such restricted
shares, including an affiliate, is entitled to sell a number of shares within
any three-month period that:

o does not exceed the greater of 1% of the then outstanding
shares or

o the average weekly reported volume of trading of such shares
on the American Stock Exchange during the four calendar weeks
preceding such sale.

o the holder may only sell shares through unsolicited brokers'
transactions. Sales under Rule 144 are also subject to certain
requirements pertaining to:

o the manner of such sales,

o notices of such sales and

o the availability of current public information concerning us.

Under Rule 144 (k), a holder of restricted shares may sell
shares immediately without regard to the volume limitations and other
restrictions described above if:

o a period of at least two years has passed between the later of
(1) the date restricted securities were acquired from us and
(2) the date they were acquired from an affiliate, as
applicable,

o the holder is not an affiliate at the time of the sale and

o has not been an affiliate for at least three months prior to
the sale.

After the offering is completed, certain employees, directors and
consultants of ours will have the right to purchase approximately 769,659
additional shares of our Common Stock under various employee and non-qualified
stock options computed as of November 30, 2001, subject to vesting periods,
which will also be restricted securities.

Notwithstanding the information above, the purchasers of shares of our
Common Stock made pursuant to our private offerings dated May 15, 1998, January
24, 1999, May 14, 1999 and January 20, 2000 and whose stock is made available
for sale by this Prospectus have agreed by contract that each will not directly
or indirectly:

o offer,

o pledge,

o sell,

o contract to sell,

o sell any option or contract to purchase,

o purchase any option or contract to sell,

o grant any option, right or warrant to purchase,

o lend or

o otherwise transfer or dispose of

any shares of our Common Stock so purchased in excess of 15% thereof in any one
calendar month. Thus, any such purchaser of shares of our Common Stock will not
be able to sell all of his Shares so purchased until the expiration of the
seventh month from the date this registration statement of which this Prospectus
forms a part becomes effective.

ORGANIZATIONAL AND OTHER TRANSACTIONS

ORGANIZATION, INITIAL CAPITALIZATION AND PURCHASE OF ASSETS OF MICRO SECURITY,
INC.

We were formed in November 1995 to acquire certain assets that had been
used in the business of Micro Security, Inc. ("Micro"). Contemporaneously with
our organization, we entered into an agreement to acquire the Micro assets from
Chocolate Leasing LLC ("Chocolate"), a limited liability company that had
previously acquired those assets. The individuals principally responsible for
organizing us were Abraham Salaman and Lynn Dixon, and the organizers of
Chocolate were Gary Christensen, Gary Peterson, Dan Maxwell and Brian Pettersen.
Messrs. Christensen, Peterson, Maxwell, Pettersen, Salaman and Dixon all may be
considered our "founders" or "promoters." Messrs. Salaman and Dixon had no
relationship with Chocolate prior to our organization and, with

the exception of Mr. Maxwell, none of the organizers of Chocolate had a
relationship with Micro prior to the time that Chocolate acquired Micro's
assets. Mr. Maxwell had been an employee of Micro, which was a publicly-owned
corporation.

In connection with the purchase and sale of Micro's assets, Mr.
Christensen received $269,000 in redemption of his interest, which exceeded the
amount he had invested by $69,000. Messrs. Maxwell, Peterson and Pettersen
received shares of our Common Stock (450,000, 105,000 and 105,000 shares,
respectively) in consideration for their interests, through Chocolate, in the
Micro assets, which assets had been acquired by them during 1995 at a cash cost
of $150,000, $20,500 and $20,500, respectively, and, in the case of Messrs.
Peterson, and Pettersen, for services valued by the Company for accounting
purposes at $16,980 and $16,980, respectively. These shares were not physically
issued by us until April 22, 1996. For accounting purposes, they are deemed to
have been issued at various dates from April 1995 through November 1995
depending on when the recipients of such shares acquired their respective
interests in Chocolate which were transferred to us in exchange for the shares.

Also in connection with our organization and initial capitalization,
and the purchase of Micro's assets, we issued 132,140 shares of our Common Stock
to Robsal, Inc. and Elvena, Inc., corporations controlled by or otherwise
associated with Messrs. Salaman and Dixon, for cash ($5,000) and for services
valued by us at $38,606. We also issued 320,000 shares of Common Stock to
Jonathan D. Rahn, who also may be considered a founder or promoter of us, for
services valued by us for accounting purposes at approximately $105,000, and
borrowed $275,000 from Robsal, Inc., Elvena, Inc., three other corporations
controlled by Messrs. Salaman and Dixon and/or their adult children (Cherry
Hill, Inc., BRRD, Inc. and Stamatt, Inc.), Mr. Salaman's nephew and three other
investors. These short term borrowings and accrued interest thereon at the rate
of 6% were converted into 1,892,860 shares of our Common Stock, an effective
cash price of approximately $.15 per share, which was approximately $.08 per
share less than the value placed on the shares by us for accounting purposes.
With the exception of 107,140 shares issued upon our organization, all of the
aforementioned shares were issued in April 1996, following the consummation of
our acquisition of assets from Chocolate. For accounting purposes, the shares
issued for services and finance fees (a total of 542,746 shares) are deemed to
have been issued in November 1995, and the shares issued upon conversion of
notes are deemed to have been issued in March 1996.

Mr. Dixon served as our initial President and sole director until Mr.
Peterson became a director, our President and Chief Executive Officer, and Mr.
Rahn became our Secretary/Treasurer and a director on November 16, 1995. Mr.
Peterson remained our President and a director until October 28, 1996. Mr.
Maxwell was employed by us in a supervisory engineering and manufacturing
position until December 31, 1997. Mr. Pettersen served as our Executive Vice
President through December 31, 1997, and as a director through June 22, 1999.
Mr. Rahn served as our Secretary and a director through December 12, 1997. None
of the our other founders/promoters is or has been employed by us.

EMPLOYMENT OF DAVID SINGER

In October 1996, we entered into an agreement with David Singer in
connection with which he assumed the duties of our Chief Executive Officer. At
the same time, we agreed to acquire ECA Contract Assembly, Inc., which had been
organized by Mr. Singer and a business associate of his to engage in contract
manufacturing and assembly, in exchange for 500,000 shares of our Common Stock.
Since ECA did not have assets or operations at the time of the agreement, the
shares Mr. Singer acquired in this transaction (475,000 shares) were treated,
for accounting purposes, as being issued for services, and have been valued by
us at approximately $1.51 per share for accounting purposes. ECA was dissolved
at the end of 1997, and discontinued the contract assembly operations previously
conducted by ECA as of December 31, 1999.

ACQUISITION OF DRCC

In February 1997, a majority of the shareholders of DRCC accepted an
offer to merge DRCC into a subsidiary of ours formed for that purpose, with the
result that DRCC became our wholly-owned subsidiary. Upon the closing of that
merger, DRCC shareholders received 0.5577349 shares of our Common Stock in
exchange for each share of DRCC common stock outstanding prior to the merger,
which resulted in the issuance of 1,798,100 shares of our Common Stock.
Outstanding options to purchase shares of DRCC common stock were converted on
the same basis into options to purchase an aggregate of 201,900 shares of our
Common Stock at a weighted average price of $1.90. For accounting purposes, the
shares issued to acquire DRCC were assigned a value of $4.44 per share, and the
options were assigned a value of $3.42 per option.

In connection with the merger, certain of DRCC's principal shareholders
(Philip Bunker, Jeffrey G. Ballif and William E. Chipman, Sr.) entered into a
Shareholders Agreement pursuant to which we agreed to include the shares of our
Common Stock which we issued or agreed to issue upon the exercise of options
issued in connection with the DRCC merger in any registration statement
subsequently filed by us. As a result, on February 17, 1998 we registered all of
the shares of our Common Stock issued in the DRCC merger and issuable upon the
exercise of the DRCC stock options which we assumed. The Shareholders Agreement
also provided for the election of David Singer and Messrs. Bunker and Chipman
(or, alternatively, of designees selected by Messrs. Bunker and Chipman) as
directors of DRCC, to constitute a majority of its Board of Directors, so long
as we own any capital stock of DRCC. As a result of this Shareholders Agreement,
control of the composition of the Board of Directors of DRCC, for all practical
purposes, was permanently subject to the control of Messrs. Bunker and Chipman.
As a result of DRCC's transfer of assets and liabilities to us in January 1998,
these provisions of the Shareholders Agreement became inapplicable.

SALE OF SECURIKEY(R) ASSETS

In January 1998, the Company sold its SecuriKey(R) assets to a
corporation organized and controlled by Dan Maxwell. The sale price for these
assets was approximately $373,000, all of which has been received by us. The
"book value" of the assets sold was approximately $73,000.

ACQUISITION OF AUSTIN ANTENNA AND XARC CORPORATION

In November 1997, we acquired TWC, Ltd. dba Austin Antenna, which
designs and engineers radio antenna products. Pursuant to the acquisition
agreement between the parties we delivered 100,000 restricted shares of our
Common Stock in exchange for all of the stock of TWC, Ltd. We valued our stock
at $1,036,000 on the date of acquisition as the net purchase price therefor.

PRINCIPAL CAPITAL TRANSACTIONS

(a) GENERAL

During the first nine months of 1998, we issued a total of 502,000
shares of our Common Stock to our major stockholders for cash in the amount of
$907,767 net of $96,233 in accumulated

offering costs or $2.00 per share before offering costs through the sale of in a
private placement transaction exempt from registration under the Act.

During the last three months of 1998, we raised a total of $1,463,000
through the sale of 2,219,258 shares of our Common Stock at prices ranging from
$0.50 per share to $1.00 per share in private placement transactions exempt from
registration under the Act to a total of 11 purchasers.

During 1999, we further raised a total of $5,578,000 through the sale
of 5,578,000 shares of our Common Stock in private placement transactions exempt
from registration under the Act to a total of six purchasers as a price of $1.00
per share.

During March, 1999, note holders converted two unsecured promissory
notes totaling $800,000 together with accrued interest, into 893,698 shares of
our Common Stock at $1.00 per share under the terms of a conversion privilege
granted to the note holder in December, 1998.

During the first quarter of 2000, we raised $13,646,000 of new capital
from the sale of 4,548,667 shares of our Common Stock in a private placement
transaction of 45 accredited investors at $3.00 per share. The proceeds of this
offering, net of $1,434,222 in placement fees, amounted to $12,211,778. We also
paid a total of $78,560 in placement fees related to 1999 offerings during this
period. The net proceeds from issuance of shares of our Common Stock were
$12,133,218.

In March, 2000, we also issued shares of Common Stock related to the
exercise of warrants to purchase 5,393,690 shares of our Common Stock at $.25
per share. We received proceeds of $401,220 in cash and $947,203 was recorded as
capital related to the cashless exercise of warrants by the deemed payment of
principal by reduction of the 1999 Notes we issued. The warrants exercised
totaled $1,348,423.

We recently commenced an offering of up to 20 units each consisting of
(i) 50 shares of our Senior Preferred Stock and (ii) a detachable one-year
warrant to purchase 416,667 shares of our Common Stock at an exercise price of
$0.30 per share (subject to certain adjustments), and sold no units through the
date hereof.

(b) BRIDGE FINANCING TRANSACTIONS

On May 14, 1998 we borrowed $2,500,000 from seven lenders for one year,
at an adjusted simple interest rate of 16% per annum, and gave such lenders a
first security interest in all of our machinery, equipment, automobiles,
inventory, fixtures, accounts receivable, securities and general intangibles,
under a pledge/security agreement we signed with the lenders. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations -
Liquidity and Capital Resources." As part of our agreement with such lenders,
including amendments we made to them, we issued to them warrants to purchase
433,333 shares of our Common Stock which they have to exercise on or before May
15, 2003. The exercise price of the warrants is now $0.25 per share (a reduction
from the original exercise price of $3.00 per share). We paid off the full
amount of such loan, with all interest then due, by June 14, 1999.

During varying dates between May 14, 1999 and October 5, 1999, we
borrowed $3,040,000 from nine lenders for a period of one year at simple
interest of 16% per year, payable quarterly(the "1999 Notes"). At the same time,
we sold them separate investment units consisting of 950 shares of our Senior
Preferred Stock and warrants to purchase 4,750,000 shares of our Common Stock,
which expire at varying dates between May 14, 2004 and October 5, 2004, at an
exercise price of $0.25 per share. We gave such lenders a first security
interest in all of our machinery, equipment, automobiles, inventory, accounts
receivable, securities and general intangibles then existing or acquired after
such date. The issued and outstanding shares of our Senior Preferred Stock were
convertible into up to 9,500,000 shares of our Common Stock if they were not
redeemed in full on

or before May 14, 2000. See "DESCRIPTION OF CAPITAL STOCK AND OTHER SECURITIES -
Preferred Stock".

During March, 2000, we paid off the 1999 Notes with cash in the amount
of $2,377,624 and the cashless exercise of warrants be deemed payment of
principal in the amount of $947,203, as discussed above, and accrued interest of
$35,059, thereby discharging such debt in full.

On February 15, 2000, we redeemed all of our shares of our mandatorily
redeemable preferred stock for cash of $950,000 for the liquidation balance and
$57,378 for the cumulative dividends accrued to date.

During the period from May 17, 2001 to November 14, 2001, we borrowed
$3,210,000 from Lancer Offshore, Inc. and Lancer Partners L.P. in bridge
financing transactions involving secured debt and warrants. See "DESCRIPTION OF
CAPITAL STOCK AND OTHER SECURITIES - Senior Secured Indebtedness."

RELATED PARTY TRANSACTIONS

During 1998, we paid outstanding loans to shareholders. The amount paid
on these loans totaled $369,807. In addition, a shareholder and an employee of
ours made a short-term loan to us for $40,000. We also repaid this loan in 1998.

During 1999, we paid $9,857 in cash on a note payable to an employee of
ours. The employee voluntarily repossessed the equipment in exchange for the
remaining $8,449 of the note payable from us. The equipment had a book value of
$16,507 at the time of disposition; we recorded a loss of $8,058 on the return
of the equipment to the employee.

In 2000, we deemed a $66,828 receivable from a shareholder to be
uncollectible, and we wrote off such balance.

DESCRIPTION OF CAPITAL STOCK AND OTHER SECURITIES

Our current articles of incorporation authorizes us to issue 50,000,000
shares of Common Stock, $.001 par value, of which 31,387,087 shares were issued
and outstanding as of November 30, 2001 and 1,000,000 shares of Preferred Stock,
$.001 par value, none of which was outstanding as of November 30, 2001, although
our Board of Directors resolved in June, 2001 to create a series of our new
Senior Preferred Stock described below under "Preferred Stock".

COMMON STOCK

Holders of shares of our Common Stock are entitled to one vote for each
share of Common Stock owned of record on all matters to be voted on by
stockholders, including the election of directors. Holders of Common Stock do
not have cumulative voting rights and, accordingly, the holders of more than 50%
of the outstanding shares of our Common Stock can elect our Board of Directors.
The holders of outstanding shares of Common Stock are entitled to receive such
dividends, if any, as may be declared from time to time by our Board of
Directors out of assets legally available therefor, subject to any preferential
dividend rights of outstanding preferred stock. In the event of a liquidation,
dissolution or winding up us, the holders of the shares of our Common Stock are
entitled to share ratably in the assets remaining after payment of all of our
liabilities, subject to any liquidation preferences of outstanding preferred
stock. The holders of shares of our Common Stock have no preemptive or other
subscription rights to subscribe to any additional shares we may issue in the
future, and there are no conversion rights or redemption provisions. All issued
and outstanding shares of our Common Stock are validly issued, fully paid, and
non-assessable.

Our Board of Directors has the authority in its sole discretion to
issue authorized but unissued shares of our Common Stock from time to time for
any proper corporate purpose. The Board of Directors has the authority to do so
without stockholder approval, except as provided by law or the rules and
regulations of any securities exchange on which any shares of our Common Stock
may then be listed.

PREFERRED STOCK

Our Board of Directors has the authority by resolution to issue up to
1,000,000 shares of preferred stock in one or more series and fix the number of
shares constituting any such series, the powers, rights and preferences and the
qualifications, limitations or restrictions thereof, without limitation the
following:

o the distinctive serial designation of such series which shall
distinguish it from other series,

o the number of shares included in such series,

o any condition upon which such dividends shall be paid and the
date or dates upon which such dividends shall be payable,

o whether dividends on the shares of such series shall be
cumulative and, in the case of shares of any series having
cumulative dividend rights, the date or dates or method of
determining the date or dates from which dividends on the
shares of such series shall be cumulative,

o the amount or amounts which shall be payable out of our assets
to holders of the shares of such series upon voluntary or
involuntary liquidation, dissolution or winding-up of us and
the relative rights of priority, if any, of payment of the
shares of such series,

o the price or prices at which, the period or periods within
which and the terms and conditions upon which the shares of
such series may be redeemed, in whole or in part, at our
option, or at the option of the holder or holders thereof or
upon the happening of a specified event or events,

o the obligation, if any, of us to purchase or redeem shares of
such series pursuant to a sinking fund or otherwise and the
price or prices at which, the period or periods within which
and the terms and conditions upon which the shares of such
series shall be redeemed or purchased, in whole or in part,
pursuant to such obligation,

o whether or not the shares of such series shall be convertible
or exchangeable, at any time or times at the option of the
holder or holders thereof or at the option of us or upon the
happening of a specified event or events, into shares of any
other class or classes or any other series of the same or any
other class or classes of stock of us and the price or prices
or rate or rates of exchange or conversion and any adjustments
applicable thereto and

o whether or not holders of the shares of such series shall have
voting rights, in addition to the voting rights provided by
law, and if so the terms of such voting rights.

For example, our Board of Directors is authorized to issue a series of
preferred stock that would have the right to vote, separately or with any other
series of preferred stock, on any proposed amendment to our Articles of
Incorporation or on any other proposed corporate action, including business
combinations and other transactions.

Pursuant to the authority vested in our Board of Directors, our Board
on May 12, 1999 resolved to issue up to 950 shares of a series of preferred
stock designated as our Senior Preferred Stock, subsequently issued all of such
shares in 1999 and thereafter redeemed all of such shares in February, 2000.

Pursuant to the authority vested in the Board of Directors, the Board
on June 8, 2001 resolved to issue up to 1,000 shares of a series of preferred
stock designated as our Senior Cumulative Convertible Preferred Stock (the
"Senior Preferred Stock".)

Each share of our new Senior Preferred Stock has been designated to
have the following characteristics:

(a) has a 8% cumulative dividend;

(b) constitutes the senior series of any preferred stock we may
issue;

(d) subject to the approval of our shareholders at a meeting, is
mandatorily convertible into shares of our Common Stock at the
conversion rate of 8,333.33 shares of Common Stock for each
share of Senior Preferred Stock (or $0.60 per share) (or up to
a potential maximum total of 8,333,333 shares of our Common
Stock if all 1,000 shares of our Senior Preferred Stock are
sold pursuant to the offering described under "Senior Secured
Indebtedness");

(e) may be redeemed by us, at our option, between February 1,
2002 and January 31, 2003 for the amount of the liquidation
preference and any deemed and unpaid cumulative dividends; and

(f) has a first priority in liquidation of $5,000 per share, plus
the amount of unpaid cumulative dividends, payable from our
assets after our payment (or our making of adequate provision
for the payment ) of all claims of our creditors.

SENIOR SECURED INDEBTEDNESS

(a) May 17 financing.

On May 17, 2001, we sold an investment unit consisting of (a)
$2,250,000 principal amount of our Senior Secured Convertible Notes (the "2001
Notes") and (b) warrants to purchase 1,125,000 shares of our Common Stock to
Lancer Offshore, Inc., an affiliate of our largest stockholder, subject to the
following terms and conditions.

1. The 2001 Notes bear simple interest at the rate of 15% per annum and
were to mature on September 15, 2001, unless they were mandatorily
converted into shares of our Common Stock prior to such date.

2. Under the 2001 Notes, we received the principal amount of $1,125,000
on May 17, 2001, issued a Note for such amount and the holder agreed
to loan us the additional amount of $1,125,000 on or before July 15,
2001 provided that we raised a minimum of $2,000,000 in equity from
persons other than Michael Lauer and his affiliates, including
Lancer Offshore Inc., Lancer Partners L.P.,and The Orbiter Fund Ltd.

3. The 2001 Notes are secured by a first security interest in
substantially all of our assets, including our machinery, equipment,
automobiles, fixtures, furniture,

accounts receivable and general intangibles, including patents,
patent applications and any stock in any subsidiary.

4. Under the 2001 Notes, we and Lancer Offshore, Inc. may jointly agree
to increase the amount of the loan to a total of $5,000,000 with a
pro rata increase in the amount of warrants issuable by us.

5. The 2001 Notes were mandatorily convertible into shares of our
Common Stock at the rate of $0.50 per share (i.e. one share for each
$0.50 of debt) upon (i) our receipt of approval of our shareholders
at a meeting of such conversion and (ii)our receipt of $2,000,000 in
equity from persons other than Michael Lauer and his affiliates on
or before December 31, 2001.

6. We agreed to give Lancer Offshore, Inc. registration rights with
respect to the shares issuable upon conversion of the 2001 Notes and
upon exercise of the warrants granted to it.

7. Any event of default under the 2001 Notes will require the issuance
of 1,000,000 shares of our Common Stock commencing with the month in
which such default first occurs and thereafter in each such month in
which such default is not cured, up to a maximum amount of
10,000,000 shares of our Common Stock.

8. The warrants issued and potentially issuable to Lancer Offshore Inc.
had an exercise price of $0.50 per share, expire on the fifth
anniversary date of the date of issuance and may be exercised in
whole or in part, but the shares subject thereto are issuable only
upon the approval of such issuance by our shareholders at a meeting.
At present, we issued warrants to purchase 562,500 shares of our
Common Stock, expiring on May 16, 2006, as a result of the loan of
$1,125,000 to us on such date.

9. We agreed to pay a finder's fee to Capital Research Ltd. and
Sterling Technology Partners of a total of 10% of the gross proceeds
received by us on the sale of the 2001 Notes payable on each closing
of a tranche of the financing under the 2001 Notes. On May 17, 2001
the closing price of a share of our Common Stock was $0.65, which
was higher than the conversion rate of one share for each $0.50 of
debt and the exercise price of each warrant of $0.50 per share.

(b) August 7 financing.

We failed to meet the conditions described in item 2 above on the May
17, 2001 financing by July 15, 2001. As a result, on August 7, 2001, Lancer
Partners L.P.,another affiliate of our largest stockholder, agreed to loan us an
additional $875,000 as part of the 2001 Notes on the following terms and
conditions:

1. Lancer Partners L.P. agreed to loan us the additional amount of
$350,000 on August, 2001 provided our Board approved the terms of
the August 7, 2001 financing (which it did). We issued an additional
2001 Note for the $350,000 loan.

2. Lancer Partners L.P. agreed to loan us $275,000 on or about
September 15, 2001 and $250,000 on or about October 15, 2001,
provided that we raised a minimum of $1,500,000 in equity from
persons other than Michael Lauer and his affiliates, including
Lancer Offshore Inc., Lancer Partners L.P. and The Orbiter Fund
Ltd., on or before September 15, 2001. Each of these additional
loans would mature on December 15, 2001 unless mandatorily converted
into shares of our Common Stock.

3. This tranche of $875,000 comprising the 2001 Notes is mandatorily
convertible into shares of our Common Stock at the rate of $0.20 per
share (i.e. one share for each $0.20 of debt) upon (a) the receipt
of approval of our stockholders at a meeting of such conversion and
(b) our receipt of $2,000,000 of equity from non-Lancer entities or
affiliates by December 31, 2001.

4. We agreed to issue additional warrants to purchase up to an
additional 562,500 shares of our Common Stock if the entire $875,000
is loaned by Lancer Partners, LP to us. As a result of the $350,000
loan made on August 7, 2001, we issued a warrant to purchase an
additional 225,000 shares of our Common Stock at an exercise price
of $0.30 per share.

