UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

QUARTERLY REPORT PURSUANT TO SECTION 13 ~~OR 15(d) OF THE~~

OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarter ended ~~June~~September 30, 2002

Commission file number 001-15837

WORLD WIRELESS COMMUNICATIONS, INC.

(Exact Name of Registrant As Specified In Its Charter)

Nevada		87-0549700
(State of other jurisdiction of incorporation or organization)		(I.R.S. employer identification No.)

5670 Greenwood Plaza Boulevard, Penthouse

Greenwood Village, Colorado 80111

(Address of principal executive offices)(Zip Code)

Registrant’s telephone number (303) 221-1944

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

As of ~~August~~October 31, 2002 there were 31,459,945 shares of the Registrant’s Common Stock, par value $0.001, issued and outstanding.

TABLE OF CONTENTS

PART I.	Financial Information
Item 1.	Financial Statements:
	Statement Regarding Forward-Looking Disclosure	3
	Unaudited Condensed Consolidated Balance Sheets—as of June 30, 2002 and December 31, 2001	3
	Unaudited Condensed Consolidated Balance Sheets—as of September 30, 2002 and December 31, 2001	4
	Unaudited Condensed Consolidated Statements of Operations—for the Three Months Ended June 30, 2002 and June 30, 2001 and for the Six Months Ended June 30, 2002 and June 30, 2001	5
	Unaudited Condensed Consolidated Statements of Operations—for the Three Months Ended September 30, 2002 and September 30, 2001 and for the Nine Months Ended September 30, 2002 and September 30, 2001	6
	Unaudited Condensed Consolidated Statements of Cash Flow—for the Six Months Ended June 30, 2002 and June 30, 2001	6
	Unaudited Condensed Consolidated Statements of Cash Flow—for the Nine Months Ended September 30, 2002 and September 30, 2001	7
	Notes to Unaudited Condensed Consolidated Financial Statements	89
Item 2.	Management’s Discussion and Analysis of Results of Operation and Financial Condition	1615
PART II.	Other Information
Item 1.	Legal Proceedings	2118
Item 2.	Changes in Securities and Use of Proceeds	2119
Item 4.	~~Submission~~Controls ofand ~~Matters to a Vote of Security Holders~~Procedures	2826
Item 5.	Other Events	2926
Item 6.	Exhibits and Reports on Form 8-K	3026
	Signatures	3127

PART I—FINANCIAL INFORMATION

STATEMENT REGARDING FORWARD-LOOKING DISCLOSURE

This report 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 the expectations or beliefs of World Wireless Communications, Inc. and our subsidiaries (collectively the “Company”, “we” or “us”) concerning future events that involve risks and uncertainties, including, without limitation, (i) those associated with the ability of the Company 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 elsewhere herein, are forward-looking statements. 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 Report, including, without limitation, in connection with the forward-looking statements included in this report. 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.

Status of Independent Auditor’s Review

The interim financial statements included in this Form 10-Q have not been reviewed by the Company’s independent auditors, nor any other independent accountants, using professional standards and procedures for conducting such reviews, as established by generally accepted auditing standards. Accordingly, the Company’s independent auditors have not expressed any opinion or any other form of assurance on such financial statements, assume no responsibility for, and disclaim any association with, such financial statements.

Item 1. Financial Statements

WORLD WIRELESS COMMUNICATIONS, INC.

UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS

	June 30, 2002		December 31, 2001
	September 30, 2002		December 31, 2001
			(As restated, see Note 3)
ASSETS
CURRENT ASSETS
Cash and cash equivalents	$	~~231~~47,~~102~~520	$	223,738
Investment in securities available-for-sale		~~1,564~~500		688
Trade receivables, net of allowance for doubtful accounts		5242,~~546~~681		68,002
Other receivables		1917,~~218~~967		19,502
Inventory		~~415~~464,~~146~~893		445,976
Prepaid expenses		~~187~~166,~~631~~504		69,526
Total current assets		~~907~~740,~~207~~065		827,432
Equipment, net of accumulated depreciation and impairments		~~270~~226,~~219~~508		369,453
Deferred debt placement fees		—		477,650
Other assets, net of accumulated amortization		13,131		12,337
Total assets	$	1979,~~190,557~~704	$	1,686,872