5. We agreed as a condition to the August 7, 2001 financing to reduce
our operating budget to a monthly burn rate of not greater than
$250,000 effective September 1, 2001 and to curtail all our
discretionary spending of funds until additional equity is raised.

6. We agreed to provide Lancer Partners L.P. with fully executed loan
agreements, Uniform Commercial Code and other filings and warrant
agreements by August 15, 2001, which were executed and delivered by
both parties on August 21, 2001.

7. The terms set forth in the May 17, 2001 financing described in 1, 3,
4, 6,7 and 9 apply with the same force and effect to the August 7,
2001 financing.

In addition, under the August 7, 2001 financing, we agreed to amend the
May 17, 2001 financing as follows:

(i) The $1,125,000 principal amount comprising a portion of the 2001
Notes is now mandatorily convertible into shares of our Common Stock at the rate
of $0.20 per share (i.e. one share for each $0.20 of debt);

(ii) We agreed to give Lancer Offshore Inc. and Lancer Partners L.P.
full anti-dilution protection in the event we sold shares of our Common Stock at
a price of less than $0.20 per share during the one-year period commencing on
May 12, 2001;

(iii) The exercise price of the warrant to purchase 562,500 shares of
our Common Stock was reduced to $0.30 per share which term will also apply to
any additional warrants issued in such the financing transactions; and

(iv) The maximum amount of shares of our Common Stock issuable in the
event of continuing monthly defaults was increased to 12,500,000 from
10,000,000.

We failed to meet the condition described in Item 2 above on the August
7, 2001 financing by September 15, 2001. Despite such failure, Lancer Partners
L.P. loaned an additional $100,000 and $175,000 on September 6, 2001 and
September 18, 2001, respectively, which loans mature on December 15, 2001. As a
result thereof, we issued separate notes comprising part of the 2001 Notes to
such party (which collectively are mandatorily convertible into 1,375,000 shares
of our Common Stock at $0.20 per share) and also issued a warrant to purchase
87,500 shares of our Common Stock at $0.30 per share.

In addition, the parties amended the August 7, 2001 financing as
follows:

(i)The maturity date of the two tranches of the 2001 Notes totaling
$1,475,000 in principal amount was extended from September 15, 2001 until
October 15, 2001; and

(ii)The creditors extended the time for us to raise $1,500,000 until
October 15, 2001 as a condition to the issuance of $250,000 loan on or about
October 15, 2001.

Also, the holders of the 2001 Notes acknowledged that there was no
default of any kind as of September 14, 2001.

October and November, 2001 Financing

We again failed to meet the condition to raise additional equity
financing of $1,500,000 on or before October 15, 2001. Despite such failure,
Lancer Partners L.P. loaned us an additional $25,000 (bringing its total loan to
us to $650,000 in principal amount) and Lancer Offshore, Inc. loaned us an
additional $85,000 on October 3, 2001, $175,000 on October 9, 2001, $175,000 on
October 29, 2001 and $1,000,000 on November 14, 2001 (bringing its total loan to
us to $2,560,000 in principal amount), or a total loan from such parties of
$3,210,000. As a result, we issued separate notes comprising part of the 2001
Notes and issued additional warrants to such parties to purchase 730,000 shares
of the Company's Common Stock at an exercise price of $0.30 per share, expiring
in each case on a date in 2006 five years after the date of their respective
issuance.

In addition, the parties agreed on November 14, 2001 to amend the
entire 2001 Note financing as follows:

(i) The entire principal amount of $3,210,000 comprising the 2001 Notes
is now mandatorily convertible into shares of our Common Stock at the rate of
one share for each $0.05 of debt (A) upon our receipt of approval of our
shareholders at a meeting of such conversion and (B) upon our receipt of
$3,210,000 in equity from sources other than Michael Lauer, Lancer Offshore,
Inc., Lancer Partners L.P. and The Orbiter Fund Ltd. on or before February 28,
2002.

(ii) The maturity date of the entire principal amount of $3,210,000
comprising the 2001 Notes was extended until February 28, 2002 (unless
mandatorily converted into shares of the Company's Common Stock prior to such
date);

(iii) The amount of shares issuable in the event of a default is now
increased to 1,605,000 shares of our Common Stock for each month in which a
default exists and continuing until such default is cured, up to a maximum of
12,500,000 shares;

(iv) The Company agreed to give Lancer Offshore Inc. and Lancer
Partners L.P. full anti-dilution protection in the event the Company sold shares
of its Common Stock at a price less than $0.05 per share during the one-year
period commencing on November 14, 2001 (which was changed from May 12, 2001);
and

(v) The finders fee payable on the transaction was increased by
requiring the Company to issue a five-year warrant to Capital Research Ltd. to
purchase 2,000,000 shares of the Company's Common Stock at an exercise price of
$0.05 per share, which expires on November 13, 2006.

On the date of the issuance of each of the additional Notes comprising
part of the 2001 Notes and the warrants to purchase shares of our Common Stock,
the average of the high and low

price of a share of the Company's Common Stock was higher than conversion rate
of the Note in question and the exercise price of each Warrant.

(d) American Stock Exchange Rules

Under applicable American Stock Exchange Rules, the Company is required
to obtain the approval of its stockholders where the Company proposes to issue
shares of its common stock (i) to a controlling stockholder at a per share price
less than the market value thereof and (ii) such issuance involves an amount of
shares that is more than 5% of the number of the corporation's then issued and
outstanding shares of common stock in any one year. Such rule applies to the
Company's recent financing transaction with, and the loans made through November
30, 2001, by Lancer Offshore, Inc. and Lancer Partners L.P. Accordingly, the
approval of the Company's stockholders is required in order to permit the
mandatory conversion of the 2001 Notes owned by Lancer Offshore, Inc. and Lancer
Partners L.P. into shares of the Company's Common Stock at the conversion rate
of one share for each $0.05 amount of debt. The affirmative vote of a plurality
of the shares of Common Stock present at the next annual shareholders meeting in
person or by proxy is needed to approve the mandatory conversion of the shares
of Senior Secured Notes owned by Lancer Offshore, Inc. and Lancer Partners L.P.
into shares of Common Stock and the issuance of the shares of Common Stock upon
the exercise of the warrants granted to Lancer Offshore, Inc. and Lancer
Partners L.P. in connection with the above financing.

If (i) Lancer Offshore, Inc. and Lancer Partners L.P. do not loan the
Company any amount in excess of the current $3,210,000 principal amount of loans
outstanding as of November 30, 2001 (ii) the shareholders approve the mandatory
conversion of the 2001 Notes and (iii) we receive $3,210,000 in equity from
sources other than Michael Lauer, Lancer Offshore, Inc., Lancer Partners L.P.
and The Orbiter Fund Ltd, such parties would acquire an additional 65,805,000
shares of our Common Stock (including the assumed exercise of the warrants to
purchase 1,605,000 shares of our Common Stock).

If Lancer Offshore Inc. and Lancer Partners L.P. loan the Company a
total sum of (i) $5,000,000, (ii) the stockholders approve the mandatory
conversion of the 2001 Notes and (iii) if the Company receives $3,210,000 in
equity from sources other than Michael Lauer, Lancer Offshore, Inc., Lancer
Partners L.P. and The Orbiter Fund Ltd. on or before February 28, 2002, such
parties would acquire, in the aggregate, an additional 100,000,000 shares of the
Company's Common Stock upon such mandatory conversion. If Lancer Offshore, Inc.
and Lancer Partners L.P. loan the Company a total of $5,000,000, such parties
would also be entitled, in the aggregate, to receive warrants to purchase
2,500,000 shares of the Company's Common Stock, although such parties could not
exercise the warrants without prior stockholder approval.

We plan to schedule a meeting of our shareholders to approve, among
other things, (i) the mandatory conversion of the shares of our Common Stock
issuable pursuant to the 2001 Notes and upon the exercise of the warrants
issuable to Lancer Offshore, Inc. and Lancer Partners L.P. (ii) the shares of
Common Stock issuable pursuant to the mandatory conversion of any shares of
Senior Preferred Stock issued by us and (iii) an amendment to our Articles of
Incorporation to increase the number of shares of authorized Common Stock from
its existing warrant of 50,000,000 shares to 225,000,000 shares, to permit, at a
minimum, the issuance of the shares of Common Stock issuable pursuant to our
recent financings.

OPTIONS AND WARRANTS

As of November 30, 2001, we had outstanding options and warrants to
purchase a total of 5,502,185 shares of our Common Stock.

The shares subject to each option generally become non-forfeitable at
the rate of one-fifth for each 12-month period and in the case of certain
options to purchase shares of our Common Stock issued commencing in November,
1999, also, become non-forfeitable in the event of a "change in

control" of our Company (as defined in such plans and options). The exercise
price of these options or warrants generally range from $0.05 to $6.50 on the
date of grant representing the fair market value on the respective grant dates.
Also, these options generally expire at varying dates between November 2, 2001
and November 13, 2006. We issued options to purchase 769,659 shares of our
Common Stock under our 1997 and 1998 stock option plans which were unexercised
and outstanding as of November 30, 2001.

We adopted the 1998 Employee Incentive Stock Option Plan and the 1998
Non-qualified Stock Option Plan. The Incentive Stock Option Plan authorizes us
to grant to key employees of us and our subsidiaries (including any officer of
director who is an employee) incentive stock options to purchase shares of our
Common Stock. The Non-qualified Stock Option Plan authorizes us to grant to key
employees, and directors, officers, consultants, employees of consultants, and
advisors who are not employees of us and our subsidiaries, non-qualified options
to purchase shares of our Common Stock. Under the Incentive Stock Option Plan,
we authorized 2,200,000 shares potentially available for grants thereunder and
1,000,000 shares of our Common Stock under our Non-qualified Stock Option Plan,
or a total of 3,200,000 shares of our Common Stock (subject to further
adjustments for stock dividends and stock splits). We may not grant any options
under our 1998 plans after December 9, 2008. As of November 30, 2001 we had
2,430,341 shares of our Common Stock available for issuance under our Incentive
Stock Option Plan and Non-qualified Stock Option Plan.

In February, 2001, our Board of Directors adopted our 2001 Incentive
Compensation Plan (the "Plan"). Under the Plan, the Committee administering the
Plan is permitted to make awards of stock and or cash or both, including
forfeitable stock awards, on such terms and conditions the Committee determines
(subject to final approval of our Board of Directors) to one or more key
employees as an incentive for their continuing efforts and superior performance
on our behalf. The Plan has a term expiring on February 22, 2006. Under the Plan
we are not allowed to issue more than up to 1,000,000 shares of Common Stock
(subject to adjustment for stock splits and similar events) as awards throughout
the term of the Plan.

REGISTRATION RIGHTS OF CERTAIN SHAREHOLDERS

In connection with certain financing involving the sale of shares of
our Common Stock for cash in 1998, 1999 and 2000 we granted such purchasers the
right to include their shares so acquired in this registration statement of
which this Prospectus is a part. These buyers are included in the group of the
Selling Shareholders listed under "PRINCIPAL AND SELLING SHAREHOLDERS" herein.

Similarly, in connection with our borrowing of $2,500,000 from seven
lenders on May 15, 1998, we granted such lenders the right to include the
433,333 shares of our Common Stock in the registration statement of which this
Prospectus forms a part which they could buy at the exercise price at $0.25 per
share. Since all of these warrants were exercised these buyers' shares are
included in the group of Selling Shareholders listed under "PRINCIPAL AND
SELLING SHAREHOLDERS" herein.

Also, in connection with our sale of 950 shares of our Senior Preferred
Stock and warrants to purchase 4,750,000 shares of our Common Stock to ten
purchasers on varying dates from May 14, 1999 to October 5, 1999, we granted
such purchasers the right to include the shares subject to the warrants which
they could buy at an exercise price of $0.25 per share in this registration
statement of which this Prospectus forms a part. In the case of those warrants
which were exercised, these buyers' shares are included in the group of Selling
Shareholders listed under "PRINCIPAL AND SELLING SHAREHOLDERS" herein.

Lastly in connection with the bridge financing transactions in 2001, we
granted the lenders certain registration rights. See "DESCRIPTION OF CAPITAL
STOCK AND OTHER SECURITIES - Senior Secured Indebtedness".

"ANTI-TAKEOVER" PROVISIONS

Although our Board of Directors is not presently aware of any takeover
attempt or interest involving us, our Articles of Incorporation and Bylaws and
the Nevada General Corporation Law (sometimes referred to as the "NGCL") contain
certain provisions which may be deemed to be "anti-takeover" in nature in that
such provisions may deter, discourage or make more difficult the assumption of
control of us by another corporation or person through a tender offer, merger,
proxy contest or similar transaction or series of transactions.

Authorized but Unissued Shares: Our Articles of Incorporation
authorizes us to issue 50,000,000 shares of our Common Stock and 1,000,000
shares of Preferred Stock. These shares of capital stock provide our Board of
Directors with as much flexibility as possible to issue additional shares for
proper corporate purposes, including, without limitation,

(a) equity financing

(b) acquisitions

(d) stock splits

(e) employee stock option plans, and

(f) public offerings.

As of November 30, 2001, as the result of our recent secured financing,
we plan to issue a minimum of 65,805,000 additional shares of our Common Stock
(upon (i) the approval by our stockholders at a meeting of such mandatory
conversion of our securities originally issued in connection therewith, i.e. the
2001 Notes and the warrants issued to Lancer Offshore, Inc. and Lancer Partners
L.P. and (ii) our receipt of $3,210,000 in equity from sources other than
Michael Lauer, Lancer Offshore Inc., Lancer Partners L.P. and The Orbiter Fund
Ltd. on or before February 28, 2002) in transactions exempt from registration
under the Securities Act to raise part of the $4,000,000 in funding we needed
through at least through January 31, 2002. We have also reserved (i) 769,659
shares of our Common Stock for employee or non-employee stock options, (ii)
4,732,526 shares of our Common Stock for the possible exercise of warrants held
by third parties and (iii) up to 1,000,000 shares for issuance under our 2001
Incentive Compensation Plan).

We have plans to raise up to $4,500,000 during the twelve-month period
ending December 31, 2002 as our minimum capital needs during such period based
on the restriction under our secured financing agreement that limits us to a
current monthly burn rate (i.e. the excess of our expenditures over revenues
received, in each case determined on a cash basis) of not greater than $375,000
while the 2001 Notes remain outstanding during such period. We are currently
seeking to raise such amount within the next 12 months and currently have an
offering to sell up to 20 units of our Senior Preferred Stock and warrants
described below.

As stated above, we resolved in June, 2001 to issue up to 1,000 shares
of our new Senior Preferred Stock to obtain part of the $5,000,000 funding we
now are seeking. Pursuant to a private placement transaction which is exempt
from registration under the Securities Act, we are currently offering to sell up
to 20 Units (each a "Unit" and collectively the "Units") each consisting of (i)
50 shares of our Senior Preferred Stock and (ii) a detachable one-year warrant
to purchase 208,333 shares of our Common Stock expiring on January 31, 2003, at
an exercise price of $0.60 per share, subject to certain adjustments, with the
purchase price for each Unit of $250,000 payable in cash upon subscription. If
all the Units are sold, we will have issued 1,000 shares of Senior Preferred
Stock mandatorily convertible into 8,333,333 shares of our Common Stock upon
the approval of such conversion by our shareholders at a meeting, and warrants
to purchase 4,166,167 shares of our Common Stock, which can be exercised only
upon the approval of such exercise by our shareholders at a meeting.

Moreover, at a future point we could issue shares of our Preferred
Stock at any time with terms calculated to delay or prevent a change in control
of us without any further action by the stockholders. None of our stockholders
has any preemptive rights to subscribe to the purchase of these shares.
Therefore, our issuance of such shares of Preferred Stock could result in a
dilution of voting rights and book value per share of the shares of our Common
Stock. However, we have no present plan to issue any such shares of Preferred
Stock except for the shares of our new Senior Preferred Stock described above.

We plan to amend our Articles of Incorporation with shareholder
approval at a meeting to increase the number of shares of Common Stock we are
authorized to issue from 50,000,000 to 225,000,000 so as to permit the issuance
of shares of our Common Stock pursuant to our current financing plans and for
other corporate purposes.

No Cumulative Voting: Our Articles of Incorporation and our Bylaws do
not contain any provisions for cumulative voting. Cumulative voting entitles
each stockholder to as many votes as equal the number of shares owned by him
multiplied by the number of directors to be elected. A stockholder may cast all
these votes for one candidate or cast them among any two or more candidates.
Thus, cumulative voting for the election of directors allows a stockholder or
group of stockholders who hold less than 50% of the outstanding shares of a
corporation voting to elect one or more members of a board of directors. Without
cumulative voting for the election of directors, the vote of holders of a
plurality of the shares voting is required to elect any member of a board of
directors and present stockholders would be able to elect all of the members of
the board of directors. Our founders did not provide for cumulative voting in
our Articles of Incorporation because they believed that each director should
represent and act in the interest of all stockholders and not any special group
of stockholders.

Control Share Acquisitions: Sections 78.378 et seq. of the Nevada
General Corporation Law provide for notice to shareholders of a "control share
acquisition", which is defined as the acquisition of 20% of the voting power of
a Nevada corporation, or of voting power exceeding one-third of such total
voting power by a person who owns 20% or more of such voting power prior to the
acquisition, or a majority or more of such voting power by a person who already
owns one-third or more of the voting power. Shareholders of a Nevada corporation
have the right to demand "fair value" for their shares if a control share
acquisition occurs. The "control share" provisions limit the voting power of the
acquiror in a control share acquisition, and permit a corporation to recover
profits resulting from the sale of control shares in certain situations. The
control share acquisition provisions of the NGCL apply only to Nevada
corporations with a minimum of 100 shareholders of record who reside in Nevada
and, for that reason, do not now apply to us.

General Effect of Anti-Takeover Provisions: These provisions have a
general effect of deterring a future tender offer or other takeover attempt that
some stockholders might view to be in their best interests at that time. In
addition, these provisions may have the effect of assisting our current
management to keep its position and place it in a better position to resist
changes which some stockholders may want to make if dissatisfied with the
conduct of our business.

LIMITATIONS OF LIABILITY AND INDEMNIFICATION

Section 78.037 of the Nevada corporations law authorizes a Nevada
corporation to include a provision in its certificate of incorporation limiting
or eliminating the personal liability of its directors to the corporation or its
stockholders for monetary damages for breach of the directors' fiduciary duty of
care. The duty of care requires that, when acting on behalf of the corporation,
directors exercise an informed business judgment based on all material
information reasonably available to them. Absent the limitations authorized by
such provision, directors are accountable to corporations or their stockholders
for monetary damages for conduct constituting gross negligence in the exercise
of their duty of care. Although Section 78.037 of the Nevada

corporations law does not change a director's duty of care, it enables
corporations to limit available relief to equitable remedies such as injunction
or rescission. Our charter includes provisions which limit or eliminate the
personal liability of our directors to the fullest extent permitted by Section
78.037 of the Nevada corporations law. Consequently, a director will not be
personally liable to us or our stockholders for monetary damages for breach of
fiduciary duty as a director, except for any breach of the directors' duty of
loyalty to us or its stockholders, acts or omissions not in good faith or which
involve intentional misconduct or a knowing violation of law, unlawful payments
of dividends and any transaction from which the director derived an improper
personal benefit.

Our charter provides that we indemnify to the full extent permitted by
Nevada corporations law. Thus under Section 78.751 of such law, we indemnify any
person made or threatened to be made a party to any action, suit or proceeding,
whether civil, criminal, administrative or investigative, by reason of the fact
that such person or such person's testator or intestate is or was a director,
officer or employee of us or serves or served at the request of us any other
enterprise as a director, officer or employee, including attorneys fees,
judgments, fines and amounts paid in settlement. In addition, under such law,
any expense incurred by any such person in defending any such action, suit or
proceeding will be paid or reimbursed by us promptly upon receipt by us of an
undertaking of such person to repay such expenses if it shall ultimately be
determined that such person is not entitled to be indemnified by us. The
inclusion of these indemnification provisions through our charter intended to
enable us to attract qualified persons to serve as directors and officers who
might otherwise be reluctant to do so.

Our directors and officers are insured under policies of insurance
maintained by us, subject to the limit of being or having been such officers or
directors. In addition, the limited liability provisions in our charter and the
indemnification provisions under the Nevada corporations law through our charter
may discourage stockholders from bringing a lawsuit against directors for breach
of their fiduciary duty, including breaches resulting from grossly negligent
conduct, and may have the effect of reducing the likelihood of derivative
litigation against directors and officers even though such an action, if
successful, might otherwise have benefitted us and our stockholders.
Furthermore, a stockholder's investment in us may be adversely affected to the
extent we pay the costs of settlement and damage awards against directors and
officers of us pursuant to the indemnification provisions in our charter. The
limited liability provisions under the Nevada corporations law made available
through our charter will not limit the liability of directors under federal
securities laws.

Sections 378 through 379 of the Nevada general corporation law, and the
provision of our charter described above, may make it more difficult for a third
party to acquire or discourage bids for us. Sections 378 through 379 and these
provisions could have the effect of inhibiting attempts to change the membership
of the board of directors.

DIVIDEND POLICY

We currently intend to retain all of our earnings to finance our
operations, repay indebtedness and fund future growth. We do not expect to pay
any dividends on shares of our shares of Common Stock for the foreseeable
future.

STOCK TRANSFER AGENT AND REGISTRAR

Interwest Transfer Co., Inc., Suite 100, 1901 E. 4000 South, Salt Lake
City, Utah 84117, is the transfer agent and registrar for our shares of Common
Stock.

DISCLOSURE OF SECURITIES AND EXCHANGE COMMISSION POSITION ON INDEMNIFICATION FOR
SECURITIES ACT LIABILITIES

Section 78.751 of the NGCL, as amended, authorizes us to indemnify any
of our directors or officers under certain prescribed circumstances and subject
to certain limitations against certain costs and expenses, including attorneys'
fees actually and reasonably incurred in connection with any action, suit or
proceeding, whether civil, criminal, administrative or investigative, to which
such person is a party by reason of being our director of officer if it is
determined that such person acted in accordance with the applicable standard of
conduct set forth in such statutory provisions. We also maintain insurance for
the benefit of any director or officer which may cover claims for which we could
not indemnify such person. Insofar as indemnification for liabilities arising
under the Act may be permitted to directors, officers and controlling persons of
us pursuant to the foregoing provisions, or otherwise, we have been advised that
in the opinion of the Securities and Exchange Commission such indemnification is
against public policy as expressed in the Act and is, therefore, unenforceable.

VALIDITY OF SHARES OF OUR COMMON STOCK

The validity of the shares offered hereby will be passed upon for us by
Law Offices of Stephen R. Field, New York, New York, counsel to us. Such counsel
will render an opinion that the Shares are validly issued, fully paid and not
subject to any assessment.

Stephen R. Field, Esq. is a co-trustee or a trustee of various trusts
in which he has a potential beneficial interest in 98,946 shares of our Common
Stock and voting rights with respect thereto, and has voting rights with respect
to 1,235 shares of our Common Stock directly (which, in the aggregate,
represents less than 1% of our issued and outstanding shares of our Common Stock
as of the date hereof).

EXPERTS

[To be furnished by amendment]

WHERE YOU CAN FIND ADDITIONAL INFORMATION

We have filed a registration statement under the Securities Act that
registers the Shares offered by this Prospectus. The rules and regulations of
the SEC allow us to omit certain information included in the Registration
Statement from this Prospectus.

In addition, we file annual, quarterly and special reports and other
information with the SEC (including future proxy statements) under the Exchange
Act. You may read and copy this information at the following locations of the
SEC:

Public Reference Room,
450 Fifth Street, N.W.,
Room 1024,
Washington, D.C. 20549

Citicorp Center
500 West Madison Street
Suite 1400
Chicago, Illinois 60661-2511

You may also obtain copies of this information by mail from the Public
Reference Section of the SEC, 450 Fifth Street, N.W., Room 1024, Washington,
D.C. 20549, at prescribed rates. Further information on the operation of the
SEC's Public Reference Room in Washington, D.C. can be obtained by calling the
SEC at 1-800-SEC-0330.

The SEC also maintains an Internet world wide web site that contains
reports, and other information about issuers, such as us, who file
electronically with the SEC. The address of that site is http://www.sec.gov.

The shares of our Common Stock are traded on the American Stock
Exchange. You may also obtain copies of this information at the offices of the
American Stock Exchange, 86 Trinity Place, New York, New York 10006.

You should rely only on the information contained in this Prospectus.
We have not authorized anyone to give any information or make any representation
about us or this offering that is different from, or in addition to, that
contained in this Prospectus or in any of the materials that we have
incorporated into this document. Therefore, if any one does give you information
of this sort, you should not rely on it. If you are in a jurisdiction where
offers to sell, or solicitation of offers to buy the securities offered by this
document are unlawful, or if you are a person to whom it is unlawful to direct
these types of activities, then the offer presented in this document does not
extend to you. The information contained in this document speaks only as of the
date of this document unless the information specifically indicates that another
date applies.

TABLE OF CONTENTS

THE SELLING SHAREHOLDERS AND ANY BROKER/DEALERS OR AGENTS THAT
PARTICIPATE WITH THE SELLING SHAREHOLDERS IN THE DISTRIBUTION OF THE SHARES MAY
BE DEEMED TO BE "UNDERWRITERS" WITHIN THE MEANING OF THE SECURITIES ACT OF 1933,
AS AMENDED (THE "SECURITIES ACT"), AND ANY COMMISSIONS RECEIVED BY THEM AND ANY
PROFIT ON THE RESALE OF THE SHARES PURCHASED BY THEM MAY BE DEEMED TO BE
UNDERWRITING COMMISSIONS OR DISCOUNTS UNDER THE SECURITIES ACT. PERSONS WHO ARE
DEEMED TO BE UNDERWRITERS MAY BE SUBJECT TO STATUTORY LIABILITIES IF THE
REGISTRATION STATEMENT OF WHICH THIS PROSPECTUS IS A PART CONTAINS A MATERIAL
MISSTATEMENT OR OMITS TO DISCLOSE ANY INFORMATION NECESSARY TO MAKE STATEMENTS
WHICH ARE MADE NOT MISLEADING. WE HAVE NOT AGREED TO INDEMNIFY ANY OF THE
SELLING STOCKHOLDERS REGARDING SUCH POTENTIAL LIABILITIES. SEE "PLAN OF
DISTRIBUTION."

PAGE NO.
--------

CAUTIONARY STATEMENT REGARDING
FORWARD-LOOKING STATEMENTS ..................................... 6
PROSPECTUS SUMMARY ............................................... 6
RISK FACTORS .....................................................11
DILUTION .........................................................19
USE OF PROCEEDS ..................................................
SELECTED CONSOLIDATED PRO FORMA
AND HISTORICAL FINANCIAL DATA..................................20
MANAGEMENT'S DISCUSSION AND
ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS ......................................22
BUSINESS .........................................................30
LEGAL PROCEEDINGS ................................................44
MANAGEMENT .......................................................44
PRINCIPAL AND SELLING SHAREHOLDERS ...............................48
PLAN OF DISTRIBUTION .............................................
MARKET INFORMATION ...............................................51
ORGANIZATIONAL AND OTHER TRANSACTIONS.............................53
DESCRIPTION OF CAPITAL STOCK AND OTHER SECURITIES.................57
VALIDITY OF STOCK ................................................68
EXPERTS ..........................................................68
WHERE YOU CAN FIND MORE ..........................................68
</Table>

UNTIL ____________, 2002 ALL DEALERS EFFECTING TRANSACTIONS IN THE
SHARES OF OUR COMMON STOCK, WHETHER OR NOT PARTICIPATING IN THIS DISTRIBUTION,
MAY BE REQUIRED TO DELIVER A PROSPECTUS. THIS IS AN ADDITION TO THE OBLIGATION
OF DEALERS TO DELIVER A PROSPECTUS WHEN ACTING AS UNDERWRITERS AND WITH RESPECT
TO THEIR UNSOLD ALLOTMENTS OR SUBSCRIPTIONS.

PART II - INFORMATION NOT REQUIRED IN PROSPECTUS

ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION

The following table sets forth the estimated amount of various expenses
in connection with the sale and distribution of the securities being registered:

<Table>

SEC registration fee $ 3,624.04
Printing and engraving expenses $ 20,000
Legal fees and expense (including blue sky fees and expenses) $ 77,500
Accounting fees and expenses $ 70,000
Miscellaneous $ 3,874
-----------
Total $174,999.44
</Table>

ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICER

The Registrant's Articles of Incorporation contain a provision permitted by
Nevada law which eliminates the personal liability of the Registrant's directors
for monetary damages for breach or alleged breach of their fiduciary duty of
care which arises under state law. Although this does not change the directors'
duty of care, it limits legal remedies which are available for breach of that
duty to equitable remedies, such as an injunction or rescission. This provision
of the Registrant's Articles of Incorporation has no effect on directors'
liability for: (1) breach of the directors' duty of loyalty; (2) acts or
omissions not in good faith or involving intentional misconduct or known
violations of law; and (3) approval of any transactions from which the directors
derive an improper personal benefit.

The Registrant's Bylaws also contain a provision providing for the
indemnification of directors and officers to the fullest extent permitted under
the Nevada corporations law. The Nevada statute permits indemnification of
directors and officers of a corporation under certain circumstances and subject
to certain limitations.

ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES.

Since January 1, 1999, the Registrant has sold securities in reliance upon
exemptions from the registration requirements of the Securities Act of 1933 (the
"Securities Act") in the following transactions:

1. In January, 1999, the Company issued 2,667 and 5,333 shares of its Common
Stock to Joseph R. Huard and James Kelly, respectively, for finder's fees on an
equity placement. The shares were issued in reliance upon Section 4(2) of the
Securities Act of 1933, as amended, (the Act) and Rule 506 of Regulation D
promulgated thereunder. The Company believes that Mr. Huard and Mr. Kelly are
accredited investors.

2. In January, 1999, the Company issued 58,003 shares of its Common Stock to
Connolly Epstein Chicco Foxman Oxholm & Ewing, Esq. (Connolly) for services
valued at $116,006, or $2.00 per share. The shares were issued in reliance upon
Section 4(2) of the Act and Rule 506 of Regulation D promulgated thereunder.
Based on information obtained by the Company in connection with its relationship
with the law firm of Connolly, the Company believes that Connolly, through its
representatives, has such knowledge on business and financial matters as to be
able to evaluate the merits and risks of an investment in the Company.

3. In February, 1999, the Company issued for cash 40,000 shares of its Common
Stock to Alan Cohen at a price of $1.00 per share. The shares were issued in
reliance upon Section 4(2) of the Act and Rule 506 of Regulation D promulgated
thereunder. The Company believes that Mr. Cohen is an accredited investor.

4. In February, 1999, the Company issued 20,754 shares of its Common Stock to
Sterling Technology Partners, LLC for services valued at $36,942, or $1.77 per
share. The shares were issued in reliance upon Section 4(2) of the Act and Rule
506 of Regulation D promulgated thereunder. The Company believes that Sterling
Technology Partners, LLC is an accredited investor.

5. In February, 1999, the Company issued for cash 2,000,000 shares of its Common
Stock to Pensionkasse der Siemens-Gesellschaften in der Schwiez (Pensionkasse)
at a price of $1.00 per share. The shares were issued in reliance upon Section
4(2) of the Act and Rule 506 of Regulation D promulgated thereunder. The Company
believes that Pensionkasse is an accredited investor.

6. In March, 1999, the Company issued 447,671 shares and 446,027 shares of its
Common Stock to Electronic Assembly Corp. and Tiverton Holding, respectively
upon conversion of notes payable and interest valued at $893,698, or $1.00 per
share. The shares were issued in reliance upon Section 4(2) of the Act and Rule
506 of Regulation D promulgated thereunder. The Company believes that Electronic
Assembly Corp. and Tiverton Holding are accredited investors.

7. In March, 1999, the Company also issued 10,000 shares of its Common Stock to
Sterling Technology Partners, LLC for services valued at $19,400, or $1.94 per
share. The shares were issued in reliance upon Section 4(2) of the Act and Rule
506 of Regulation D promulgated thereunder. The Company believes that Sterling
Technology Partners, LLC is an accredited investor.

8. In April, 1999, the Company issued for cash 10,000 shares of its Common Stock
to Richard Mallen at a price of $1.00 per share. The shares were issued in
reliance upon Section 4(2) of the Securities Act of 1933, as amended (the Act)
and Rule 506 of Regulation D promulgated thereunder. The Company believes that
Mr. Mallen is an accredited investor.

9. In April, 1999, the Company issued 27,584 shares of its Common Stock to
Murdock Capital Partners, Corp. for services valued at $51,692, or $1.88 per
share. The shares were issued in reliance upon Section 4(2) of the Act and Rule
506 of Regulation D promulgated thereunder. Based on information obtained by the
Company in connection with its business relationship with Murdock Capital
Partners Corp., the Company believes, that Murdock Capital Partners Corp.,
through its representatives, has such knowledge on business and financial
matters as to be able to evaluate the merits and risks of an investment in the
Company.

10. In May, 1999, the Company issued 1,500 shares of its Common Stock to
Sterling Technology Partners, LLC for services valued at $2,625 or $1.75 per
share. The shares were issued in reliance upon Section 4(2) of the Act and Rule
506 of Regulation D promulgated thereunder. The Company believes that Sterling
Technology Partners, LLC is an accredited investor.

11. On May 14, 1999 the Company issued $2,600,000 of senior secured 16% notes
payable which mature in one year. The notes were issued for $2,600,000
consisting of $1,600,000 in cash and the deemed payment of $1,000,000 principal
amount of 1998 Bridge Loan notes. The notes were issued to the nine purchasers
listed and in the amounts set forth below:

Name of Purchaser Principal Amount of Notes

1. Lancer Offshore, Inc. $800,000
2. The Orbiter Fund Ltd. $600,000
3. The McCloskey Trust $440,000
4. DPM Investments Corp. $ 40,000
5. Frying Pan Partners, LLC $ 40,000
6. CJL Investments, LLC $ 80,000
7. Sterling Technology Partners LLC $200,000
8. James T. Kelly $200,000
9. K.R. Braithwaite $200,000
</Table>

The 1999 Notes were issued in reliance upon Section 4(2) of the Act and Rule 506
of Regulation D promulgated thereunder. The Company believes that each of the
purchasers of the Notes is an accredited investor.

12. In May, 1999, the Company issued 650 shares of the Company's Senior
Preferred Stock and warrants to purchase 3,250,000 shares of its Common Stock at
an exercise price of $0.25 per share expiring on May 14, 2004. The preferred
stock was issued for $650,000 consisting of $400,000 cash and the deemed payment
of $250,000 principal amount of 1998 bridge loan notes. The Senior Preferred
Stock and Warrants were issued to nine purchasers listed and in the amounts set
forth below:

No. of Shares of No. of Shares
Senior Preferred of Common Stock
Name of Purchaser Stock Subject to Warrants
- --------------------- ---------------- -------------------

Lancer Offshore, Inc. 200 1,750,000
The Orbiter Fund Ltd. 150 -0-
The McCloskey Trust 110 550,000
DPM Investments Corp 10 50,000
Frying Pan Partners, LLC 10 50,000
CJL Investments, LLC 20 100,000
Sterling Technology Partners LLC 50 250,000
James T. Kelly 50 250,000
K.R. Braithwaite 50 250,000
</Table>

13. In June, 1999, the Company issued for cash 500,000 shares of its Common
Stock to RUSP Holding S.A at a price of $1.00 per share. The shares were issued
in reliance upon Section 4(2) of the Act and Rule 506 of Regulation D
promulgated thereunder. The Company believes that RUSP Holding S.A. is an
accredited investor.

14. In June, 1999, the Company issued 1,000 and 2,000 shares of its Common Stock
to Strategic Alliance Unlimited and Sterling Technology Partners LLC,
respectively, in connection with services valued at $4,688, or $1.56 per share.
The shares were issued by the Company in reliance upon Section 4(2) of the Act
and Rule 506 promulgated thereunder. The Company believes that Strategic
Alliance Unlimited and Sterling Technology Partners LLC are accredited
investors.

15. In July, 1999 the Company issued for cash 405,000 shares of its Common Stock
to Riedel Investments at a price of $1.00 per share. The shares were issued in
reliance upon Section 4(2) of the Securities Act of 1933, as amended

(the Act) and Rule 506 of Regulation D promulgated thereunder. The Company
believes that Reidel Investments are an accredited investor.

16. In July, 1999 the Company issued for cash 195,000 shares of its Common Stock
to Rush & Co. at a price of $1.00 per share. The shares were issued in reliance
upon Section 4(2) of the Act and Rule 506 of Regulation D promulgated
thereunder. The Company believes that Rush & Co. are an accredited investor.

17. In July, 1999 the Company issued for services 26,000 shares of its Common
Stock to James T. Kelly for services rendered valued at $26,000 or $1.00 per
share. The shares were issued in reliance upon Section 4(2) of the Act and Rule
506 of Regulation D promulgated thereunder. The Company believes that James
Kelly is an accredited investor

18. In August, 1999, the Company issued 200,000 shares of its Common Stock at
$1.00 per share and Warrants to purchase 300,000 shares of its Common Stock at
an exercise price of $0.25 per share, expiring on May 14, 2004, to the nine
holders of the Company's 16% Senior Secured Notes issued on May 14, 1999 (the
1999 Notes) listed below in consideration of such persons' collective waiver of
the Company's potential default under the 1999 Notes. The shares of Common Stock
and Warrants were issued to the nine persons listed and in the amounts set forth
below:

Number of Shares of
Common Stock
Name of Purchaser Shares of Common Stock Subject To Warrants
- ---------------------- ---------------------- -------------------

Lancer Offshore Inc. 61,538 161,540
The Orbiter Fund Ltd. 46,154 -0-
The McCloskey Trust 33,846 50,769
DPM Investment Corp. 3,077 4,615
Frying Pan Partner, LLC 3,077 4,615
CJL Investments, LLC 6,153 9,230
Sterling Technology Partners LLC 15,385 23,077
James T. Kelly 15,385 23,077
K.R. Braithwaite 15,385 23,077
</Table>

The shares of Common Stock and the Warrants were issued in reliance upon Section
4(2) of the Act and Rule 506 of Regulation D promulgated thereunder. The Company
believes that each of the holders of the 1999 Notes is an accredited investor.

19. In August, 1999, the Company issued 50,000 shares of its Common Stock to the
five holders of the 1999 Notes listed below in consideration of such persons'
collective waiver of the Company's potential default in the payment of interest
due under the 1999 Notes. The shares of Common Stock were issued to the five
persons listed and in the amounts set forth below:

No. of Shares of
Name of Purchaser Common Stock
- --------------------- ------------------

Lancer Offshore, Inc. 20,000
The Orbiter Fund Ltd. 15,000
Sterling Technology Partners LLC 5,000
James T. Kelly 5,000
K. R. Braithwaite 5,000
</Table>

The shares of Common Stock were issued in reliance upon Section 4(2) of the Act
and Rule 506 of Regulation D promulgated thereunder. The Company believes that
each of the above holders of the 1999 Notes is an accredited investor.

20. In August, 1999 K.R. Braithwaite exercised her warrants to purchase for cash
92,500 shares of its Common Stock at a price of $.25 per share. The shares were
issued in reliance upon Section 4(2) of the Act and Rule 506 of Regulation D
promulgated thereunder. The Company believes that K.R. Braithwaite is an
accredited investor.

21. In August, 1999, the Company sold $400,000 and $80,000 principal amount of
its 16% Senior Secured Notes maturing on May 14, 2000 to Lancer Offshore Inc.
and Sterling Technology Partners LLC, respectively, for $480,000 in cash. The
Notes were issued in reliance upon Section 4(2) of the Act and Rule 506 of
Regulation D promulgated thereunder. The Company believes that each of Lancer
Offshore Inc. and Sterling Technology Partners LLC is an accredited investor.

22. In August 1999, the Company sold 100 and 20 shares of its Senior Preferred
Stock to Lancer Offshore Inc. and Sterling Technology Partners, LLC,
respectively and detachable warrants to purchase 500,000 shares and 100,000
shares of its Common Stock at an exercise price of $0.25 per share expiring on
August 27, 2004 to Lancer Offshore Inc. and Sterling Technology Partners, LLC,
respectively, for $100,000 and $20,000 in cash, respectively. The shares of
Senior Preferred Stock and Warrants were issued in reliance upon Section 4(2) of
the Act and Rule 506 of Regulation D promulgated thereunder. The Company
believes that each of Lancer Offshore Inc. and Sterling Technology Partners LLC
is an accredited investor.

23. In August, 1999, the Company sold 50 shares of its Senior Preferred Stock
and detachable warrants to purchase 250,000 shares of its Common Stock at an
exercise price of $0.25 per share expiring on August 27, 2004 to Capital
Research Ltd. for $50,000 in cash. The shares of Senior Preferred Stock and
Warrants were issued in reliance upon Section 4(2) of the Act and Rule 506 of
Regulation D promulgated thereunder. The Company believes that Capital Research
Ltd. is an accredited investor.

24. In September, 1999 the Company sold 250,000 shares of its Common Stock to
RUSP Holding S.A., at a price of $1.00 per share, in cash. The shares were
issued in reliance upon Section 4(2) of the Act Rule 506 of Regulation D
promulgated thereunder. The Company believes that Rusp Holding S.A., is an
accredited investor.

25. In September, 1999, the Company issued Warrants to James T. Kelly and
Sterling Technology Partners LLC to purchase 75,000 shares and 75,000 shares of
its Common Stock at an exercise price of $1.00 per share, in consideration of
services rendered by the Company in connection with the Company's raising of
equity in the fourth quarter of 1998 and the first quarter of 1999. The Warrants
were issued in reliance upon Section 4(2) of the Act and Rule 506 of Regulation
D promulgated thereunder. The Company believes that each of James T. Kelly and
Sterling Technology Partners LLC is an accredited investor.

26. In October, 1999 the Company issued 250,000 shares of its Common Stock to
RUSP Holding S.A., at a price of $1.00 per share, in cash. The shares were
issued in reliance upon Section 4(2) of the Securities Act of 1933, as amended
(the Act) and Rule 506 of Regulation D promulgated thereunder. The Company
believes that RUSP Holding S.A. is an accredited investor.

27. In October, 1999, the Company issued for cash 37,500 shares of its Common
Stock to Kathryn Braithwaite upon the exercise of certain warrants at a price of
$0.25 per share. The shares of Common Stock were issued in reliance upon Section
4(2) of the Act and Rule 506 of Regulation D promulgated thereunder. The Company
believes that Kathryn Braithwaite is an accredited investor.

28. In October, 1999, the Company issued for cash 23,077 shares of its Common
Stock to Sterling Technology Partners upon the exercise of certain warrants at a
price of $0.25 per share. The shares of Common Stock were issued in reliance
upon Section 4(2) of the Act and Rule 506 of Regulation D promulgated
thereunder. The Company believes that Sterling Technology Partners is an
accredited investor.

29. In October, 1999, the Company sold $400,000 principal amount of its 16%
Senior Secured Notes maturing on May 14, 2000 to Lancer Offshore Inc. for
$400,000 in cash. The Notes were issued in reliance upon Section 4(2) of the Act
and Rule 506 of Regulation D promulgated thereunder. The Company believes that
Lancer Offshore Inc. is an accredited investor.

30. In October, 1999, the Company sold 100 shares of its Senior Preferred Stock,
and detachable warrants to purchase 500,000 shares of its Common Stock at an
exercise price of $0.25 per share expiring on October 5, 2004, to Lancer
Offshsore Inc. for $100,000 in cash. The shares of Senior Preferred Stock and
Warrants were issued in reliance upon Section 4(2) of the Act and Rule 506 of
Regulation D promulgated thereunder. The Company believes that Lancer Offshore
Inc. is an accredited investor.

31. In October, 1999, the Company sold 30 shares of its Senior Preferred Stock
and detachable warrants to purchase 250,000 shares of its Common Stock at an
exercise price of $0.25 per share expiring on October 5, 2004, to Capital
Research Ltd. for $30,000 in cash. The shares of Common Stock and Warrants were
issued in reliance upon Section 4(2) of the Act and Rule 506 of Regulation D
promulgated thereunder. The Company believes that Capital Research Ltd. is an
accredited investor.

32. In October 1999, the Company sold 250,000 shares of its common stock to RUSP
Holding S.A. for $250,000. The shares were issued in reliance upon Section 4(2)
of the Act and Rule 506 of Regulation D promulgated thereunder. The Company
believes that RUSP Holding S.A. is an accredited investor.

33. In November, 1999, the Company sold 500,000 shares of its Common Stock to
RUSP Holding S.A., at a price of $1.00 per share, in cash. The shares were
issued in reliance upon Section 4(2) of the Act and Rule 506 of Regulation D
promulgated thereunder. The Company believes that RUSP Holding S.A. is an
accredited investor.

34. In December, 1999, the Company sold 1,000,000 shares of its Common Stock to
RUSP Holding S.A. at a price of $1.00 per share, in cash. The shares were issued
in reliance upon Section 4(2) of the Act and Rule 506 of Regulation D
promulgated thereunder. The Company believes that RUSP Holding is an accredited
investor.

35. In December 1999, the Company sold 428,000 shares of its Common Stock to two
investors at a price of $1.00 per share, in cash. The shares were issued in
reliance upon Section 4(2) of the Act and Rule 506 of Regulation D promulgated
thereunder. The Company believes that each of the investors is an accredited
investor.

36. In February, 2000, the Company sold 200,000 shares of its Common Stock to
The Pinnacle Fund L.P., at a price of $3.00 per share, in cash. The shares were
issued in reliance upon Section 4(2) of the Securities Act of 1933, as amended
(the Act) and Rule 506 of Regulation D promulgated thereunder. The Company
believes that The Pinnacle Fund L.P. is an accredited investor.

37. In February, 2000, the Company sold 40,000 shares of its Common Stock to
John S. Lemak, at a price of $3.00 per share, in cash. The shares were issued in
reliance upon Section 4(2) of the Act and Rule 506 of Regulation D promulgated
thereunder. The Company believes that John S. Lemak is an accredited investor.

38. In February, 2000, the Company sold 40,000 shares of its Common Stock to
Robert L. Swisher, Jr., at a price of $3.00 per share, in cash. The shares were
issued in reliance upon Section 4(2) of the Act and Rule 506 of Regulation D
promulgated thereunder. The Company believes that Robert L. Swisher, Jr. is an
accredited investor.

39. In February, 2000, the Company sold 10,000 shares of its Common Stock to
Stephen R. Field, Trustee of the Trust under Article Fourth of the Will of
Nathaniel Field, at a price of $3.00 per share, in cash. The shares were issued
in reliance upon Section 4(2) of the Act and Rule 506 of Regulation D
promulgated thereunder. The Company believes that Stephen R. Field, Trustee, is
an accredited investor.

40. In February, 2000, the Company sold 10,000 shares of its Common Stock to
Peter Rettman, at a price of $3.00 per share, in cash. The shares were issued in
reliance upon Section 4(2) of the Act and Rule 506 of Regulation D promulgated
thereunder. The Company believes that Peter Rettman is an accredited investor.