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

LIABILITIES AND STOCKHOLDERS’ EQUITY

	June 30, 2002			December 31, 2001
	September 30, 2002			December 31, 2001
				(As restated, see Note 3)
CURRENT LIABILITIES
Trade accounts payable	$	~~688~~904,~~101~~758			746,699
Accrued liabilities		~~399~~437,~~317~~152			281,578
Accrued interest		~~511~~738,~~135~~810			174,892
Notes payable		6225,~~500~~000			—
Notes payable—related party, net of discount		56,~~535~~285,000			3,098,216
Deferred revenue		30,000			30,000
Obligation under capital leases—current portion		5,076			5,076
Total Current Liabilities		78,~~231~~425,~~129~~796			4,336,461
Long-term Obligation Under Capital Leases		~~1,600~~577			4,009
Mandatorily Redeemable 8% Preferred Stock—$0.001 par value; 1,000 shares authorized; 0 shares issued and outstanding; liquidation preference of $0		—			—
STOCKHOLDERS’ DEFICIT
Common stock to be issued		23,~~136~~238,~~000~~900			—
Common stock—$0.001 par value; 225,000,000 and 50,000,000 shares authorized; issued and outstanding: 31,459,945 shares at June 30, 2002 and 31,447,087 shares at December 31, 2001		31,459			31,447
Common stock—$0.001 par value; 225,000,000 and 50,000,000 shares authorized; issued and outstanding: 31,459,945 shares at September 30, 2002 and 31,447,087 shares at December 31, 2001		31,459			31,447
Additional paid-in capital		48,~~349~~406,~~178~~749			48,023,183
Accumulated other comprehensive loss		(67,~~534~~597	)		(7,409	)
Accumulated deficit		(5659,~~552~~116,~~275~~180	)		(50,700,819	)
Total Stockholders’ Deficit		(67,~~042~~446,~~172~~669	)		(2,653,598	)
Total Liabilities and Stockholders’ Deficit	$	1979,~~190,557~~704		$	1,686,872

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

WORLD WIRELESS COMMUNICATIONS, INC.

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

	For the Three Months Ended June 30						For the Six Months EndedJune 30
	For the Three Months Ended September 30						For the Nine Months Ended September 30
	2002			2001			2002			2001
REVENUES:
Services	$	~~15,000~~—		$	6223,~~218~~275		$	15,000		$	81104,~~218~~493
Royalties		—			71,~~062~~099			—			1617,~~441~~540
Product sales		~~225~~146,~~713~~071			~~273~~238,~~089~~081			~~428~~574,~~835~~906			~~503~~741,~~201~~282
Total Revenue		~~240~~146,~~713~~071			~~342~~262,~~369~~455			~~443~~589,~~835~~906			~~600~~863,~~860~~315
COST OF SALES:
Services		514,~~542~~922			4174,~~557~~601			520,~~542~~464			57132,~~904~~505
Products		8277,~~531~~821			~~121~~316,~~200~~520			~~166~~244,~~830~~651			~~235~~551,~~324~~844
Total Cost of Sales		8892,~~073~~743			~~162~~391,~~757~~121			~~172~~265,~~372~~115			~~293~~684,~~228~~349
Gross Profit		~~152~~53,~~640~~328			~~179~~(128,~~612~~666	)		~~271~~324,~~463~~791			~~307~~178,~~632~~966
EXPENSES
Research and development expense		~~176~~168,~~707~~524			~~120~~131,~~378~~978			~~323~~491,~~304~~828			~~274~~406,~~177~~155
Selling, general and administrative expenses		1996,~~077,997~~946			1,~~956~~440,~~208~~622			23,~~210~~207,~~799~~745			34,~~525~~966,~~570~~192
Amortization of goodwill		—			42,858			—			85128,~~716~~574
Total Expenses		1,~~254~~165,~~704~~470			21,~~119~~615,~~444~~458			23,~~534~~699,~~103~~573			35,~~885~~500,~~463~~921
Loss From Operations		(1,~~102~~112,~~064~~142	)		(1,~~939~~744,~~832~~124	)		(23,~~262~~374,~~640~~782	)		(35,~~577~~321,~~831~~955	)
Other Income/(Expense):
Interest expense		(21,~~599~~451,~~969~~131	)		(~~118~~255,~~102~~786	)		(35,~~616~~067,~~579~~710	)		(~~119~~375,~~554~~340	)
Other income		802			5,633			27,763			29,678
Other income (expense)		(632	)		437			27,131			30,115
Net Loss		(32,~~701~~563,~~231~~905	)		(21,~~052~~999,~~301~~473	)		(58,~~851~~415,~~456~~361	)		(35,667,~~707~~180	)
Net Loss Applicable To Common Stockholders	$	(3,701,231	)	$	(2,052,301	)	$	(5,851,456	)	$	(3,667,707	)
Basic and Diluted Net Loss Per Common Share		(0.08	)		(0.06	)		(0.27	)		(0.18	)
Basic and Diluted Net Loss Per Common Share		(0.12	)		(0.07	)		(0.19	)		(0.12	)
Weighted Average Number of Common Shares Used in Per Share Calculations		31,459,945			31,443,635			31,455,754			31,333,990
Weighted Average Number of Common Shares Used in Per Share Calculations		31,459,945			31,284,859	*		31,453,516			31,279,107	*

* As restated, see Note 3.