41. In February, 2000, the Company sold 2,000 shares of its Common Stock to
Malcolm P. Thomas, at a price of $3.00 per share, in cash. The shares were
issued in reliance upon Section 4(2) of the Act and Rule 506 of Regulation D
promulgated thereunder. The Company believes that Malcolm P. Thomas is an
accredited investor.

42. In February, 2000, the Company sold 20,000 shares of its Common Stock to
Susan S. Oelsen, at a price of $3.00 per share, in cash. The shares were issued
in reliance upon Section 4(2) of the Act and Rule 506 of Regulation D
promulgated thereunder. The Company believes that Susan S. Olesen is an
accredited investor.

43. In February, 2000, the Company sold 10,000 shares of its Common Stock to Tom
S. Humse, at a price of $3.00 per share, in cash. The shares were issued in
reliance upon Section 4(2) of the Act and Rule 506 of Regulation D promulgated
thereunder. The Company believes that Tom S. Humse is an accredited investor.

44. In February, 2000, the Company sold 20,000 shares of its Common Stock to
Barry Michael Kitt, at a price of $3.00 per share, in cash. The shares were
issued in reliance upon Section 4(2) of the Act and Rule 506 of Regulation D
promulgated thereunder. The Company believes that Barry Michael Kitt is an
accredited investor.

45. In February, 2000, the Company sold 650,000 shares of its Common Stock to
Elkron International S.p.A., at a price of $3.00 per share, in cash. The shares
were issued in reliance upon Section 4(2) of the Act and Rule 506 of Regulation
D promulgated thereunder. The Company believes that Elkron International S.p.A.
is an accredited investor.

46. In February, 2000, the Company sold 166,667 shares of its Common Stock to
Clinton A. Thomas Living Trust, at a price of $3.00 per share, in cash. The
shares were issued in reliance upon Section 4(2) of the Act and Rule 506 of
Regulation D promulgated thereunder. The Company believes that Clinton A. Thomas
Living Trust is an accredited investor.

47. In February, 2000, the Company sold 500,000 shares of its Common Stock to
Kermit B. Thomas Living Trust, at a price of $3.00 per share, in cash. The
shares were issued in reliance upon Section 4(2) of the Act and Rule 506 of
Regulation D promulgated thereunder. The Company believes that Kermit B. Thomas
Living Trust is an accredited investor.

48. In February, 2000, the Company sold 666,667 shares of its Common Stock to
President & Fellows of Harvard College, at a price of $3.00 per share, in cash.
The shares were issued in reliance upon Section 4(2) of the Act and Rule 506 of
Regulation D promulgated thereunder. The Company believes that President &
Fellows of Harvard College is an accredited investor.

49. In February, 2000, the Company sold 10,000 shares of its Common Stock to
Alfred Lagana, at a price of $3.00 per share, in cash. The shares were issued in
reliance upon Section 4(2) of the Act and Rule 506 of Regulation D promulgated
thereunder. The Company believes that Alfred Lagana is an accredited investor.

50. In February, 2000, the Company sold 3,334 shares of its Common Stock to
Eliane Reinhold, at a price of $3.00 per share, in cash. The shares were issued
in reliance upon Section 4(2) of the Act and Rule 506 of Regulation D
promulgated thereunder. The Company believes that Eliane Reinhold is an
accredited investor.

51. In February, 2000, the Company sold 20,000 shares of its Common Stock to
John A. and Maria Famiglietti, at a price of $3.00 per share, in cash. The
shares were issued in reliance upon Section 4(2) of the Act and Rule 506 of
Regulation D promulgated thereunder. The Company believes that John A. and Maria
Famiglietti are accredited investors.

52. In February, 2000, the Company sold 160,000 shares of its Common Stock to
Graham Properties, LP, at a price of $3.00 per share, in cash. The shares were
issued in reliance upon Section 4(2) of the Act and Rule 506 of Regulation D
promulgated thereunder. The Company believes that Graham Properties, LP is an
accredited investor.

53. In February, 2000, the Company sold 200,000 shares of its Common Stock to
West Core Select Funds, at a price of $3.00 per share, in cash. The shares were
issued in reliance upon Section 4(2) of the Act and Rule 506 of Regulation D
promulgated thereunder. The Company believes that West Core Select Funds is an
accredited investor.

54. In February, 2000, the Company sold 100,000 shares of its Common Stock to
Puglisi Capital Partners L.P., at a price of $3.00 per share, in cash. The
shares were issued in reliance upon Section 4(2) of the Act and Rule 506 of
Regulation D promulgated thereunder. The Company believes that Puglisi Capital
Partners L.P. is an accredited investor.

55. In February, 2000, the Company sold 4,000 shares of its Common Stock to
Richard T. Mallen, at a price of $3.00 per share, in cash. The shares were
issued in reliance upon Section 4(2) of the Act and Rule 506 of Regulation D
promulgated thereunder. The Company believes that Robert T. Mallen is an
accredited investor.

56. In February, 2000 and March, 2000, the Company sold a total of 20,000 shares
of its Common Stock to Jonathan Merriman, at a price of $3.00 per share, in
cash. The shares were issued in reliance upon Section 4(2) of the Act and Rule
506 of Regulation D promulgated thereunder. The Company believes that Jonathan
Merriman is an accredited investor.

57. In February, 2000, the Company sold 73,333 shares of its Common Stock to
Tiedemann Boltres, at a price of $3.00 per share, in cash. The shares were
issued in reliance upon Section 4(2) of the Act and Rule 506 of Regulation D
promulgated thereunder. The Company believes that Tiedemann Boltres is an
accredited investor.

58. In February, 2000, the Company sold 313,000 shares of its Common Stock to
Tiedemann Boltres Ptrs., at a price of $3.00 per share, in cash. The shares were
issued in reliance upon Section 4(2) of the Act and Rule 506 of Regulation D
promulgated thereunder. The Company believes that Tiedemann Boltres Ptrs. is an
accredited investor.

59. In February, 2000, the Company sold 3,000 shares of its Common Stock to
Apaquoque GP, at a price of $3.00 per share, in cash. The shares were issued in
reliance upon Section 4(2) of the Act and Rule 506 of Regulation D promulgated
thereunder. The Company believes that Apaquoque GP is an accredited investor.

60. In February, 2000, the Company sold 73,334 shares of its Common Stock to
Canadian Imperial Holding, at a price of $3.00 per share, in cash. The shares
were issued in reliance upon Section 4(2) of the Act and Rule 506 of Regulation
D promulgated thereunder. The Company believes that Canadian Imperial Holding is
an accredited investor.

61. In February, 2000, the Company sold 153,333 shares of its Common Stock to
Ira Partners, at a price of $3.00 per share, in cash. The shares were issued in
reliance upon Section 4(2) of the Act and Rule 506 of Regulation D promulgated
thereunder. The Company believes that Ira Partners is an accredited investor.

62. In February, 2000, the Company sold 100,000 shares of its Common Stock to
Treeline, at a price of $3.00 per share, in cash. The shares were issued in
reliance upon Section 4(2) of the Act and Rule 506 of Regulation D promulgated
thereunder. The Company believes that Treeline is an accredited investor.

63. In February, 2000, the Company sold 100,000 shares of its Common Stock to
Steamers Partners, at a price of $3.00 per share, in cash. The shares were
issued in reliance upon Section 4(2) of the Act and Rule 506 of Regulation D
promulgated thereunder. The Company believes that Steamers Partners is an
accredited investor.

64. In February, 2000, the Company sold 50,000 shares of its Common Stock to
Cooperative Holding Corporation, at a price of $3.00 per share, in cash. The
shares were issued in reliance upon Section 4(2) of the Act and Rule 506 of
Regulation D promulgated thereunder. The Company believes that Cooperative
Holding Corporation is an accredited investor.

65. In February, 2000, the Company issued 273,077 shares of its Common Stock to
James T. Kelly, pursuant to his exercise of certain warrants at an exercise
price of $0.25 per share, in cash. The shares were issued in reliance upon
Section 4(2) of the Act and Rule 506 of Regulation D promulgated thereunder. The
Company believes that James T. Kelly is an accredited investor.

66. In February, 2000, the Company issued 21,667 shares of its Common Stock to
Scott Ryan, pursuant to his exercise of certain warrants at an exercise price of
$0.25 per share, in cash. The shares were issued in reliance upon Section 4(2)
of the Act and Rule 506 of Regulation D promulgated thereunder. The Company
believes that Scott Ryan is an accredited investor.

67. In February, 2000, the Company issued 21,667 shares of its Common Stock to
Warren Palitz, pursuant to his exercise of certain warrants at an exercise price
of $0.25 per share, in cash. The shares were issued in reliance upon Section
4(2) of the Act and Rule 506 of Regulation D promulgated thereunder. The Company
believes that Warren Palitz is an accredited investor.

68. In March, 2000, the Company sold 40,000 shares of its Common Stock to Thomas
E. Hodapp, at a price of $3.00 per share, in cash. The shares were issued in
reliance upon Section 4(2) of the Act and Rule 506 of Regulation D promulgated
thereunder. The Company believes that Thomas E. Hodapp is an accredited
investor.

69. In March, 2000, the Company sold 10,000 shares of its Common Stock to
Michael Seely, at a price of $3.00 per share, in cash. The shares were issued in
reliance upon Section 4(2) of the Act and Rule 506 of Regulation D promulgated
thereunder. The Company believes that Michael Seely is an accredited investor.

70. In March, 2000, the Company sold 30,000 shares of its Common Stock to Kevin
Ketelsen, at a price of $3.00 per share, in cash. The shares were issued in
reliance upon Section 4(2) of the Act and Rule 506 of Regulation D promulgated
thereunder. The Company believes that Kevin Ketelsen is an accredited investor.

71. In March, 2000, the Company sold 10,000 shares of its Common Stock to Allan
Lipton, at a price of $3.00 per share, in cash. The shares were issued in
reliance upon Section 4(2) of the Act and Rule 506 of Regulation D promulgated
thereunder. The Company believes that Allan Lipton is an accredited investor.

72. In March, 2000, the Company sold 10,000 shares of its Common Stock to Nancy
Lipton, at a price of $3.00 per share, in cash. The shares were issued in
reliance upon Section 4(2) of the Act and Rule 506 of Regulation D promulgated
thereunder. The Company believes that Nancy Lipton is an accredited investor.

73. In March, 2000, the Company sold 20,000 shares of its Common Stock to Brian
Manolis, at a price of $3.00 per share, in cash. The shares were issued in
reliance upon Section 4(2) of the Act and Rule 506 of Regulation D promulgated
thereunder. The Company believes that Brian Manolis is an accredited investor.

74. In March, 2000, the Company sold 350,000 shares of its Common Stock to
Tanalux S.A., at a price of $3.00 per share, in cash. The shares were issued in
reliance upon Section 4(2) of the Act and Rule 506 of Regulation D promulgated
thereunder. The Company believes that Tanalux S.A. is an accredited investor.

75. In March, 2000, the Company sold 30,000 shares of its Common Stock to
Lawrence S. Black, at a price of $3.00 per share, in cash. The shares were
issued in reliance upon Section 4(2) of the Act and Rule 506 of Regulation D
promulgated thereunder. The Company believes that Lawrence S. Black is an
accredited investor.

76. In March, 2000, the Company sold 20,000 shares of its Common Stock to F. Van
Kasper, at a price of $3.00 per share, in cash. The shares were issued in
reliance upon Section 4(2) of the Act and Rule 506 of Regulation D promulgated
thereunder. The Company believes that F. Van Kasper is an accredited investor.

77. In March, 2000, the Company sold 20,000 shares of its Common Stock to Alan
Frost, at a price of $3.00 per share, in cash. The shares were issued in
reliance upon Section 4(2) of the Act and Rule 506 of Regulation D promulgated
thereunder. The Company believes that Alan Frost is an accredited investor.

78. In March, 2000, the Company sold 10,000 shares of its Common Stock to
Michael J. Joly, at a price of $3.00 per share, in cash. The shares were issued
in reliance upon Section 4(2) of the Act and Rule 506 of Regulation D
promulgated thereunder. The Company believes that Michael J. Joly is an
accredited investor.

79. In March, 2000, the Company sold 20,000 shares of its Common Stock to Alex
Brown CUST FBO Peter A. Massanisco Roth IRA, at a price of $3.00 per share, in
cash. The shares were issued in reliance upon Section 4(2) of the Act and Rule
506 of Regulation D promulgated thereunder. The Company believes that Alex Brown
CUST FBO Peter A. Massanisco Roth IRA is an accredited investor.

80. In March, 2000, the Company sold 20,000 shares of its Common Stock to Peter
A. Massanisco, at a price of $3.00 per share, in cash. The shares were issued in
reliance upon Section 4(2) of the Act and Rule 506 of Regulation D promulgated
thereunder. The Company believes that Peter A. Massanisco is an accredited
investor.

81. In March, 2000, the Company sold 100,000 shares of its Common Stock to
Douglas and Laurie Moore, Trustees, at a price of $3.00 per share, in cash. The
shares were issued in reliance upon Section 4(2) of the Act and Rule 506 of
Regulation D promulgated thereunder. The Company believes that Douglas and
Laurie Moore, Trustees, are accredited investors.

82. In March, 2000, the Company sold 100,000 shares of its Common Stock to
Lodestone Capital Fund, at a price of $3.00 per share, in cash. The shares were
issued in reliance upon Section 4(2) of the Act and Rule 506 of Regulation D
promulgated thereunder. The Company believes that Lodestone Capital Fund is an
accredited investor.

83. In March, 2000, the Company sold 40,000 shares of its Common Stock to Ponte
Vedra Partners, L.P., at a price of $3.00 per share, in cash. The shares were
issued in reliance upon Section 4(2) of the Act and Rule 506 of Regulation D
promulgated thereunder. The Company believes that Ponte Vedra Partners, L.P. is
an accredited investor.

84. In March, 2000, the Company issued 302,538 shares of its Common Stock to
Sterling Technology Partners, upon the exercise of certain warrants at an
exercise price of $0.25 per share, in cash. The shares were issued in reliance
upon Section 4(2) of the Act and Rule 506 of Regulation D promulgated
thereunder. The Company believes that Sterling Technology Partners is an
accredited investor.

85. In March, 2000, the Company issued 310,604 shares of its Common Stock to
Kathryn Braithwaite, upon the exercise of certain warrants at an exercise price
of $0.25 per share, in cash. The shares were issued in reliance upon

Section 4(2) of the Act and Rule 506 of Regulation D promulgated thereunder. The
Company believes that Kathryn Braithwaite is an accredited investor.

86. In March, 2000, the Company issued 78,520 shares of its Common Stock to DPM
Investment Corp upon the deemed exercise of certain warrants at an exercise
price of $0.25 per share, which amount was treated as part payment of the amount
owed under the 16% Senior Secured Notes owned by such party. The shares were
issued in reliance upon Section 4(2) of the Act and Rule 506 of Regulation D
promulgated thereunder. The Company believes that DPM Investment Corp. is an
accredited investor.

87. In March, 2000, the Company issued 78,520 shares of its Common Stock to
Frying Pan Partners LLC upon the deemed exercise of certain warrants at an
exercise price of $0.25 per share, which amount was treated as part payment of
the amount owed under the 16% Senior Secured Notes owned by such party. The
shares were issued in reliance upon Section 4(2) of the Act and Rule 506 of
Regulation D promulgated thereunder. The Company believes that Frying Pan
Partners LLC is an accredited investor.

88. In March, 2000, the Company issued 863,727 shares of its Common Stock to
Thomas McCloskey, the Trustee of the McCloskey Trust, upon the deemed exercise
of certain warrants at an exercise price of $0.25 per share, which amount was
treated as part payment of the amount owed under the 16% Senior Secured Notes
owned by such party. The shares were issued in reliance upon Section 4(2) of the
Act and Rule 506 of Regulation D promulgated thereunder. The Company believes
that Thomas McCloskey, Trustee, is an accredited investor.

89. In March, 2000, the Company issued 18,046 shares of its Common Stock to
James T. Kelly upon the deemed exercise of certain warrants at an exercise price
of $0.25 per share, which amount was treated as part payment of the amount owed
under the 16% Senior Secured Notes owned by such party. The shares were issued
in reliance upon Section 4(2) of the Act and Rule 506 of Regulation D
promulgated thereunder. The Company believes that James T. Kelly is an
accredited investor.

90. In March, 2000, the Company issued 2,250,000 shares of its Common Stock to
Lancer Offshore Inc. upon the deemed exercise of certain warrants at an exercise
price of $0.25 per share, which amount was treated as part payment of the amount
owed under the 16% Senior Secured Notes owned by such party. The shares were
issued in reliance upon Section 4(2) of the Act and Rule 506 of Regulation D
promulgated thereunder. The Company believes that Lancer Offshore Inc. is an
accredited investor.

91. In March, 2000, the Company issued 500,000 shares of its Common Stock to
Lancer Partners L.P. upon the deemed exercise of certain warrants at an exercise
price of $0.25 per share, which amount was treated as part payment of the amount
owed under the 16% Senior Secured Notes owned by such party. The shares were
issued in reliance upon Section 4(2) of the Act and Rule 506 of Regulation D
promulgated thereunder. The Company believes that Lancer Partners L.P. is an
accredited investor.

92. In March, 2000, the Company issued 675,324 shares of its Common Stock to
Capital Research, LTD., upon the exercise of certain warrants at an exercise
price of $0.25 per share, in cash. The shares were issued in reliance upon
Section 4(2) of the Act and Rule 506 of Regulation D promulgated thereunder. The
Company believes that Capital Research, LTD. is an accredited investor.

93. In March, 2001, we issued 13,334 shares of our Common Stock to Charles G.
Sherwood, pursuant to his exercise of an employee stock option at an exercise
price of $1.31 per share, in cash. The shares were issued in reliance upon
Section 4(2) of the Act.

94. In May, 2001, we issued 7,862 shares of our Common Stock to IBT Ventures,
pursuant to its exercise of an option to receive such shares with a value
without any payment therefor for services rendered or to be paid cash, for such
services. We issued such shares to IBT Ventures in reliance upon Section 4(2) of
the Act.

95. As of May 17, 2001, we issued (i) a Senior Secured Note in the principal
amount of $1,125,000 and (ii) warrants to purchase 562,500 shares of our Common
Stock at an exercise price of $0.50 per share to Lancer Offshore, Inc., an
affiliate of our largest stockholder. We believe that Lancer Offshore, Inc. is
an accredited investor within the meaning of Regulation D issued under the Act.
We issued such securities in reliance upon Section 4(2) of the Act.

96. As of August 7, 2001, we issued (i) a Senior Secured Note in the principal
amount of $350,000 and (ii) a warrant expiring on August 6, 2006 to purchase
225,000 shares of our Common Stock at an exercise price of $0.30 per share, to
Lancer Partners L.P., an affiliate of our largest stockholder. We believe that
Lancer Partners L.P. is an accredited investor within the meaning of Regulation
D issued under the Act. We issued such securities in reliance upon Section 4(2)
of the Act.

97. As of September 6, 2001, we issued a Senior Secured Note in the principal
amount of $100,000 to Lancer Partners L.P., an affiliate of our largest
stockholder. We believe that Lancer Partners L.P. is an accredited investor
within the meaning of Regulation D issued under the Act. We issued such
securities in reliance upon Section 4(2) of the Act.

98. As of September 18, 2001, we issued (i) a Senior Secured Note in the
principal amount of $175,000 to Lancer Partners L.P. and (ii) a warrant to
purchase 87,500 shares of our Common Stock at an exercise price of $0.30 per
share, expiring on September 17, 2006, to Lancer Partners L.P., an affiliate of
our largest stockholder. We believe that Lancer Partners L.P. is an accredited
investor within the meaning of Regulation D issued under the Act. We issued such
securities in reliance upon Section 4(2) of the Act.

99. As of October 3, 2001, we issued (i) a Senior Secured Note in the principal
amount of $25,000 to Lancer Partners L.P. and (ii) a warrant to purchase 12,500
shares of our Common Stock at an exercise price of $0.30 per share, expiring on
October 2, 2006, to Lancer Partners L.P., an affiliate of our largest
stockholder. We believe that Lancer Partners L.P. is an accredited investor
within the meaning of Regulation D issued under the Act. We issued such
securities in reliance upon Section 4(2) of the Act.

100. As of October 3, 2001, we issued (i) a Senior Secured Note in the principal
amount of $85,000 to Lancer Offshore, Inc. and (ii) a warrant to purchase 42,500
shares of our Common Stock at an exercise price of $0.30 per share, expiring on
October 2, 2006, to Lancer Offshore, Inc., an affiliate of our largest
stockholder. We believe that Lancer Offshore, Inc. is an accredited investor
within the meaning of Regulation D issued under the Act. We issued such
securities in reliance upon Section 4(2) of the Act.

101. As of October 8, 2001, we issued (i) a Senior Secured Note in the principal
amount of $175,000 to Lancer Offshore, Inc. and (ii) a warrant to purchase
87,500 shares of our Common Stock at an exercise price of $0.30 per share,
expiring on October 7, 2006, to Lancer Offshore, Inc., an affiliate of our
largest stockholder. We believe that Lancer Offshore, Inc. is an accredited
investor within the meaning of Regulation D issued under the Act. We issued such
securities in reliance upon Section 4(2) of the Act.

102. As of October 28, 2001, we issued (i) a Senior Secured Note in the
principal amount of $175,000 to Lancer Offshore, Inc. and (ii) a warrant to
purchase 87,500 shares of our Common Stock at an exercise price of $0.30 per
share, expiring on October 27, 2006, to Lancer Offshore, Inc., an affiliate of
our largest stockholder. We believe that Lancer Offshore, Inc. is an accredited
investor within the meaning of Regulation D issued under the Act. We issued such
securities in reliance upon Section 4(2) of the Act.

103. As of November 14, 2001, we issued (i) a Senior Secured Note in the
principal amount of $1,000,000 to Lancer Offshore, Inc. and (ii) a warrant to
purchase 500,000 shares of our Common Stock at an exercise price of $0.30 per
share, expiring on November 13, 2006, to Lancer Offshore, Inc., an affiliate of
our largest stockholder. We believe that Lancer Offshore, Inc. is an accredited
investor within the meaning of Regulation D issued under the Act. We issued such
securities in reliance upon Section 4(2) of the Act.

104 As of November 14, 2001, we issued to Capital Research Ltd. a warrant to
purchase 2,000,000 shares of our Common Stock at $0.05 per share, expiring on
November 13, 2006 in consideration for its services in connection with the
secured loan financing of $3,210,000 received by us during the period from May
17, 2001 through November 14, 2001. We believe that Capital Research Ltd. is an
accredited investor within the meaning of Regulation D issued under the Act. We
issued such securities in reliance upon Section 4(2) of the Act.

WORLD WIRELESS COMMUNICATIONS, INC. AND SUBSIDIARIES

TABLE OF CONTENTS

<Table>
<Caption>
PAGE
----

Consolidated Balance Sheet of September 30, 2001 (unaudited) F-2

Consolidated Statement of Operations for the Nine Months
ended September 30, 2001 and September 30, 2000 (unaudited) F-4

Consolidated Statement of Cash Flows for the Nine Months
ended September 30, 2001 and September 30, 2000 (unaudited) F-5

Notes to Consolidated Financial Statements F-7

Independent Auditors' Report F-16

Report of Independent Certified Public Accountants F-17

Consolidated Balance Sheets - December 31, 2000 and 1999 F-18

Consolidated Statements of Operations for the Years Ended
December 31, 2000, 1999, and 1998 F-19

Consolidated Statements of Stockholders' Equity (Deficit)
for the Years Ended December 31, 1998, 1999 and 2000 F-20

Consolidated Statements of Cash Flows for the Years Ended
December 31, 2000, 1999, and 1998 F-21

Notes to Consolidated Financial Statements F-22
</Table>

F-1

WORLD WIRELESS COMMUNICATIONS, INC.
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
ASSETS

SEPTEMBER 30,
2001
-------------
(As Restated, see Note 8)

CURRENT ASSETS
Cash and cash equivalents $ 83,456
Investment in securities available-for-sale 1,063
Trade receivables, net of allowance for doubtful
accounts 112,960
Other receivables 116,459
Inventory 565,011
Prepaid expenses 260,245
----------
TOTAL CURRENT ASSETS 1,139,194
----------

EQUIPMENT, NET OF ACCUMULATED DEPRECIATION AND
IMPAIRMENTS 543,860
----------

GOODWILL, NET OF ACCUMULATED AMORTIZATION 85,712
----------

OTHER ASSETS, NET OF ACCUMULATED AMORTIZATION 23,864
----------

TOTAL ASSETS $1,792,630
==========

(CONTINUED)

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

F-2

WORLD WIRELESS COMMUNICATIONS, INC.
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS (CONTINUED)
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)

SEPTEMBER 30,
2001
-------------
(As Restated, see Note 8)

CURRENT LIABILITIES
Trade accounts payable $ 927,402
Accrued liabilities 231,675
Accrued interest 72,477
Other liabilities 90,901
Note payable 15,057
Note payable, net of discount - related party 1,664,843
Deferred revenue 30,000
Obligation under capital leases - current portion 6,453
------------
TOTAL CURRENT LIABILITIES 3,038,808
------------

LONG-TERM OBLIGATION UNDER CAPITAL LEASES 7,509
------------

STOCKHOLDERS' EQUITY (DEFICIT)
Preferred stock - 1,000 shares of 8% cumulative
Convertible senior series authorized; 0 issued and
outstanding Common stock - $0.001 par value;
50,000,000 shares authorized, issued and outstanding:
31,387,087 shares at September 30, 2001 and
31,208,847 shares at December 31, 2000 31,386
Additional paid-in capital 46,880,965
Accumulated other comprehensive loss (40,010)
Accumulated deficit (48,126,027)
------------

TOTAL STOCKHOLDERS' EQUITY (DEFICIT) (1,253,686)
------------

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT) $ 1,792,630
============

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

F-3

WORLD WIRELESS COMMUNICATIONS, INC.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

FOR THE NINE MONTHS
ENDED SEPTEMBER 30,
----------------------------
2001 2000
------------ ------------
(As Restated, see Note 8)

REVENUES:
Services $ 104,493 $ 232,807
Royalties 17,540 459,986
Product sales 741,282 650,331
------------ ------------
TOTAL SALES 863,315 1,343,124

COST OF SALES:
Services 132,505 446,837
Products 551,844 515,189
------------ ------------
TOTAL COST OF SALES 684,349 962,026

GROSS PROFIT (LOSS) 178,966 381,098
------------ ------------

EXPENSES
Research and development 406,155 1,060,762
Selling, general and administrative 4,966,192 4,190,564
Manufacturing activity exit costs -- (1,677,668)
Amortization of goodwill 128,574 128,574
------------ ------------
TOTAL EXPENSES 5,500,921 3,702,232
------------ ------------
LOSS FROM OPERATIONS (5,321,955) (3,321,134)

OTHER INCOME/(EXPENSE):
Interest expense (375,340) (117,119)
Interest and other income 30,115 364,910
------------ ------------
NET LOSS $ (5,667,180) $ (3,073,343)
============ ============

Basic and Diluted Loss Per
Common Share $ (0.18) $ (0.11)
============ ============

WEIGHTED AVERAGE NUMBER OF
COMMON SHARES USED IN PER SHARE
CALCULATION 31,273,990 28,856,083
============ ============

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

F-4

WORLD WIRELESS COMMUNICATIONS, INC.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE NINE MONTHS
ENDED SEPTEMBER 30,
---------------------------------------------------
2001 2000
(As Restated, see Note 8) (As Restated, see Note 8)
------------------------- -------------------------

CASH FLOW FROM OPERATING ACTIVITIES
Net Loss $(5,667,180) $(3,073,343)
Adjustments to reconcile net loss
to net cash used by operating activities:
Amortization of goodwill 128,574 128,574
Depreciation 97,220 101,794
Amortization of debt discount 264,269 --
Consulting services paid with stock 12,000 --
Change in compensation from stock options (37,170) 334,289
Loss on sale of securities 26,762 --
Valuation allowance on inventory 172,741 (72,624)
Provision for doubtful accounts receivable 11,545 93,304
Changes in operating assets and liabilities:
Accounts receivable 163,599 79,738
Inventory (179,677) (15,077)
Prepaid expenses/other assets (183,355) 38,986
Deferred revenue 30,000 --
Accounts payable 386,503 (419,280)
Accrued interest 72,477 --
Accrued liabilities (61,649) (1,639,243)
----------- -----------

NET CASH AND CASH EQUIVALENTS USED BY OPERATING
ACTIVITIES (4,763,341) (4,442,882)
----------- -----------

CASH FLOW FROM INVESTING ACTIVITIES
Payments for the purchase of property and equipment (65,605) (235,218)
Proceeds from sale of property and equipment -- 18,913
Proceeds from sale of securities 31,083 --

NET CASH AND CASH EQUIVALENTS
USED BY INVESTING ACTIVITIES (34,522) (216,305)
----------- -----------

(CONTINUED)

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

F-5

WORLD WIRELESS COMMUNICATIONS, INC.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)

FOR THE NINE MONTHS
ENDED SEPTEMBER 30,
-------------------------------------
2001 2000
------------ ------------

CASH FLOW FROM FINANCING ACTIVITIES
Net proceeds from issuance of common stock $ -- $ 12,133,217
Proceeds from exercise of options 17,467 --
Proceeds from exercise of warrants 39,261 401,220
Redemption of preferred stock -- (950,000)
Proceeds from borrowings and issuance of warrants 1,815,600 --
Principal payments on notes payable (50,543) (2,415,208)
Principal payments on obligation under capital lease (15,045) (67,196)
Payment of preferred dividends -- (57,378)
------------ ------------

NET CASH AND CASH EQUIVALENTS PROVIDED BY
FINANCING ACTIVITIES 1,806,740 9,044,655
------------ ------------

EFFECT OF EXCHANGE RATE ON CASH AND CASH EQUIVALENTS (23,045) --
------------ ------------

NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS (3,014,168) 4,385,468
CASH AND CASH EQUIVALENTS - BEGINNING OF PERIOD 3,097,624 893,849
------------ ------------

CASH AND CASH EQUIVALENTS - END OF PERIOD $ 83,456 $ 5,279,317
============ ============

SUPPLEMENTAL CASH FLOW INFORMATION -

Cash paid for interest was $7,318 and $193,719 in 2001 and 2000 respectively.

NON-CASH INVESTING AND FINANCING ACTIVITIES - NOTES 3 AND 5

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

F-6

WORLD WIRELESS COMMUNICATIONS, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1 -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - The accompanying condensed
consolidated financial statements are unaudited. In the opinion of management,
all necessary adjustments (which include only normal recurring adjustments) have
been made to present fairly the financial position, results of operations and
cash flows for the periods presented. Certain information and note disclosure
normally included in financial statements prepared in accordance with generally
accepted accounting principles have been condensed or omitted. It is suggested
that these condensed consolidated financial statements be read in conjunction
with the financial statements and notes thereto included in the December 31,
2000 annual report on Form 10-K/A. The results of operations for the nine month
period ended September 30, 2001 are not necessarily indicative of the operating
results to be expected for the full year.

GOING CONCERN - The accompanying financial statements have been prepared on a
going concern basis, which contemplates the realization of assets and the
satisfaction of liabilities in the normal course of business. The Company has
sustained recurring losses from operations, and has a working capital
deficiency, a stockholders' deficit and does not have the necessary funds to
repay its debt, which is all due February 28, 2002. As operations have not
generated sufficient amounts of cash, the Company has relied upon financing to
fund its current period operations. The financing has been with debt holders who
are affiliates of the Company's largest shareholder and have extended the due
dates of the notes several times during 2001. There is no guarantee that the due
dates of the notes will continue to be extended. The Company's attainment of
profitable operations and sufficient additional financing cannot be determined
at this time. These uncertainties among others raise substantial doubt about the
Company's ability to continue as a going concern. See also Note 5 and 9.

The financial statements do not include any adjustments relating to the
recoverability and classification of recorded asset amounts or the amounts and
classification of liabilities that might be necessary should the Company be
unable to continue as a going concern. The Company's continuation as a going
concern is dependent upon its ability to generate sufficient cash flow to meet
its obligations on a timely basis, to comply with the terms and covenants of its
financing agreements, to obtain additional financing or refinancing as may be
required, and ultimately to attain successful operations. Management is
continuing its efforts to obtain additional funds so that the Company can meet
its obligations and sustain operations from sources that are described below.

MANAGEMENT'S PLANS - Based on the Company's current cash position and its plans
for 2001 and early 2002, management believes that additional capital will be
required by the end of February 2002. The Company's financing agreement with
Lancer Offshore, Inc. and Lancer Partners L.P. allows for such loan to be
increased to a total of $5,000,000 from its current outstanding principal amount
of $3,210,000 (see Note 5 and Note 9), provided that both parties agree to do
so, although such mutual agreement cannot be assured. The Company is currently
seeking funding from other sources, however there can be no assurances that the
Company will be successful.

MAJOR CUSTOMERS - Sales to major customers are defined as sales to any one
customer which exceeded 10% of total sales in any of the two reporting periods.

Sales to the major customers during each of the nine months ended September 30,
2001 and 2000 are as follows: Customer "B" represented 12.6% and 25.8% of sales
respectively; Customer "C" represented 0.0% and 12.5% respectively and Customer
"D" represented 13.2% and 0.07% respectively.

Sales to the major customers during each of the three months ended September 30,
2001 and 2000 are as follows: Customer "A" represented 0% and 33.3%; Customer
"B" represented 15.7% and 0.09%; and Customer "D" represented 9.0% and 0.03%
respectively.

INVENTORY - Inventory is stated at the lower of cost or market. Cost is
determined using the first-in, first-out method. Reserves for inventory
valuation are reviewed periodically, and adjusted accordingly. During the third
quarter, the inventory valuation reserve was increased by $198,000 to reflect
the obsolescence of various component parts. As of September 30, 2001, inventory
consisted of the following:

September 30,
2001
-------------

Materials $404,697

Work in process 56,683

Finished goods 103,631
--------

Total $565,011
========

F-7

DEFERRED REVENUE - deferred revenue represents amounts invoiced and paid by
customers for which products have not yet been shipped.

LOSS PER SHARE - Basic loss per common share is computed by dividing net loss by
the weighted-average number of common shares outstanding during the period.
Diluted loss per share reflects potential dilution which could occur if all
potentially issuable common shares from stock purchase warrants and options or
convertible notes payable and preferred stock resulted in the issuance of common
stock. In the present position, diluted loss per share is the same as basic loss
per share because the inclusion of potentially issuable common shares at
September 30, 2001 and 2000, respectively, would have decreased the loss per
share.

COMPREHENSIVE LOSS - Comprehensive income/(loss) provides a measure of overall
Company performance that includes all changes in equity resulting from
transactions and events other than capital transactions. The Company's
comprehensive income and loss for the reporting periods ended September 30, 2001
and 2000 are as follows:

For the Nine Months
Ended September 30,
-------------------------------
2001 2000
----------- -----------

Net Loss $(5,667,180) $(3,073,334)
Unrealized Gain (loss)
on Marketable Equity Securities 13,037 (36,312)

Effect of foreign currency translation (23,045) --

Comprehensive Loss
for the Period $(5,677,188) $(3,109,646)
=========== ===========

NOTE 2 -- EXIT FROM MANUFACTURING ACTIVITIES

During the fourth quarter of 1999, the Company executed a plan to focus its
efforts primarily on enhancing and marketing its X-traWebTM products whereby all
contract manufacturing was discontinued, all in-house production was outsourced
and the Company moved its executive offices to the Denver, Colorado area. The
plan also involved liquidating the Company's raw materials and work in process
inventory and selling all equipment used in production and contract
manufacturing. The Company was able to effect the inventory liquidation under
terms more favorable than previously estimated, resulting in a recovery of
$72,624 of inventory impairment previously charged to cost of sales. The
recovery was recognized as other income during the first quarter of 2000.

The Company recognized as exit costs the related non-cancelable obligation under
a lease agreement for the office and manufacturing facilities in Salt Lake City,
Utah through 2005. Future minimum lease payments of $1,756,924 under the lease
were charged to operations during the year ended December 31, 1999.

F-8

The Company completed its relocation to the Denver, Colorado area in the first
quarter of 2000. Pursuant to a Lease Termination Agreement dated May 1, 2000,
the Company paid a $75,000 settlement payment and transferred its security
deposit in the amount of $27,742 to the benefit of a new tenant in the Salt Lake
City Utah office and manufacturing facilities, and the lease was terminated as
of that date.

Incident to the lease termination, the settlement funds described above were
charged to the outstanding lease liability on the Company's balance sheet
resulting in a remaining liability balance of $1,598,342, which was recorded to
manufacturing exit recoveries income during the second quarter of 2000.

NOTE 3 - STOCKHOLDERS' EQUITY

During the first quarter of 2000, the Company issued 4,548,557 common shares for
gross cash proceeds of $13,646,000 received from 45 accredited investors in a
private placement offering, at $3.00 per share. These securities are exempt from
registration under the Act. In connection with the offering, a total of
$1,512,782 was incurred as placement costs.

During March 2000, the Company issued a total 5,393,690 common shares related to
the exercise of warrants to purchase common stock at $.25 per share. The Company
received $401,220 in cash and recorded $947,203 related to the cashless exercise
of warrants as a deemed payment of the principal of the 1999 Notes, as described
in Note 5 - Notes Payable.

Pursuant to the authority vested in the Board of Directors, the Board on June 8,
2001 resolved to issue up to 1,000 shares of a series of 8% cumulative,
convertible senior preferred stock. The shares, if and when issued, will be
convertible into shares of common stock at a rate of 16,667 shares of common
stock for each share of preferred stock. The Company has not issued any of such
shares as of the date hereof.

NOTE 4 - MANDATORILY REDEEMABLE PREFERRED STOCK

On May 14, 1999 the Company authorized 950 shares of senior liquidating
mandatorily redeemable 10% preferred stock with a liquidation preference of
$1,000 per share and detachable five-year warrants to purchase 4,750,000 common
shares at $0.25 per share, and issued such 950 shares of preferred stock and the
related warrants between May 15, 1999 and October 5, 1999. By their terms, the
preferred shares had to be redeemed within one year at their par value plus
accrued dividends. The preferred stock cash dividend requirement was $95,000
annually. The preferred stock was issued for proceeds of $950,000 consisting of
$700,000 cash and the deemed payment of $250,000 principal amount of 1998 bridge
loan notes.

On February 25, 2000, the Company redeemed the mandatorily redeemable preferred
stock for cash of $950,000 for the principal balance and $57,378 for the
preferred dividends accrued to date.

F-9

NOTE 5 - NOTES PAYABLE

On May 14, 1999 the Company issued $2,600,000 of senior secured 16% notes
payable ("the 1999 Notes") which were to mature in one year and bore interest at
the rate of 16% annually and payable quarterly. The notes were issued for
$2,600,000 consisting of $1,600,000 in cash and the deemed payment of $1,000,000
principal amount of the 1998 bridge loan notes. The 1999 Notes were secured by
substantially all the Company's assets.

In March 2000, the Company repaid the 1999 Notes outstanding with cash in the
amount of $2,377,623 and with the deemed proceeds from the exercise of warrants
to purchase 3,788,813 common shares at $.25 per share. The portion of the 1999
Notes repaid by the exercise of warrants was $947,203. The warrants exercised
are included in the total warrants issued during the three months ended March
31, 2000 as discussed in Note 3

On May 17, 2001 the Company issued $1,125,000 of 15% senior secured convertible
notes payable to an affiliate of the Company's largest shareholder, Lancer
Offshore, Inc. (the "2001 Notes"). The 2001 Notes are mandatorily convertible
into shares of Common Stock of the Company at the rate of $0.50 of debt for each
share upon (i) approval by the Company's shareholders to such conversion at a
meeting and (ii) the Company's receipt of $2,000,000 in equity on or before
December 31, 2001 from sources other than Michael Lauer and his affiliates. The
Company also issued detachable five-year warrants to purchase 562,500 shares of
the Company's common stock at $.50 per share. Such financing agreement also
allows for such loan to be increased to a total of $5,000,000 provided that both
parties agree to do so. The 2001 Notes are secured by a first security interest
in substantially all the assets of the Company.

$258,949 of the net proceeds from the 2001 Notes was deemed to result from the
issuance of the detachable warrant. This amount was recorded as discount on the
2001 Notes, and is being amortized over the term of the loan.

On May 17, 2001 the closing price of a share of our Common Stock was $0.65,
which was higher than the conversion rate of one share for each $0.50 of debt
and the exercise price of each warrant of $0.50 per share. The resulting
beneficial conversion feature of $596,449 will be recognized when the related
contingencies are resolved.

Any event of default under the 2001 Notes will require the issuance of 1,000,000
shares of our Common Stock commencing with the month in which such default first
occurs and thereafter in each such month in which such default is not cured, up
to a maximum amount of 10,000,000 shares.

On August 7, 2001 the 2001 Notes were amended to provide for an additional
$875,000 in debt financing over a three month period by Lancer Partners L.P., an
affiliate of our largest stockholder. Pursuant thereto the Company received
$350,000 on August 7, 2001, with $275,000 and $250,000 to be provided on or
about September 15, 2001 and October 15, 2001, respectively, with the September
and October payments conditioned upon the receipt of $2,000,000 in additional
equity financing to be provided by sources other than Michael Lauer and his
affiliates on or before September 15, 2001. The Company also issued detachable
five-year warrants to purchase 225,000 shares of our Common Stock at $0.30 per
share as the result of the $350,000 August 7 loan. The Company recorded the
August 7, 2001 debt net of a discount equal to $64,136, attributable to the
related warrants.

F-10

On August 7, 2001, the average of the high and low price per share of the
Company's Common Stock was $0.38, which was higher than the conversion rate of
one share for each $0.20 of debt and the exercise price of each warrant at $0.30
per share. The resulting beneficial conversion feature of $379,136 will be
recognized when the related contingencies are resolved.

While the Company did not meet the requirements for the conditional funding of
$275,000 originally to have been provided on or about September 15, 2001,
$100,000 of the $275,000 was provided on September 6, 2001 and the balance of
$175,000 was provided on September 18, 2001 without the issuance of any
additional special consideration for the making of such modification. Detachable
warrants to purchase 87,500 shares of stock at $0.30 per share were issued in
connection with the September loans. The Company recorded the debt net of a
discount equal to $17,767, attributable to the related warrants.

On September 8, 2001 and September 16, 2001, the average of the high and low
price per share of the Company's Common Stock was $0.255 and $0.235,
respectively, which was higher than the conversion rate of one share for each
$0.20 of debt, but lower than the exercise price of each warrant at $0.30 per
share. The resulting beneficial conversion features of $32,813 and $61,517
respectively will be recognized when the related contingencies are resolved

As a condition of this additional financing, among other changes, the $1,125,000
principal amount of the 2001 Notes funded on May 17, 2001 then became
convertible into shares of the Company's Common Stock at the rate of $0.20 of
debt per share, and the exercise price of the 562,500 warrants issued on May 17,
2001 was reduced to $0.30 per share. The maximum amount of shares of common
stock issuable in the event of continuing monthly defaults was increased to
12,500,000 from 10,000,000.

By an agreement dated September 14, 2001 the 2001 Notes were amended (a) to
extend the maturity dates of the first two tranches of the 2001 Notes totaling
$1,475,000 in principal amount from September 15, 2001 until October 15, 2001
and (b) to extend the time for the Company to raise $2,000,000 until October 15,
2001 as a condition to the issuance of the $250,000 loan on or about October 15,
2001.

Although the first two tranches of the 2001 Notes totaling $1,475,000 in
principal amount were due on October 15, 2001, Lancer Offshore, Inc. and Lancer
Partners L.P. agreed to extend the maturity date thereof until February 28,
2002. Although the third and fourth tranches of the 2001 Notes totaling $275,000
in principal amount were originally to be due on December 15, 2001, Lancer
Offshore, Inc. and Lancer Partners L.P. agreed to extend the maturity date
thereof until February 28, 2002. The Company does not currently have the ability
to pay those portions of the 2001 Notes and may default on this debt on February
28, 2002. See Note 9.

NOTE 6 - BUSINESS SEGMENT INFORMATION

As of September 30, 2001 the Company's operations are classified into two
reportable business segments: X-traWeb products and radio products. Corporate
includes income, expenses, and assets that are not allocable to a specific
business segment, or relate to activities no longer being pursued. The revenues,
expenses, and assets associated with our former manufacturing activities

F-11

have been reclassified to Corporate to provide a better comparison of our
ongoing business model.

Segment operating income is total segment revenue reduced by operating expenses
identifiable with or allocable to that business segment. The Company evaluates
performance of its segments based on revenues and operating income.

The Company's Italian subsidiary, X-traWeb Europe, S.p.A., held assets of under
$50,000 as of September 30, 2001, and contributed only $700 in revenue for the
three and nine month periods ended September 30, 2001. These amounts have been
included in the X-traWeb segment.

For the Nine Months Ended
September 30
-------------------------------
2001 2000
----------- -----------

Revenues:
X-traWebTM $ 233,012 $ 272,946
Radio products 612,763 496,619
Corporate 17,540 573,559
----------- -----------
Total sales $ 863,315 $ 1,343,124
=========== ===========

Operating loss:
X-traWebTM $(2,908,724) $(2,324,647)
Radio products (2,484,052) (2,300,683)
Corporate 70,821 1,304,196
----------- -----------
Total operating loss $(5,321,955) $(3,321,134)
=========== ===========

As of
-------------
September 30,
2001
-------------

Assets:
X-traWebTM $1,050,866
Radio products 114,563
Corporate 627,201
----------
Total assets $1,792,630
==========

NOTE 7 - RECENT ACCOUNTING PRONOUNCEMENTS

In July 2001, the Financial Accounting Standards Board ("FASB") issued Statement
of Financial Accounting Standards No. 141 ("SFAS 141"), "Business Combinations."
SFAS 141 requires the purchase method of accounting for business combinations
initiated after June 30, 2001 and eliminates the pooling-of-interests method.
The Company does not believe that the adoption of SFAS 141 has a significant
impact on its financial statements.

F-12

Effective January 2002, the Company is required to adopt Statement of Financial
Accounting Standards (SFAS) No. 142, Goodwill and Other Intangible Assets. Under
the provisions of SFAS No. 142, goodwill is no longer subject to amortization
over its estimated useful life. Instead, goodwill is assessed for impairment on
an annual basis (or more frequently if circumstances indicate a possible
impairment) by means of a fair-value-based test. As of September 30, 2001, the
Company had approximately $85,712 of unamortized goodwill. The Company believes
the implementation of SFAS No. 142 will not have a material adverse effect on
its future results of operations.

The Company will adopt SFAS No. 143, Accounting for Asset Obligations, no later
than January 1, 2003. Under SFAS No. 143, the fair value of a liability for an
asset retirement obligation covered under the scope of SFAS No. 143 would be
recognized in the period in which the liability is incurred, with an offsetting
increase in the carrying amount of the related long-lived asset. Over time, the
liability would be accreted to its present value, and the capitalized cost would
be depreciated over the useful life of the related asset. Upon settlement of the
liability, an entity would either settle the obligation for its recorded amount
or incur a gain or loss upon settlement. The Company is still studying this
newly-issued standard to determine, among other things, whether it has any asset
retirement obligations which are covered under the scope of SFAS No. 143. The
effect to the Company of adopting this standard, if any, has not yet been
determined.