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

WORLD WIRELESS COMMUNICATIONS, INC.

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

	For the Six Months Ended June 30,
	For the Nine Months Ended September 30,
	2002			2001
CASH FLOW FROM OPERATING ACTIVITIES
Net Loss	$	(58,~~851~~415,~~456~~361	)	$	(35,667,~~707~~180	)
Adjustments to reconcile net loss to net cash used in operating activities:
Amortization of goodwill		—			85128,~~716~~574
Depreciation		~~110~~159,~~730~~230			6597,~~013~~220
Compensation expense from stock options		—			(37,169	)
Change in compensation from stock options		—			(37,170	)
Loss on sale of securities		—			326,~~290~~762
Amortization of debt discount		~~426~~484,~~542~~113			95264,~~514~~269
Amortization of debt placement fees		~~710~~770,~~150~~148			—
Debt extension charge—related party		23,~~136~~238,~~000~~900			—
Valuation allowance on inventory		—			172,741
Consulting services paid with stock		11,250			12,000
Provision for doubtful accounts receivable		(6,900	)		11,545
Changes in operating assets and liabilities:
Accounts receivable		2233,~~640~~757			34163,~~850~~599
Inventory		30(18,~~830~~917	)		(64179,~~276~~677	)
Prepaid expenses/other assets		(~~118~~97,~~898~~771	)		(~~277~~183,~~630~~355	)
Deferred revenue		—			30,000
Accounts payable		~~(58~~158,~~598~~060	)		~~(91~~386,~~086~~503	)
Accrued liabilities		~~117~~155,~~739~~574			(~~199~~61,~~984~~649	)
Accrued interest		~~336~~563,~~243~~918			2072,~~342~~477
Net Cash Used in Operating Activities		(2,~~133~~963,~~728~~999	)		(34,~~979~~763,~~582~~341	)
CASH FLOW FROM INVESTING ACTIVITIES
Payments for the purchase of property and equipment		(1116,~~497~~286	)		(6465,~~594~~605	)
Proceeds from sale of securities		—			731,~~324~~083
Net Cash Provided (Used) by Investing Activities		(11,497	)		(57,270	)
Net Cash Used by Investing Activities		(16,286	)		(34,522	)

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

	For the Six Months Ended June 30,
	For the Nine Months Ended September 30,
	2002			2001
CASH FLOW FROM FINANCING ACTIVITIES
Proceeds from exercise of options	$	—		$	17,467
Proceeds from borrowings and issuance of warrants		2,437,500			1,190,600
Proceeds from exercise of warrants		—			39,261
Deferred debt placement fees		(232,500	)		—
Proceeds from borrowings and issuance of warrants		3,187,500			1,815,600
Principal payments on notes payable		(50,000	)		(28,477	)
Deferred debt placement fees		(292,500	)		—
Principal payments on obligation under capital lease		(2,409	)		(14,201	)
Principal payments on notes payable		(87,500	)		(50,543	)
Net cash provided by financing activities		2,152,591			1,165,389
Principal payments on obligation under capital lease		(3,432	)		(15,045	)
Effect of exchange rate on cash and cash equivalents		—			(28,484	)
Net cash provided by financing activities		2,804,068			1,806,740
Net (decrease) increase in cash and cash equivalents		7,365			(2,899,947	)
Effect of exchange rate on cash and cash equivalents		—			(23,045	)
Net decrease in cash and cash equivalents		(176,217	)		(3,014,168	)
Cash and cash equivalents—beginning of period		223,737			3,097,624
Cash and cash equivalents—end of period	$	~~231~~47,~~102~~520		$	~~197~~83,~~677~~456
SUPPLEMENTAL CASH FLOW INFORMATION—
Cash paid for interest was $10,630 and $7,318 in 2002 and 2001 respectively
NON-CASH INVESTING AND FINANCING ACTIVITIES—NOTES 3 AND 6

SUPPLEMENTAL CASH FLOW INFORMATION—

Cash paid for interest was $7,584 and $3,871 in 2002 and 2001 respectively.