In August 2001, the FASB issued SFAS No. 144 "Accounting for the Impairment or
Disposal of Long-Lived Assets". SFAS No. 144 provides new guidance on the
recognition of impairment losses on long-lived assets to be held and used or to
be disposed of and also broadens the definition of what constitutes a
discontinued operation and how the results of a discontinued operation are to be
measured and presented. SFAS No. 144 is effective for the Company's fiscal year
beginning in 2002, but is not expected to have a material impact on the
Company's financial statements.

NOTE 8 - RESTATEMENT OF FINANCIAL STATEMENTS

Subsequent to the issuance of the Company's financial statements for the three
and nine months ended September 30, 2001 the Company concluded that the
calculations for compensation expense related to options accounted for as
variable plan options were not current, and the unaudited consolidated financial
statements for the three and nine months ended September 30, 2001 and 2000
should be restated. In addition, the Company has made certain reclassifications
to the statement of operations for the nine months ended September 30, 2000.
These reclassifications did not affect net loss per share for any of the periods
presented.

The balance sheet as of September 30, 2001 and the statement of operations for
the nine months ended September 30, 2001 and 2000 presented herein reflects the
restatement as follows:

As Previously
Reported As restated
------------- ------------

Balance sheet as of September 30, 2001:

Additional paid-in capital $ 48,086,323 $ 46,880,965

Accumulated deficit (49,331,386) (48,126,027)

F-13

As Previously
Reported As restated
------------- ------------

Statements of operations:

Nine months ended September 30, 2001
------------------------------------

Selling, general and administrative expenses $ 4,949,948 $ 4,966,192

Net loss (5,651,110) (5,667,180)

Net loss per share (0.18) (0.18)

Nine months ended September 30, 2000
------------------------------------

Selling, general and administrative expenses $ 4,147,612 $ 4,190,564

Net loss (3,030,384) (3,073,343)

Net loss per share (0.11) (0.11)

NOTE 9 - SUBSEQUENT EVENTS

Although the Company did not meet the requirements for additional funding by
October 15, 2001, Lancer Partners L.P. loaned an additional $25,000 on October
3, 2001 and Lancer Offshore Inc. loaned an additional $85,000 on October 3,
2001, $175,000 on October 9, 2001 and $175,000 on October 29, 2001 without the
issuance of any additional special consideration for the making of such
modification.

On November 14, 2001, Lancer Offshore Inc. loaned the Company an additional
$1,000,000 and among other things, the Company and such creditors agreed to
change the conversion rate of each note comprising the 2001 Notes to one share
for each $0.05 of debt and to extend the date of the entire $3,210,000 principal
amount of the loans to February 28, 2002. The Company also issued detachable
five-year warrants to purchase 1,042,500 shares of its Common Stock at $0.30 per
share as a result of these additional loans, of which total warrants to purchase
312,500 shares of the Company's Common Stock were issued with respect to the
quarter ended September 30, 2001

F-14

The finders fee payable on the transaction was increased by requiring us to
issue a five-year warrant to Capital Research Ltd. to purchase 2,000,000 shares
of our Common Stock at an exercise price of $0.05 per share, which expires on
November 13, 2006.

F-15

INDEPENDENT AUDITORS' REPORT

To be provided by amendment

F-16

REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS

To be provided by amendment.

F-17

WORLD WIRELESS COMMUNICATIONS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS

<Table>
<Caption>
DECEMBER 31,
----------------------------------
2000 1999
------------- -------------
(AS RESTATED, (AS RESTATED,
SEE NOTE 16) SEE NOTE 16)

ASSETS
Current Assets
Cash $ 3,097,624 $ 893,849
Investment in securities available for sale 19,109 130,403
Trade receivables, net of allowance for doubtful accounts 347,218 723,355
Other receivables 57,345 584
Inventory 558,076 201,815
Prepaid expenses 71,891 10,924
Total Current Assets 4,151,263 1,960,930
Equipment, net of accumulated depreciation 575,475 192,252
Goodwill, net of accumulated amortization 214,286 385,718
Other Assets, net of accumulated amortization 28,863 39,314
------------ ------------
Total Assets $ 4,969,887 $ 2,578,214
============ ============

LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)

Current Liabilities
Trade accounts payable $ 540,899 $ 547,978
Accrued liabilities 371,149 338,112
Other liabilities 13,077 --
Accrued lease obligation on abandoned office and manufacturing facility -- 1,756,924
Notes payable -- 3,324,827
Obligations under capital lease - current portion 19,374 119,226
------------ ------------
Total Current Liabilities 944,499 6,087,067
------------ ------------
Long-Term Obligations Under Capital Lease 9,633 21,459
------------ ------------
Mandatorily Redeemable 10% Preferred Stock -
$0.001 par value; 1,000,000 shares authorized; 950 shares designated
mandatorily redeemable; 0 and 950 shares issued and outstanding;
liquidation preference of $0 and $1,000,658 -- 950,000
------------ ------------
Stockholders' Equity (Deficit)
Common stock - $0.001 par value; 50,000,000 shares authorized; issued
and outstanding: 31,208,847 shares in 2000 and 21,250,016 shares
in 1999 31,209 21,250

Additional paid-in capital 46,500,157 33,394,207
Receivable from shareholders -- (66,829)
Accumulated deficit (42,458,847) (37,884,343)
Accumulated other comprehensive income (loss) (56,764) 55,403
------------ ------------
Total Stockholders' Equity (Deficit) 4,015,755 (4,480,312)
------------ ------------
Total Liabilities and Stockholders' Equity (Deficit) $ 4,969,887 $ 2,578,214
============ ============
</Table>

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

F-18

WORLD WIRELESS COMMUNICATIONS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS

<Table>
<Caption>
FOR THE YEARS ENDED DECEMBER 31,
---------------------------------------------------
2000 1999 1998
------------- ------------- -------------
(AS RESTATED, (AS RESTATED, (AS RESTATED,
SEE NOTE 16) SEE NOTE 16) SEE NOTE 16)

REVENUES:
Services $ 360,388 $ 867,451 $ 3,009,416
Royalties 457,194 540,075 --
Product sales 897,251 2,158,781 1,300,275
------------ ------------ ------------
Total revenues 1,714,833 3,566,307 4,309,691

COST OF SALES:
Services 460,005 500,070 2,275,448
Products 753,422 2,426,389 1,476,159
Inventory write-down -- 405,466 --
------------ ------------ ------------
Total cost of sales 1,213,427 3,331,925 3,751,607
------------ ------------ ------------

Gross profit 501,406 234,382 558,084

Operating Expenses
Research and development 1,483,365 1,318,963 3,179,557
Selling, general and administrative 5,614,732 5,192,901 2,397,995
Manufacturing activity exit costs (1,677,668) 2,210,023 --
Impairment of goodwill and patents -- 641,679 4,722,425
Amortization of goodwill 171,432 200,397 1,254,583
------------ ------------ ------------
Total operating expenses 5,591,861 9,563,963 11,554,560
------------ ------------ ------------
Loss from operations (5,090,455) (9,329,581) (10,996,476)

Other income (expense)
Interest expense (132,586) (3,556,097) (1,813,208)
Other income 648,537 26,662 343,625
------------ ------------ ------------
Net loss (4,574,504) (12,859,016) (12,466,059)

Preferred dividends 6,400 1,000,658 --
------------ ------------ ------------
Loss applicable to common shares $ (4,580,904) $(13,859,674) $(12,466,059)
============ ============ ============
Basic and diluted loss per
Common share $ (0.16) $ (0.80) $ (1.11)
============ ============ ============
Weighted average number of common

Shares used in per share calculation 29,447,488 17,308,258 11,189,603
============ ============ ============
</Table>

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

F-19

WORLD WIRELESS COMMUNICATIONS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)

<Table>
<Caption>
UNEARNED
COMMON STOCK COMPENSATION TOTAL
------------------------ ADDITIONAL AND OTHER STOCKHOLDERS
PAID-IN SHAREHOLDER ACCUMULATED COMPREHENSIVE EQUITY
SHARES AMOUNT CAPITAL RECEIVABLE DEFICIT INCOME (DEFICIT)
----------- ---------- ------------ ------------ ------------ ------------- ------------

Balance - December 31, 1997 10,225,260 10,225 20,746,944 (18,409) (12,559,268) 113,354 8,292,846
Comprehensive Loss:
Net loss (As restated,
see Note 16) -- -- -- -- (12,466,059) -- (12,466,059)

Decrease in realized gain on -- -- -- -- -- (50,706) (50,706)
securities Comprehensive
Loss for the Year
(As restated, see Note 16) (12,516,765)
------------
Compensation adjustment
relating to stock options -- -- (1,677,759) -- -- (1,677,759)

Shares issued for cash 2,721,258 2,721 2,410,353 -- -- -- 2,413,074

Beneficial conversion feature
of notes payable -- -- 374,172 -- -- -- 374,172

Exercise of stock options for
cash and a promissory note 435,051 435 191,307 (48,420) -- -- 143,322

Shares issued for services 443,831 444 404,587 -- -- -- 405,031

Acquisition of technology 65,000 65 324,935 -- -- -- 325,000

Shares and warrants issued
for interest 30,000 30 1,239,043 -- -- -- 1,239,073
----------- ---------- ------------ ---------- ------------ ----------- ------------
Balance - December 31, 1998 13,920,400 13,920 24,013,582 (66,829) (25,025,327) 62,648 (1,002,006)
(As restated, see Note 16)

Comprehensive Loss:
Net loss
(As restated, see Note 16) -- -- -- -- (12,859,016) -- (12,859,016)
------------

Decreased realized gain
securities on -- -- -- -- -- (7,245) (7,245)
------------

Comprehensive Loss for the Year
(As restated, see Note 16) (12,866,261)

Compensation adjustment
relating to stock options -- -- 643,833 -- -- 643,833

Shares issued for cash 5,612,000 5,612 5,018,661 -- -- -- 5,024,273

Conversion of note payable 893,698 894 892,804 -- -- -- 893,698
and accrued interest

Beneficial conversion feature
of note payable -- -- 81,517 -- -- -- 81,517

Shares issued for services 120,841 121 231,265 -- -- -- 231,386

Shares and warrants issued
for defaults and interest
on notes payable 450,000 450 2,075,032 -- -- -- 2,075,482

Warrants issued for services -- -- 425,155 -- -- -- 425,155

Exercise of warrants for cash 253,077 253 63,016 -- -- -- 63,269

Preferred dividends -- -- (1,000,658) -- -- (1,000,658)
Warrants granted on issuance
of Preferred stock -- -- 950,000 -- -- -- 950,000
----------- ---------- ------------ ---------- ------------ ----------- ------------
Balance - December 31,1999 21,250,016 21,250 33,394,207 (66,829) (37,884,343) 55,403 (4,480,312)
(As restated, see Note 16)

Comprehensive Loss:
Net loss (As restated, see Note 16) -- -- -- -- (4,574,504) -- (4,574,504)

Decrease in unrealized gain
on securities -- -- -- -- -- (102,236) (102,236)

Adjustment from foreign
currency Translation -- -- -- -- -- (9,931) (9,931)
------------
Comprehensive Loss for the Year
(As restated, see Note 16) (4,686,671)
------------
Compensation adjustment -- -- (382,364) -- -- -- (382,364)
relating to stock options

Shares issued for cash, net of
placement fees of $1,512,782 4,548,667 4,549 12,128,669 -- -- -- 12,133,218

Exercise of warrants 5,393,690 5,394 1,343,029 -- -- -- 1,348,423

Cashless exercise of stock options 16,474 16 23,016 -- -- -- 23,032

Preferred dividends -- -- (6,400) -- -- (6,400)

Write-off of receivable -- -- -- 66,829 -- -- 66,829
----------- ---------- ------------ ---------- ------------ ----------- ------------
Balance - December 31, 2000
(As restated, see Note 16) 31,208,847 $ 31,209 $ 46,500,157 $ -- $(42,458,847) $ (56,764) $ 4,015,755

</Table>

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

F-20

WORLD WIRELESS COMMUNICATIONS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS

<Table>
<Caption>
FOR THE YEARS ENDED DECEMBER 31,
--------------------------------------------------------
2000 1999 1998
------------- ------------- -------------
(AS RESTATED, (AS RESTATED, (AS RESTATED,
SEE NOTE 16) SEE NOTE 16) SEE NOTE 16)

Cash Flows From Operating Activities
Net loss $ (4,574,504) $ (12,859,016) $ (12,466,059)
Adjustments to reconcile net loss to net
cash used by operating activities:
Amortization of goodwill 171,432 200,397 1,254,583
Impairment of goodwill and patent -- 641,679 4,722,425
Depreciation and amortization 127,813 874,400 686,121
Manufacturing activity exit costs (1,677,668) 2,210,023 --
Impairment of inventory -- 405,466 --
Amortization of debt discount and financing -- -- 542,408
Interest paid with stock and stock warrants -- 2,582,154 331,827
Purchased research and development -- -- 325,000
Stock issued for services -- 231,386 397,292
Compensation adjustments relating to stock
options (359,331) 643,833 (1,677,759)
Realized gain on securities held for sale (7,007) -- --
Write-off of receivable from shareholder 66,829 -- --
Provision for doubtful accounts receivable 124,397 42,772 295,504
Beneficial conversion feature granted -- -- 413,563
Gain on sale of business assets -- -- (332,752)
Changes in operating assets and liabilities:
Accounts receivable 194,978 (413,384) (332,314)
Inventory (356,261) (57,042) (109,182)
Accounts payable (6,759) (434,528) 509,631
Accrued liabilities (62,129) (580,008) 467,140
Other (50,516) 137,070 261,441
------------ ------------- -------------
Net Cash and Cash Equivalents Used By
Operating Activities (6,408,727) (6,374,798) (4,711,131)
------------ ------------- -------------
Cash Flows From Investing Activities
Payments for the purchase of property
and equipment (526,265) (128,461) (247,457)
Proceeds from sale of business assets
and property 94,875 4,359 394,499
Proceeds from sale of marketable
securities 16,065 -- --
------------ ------------- -------------
Net Cash and Cash Equivalents (Used By)
Provided By Investing Activities (415,325) (124,102) 147,042
------------ ------------- -------------
Cash Flows From Financing Activities
Proceeds from issuance of common stock 12,133,218 5,024,273 2,564,137
Proceeds from borrowings, net of discount -- 2,480,000 2,900,000
Proceeds from issuance of mandatorily
redeemable preferred stock -- 700,000 --
Redemption of preferred stock (950,000) -- --
Payment of preferred dividends (57,378) -- --
Proceeds from exercise of warrants 401,220 63,269 --
Principal payments on obligation under
capital lease (111,678) (159,909) (108,088)
Principal payments on notes payable (2,377,624) (1,329,781) (395,297)
------------ ------------- -------------
Net Cash and Cash Equivalents Provided
By Financing Activities 9,037,758 6,777,852 4,960,752
------------ ------------- -------------
Effect of Exchange Rate on Cash and
Cash Equivalents (9,931) -- --
------------ ------------- -------------
Net Increase In Cash and Cash Equivalents 2,203,775 278,952 396,663

Cash and Cash Equivalents - Beginning of Year 893,849 614,897 218,234
------------ ------------- -------------
Cash and Cash Equivalents - End of Year $ 3,097,624 $ 893,849 $ 614,897
============ ============= =============

</Table>

Supplemental cash flow information and non-cash investing and financing
activities - Note 8

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

F-21

WORLD WIRELESS COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1--ORGANIZATION AND SUMMARY OF SIGNIFICANT

ACCOUNTING POLICIES

ORGANIZATION AND NATURE OF BUSINESS - World Wireless Communications, Inc. and
its subsidiaries (collectively, "the Company") design and develop wired and
wireless communications systems. The Company has created the latest generation
of technology to monitor and control various remote devices through the
internet, known as X-traWeb(TM). The Company's primary efforts are on marketing
and further enhancing X-traWeb(TM). Through December 1999, the Company provided
contract manufacturing services to the electronics wireless communications
industry, as well as engineering and products related to supervisory control and
data acquisition (commonly known as SCADA) technologies. During the fourth
quarter of 1999 the Company executed a plan to exit activities related to
contract and in-house manufacturing.

During the year ended December 31, 2000, the Company used approximately $6.4
million of cash in operations, as it exited from in-house manufacturing
activities, relocated to the Denver, Colorado area, and redirected its efforts
to focus on the X-traWeb business opportunity and proprietary radio products.
The Company had its initial revenues from the X-traWeb product in 2000 and cash
will not be required for manufacturing exit costs in 2001. However, the Company
believes that additional capital will be required by May 2001 to finance
operating cash deficits until significant revenues generating adequate margins
are realized. The Company has obtained a financing commitment totaling $4
million, to be provided as private equity placements. If significant revenues
with adequate margins are not generated to supplement the additional financing,
the Company has a contingency plan to reduce overhead and other operating costs
so as to remain a going concern. These contingency plans, however, would require
reductions in the product development and marketing costs, which could impact
the timing and ultimate amount of future revenues.

The Company was formed on November 15, 1995 as a Nevada Corporation. Its
name was changed during January 1998, from Data Security Corporation, to World
Wireless Communications, Inc. During February 1997, the Company acquired Digital
Radio Communications Corp. ("Digital Radio"), and thereby gained wired and
wireless communication technology engineering, design, assembly and
manufacturing capabilities. The results of operations for Digital Radio have
been included in the consolidated operations since February 12, 1997. During
October and November 1997, the Company acquired the Delaware company, TWC Ltd.,
operating under the name Austin Antenna, and the Kansas company, XARC
Corporation. Effective January 1, 1998, all of the subsidiaries of the Company
at that date, except TWC Ltd., were merged into World Wireless Communications,
Inc. During 1998, the Company sold business assets and products relating to a
line of personal computer security products known as SecuriKey. Sales from the
security products were insignificant during 1998 and 1997.

During June, 2000 the Company formed a new operating subsidiary, X-traWeb
Europe S.p.A., based in Milan, Italy. This subsidiary is responsible for the
development and sale of X-traWeb(TM) products through European markets. In
addition, the Company formed two additional operating subsidiaries, X-traWeb
Services Corp. and X-traWeb Financial Corp. in June 2000, which are designed to
offer various services of X-traWeb products and to provide financing capability
of sales of X-traWeb products or services, respectively.

PRINCIPLES OF CONSOLIDATION - The consolidated financial statements include the
accounts of World Wireless Communications, Inc. and its wholly owned
subsidiaries. Intercompany accounts and transactions have been eliminated in
consolidation.

USE OF ESTIMATES - The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts in these financial statements
and accompanying notes. Actual results could differ from those estimates.

CONCENTRATION OF RISK AND SEGMENT INFORMATION - The Company operates solely in
the electronics industry and has assets primarily within the United States. The
concentration of business in one industry subjects the Company to a
concentration of credit risk relating to trade accounts receivable. The Company
generally does not require collateral from its customers with respect to trade
receivables.

F-22

FINANCIAL INSTRUMENTS - The Company has a concentration of risk from cash in
banks in excess of insured limits. The amounts reported as cash, investments in
securities available-for-sale, other receivables, trade accounts payable,
accrued liabilities, accrued lease obligation on abandoned office and
manufacturing facility, notes payable and obligations under capital lease are
considered to be reasonable approximations of their fair values. The fair value
estimates presented herein were based on market information available to
management at the time of the preparation of the financial statements.

TRADE ACCOUNTS RECEIVABLE AND SIGNIFICANT CUSTOMERS - Sales to significant
customers are defined as sales to any one customer which exceeded 10% of total
sales in any of the three reporting years. Sales to significant customers
represented 56%, 52%, and 75% of total net revenue for the years ended December
31, 2000, 1999, and 1998, respectively. Sales to the five significant customers
during each of the years presented were as follows: Customer "A" - $724,083,
$463,041, and $322,387; Customer "B" - $0, $601,606, and $2,739,375; Customer
"C" - $0, $423,090, $148,765; Customer "D" - $0, $363,120,and $0; and Customer
"E" - $240,915, $0, and $0. Sales to significant customers subject the Company
to the risk that the Company may not be able to continue the current level of
sales if there were a loss of a significant customer.

At December 31, 2000 and 1999, an allowance for doubtful accounts of $47,179
and $190,328, respectively, was provided against trade and other receivables.
The Company recorded net charge offs of $267,546 for the year ended December 31,
2000. The charge offs were in settlement of outstanding issues that had been
evaluated in determining the allowance for doubtful accounts as of December 31,
1999. For the years ended December 31, 2000, 1999 and 1998 provisions for
doubtful accounts charged to expense totaled $124,397, $42,772 and $295,504,
respectively. Trade receivables and the allowance for doubtful accounts are
reviewed periodically and adjusted, accordingly.

INVENTORY - Inventory is stated at the lower of cost or market. Cost is
determined using the first-in, first-out method. In connection with the exit
from contract and in-house manufacturing, the Company recognized a write-down of
inventory of $405,466 to its estimated liquidation value. The write-down was
charged to operations during the year ended December 31, 1999 and is included in
cost of sales.

During 2000, the marked down inventory was sold or disposed of at prices
higher than originally estimated. As a result, $297,310 in gain was recorded as
other income.

RESEARCH AND DEVELOPMENT EXPENSE - Current operations are charged with all
research, engineering and product development expenses.

GOODWILL AND LONG-LIVED ASSETS - Goodwill and other long-lived assets are
evaluated periodically for impairment when indicators of impairment are present
and undiscounted cash flows estimated to be generated by those assets are less
than their carrying amounts. Goodwill is included along with other assets
acquired as a group when evaluating their recoverability. Impairment losses are
recognized to the extent estimated discounted net future cash flows expected to
be generated from those assets are less than their carrying amounts. Goodwill is
further evaluated separately and impairment losses are recognized for the excess
of the carrying amount of goodwill over management's estimation of the value and
future benefits expected to be realized from the goodwill. In both of these
analyses, significant management judgment is required to evaluate the capacity
of the assets or the acquired business to perform within projections.

The original amortization periods for goodwill and other intangible assets
are evaluated periodically to determine whether later events and circumstances
warrant revised estimates of their useful lives. If estimated useful lives are
changed, the unamortized cost is allocated to the remaining periods in the
revised useful lives. The Company determines the useful life of goodwill based
upon an analysis of all relevant factors.

The Company evaluated the recoverability of the long-lived assets and
goodwill recognized in connection with the Digital Radio acquisition during 1998
and with the TWC Ltd. acquisition during the fourth quarter of 1999, and
determined that circumstances indicate an inability to recover their carrying
amount. Accordingly, an impairment loss of $641,679 and $4,722,425 was
recognized during 1999 and 1998, respectively, to adjust the carrying amount of
the long-lived assets and goodwill to their estimated expected discounted net
future cash flows. Based on future expected discounted cash flows from the
technology acquired from Digital Radio, the value of the asset group, including
goodwill, was reduced at December 31, 1998 to approximately $900,000 with
goodwill comprising $600,000 of that amount. The TWC Ltd. goodwill was reduced
to zero at December 31, 1999.

F-23

The remaining balance of goodwill arose from the acquisitions of Digital
Radio, and is being amortized over a 5-year period from the original acquisition
dates, on a straight-line basis. Amortization expense was $171,432, $200,397,
and $1,254,583 during the years ended December 31, 2000, 1999 and 1998,
respectively.

EQUIPMENT - Equipment is stated at cost. Depreciation, including amortization of
leased assets, is computed using the straight-line method over the estimated
useful lives of the equipment, which are three to seven years. Leased equipment
is amortized over the shorter of the useful life of the equipment or the term of
the lease. Depreciation expense was $127,813, $573,285, and $613,240, for the
years ended December 31, 2000, 1999 and 1998, respectively. Maintenance and
repair of equipment are charged to operations and major improvements are
capitalized. Upon retirement, sale, or other disposition of equipment, the cost
of the equipment and accumulated depreciation are eliminated from the accounts
and gain or loss is included in operations. The cost of equipment was reduced,
as of December 31, 1999, by a $359,822 write-down reserve attributable to the
exit from manufacturing activities.