NON-CASH INVESTING AND FINANCING ACTIVITIES—NOTES 4 AND 7

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

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 accounting principles generally accepted in the United States have been condensed or omitted. The results of operations for the three and ~~six~~nine month periods ended ~~June~~September 30, 2002 are not necessarily indicative of the operating results to be expected for the full year.

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 three months ended ~~June~~September 30, 2002 and 2001 are as follows: Customer “A” represented 2415.38% and 013.2% of sales, respectively; Customer “B” represented 1633.36% and 0% of sales respectively, and Customer “C” represented 0% and 1912.36% respectively.

For the ~~six~~nine months ended ~~June~~September 30, 2002 and 2001, sales to major customers were: Customer “A” represented 2220.37% and 9.0% respectively, Customer “B” represented 1822.85% and 0% respectively, Customer “C” represented 0% and 1115.07% respectively, and Customer “D” represented 0% and 177.16% 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. As of ~~June~~September 30, 2002 and December 31, 2001 inventory consisted of the following:

	June 30, 2002		December 31, 2001
	September 30, 2002		December 31, 2001
Materials	$	~~196~~198,~~234~~323	$	148,957
Work in process		1638,~~257~~178		23,255
Finished goods		~~202~~228,~~655~~392		273,764
Total	$	~~415~~464,~~146~~893	$	445,976

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 resulted in the issuance of common stock. Diluted loss per share is the same as basic loss per share because the inclusion of potentially issuable common shares at June 30, 2002 and 2001, respectively, would have decreased the loss per share and have been excluded from the calculation. For the quarters ended ~~June~~September 30, 2002 and 2001 ~~124~~133,~~795~~040,~~725~~367 and 711,~~927~~569,~~711~~494 potentially dilutive securities from common stock options, warrants and convertible debt have been excluded from the weighted-average number of common shares outstanding for the diluted net loss per share computations asbecause they ~~are~~would ~~antidilutive~~have decreased the loss per share.

Deferred Revenue—Deferred revenue represents amounts invoiced and paid by customers for which products have not yet been shipped.

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. The Company’s comprehensive ~~income (~~loss) for the three and ~~six~~nine months ended ~~June~~September 30, 2002 and 2001 are as follows:

	For the Three Months Ended September 30,						For the Nine Months Ended September 30,
	2002			2001			2002			2001
Net loss	$	(2,563,905	)	$	(1,999,473	)	$	(8,415,361	)	$	(5,667,180	)
Unrealized loss on marketable equity securities		(1,063	)		7,671			(188	)		13,037
Effect of foreign currency translation		—			5,439			—			(23,045	)
Comprehensive loss for the period	$	(2,564,968	)	$	(1,986,363	)	$	(8,415,549	)	$	(5,677,188	)

	For the Three Months Ended June 30,						For the Six Months Ended June 30,
	2002			2001			2002			2001
Net loss	$	(3,701,231	)	$	(2,052,301	)	$	(5,851,456	)	$	(3,667,707	)
Unrealized loss on marketable equity securities		(1,939	)		6,360			875			23,998
Effect of foreign currency translation		—			2,497			—			(28,484	)
Comprehensive loss for the period	$	(3,703,170	)	$	(2,043,444	)	$	(5,850,581	)	$	(3,672,193	)

NOTE 2 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 ~~September~~December 3031, 2002. As operations have not generated sufficient amounts of cash, the Company has relied upon debt financing to fund its current period operations. The financing has been obtained from affiliates of the Company’s largest shareholder who extended the due dates of the notes several times during 2001 and 2002. 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 conditions among others raise substantial doubt about the Company’s ability to continue as a going concern. See also Notes 7 6 and 10 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 2002, management believes that additional capital will be required ~~by mid-September 2002~~immediately, including an additional extension of the debt that is due to mature on ~~September~~December 3031, 2002. The Company’s financing agreement with Lancer Offshore, Inc. and Lancer Partners L.P. allowed for such loans to be increased to a total of their current outstanding principal amount of $6,~~285~~585,000, an increase over the prior loan ceiling of $6,~~135~~285,000 (see ~~Note~~Notes 76 and ~~Note 10~~9). Although both lenders can agree to increase such loans again, provided the Company agrees to do so, the Company has no assurance of such mutual agreement. The Company is currently seeking funding from other sources. There can be no assurance that the Company will be successful in such efforts.