INVESTMENTS - At December 31, 2000, investment in securities consisted of common
stock of customers classified as available-for-sale and stated at quoted fair
value of $19,109, compared to $130,403 in 1999. The cost of the securities was
$65,938 and $75,000 for 2000 and 1999 respectively. The unrealized loss as of
December 31, 2000 was $46,833 which is shown as a separate component of
stockholders' equity. The change in net unrealized gains on securities during
2000 was a decrease in the holding gain of $102,236. The changes in net
unrealized gains on the securities during the years ended December 31, 1999 and
1998 was $(7,245) and $(50,706), respectively.

SALES RECOGNITION - Sales are recognized upon delivery of products or services
and acceptance by the customer. Because purchasers of the radio products
typically test the radios' application using a developer kit prior to placing an
order, sales returns are negligible. Sales of X-traWeb(TM) products are custom
applications, subject to the terms of individual contracts, and are not subject
to return.

As a result of design and technology contracts, the Company has a right to
receive royalties which will be recognized upon the related sales by customers.

STOCK-BASED COMPENSATION - Stock-based compensation to employees is measured by
the intrinsic value method. This method recognizes compensation expense related
to stock options granted to employees based on the difference between the fair
value of the underlying common stock and the exercise price of the stock option
on the date granted, and for options accounted for under variable plan
accounting, is subject to adjustment at each balance sheet date to reflect
changes in the price of the stock relative to the exercise price of the options.
Stock-based compensation to non-employees is measured by the fair value of the
stock options and warrants on the grant date as determined by the Black-Scholes
option pricing model.

INCOME TAXES - The Company provides for income taxes on an assets and
liabilities approach. Deferred tax assets and liabilities are recognized for the
future tax consequences of differences between the carrying amounts of assets
and liabilities in the financial statements and their respective tax bases, and
for net operating loss carryforwards. Valuation allowances are provided for
deferred tax assets if realization is not more likely than not.

LOSS PER SHARE - Basic loss per common share is computed by dividing net loss by
the weighted-average number of common shares outstanding during the period.
Diluted loss per share reflects potential dilution which could occur if all
potentially issuable common shares from stock purchase warrants and options or
convertible notes payable and preferred stock resulted in the issuance of common
stock. For all years presented, diluted loss per share is the same as basic loss
per share because the inclusion of 2,474,729, 7,415,260, and 641,922 potentially
issuable common shares at December 31, 2000, 1999 and 1998, respectively, would
have decreased the loss per share and have been excluded from the calculation.

COMPREHENSIVE INCOME/(LOSS) - Comprehensive income/(loss) provides a measure of
overall Company performance that includes all changes in equity resulting from
transactions and events other than capital transactions.

RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS - The Securities and Exchange
Commission issued Staff Accounting Bulletin No. 101, Revenue Recognition in
Financial Statements on December 3, 1999. This bulletin requires the application
of specific criteria in determination of the timing of revenue recognition in
financial statements and is effective for all fiscal years beginning after
December 16, 1999. The Company believes revenue

F-24

for the year ending December 31, 2000, 1999 and 1998 is recognized in a manner
consistent with the criteria specified in the bulletin.

The Financial Accounting Standards Board issued FASB No. 133-Accounting for
Derivative Instruments and Hedging Activities which, as amended, is effective
for all fiscal years beginning after June 15, 2000. The statement establishes
accounting and reporting standards for derivative instruments, including certain
derivative instruments embedded in other contracts, and for hedging activities.
The Company does not expect the adoption of FASB No. 133 to have a material
impact on the Company's financial condition or operations.

RECLASSIFICATIONS - Certain prior year amounts have been reclassified to conform
to the current year presentation.

NOTE 2--EXIT FROM MANUFACTURING ACTIVITIES

During the fourth quarter of 1999, the Company executed a plan to focus its
efforts primarily on enhancing and marketing its X-traWeb(TM) products whereby
production of the Company's continuing products would be outsourced, contract
manufacturing discontinued, and the Company would move its executive offices to
the Denver, Colorado area. The plan also involved liquidating the Company's raw
materials and work in process inventory and selling all equipment used in
production and contract manufacturing. The exit was not considered the disposal
of a segment because the change did not encompass a separate major line of
business or class of customer, and because the Company only had one segment
prior to 1999. The Company recognized as exit costs the related non-cancelable
obligation under a lease agreement for office and manufacturing facilities in
Salt Lake City, Utah through 2005. Future minimum lease payments of $1,756,924
under the lease were charged to operations during the year ended December 31,
1999.

The Company completed its relocation to the Denver, Colorado area in March,
2000. Pursuant to a Lease Termination Agreement, dated May 1, 2000, the Company
paid a $75,000 settlement payment and transferred its security deposit in the
amount of $27,742 to the benefit of a new tenant in the Salt Lake City, Utah
manufacturing and office facilities and the lease agreement was terminated as of
the May 1, 2000 date. Incident to the lease termination, the settlement funds
described above were charged to the outstanding lease liability on the Company's
balance sheet resulting in a remaining liability balance of $1,598,342. This
balance was reversed and credited to operations as manufacturing exit recoveries
income during the six months ended June 30, 2000.

NOTE 3--BUSINESS COMBINATION AND ACQUISITIONS

On November 11, 1997 the Company acquired all of the issued and outstanding
stock of XARC Corporation, a Kansas corporation primarily engaged in development
and sales of wireless technology, by issuing 10,000 shares of restricted common
stock valued at $103,000. XARC had no assets or liabilities prior to the
acquisition. The acquisition was accounted for under the purchase method of
accounting with the purchase price allocated to purchased research and
development and charged against operations at the acquisition date. Results of
operations for XARC are included in the consolidated financial statements from
the date of acquisition.

NOTE 4--INVENTORY

Inventory consisted of the following:

<Table>
<Caption>
DECEMBER 31,
--------------------------
2000 1999
--------- ---------

Materials $ 297,147 $ --
Finished goods 260,929 201,815
--------- ---------
Total $ 558,076 $ 201,815
========= =========
</Table>

F-25

NOTE 5--EQUIPMENT

Equipment consisted of the following:

<Table>
<Caption>
DECEMBER 31,
-------------------------------
2000 1999
----------- -----------

Computer equipment $ 1,098,980 $ 390,047
Manufacturing equipment 22,920 837,099
Office furniture 350,050 204,946
Software 171,119 151,403
Leasehold improvements 15,000 192,360
----------- -----------
Total 1,658,069 1,775,855

Accumulated depreciation (1,082,594) (1,583,603)
----------- -----------

Net Equipment $ 575,475 $ 192,252
=========== ===========
</Table>

NOTE 6--NOTES PAYABLE

<Table>
<Caption>
DECEMBER 31,
------------------------------
2000 1999
----------- -----------

16% senior secured notes payable;
interest payable quarterly; due
May 14, 2000; secured by all assets -- 3,324,827
----------- -----------
Total Notes Payable $ -- $ 3,324,827
=========== ===========
</Table>

On May 14, 1999 the Company issued $2,600,000 of senior secured 16% notes
payable which were to mature in one year. The notes were issued for $2,600,000
consisting of $1,600,000 in cash and the deemed payment of $1,000,000 of
principal of the 1998 bridge loan notes. On August 27, 1999, the Company issued
an additional $480,000 of senior secured 16% notes payable for cash in the
amount of $480,000, and on October 11, 1999, the Company issued an additional
$400,000 of senior secured 16% notes payable for cash in the amount of $400,000
(collectively the "1999 Notes"). The Company paid $155,173 of the notes during
1999.

The 1999 Notes were secured by substantially all the Company's assets.
Interest on the notes was payable quarterly. A mandatory pre-payment of
principal equal to 25% of the gross proceeds from any issuance of the Company's
securities was due upon the closing of the issuance. The terms of the notes
stated that the notes would be in default if the reported loss before interest,
depreciation, amortization and taxes exceeded $1,000,000 for the quarter ended
June 30, 1999, or if income as computed above was less than $250,000 or
$1,000,000 for the quarters ended September 30, 1999 or December 31, 1999,
respectively. The notes also would have been in default if the Company failed to
make a mandatory pre-payment of principal from the issuance of the Company's
securities. If the notes were determined to be in default for a quarter the
Company could be required to issue five-year warrants to purchase 300,000 shares
of common stock at $0.25 per share as compensation for the default with respect
to such quarter. The Company was not in compliance with the terms of the notes,
accordingly, for the quarters ended June 30, and September 30, 1999, the Company
accrued $279,555 and $397,647 of interest expense respectively, for such
non-compliance. The interest accrual was valued based upon the value of the
warrants had they been issued on June 30, and September 30, 1999, respectively.
The Company also issued 200,000 shares of common stock as compensation to the
holders of the notes as consideration of extending the interest payment on the
notes to December 31, 1999. The Company recognized $512,000 of interest expense
for the issuance of the 200,000 shares.

In March, 2000 the Company paid off the 1999 Notes outstanding with cash in
the amount of $2,377,624 and with the deemed proceeds from the exercise of
warrants to purchase 3,788,813 common shares at $.25 per share. The portion of
the 1999 Notes paid by the exercise of warrants was $947,203. The warrants
exercised are included in the total warrants issued during the three months
ended March 31, 2000 as discussed in Note 11.

NOTE 7--INCOME TAXES

The net loss for 1999 resulted entirely from operations within the United
States. 2000 results include a net operating loss of $229,000 relating to
operations in Italy. There was no provision for or benefit from income tax for
any period, as it is considered to be more likely than not that any benefit
would not be realized during the next fiscal year. The components of the net
deferred tax asset are shown below:

F-26

<Table>
<Caption>
2000 1999
------------ ------------

Operating loss carry forwards $ 10,455,000 $ 8,383,000
Accrued liabilities and other 38,000 1,070,000
------------ ------------
Total Deferred Tax Assets 10,493,000 9,453,000
Valuation Allowance (10,493,000) (9,453,000)
------------ ------------
Net Deferred Tax Asset $ -- $ --
============ ============
</Table>

For tax reporting purposes, the Company has net operating loss carryforwards
of approximately $28,000,000 which will expire beginning in the year 2012. Of
this amount, $1,246,871 was from Digital Radio prior to its acquisition, and the
availability of this amount to offset future taxable income is limited.

The following is a reconciliation of the amount of tax (benefit) that would
result from applying the federal statutory rate to pretax loss with the
provision for income taxes.

<Table>
<Caption>
FOR THE YEARS ENDED DECEMBER 31,
------------------------------------------------------
2000 1999 1998
------------ ------------ ------------

Tax at statutory rate (34%) $ (1,555,000) $ (4,372,000) $ (4,238,460)
Other differences, net 666,000 1,733,000 2,062,547
Change in valuation allowance 1,040,000 3,064,000 2,587,293
State tax benefit, net of
federal tax effect (151,000) (425,000) (411,380)
------------ ------------ ------------
Net Income Taxes $ -- $ -- $ --
============ ============ ============

</Table>

NOTE 8--SUPPLEMENTAL CASH FLOW INFORMATION AND NONCASH
INVESTING AND FINANCING ACTIVITIES

SUPPLEMENTAL CASH FLOW INFORMATION --

<Table>
<Caption>
FOR THE YEARS ENDED DECEMBER 31,
----------------------------------------
2000 1999 1998
--------- --------- ---------

Interest Paid 209,186 $ 424,620 $ 531,247
</Table>

NONCASH INVESTING AND FINANCING ACTIVITIES --

In March, 2000 the Company recorded $947,203 related to the cashless
exercise of warrants as a deemed payment of the principal of the 1999 Notes, as
defined in Note 6 - Notes Payable.

The Company acquired equipment and incurred obligations under capital lease
agreements during 1999 for equipment acquired valued at $18,000. Two notes
payable totaling $800,000 along with $93,698 of accrued interest were converted
into 893,698 shares of common stock during 1999.

The Company converted $1,000,000 of its 1998 bridge loan notes into the 16%
senior secured notes payable. In addition, $250,000 of the 1998 bridge loan
notes were converted into mandatorily redeemable preferred stock. During 1999,
the Company also canceled $8,449 of the remaining balance of a note issued to an
employee, and returned to the employee the equipment previously purchased from
the employee.

During 1998, the Company issued stock for notes payable to three
individuals. The total of the notes was $72,852. Interest expense in the amount
of $10,567 was charged on one of these notes. The Company acquired equipment and
incurred obligations under capital lease agreements during 1998 for equipment
valued at $900,993. The Company also purchased equipment for a note in the
amount of $4,278.

The Company sold business assets relating to its SecuriKey products during
1998. The Company realized proceeds on the sale of $372,499 and recognized a
gain of $319,528. The Company also sold other assets to various parties during
the year. The book value of the assets sold was $16,940. The Company realized
proceeds on the sale of $8,636 resulting in a loss upon disposal of $13,223.

F-27

NOTE 9--MANDATORILY REDEEMABLE PREFERRED STOCK AND WARRANTS

On February 25, 2000, the Company redeemed the mandatorily redeemable
preferred stock for cash of $950,000 for the principal balance and $57,378 for
the preferred dividends accrued to date.

NOTE 10--STOCK WARRANTS

During 1998, the Company issued warrants to purchase 250,000 common shares
of stock at $3.00 per share to holders of the 1998 bridge loan notes. The
warrants were subsequently repriced to $0.25 per share. An additional 83,333
warrants were issued to the note holders during 1998. The value of the warrants
was estimated on the dates issued and on the dates the warrants were modified
using the Black-Scholes option-pricing model. The Company recognized $1,199,683
of interest expense on the issuance and repricing of the warrants. In addition,
the Company issued 398,000 warrants to purchase common shares at $1.75 to $5.00
per share as financing fees in connection with the issuance of the 1998 bridge
loan notes. Interest expense of $425,155 was recognized on the issuance of the
warrants. During 1999, the Company issued warrants to purchase 4,750,000 shares
of common stock to the purchasers of the Company's preferred stock. The warrants
were valued at $950,000 and recognized as a preferred dividend.

The Company issued warrants to purchase 1,050,000 common shares to the
holders of the 1998 bridge loan notes and the 16% senior secured notes as
satisfaction for the potential defaults on the notes throughout 1999. The
Company recognized $1,313,195 of interest for the warrants issued.

During the year ended December 31, 1999, 253,077 warrants were exercised for
services rendered to the Company valued at $63,269 or $0.25 per share.

At December 31, 2000, following the exercise of warrants as described in
Note 11 - Stockholder's Equity, warrants to purchase 1,284,570 shares of common
stock were outstanding.

NOTE 11--STOCKHOLDERS' EQUITY

During 1998, the Company issued 502,000 restricted common shares in a
private placement to the major shareholders of the Company for cash in the
amount of $907,767, net of $96,233 in accumulated offering costs, or $2.00 per
share before offering costs. There were no unstated rights or privileges
received with respect to this issuance. The Company issued 2,219,258 shares of
common stock from October 1998 through December 1998 in private placement
offerings for $1,436,047.

The Company issued 10,000 common shares in conjunction with the execution of
a manufacturing contract during February 1998. The shares were valued at $75,000
or $7.50 per share, which was the quoted market trading price on the date of
issuance and was considered a preliminary cost of obtaining the contract. The
cost was amortized over the fulfillment of the contract. The Company also issued
234,283 shares of common stock for legal and consulting services. An additional
199,546 shares were issued as finders fees and commissions.

In May 1998, the Company acquired proprietary intellectual property rights
in and to spread spectrum radio technology which has been accounted for as
purchased research and development. The acquisition of this technology provided
the Company with the ability to modify and update the technology for use in its
radio products and engineering contracts. The purchase price was $305,651, of
which $300,000 was paid by the issuance of 60,000 common shares valued at $5.00
per share, with the balance being paid in cash for closing and related costs.
Additionally, the Company loaned $66,975 to the seller, of which $41,975 was
paid in cash and carries interest at

F-28

10%. The balance of $25,000 was advanced through the issuance of 5,000 common
shares, valued at $5.00 per share, to two creditors of the seller. The seller
executed an unsecured promissory note which was subsequently written off in
June, 2000.

During 1998, the Company issued 435,051 shares of common stock upon the
exercise of stock options. Proceeds from the issuance were $143,323 and a
promissory note from a shareholder of $48,419. $10,000 of the note has been
received and the Company has charged the shareholder interest of $10,567 on the
note.

In November 1998, the Company converted $15,123 of accrued interest to
30,000 shares of common stock. This interest was converted to shares at a rate
that was below the market value for the stock. An additional $24,267 of interest
expense was recognized on the conversion of the interest. In association with
the bridge loans discussed in Note 6, $867,856 of interest expense was
recognized and recorded as additional paid-in capital. As a result of obtaining
waivers of default on the bridge loans, additional warrants were issued and the
existing warrants were repriced. This resulted in an additional $184,720 of
interest that was recognized as additional paid-in capital. The total amount of
interest expense that was recorded as additional paid-in capital is $1,091,966.

During February 1999, the Company issued 2,040,000 common shares for cash in
the amount of $2,040,000 received in a private placement offering. In connection
with the offering, the Company granted options to purchase 200,000 common shares
at $1.75 per share within 5 years and issued 8,000 shares of common stock as a
finder's fee. The Company paid $163,200 as a finder's fee in connection with the
private placement. The Company issued 3,538,000 common shares for cash in the
amount of $3,538,000 received in other various private placement offerings
throughout the year. In connection with the offerings, the Company paid $390,527
and issued 26,000 shares of common stock as finders' fees.

During March 1999, note holders converted two unsecured promissory notes
totaling $800,000, together with accrued interest, into 893,698 common shares at
$1.00 per share under the terms of a conversion privilege granted to the note
holders in December 1998. At the date of the conversion, the Company recognized
a beneficial conversion feature of $81,517 relating to the conversion of accrued
interest into common stock at a favorable conversion rate

During 1999, the Company issued 120,841 restricted common shares for
services valued at $231,386, or $1.91 per share.

During 1999, the Company issued 253,077 common shares upon exercise of
warrants for cash in the amount of $63,269 or $0.25 per share and, during August
1999, the Company issued 250,000 common shares to holders of bridge loan notes
in satisfaction of the waivers of default on the notes. The value of the shares
issued on the waiver of default of the bridge loan was $250,000, or $1.00 per
share. During November 1999, the Company issued 200,000 shares of common stock
in satisfaction of the waiver of default and the interest payment. The stock was
valued at $512,000 or $2.56 per share.

During 1999, Company issued warrants to the holders of the 16% senior
secured loan notes as satisfaction of a waiver of default on the notes. The
Company issued 300,000 warrants on June 30 and again on September 30, 1999, and
recognized $279,555, and $397,647 of interest expense, respectively, from the
issuance of the warrants.

During April 1999, the Company granted warrants to purchase 100,000 shares
of common stock to the holders of the 1998 bridge loan notes. The Company
recognized $170,774 of interest expense from the issuance of the warrants. Also,
on October 1, 1999, the Company granted warrants to purchase 398,000 shares of
common stock to two shareholders for services to the Company. The Company
recognized an expense relating to these services of $425,155 at the date of the
grant.

During the first quarter of 2000, the Company issued 4,548,667 common shares
for gross cash proceeds of $13,646,000 received from 45 accredited investors in
a private placement offering, at $3.00 per share. These securities are exempt
from registration under the Act. In connection with the offering, a total of
$1,512,782 was incurred as placement costs.

During March, 2000, the Company issued a total 5,393,690 common shares
related to the exercise of warrants to purchase common stock at $.25 per share.
The Company received $401,220 in cash and recorded $947,203 related to the
cashless exercise of warrants as a deemed payment of the principal of the 1999
Notes, as defined in Note 6 - Notes Payable. The warrants exercised totaled
$1,348,423.

F-29

In March, 2000, the Company issued 16,474 shares of common stock upon the
cashless exercise of 18,333 stock options.

NOTE 12--STOCK OPTIONS

The Company has granted stock options under stock option plans and has
granted other individual options to employees, directors and consultants.

Under the 1997 Stock Option Plan (the 1997 Plan), options to purchase a
maximum of 1,500,000 common shares were authorized for issuance to officers and
employees. Options to purchase 937,044 common shares were granted under the 1997
Plan on November 10, 1997 with a weighted-average exercise price of $6.50 per
share. The options were exercisable from the date granted through November 10,
1999. The options were exercisable by payment of cash or by shares of common
stock of the Company. Accordingly, the options granted under the plan have been
accounted for as variable options. Compensation relating to the options was
recognized over the period the options vest, and $1,940,225 was recognized
during 1997 based on the difference between the market value of the Company's
common stock on December 31, 1997 and the exercise price. On April 28, 1998, the
Board of Directors approved the repurchase of 638,236 unvested options under the
1997 Plan for $6,382, or $0.01 per share. The Company recognized a decrease in
compensation expense relating to these options of $1,940,225 during 1998 due to
the market value of the Company's common stock decreasing to below the exercise
price of the options.

The Company adopted the 1998 Employee Incentive Stock Option Plan and the
1998 Non-Qualified Stock Option Plan during December 1998. The plans were
ratified by the shareholders in April 1999. Options to purchase up to 2,200,000
and 1,000,000 shares of the Company's common shares are authorized under the
1998 Employee Incentive Stock Option Plan and 1998 Non-Qualified Stock Option
Plan respectively. Options granted under the 1998 Employee Incentive Stock
Option Plan are exercisable at the fair value of the common stock on the date
granted (110% of fair value if granted to a shareholder who owns 10% or more of
the total combined voting power of all classes of stock of the Company). Options
may be exercised by payment of cash or by shares of common stock of the Company.
Accordingly, the options granted under the plans have been accounted for as
variable options. Options granted under the plans are generally exercisable over
three to five years and expire five years from the date of grant.

During 1999, the Company granted 30,000 5-year and 30,000 4-year options to
purchase 60,000 shares of common stock at $1.94 and $2.04 per share,
respectively to Directors. The Company also issued 150,000 warrants to purchase
common stock to holders of the bridge loan notes for services rendered. Interest
expense of $130,385 was recognized on the issuance of the warrants.

A summary of the status of the Company's stock options as of December 31,
2000, 1999 and 1998, and changes during the years then ended are presented
below:

<Table>
<Caption>
2000 1999 1998
------------------------- ----------------------- ------------------------
WEIGHTED WEIGHTED WEIGHTED
AVERAGE AVERAGE AVERAGE
EXERCISE EXERCISE EXERCISE
SHARES PRICE SHARES PRICE SHARES PRICE
----------- --------- ----------- -------- ------------ ---------

Outstanding at beginning of year 1,020,650 $ 2.89 641,922 $ 4.22 1,521,846 $ 4.33
Granted 279,659 3.20 837,000 1.98 595,678 5.03
Exercised (20,833) 1.41 -- -- (435,051) 0.44
Forfeited or canceled (89,317) 2.67 (458,272) 3.08 (1,040,551) 6.32
----------- ----------- ------------
Outstanding at end of year 1,190,159 2.92 1,020,650 2.89 641,922 4.22
=========== =========== ============
Options exercisable at year-end 555,471 3.73 352,649 4.52 417,900 4.60
=========== =========== ============
Weighted-average fair value
of options granted during
the year $ 2.71 $ 1.55 $ 3.86
=========== =========== ============
</Table>

F-30

The following table summarizes information about stock options outstanding
at December 31, 2000:

<Table>
<Caption>
OPTIONS OUTSTANDING OPTIONS EXERCISABLE
----------------------------------- --------------------
WEIGHTED- WEIGHTED-
AVERAGE AVERAGE AVERAGE
RANGE OF CONTRACTUAL EXERCISE EXERCISE
PRICES SHARES LIFE PRICE SHARES PRICE
--------------- --------- ----------- --------- -------- ---------

$ 1.31 - $ 1.75 160,000 3.21 years $ 1.70 106,656 $ 1.70
$ 2.09 - $ 2.81 642,184 4.51 years 2.20 183,315 2.09
$ 3.00 - $ 3.40 182,475 4.16 years 3.21 60,000 3.40
$ 4.00 - $ 4.00 57,500 3.27 years 4.00 57,500 4.00
$ 6.50 - $ 6.50 128,000 1.15 years 6.50 128,000 6.50
$12.00 - $12.00 20,000 2.03 years 12.00 20,000 12.00
--------- -------
$ 1.31 - $12.00 1,190,159 3.78 years 2.92 555,471 3.73
========= =======
</Table>

The Company measures compensation under stock-based options and plans using
the intrinsic value method prescribed in Accounting Principles Board Opinion 25,
Accounting for Stock Issued to Employees, and related interpretations, for stock
options granted to employees, and determines compensation cost granted to
non-employees based on the fair value at the grant dates consistent with the
alternative method set forth under Statement of Financial Accounting Standards
No. 123, (SFAS 123) Accounting for Stock-Based Compensation. Stock-based
compensation charged to operations was $(359,331), $643,833, and $(1,677,759),
for the years ended December 31, 2000, 1999 and 1998, respectively. Had
compensation cost for all of the Company's options been determined based upon
SFAS 123, net loss and loss per share would have increased to the pro forma
amounts indicated below:

<Table>
<Caption>
FOR THE YEARS ENDED DECEMBER 31,
--------------------------------------------
2000 1999 1998
------------ ------------- -------------

Net loss:
As reported $ (4,580,904) $ (13,859,674) $ (12,466,059)
Pro forma (5,611,499) (12,766,433) (17,506,009)
Basic and diluted loss
per common share:
As reported $ (0.16) $ (0.80) $ (1.11)
Pro forma (0.19) (0.80) (1.56)
</Table>

The fair value of each option granted was estimated on the date of grant
using the Black-Scholes option-pricing model with the following weighted-average
assumptions used for grants in 2000, 1999, and 1998, respectively: dividend
yield of 0.0% for all years; expected volatility of 143%, 166%, and 105%;
risk-free interest rate of 6.0%, 5.6%, and 5.2%; and expected lives of the
options of 4.8 years, 2.0 years, and 4.1 years.

NOTE 13 -- BUSINESS SEGMENT INFORMATION

As of December 31, 2000, the Company's operations are classified into two
reportable business segments: X-traWeb products and radio products. Corporate in
1999 and 1998 represents primarily contract manufacturing.

The Company's business was conducted primarily in the United States during
2000, 1999 and 1998. In 2000 the Company established a European subsidiary to
facilitate international expansion. Less than $10,000 of revenue was realized
from European operations in 2000.

Segment operating income is total segment revenue reduced by operating
expenses identifiable with or allocable to that business segment. Corporate
includes general corporate assets and assets of business activities no longer
being pursued.

The Company evaluates performance of its segments based on revenues and
operating income. The accounting policies of the reportable segment are the same
as those described in the summary of significant accounting policies. There are
no inter-segment sales.

F-31

<Table>
<Caption>
2000 1999 1998
------------ ------------ -------------

Revenues:
X-traWeb $ 450,604 $ -- $ --
Radio products 690,377 789,167 586,000
Corporate 573,852 2,777,140 3,723,691
Total sales $ 1,714,833 $ 3,566,307 $ 4,309,691

Operating income (loss):
X-traWeb $ (3,593,924) $ (387,464) $ --
Radio products (1,441,430) (1,358,626) (1,845,664)
Corporate (55,101) (7,583,491) (9,150,812)
Total operating loss $ (5,090,455) $ (9,329,581) $ (10,996,476)

Assets:
X-traWeb $ 1,324,821 $ --
Radio products 642,595 631,627
Corporate 3,002,471 1,946,587
Total assets $ 4,969,887 $ 2,578,214
</Table>

NOTE 14--RELATED PARTY TRANSACTIONS

In 2000, the Company deemed a $66,829 receivable from a shareholder to be
uncollectible, and the balance was written off.

During 1998, the Company paid outstanding loans to shareholders. The amount
paid on these loans totaled $369,807. In addition, a shareholder and an employee
of the Company made a short-term loan to the Company for $40,000. This loan was
also repaid in 1998.

NOTE 15--COMMITMENTS AND CONTINGENCIES

LEASE COMMITMENTS - The Company leases office facilities and equipment under
agreements accounted for as operating leases. Lease expense attributable to the
years ended December 31, 2000, 1999, and 1998 was $310,338, $342,051, and
$483,456 respectively. Lease expense recognized during 1999 for abandonment of
property with a non-cancelable lease with a lease term ending in August 2005,
was $1,756,924. During 1999 the Company entered into an agreement to lease new
facilities in connection with its new location in the Denver area with the lease
term ending December 2005. The Company also leases engineering and office
equipment under capital leases with interest rates from 8 to 24 percent, with a
weighted average interest rate of 10.16%. The following is a schedule by years
of the future minimum lease payments required under operating and capital leases
together with the present value of net minimum lease payments as of December 31,
2000:

<Table>
<Caption>
CAPITAL OPERATING
YEARS ENDING DECEMBER 31,: LEASES LEASES
-------------------------- ---------- -----------

2001 $ 21,134 $ 282,732
2002 5,076 242,117
2003 5,076 238,637
2004 423 242,786
2005 -- 251,002
---------- -----------
Total Minimum Lease Payments 31,709 $ 1,257,274
===========
Less amount representing interest 2,702
----------
Present Value of Net Minimum Lease Payments 29,007
Less Current Portion 19,374
----------
Long-Term Obligations Under Capital Lease $ 9,633
==========
</Table>

LEGAL MATTERS - During 1999 the Company settled a claim from a software vendor
for a $100,000 cash payment. The claim arose when the Company returned leased
software and requested cancellation of the lease and related technical support
agreement. During 1999, the Company also settled a lawsuit brought by an
investment banker and paid $145,000 as settlement expense.

Williams Wireless, Inc. raised a claim that the Company violated the
non-competition provisions of their agreements by allegedly marketing
X-traWeb(TM) products in the telemetry meter reading applications. The
Company, in turn, claimed that Williams Wireless, Inc. failed to satisfy all
of its duties under its various agreements with the Company. While the
Company believed that Williams' claim was properly disputable, the parties
orally agreed to enter into a settlement agreement and mutual release. On
March 8, 2000, before such settlement agreement was concluded, Williams sold
substantially all of its assets and business, including its agreements with
the Company, to an unrelated party, Internet telemetry Corp., and thereafter
the claims were amicably resolved.

The Company and Internet entered into a settlement agreement and mutual
release dated as of August 7, 2000, which contained the following key
elements:

(a) each party released the other of any claims under the Williams'
agreements, and the parties terminated such agreements in all respects;

F-32

(b) the Company agreed to grant Internet a perpetual, non-exclusive
irrevocable royalty-free worldwide license to manufacture, use and sell the
Company's MicroHopper radio, as configured on the date of the settlement
agreement, as a component of Internet's telemetry systems or products, and
to manufacture, use and sell such radio only when incorporated into
Internet's telemetry systems or products;

(c) each party agreed to allow the other party to resell the other's
products pursuant to a standard resellers agreement adopted by such party;
and

(d) each party agreed to indemnify the other from any claims arising under
such agreement. The Company believes that this agreement will have no
material adverse effect on our business.

On February 20, 2001 certain parties filed a lawsuit against the Company
with respect to the purchase of a total of 230,000 shares of common stock of the
Company at $3.00 per share in a private placement transaction in February 2000.

The plaintiffs seek rescission of the transaction and/or damages, including
treble damages, which they allege arise out of the Company's failure to file a
registration statement on or before December 31, 2000. The Company believes that
it has meritorious defenses to such action and intends to prosecute its defense
of the action vigorously, but there can be no assurance as to the outcome
thereof.

401K PROFIT SHARING PLAN - The Company sponsors a 401K profit sharing plan
but has no commitment to match employees' contributions to the plan, nor has the
Company made any contributions to the plan to date.

NOTE 16 - RESTATEMENT OF FINANCIAL STATEMENTS

Subsequent to the issuance of the Company's financial statements for the
year ended December 31, 2000, the Company concluded that certain stock options
granted under the Company's 1997 and 1998 Employee Incentive Stock Option Plans
(the "Plans") should have been accounted for as variable plan options and
determined that the consolidated financial statements for the years ended
December 31, 2000, 1999 and 1998 should be restated. In addition, the Company
has made certain reclassifications to the statements of operations for 2000,
1999 and 1998. These reclassifications did not effect net loss per share for any
of the years presented. A summary of the significant effects of the restatement
is as follows:

Balance Sheet Data:

<Table>
<Caption>
December 31, 2000 December 31, 1999
---------------------------- ----------------------------
As Previously As Previously
Reported As Restated Reported As Restated
------------- ------------ ------------- ------------

Additional Paid-in Capital $ 48,901,546 $ 46,500,157 $ 35,242,864 $ 33,394,207
Accumulated Deficit (44,844,164) (42,458,847) (39,684,707) (37,884,343)
</Table>

Statement of Operations Data:

<Table>
<Caption>
Year Ended Year Ended Year Ended
December 31, 2000 December 31, 1999 December 31, 1998
--------------------------- ---------------------------- -----------------------------
As Previously As Previously As Previously
Reported As Restated Reported As Restated Reported As Restated
------------- ----------- ------------- ------------ ------------- -------------

Selling, General & Administrative
Expenses $ 5,895,975 $ 5,614,732 $ 4,657,680 $ 5,192,901 $ 4,975,307 $ 2,397,995

Net Loss Applicable to Common
Shareholders (5,159,457) (4,580,904) (13,324,453) (13,859,674) (15,043,371) (12,466,059)

Loss Per Share (0.18) (0.16) (0.77) (0.80) (1.34) (1.11)
</Table>

F-33

NOTE 17 -- SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED)

The Company's interim financial information for the quarterly periods ended
March 31, June 30, and September 30, 2000 and 1999 has been restated to give
effect to the restatement discussed in Note 16.

<Table>
<Caption>
2000 FISCAL QUARTER YEAR
------------------------------------------------------------ ------------
1 2 3 4
------------ ------------ ------------ ------------

Net sales
As previously reported $ 510,815 $ 455,425 $ 376,885 $ 371,708 $ 1,714,833
As restated 510,815 455,425 376,885 371,708 1,714,833
Gross profit
As previously reported 82,709 185,454 117,775 115,468 501,406
As restated 82,709 185,454 117,775 115,468 501,406
Net income
(loss)applicable to common
shares
As previously reported (1,297,585) 92,503 (1,578,807) (2,375,568) (5,159,457)
As restated (2,380,967) 961,648 (1,655,899 (1,505,686) (4,580,904)
Basic and diluted income
(loss) applicable to
common shares
As previously reported (0.05) 0.00 (0.05) (0.07) (0.18)
As restated (0.10) 0.03 (0.05) (0.05) (0.16)
</Table>

<Table>
<Caption>
1999 FISCAL QUARTER YEAR
------------------------------------------------------------ ------------
1 2 3 4
------------ ------------ ------------ ------------

Fiscal 1999
Net sales
As previously reported $ 1,033,375 $ 639,624 $ 1,044,511 $ 848,797 $ 3,566,307
As restated 1,033,375 639,624 1,044,511 848,797 3,566,307
Gross profit
As previously reported 211,690 80,038 153,078 195,042 639,848
As restated 211,690 80,038 153,078 (210,424) 234,382
Net loss applicable to
common shares
As previously reported (1,682,544) (2,857,212) (2,280,065) (6,504,632) (13,324,453)
As restated (1,668,299) (2,807,197) (2,267,830) (7,116,348) (13,859,674)
Basic and diluted loss per
share
As previously reported (0.10) (0.17) (0.13) (0.37) (0.77)
As restated (0.10) (0.16) (0.13) (0.36) (0.80)
</Table>

F-34

ITEM 16. EXHIBITS

Description

EXHIBIT INDEX

No. Description

3.1 Articles of Incorporation of the Company and all amendments
thereto*

3.2 Bylaws of the Company*

4.1 Form of Common Stock Certificate*

4.2 Form of Subscription Agreement used in private financing
providing for registration rights*

5.1 Opinion of Connolly Epstein Chicco Foxman Engelmyer & Ewing
regarding the legality of securities being registered*

5.2 Opinion of Law Offices of Stephen R. Field as to the legality of
the securities being registered**

10.1 1997 Stock Option Plan*

10.2 DRCC Omnibus Stock Option Plan*

10.3 Development and License Agreement dated April 4, 1997, between
DRCC and Kyushu Matsushita Electric Co., Ltd.*

10.4 Amended and restated Technical Development and Marketing
Alliance Agreement dated September 15, 1997, between the Company
and Williams Telemetry Services, Inc.*

10.5 Lease Agreement dated May 17, 1995, between DRCC and Pracvest
Partnership relating to the Company's American Fork City offices
and facility*

10.6 Lease Agreement dated February 12, 1996, between the Company the
Green/Praver, et al., relating to the Company's Salt Lake City
offices*

10.7 Shareholders Agreement dated May 21, 1997 between the Company,
DRCC, Philip A. Bunker and William E. Chipman, Sr.*

10.8 Asset Purchase Agreement dated October 31, 1997, between the
Company and Austin Antenna, Ltd.*

10.9 Stock Exchange Agreement dated October 31, 1997, between the
Company, TWC, Ltd. and the shareholders of TWC, Ltd.*

10.10 Settlement Agreement, Mutual Waiver and Release of All Claims
dated November 11, 1997 between Digital Radio Communications
Corp. and Digital Scientific, Inc.*

10.11 Agreement (undated) between the Company, Xarc Corporation and
Donald J. Wallace relating to the Company's acquisition of Xarc
Corporation*

10.12 Promissory Note dated December 4, 1997, by the Company, payable
to William E. Chipman, Sr. in the principal amount of $125,000*

10.13 Promissory Note dated November 13, 1997, by the Company, payable
to T. Kent Rainey in the principal amount of $200,000*

10.14 Investment Banking Services Agreement dated November 19, 1997,
between the Company and PaineWebber Incorporated*

10.15 $400,000 Promissory Note dated December 24, 1997, payable to
Electronic Assembly Corporation*

10.16 $400,000 Promissory Note dated January 8, 1998, payable to
Tiverton Holdings Ltd.*

10.17 Loan Agreement by and among the Registrant and the Bridge
Noteholders* dated as of May 15, 1998*

10.18 Amendment and Waiver Agreement by and among the Registrant and
the Bridge Noteholders dated August 7, 1998*

10.19 Amendment and Waiver Agreement by and among the Registrant and
the Bridge Noteholders dated September 11, 1998*

10.20 Loan Agreement by and among the Registrant and the Bridge
Noteholders dated as of May 15, 1998 (Previously filed),
together with the Notes, Pledge/Security Agreement,
Pledgee/Representative Agreement, Subordination, and
Registration Rights Agreement*

10.21 Separation and Mutual Release Agreement between the Registrant
and William E. Chipman, Sr. dated as of May 26, 1998*

10.22 Registration Rights Agreement by and among the Registrant and
the purchasers of common stock issued pursuant to the
Registrants Confidential Private Placement Memorandum dated
September 9, 1998, as amended*

10.23 Employment Agreement between the Registrant and James
O'Callaghan dated May 20, 1998*

10.24 Lease agreement between the Registrant and NP#2 dated as of July
29, 1998 relating to the premises at 2441 South 3850 West, West
Valley City, Utah 84120*

10.25 Agreement between KME and the Registrant dated October 19, 1998
relating to the Registrant's providing of technical assistance
and development relating to the Gigarange telephone*

10.26 Agreement between KME and the Registrant dated as of March 1,
1998 relating to the Panasonic MicroCast System*

10.27 General and Mutual Release Agreement between the Registrant and
Phil Acton dated November 2, 1998*

10.28 Agreement and Waiver Agreement by and among the Registrant and
the Bridge Noteholders dated November 25, 1998*

10.29 1998 Employee Incentive Stock Option Plan*

10.30 1998 Non-qualified Stock Option Plan*

10.31 Amendment of Agreement by and among the Registrant and the
Bridge Noteholders dated as of March 26, 1999*

10.32 Loan Agreement by and among the Registrant and the Senior
Secured Noteholders dated as of May 14, 1999, together with the
Notes, Pledge/Security Agreement, Pledgee Representative
Agreement, Subordination and Registration Rights Agreement*

10.33 Two separate Agreements by and among the Registrant and the 1999
Bridge Noteholders dated August 19, 1999*

10.34 Waiver Agreement by and among the Registrant and the Bridge
Noteholders dated as of December 7, 1999*

10.35 Registration Rights Agreement by and among the Registrant and
the purchasers of common stock issued pursuant to the
Registrant's Confidential Private Placement Memorandum dated
January 12, 2000 as amended*

10.36 Settlement Agreement and Mutual Release between Internet
Telemetry Corp. and the Registrant, dated as of August 7, 2000.*

10.37 Financing Commitment Letter between the Registrant and Insight
Capital LLC dated April 2, 2001.*

10.38 Loan Agreement by and among the Registrant and Lancer Offshore,
Inc. Noteholders dated as of May 17, 2001, together with the
Notes, Warrant, Pledge/Security Agreement, Subordination
Agreement, and Registration Rights Agreement.*

10.39 Amended and Restated Loan Agreement by and among the Registrant,
Lancer Offshore, Inc. and Lancer Partners L.P. dated as of
August 7, 2001, together with the Note, Warrant, Amended and
Restated Pledge / Security Agreement, Subordination Agreement,
Pledgee Representation Agreement and the Amended and Restated
Registration Rights Agreement.*

10.40 Amendment of Agreements by and among the Registrant and Lancer
Offshore, Inc. and Lancer Partners L.P. dated September 14,
2001.*

10.41 Amendment of Agreements by and among the Registrant and Lancer
Offshore, Inc. and Lancer Partners L.P. dated as of October 12,
2001.**

16.1 Letter from Hansen, Barnett & Maxwell regarding change in
Certifying Accountant.*

23.1 Consent of Deloitte & Touche LLP++

23.2 Consent of Hansen, Barnett & Maxwell++

- ----------

* Filed previously

** Filed herewith.

+ Management contract or compensatory plan or arrangement filed previously.

++ To be filed by amendment.

ITEM 17. UNDERTAKINGS.

The undersigned Registrant hereby undertakes to:

1. File, during any period in which it offers or sells securities, a
post-effective amendment to this Registration Statement to:

(i) Include any prospectus required by Section 10(a)(3) of the
Securities Act;

(ii) Reflect in the Prospectus any facts or events which,
individually or in the aggregate, represent a fundamental
change in the information set forth in the Registration
Statement; and

(iii) Include any additional or changed material information on the
Plan of Distribution described in the Registration Statement.

2. For the purpose of determining any liability under the Securities Act,
treat each post-effective amendment as a new registration of the
securities offered, and the offering of the securities at that time to
be the initial bona fide offering thereof.

3. To file a post-effective amendment to remove from registration any of
the securities that remain unsold at the end of the offering.

Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the foregoing provisions, or otherwise, the Registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Securities Act
and is, therefore, unenforceable.

In the event that a claim for indemnification against such liabilities
(other than the payment by the Registrant of expenses incurred or paid by a
director, officer or controlling person of the Registrant in the successful
defense of any action, suit or proceeding) is asserted by such director, officer
or controlling person in connection with the securities being registered, the
Registrant will, unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of competent jurisdiction
the question whether such indemnification by it is against public policy as
expressed in the Securities Act and will be governed by the final adjudication
of such issue.

The undersigned Registrant hereby undertakes that:

For purposes of determining any liability under the Securities Act, the
information omitted from the form of the Prospectus filed as part of this
Registration Statement in reliance upon Rule 430A and contained in a form of
prospectus filed by the Registrant pursuant to Rule 424(b)(1) or (4) or 497(h)
under the Securities Act shall be deemed to be a part of this Registration
Statement as of the time the Commission declared it effective.

For purposes of determining any liability under the Securities Act, each
post-effective amendment that contains a form of prospectus as a new
registration statement for the securities offered in this Registration
Statement, and the offering of the securities at that time, shall be deemed to
be the initial bona fide offering of those securities.

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Registration Statement to be signed on behalf by the
undersigned, thereunto duly authorized, in the city of Greenwood Village,
Colorado, on January 16, 2002.

WORLD WIRELESS COMMUNICATIONS, INC.

By: /s/ David D. Singer
--------------------------
David D. Singer, President

POWER OF ATTORNEY

KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints David D. Singer and Robert Hathaway, and each of
them, his true and lawful attorneys-in-fact and agents, with full power of
substitution for him and in his name, place and stead, in any and all
capacities, to sign any and all amendments (including pre-effective and
post-effective amendments) to this Registration Statement, and to file the same
with all exhibits thereto and other documents in connection therewith, including
any Registration Statement filed pursuant to Rule 462(b) under the Securities
Act of 1933, with the Securities and Exchange Commission, grants unto said
attorneys-in-fact and agents, and each of them, full power and authority to do
and perform each and every act and thing requisite and necessary to be done in
and about the premises, as fully to all intents and purposes as he might and
could do in person, and hereby ratifies and confirms all that such
attorneys-in-fact and agents or any of them, or their substitute or substitutes
may lawfully do or cause to be done by virtue hereof.

Pursuant to the requirements of the Securities Act of 1933, this report has
been signed below by the following persons on behalf of the Registrant and in
the capacities and on the dates indicated.

Signature Title Date
--------- ----- ----

/s/ David D. Singer Chairman of the Board, January 16, 2002
- --------------------- President, Chief Executive
David D. Singer Officer and Director

/s/ Charles Taylor Director January 16, 2002
- ---------------------
Charles Taylor

/s/ Malcolm P. Thomas Director January 16, 2002
- ---------------------
Malcolm P. Thomas

/s/ M. Robert Carr Director January 16, 2002
- ---------------------
M. Robert Carr

/s/ Robert Hathaway Vice President of Finance
- --------------------- And Chief Financial Officer
Robert Hathaway (Principal Financial Officer January 16, 2002
and Principal Accounting
Officer)
</Table>

EXHIBIT INDEX

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

3.1 Articles of Incorporation of the Company and all amendments
thereto*

3.2 Bylaws of the Company*

4.1 Form of Common Stock Certificate*

4.2 Form of Subscription Agreement used in private financing
providing for registration rights*

5.1 Opinion of Connolly Epstein Chicco Foxman Engelmyer & Ewing
regarding the legality of securities being registered*

5.2 Opinion of Law Offices of Stephen R. Field as to the legality of
the securities being registered**

10.1 1997 Stock Option Plan*

10.2 DRCC Omnibus Stock Option Plan*

10.3 Development and License Agreement dated April 4, 1997, between
DRCC and Kyushu Matsushita Electric Co., Ltd.*

10.4 Amended and restated Technical Development and Marketing
Alliance Agreement dated September 15, 1997, between the Company
and Williams Telemetry Services, Inc.*

10.5 Lease Agreement dated May 17, 1995, between DRCC and Pracvest
Partnership relating to the Company's American Fork City offices
and facility*

10.6 Lease Agreement dated February 12, 1996, between the Company the
Green/Praver, et al., relating to the Company's Salt Lake City
offices*

10.7 Shareholders Agreement dated May 21, 1997 between the Company,
DRCC, Philip A. Bunker and William E. Chipman, Sr.*

10.8 Asset Purchase Agreement dated October 31, 1997, between the
Company and Austin Antenna, Ltd.*

10.9 Stock Exchange Agreement dated October 31, 1997, between the
Company, TWC, Ltd. and the shareholders of TWC, Ltd.*

10.10 Settlement Agreement, Mutual Waiver and Release of All Claims
dated November 11, 1997 between Digital Radio Communications
Corp. and Digital Scientific, Inc.*
</Table>