NOTE 3 ~~RESTATEMENT~~STOCKHOLDERS’ OFEQUITY ~~FINANCIAL STATEMENTS~~

As a result, the condensed consolidated balance sheet as of December 31, 2001 presented herein has been restated from the amounts previously reported to give effect to the issuance of the common stock. A summary of the significant effects of the restatement is as follows:

As of December 31, 2001:

	As previously reported			As restated
Common stock, $0.001 par value	$	31,387		$	31,447
Additional paid-in capital		47,827,943			48,023,183
Accumulated deficit		(50,505,519	)		(50,700,819	)

The restatement of the December 31, 2001 balance sheet has no net effect on total stockholders’ deficit.

NOTE 4 STOCKHOLDERS’ EQUITY

Options for 13,334 shares were exercised in March 2001 at a price of $1.31 per share, for proceeds of $17,467.

NOTE 54 MANDATORILY REDEEMABLE PREFERRED STOCK

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 65 COMMITMENTS AND CONTINGENCIES

On February 20, 2001 certain parties filed a lawsuit against the Company with respect to their 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 lawsuit is currently pending and in the discovery stage in the United States District Court for the District ~~district~~ of Utah.

In December 2001, the United States District Court in Utah approved the plaintiff’s motion for leave to amend their pleading 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 the Corporation 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. The plaintiffs continue to seek the same relief originally sought by them. The ~~Corporation~~ Company and the individual defendants recently filed answers in the case.

The ~~Corporation~~Company believes that it has meritorious defenses to such action and intends to prosecute its defenses of the action vigorously, but there can be no assurance as to the outcome thereof. An estimate of potential losses, if any, cannot be made at this time. The ~~Corporation will~~Company ~~also~~is vigorously ~~contest~~contesting these new additional claims and believes it has meritorious defenses to these new claims, and ~~it is anticipated that~~ the individual defendants named in the lawsuit ~~will~~are dodoing the same, although the ~~Corporation~~Company cannot assure the results of such lawsuit.

In May 2002. the Business Software Alliance, a trade association representing various software companies rights under the Federal Copyright Act, (“BSA”) asserted a claim against us alleging that we had unauthorized or unlicensed copies of certain software products published by BSA member companies (in this case, Adobe Systems Incorporated and Microsoft Corporation) installed on our computers. BSA alleged that we could be held liable for statutory damages on a per product basis of between $30,000 and $150,000 per product, plus reasonable attorney’s fees and court costs.

In August, 2002 the Company reached a tentative settlement of the claim that would require the Company to pay $54,710 and to acquire various software licenses. The tentative settlement amount has been accrued as of June 30, 2002. The Company is working with BSA to finalize the agreement.

NOTE 76 NOTES PAYABLE—RELATED PARTY

On May 17, 2001 the Company issued senior secured convertible debt (the “2001 Notes”) for $1,125,000 to affiliates of its largest shareholder. The notes bear interest at the rate of 15% per year and were originally to mature on September 15, 2001, unless they were mandatorily converted into shares of the Company’s Common Stock prior to the maturity date. The mandatory conversion was conditional, and provided for the debt to convert into shares of common stock at a rate below the then market price of the stock. The 2001 Notes are secured by a first security interest in substantially all of the Company’s assets. The Company issued a warrant to purchase 562,500 shares of Common Stock in connection with the notes, and agreed to pay a finders fee of 10%. The value of the warrants was accounted for as discount on the notes, and the amortization of the discount and the placement fee were accounted for as additional interest expense. Under the terms of the 2001 Notes, the Company and the lender could mutually 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 the Company. The notes contain a default provision that would increase the annual interest rate to 16%, and would require the Company to issue a certain number of shares of Common Stock, up to a certain limit.

could mutually 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 the Company. The notes contain a default provision that would increase the annual interest rate to 16%, and would require the Company to issue a certain number of shares of Common Stock, up to a certain limit.

During the rest of 2001, the Company borrowed an additional $2,085,000 and issued additional warrants to purchase 3,042,500 shares of Common Stock, including a warrant to purchase 2,000,000 shares of stock issued as an additional placement fee. The Company did not meet the conditions required to convert the debt into shares of Common Stock, and the maturity date of the notes was extended first to December 15, 2001, and again to February 28, 2002. In consideration for the additional borrowings and other modifications to the original terms of the 2001 Notes, the contingent conversion rate, warrant stock purchase price, default terms and other terms of the notes were modified so that on December 31, 2001 the notes bore the following terms:

The entire principal amount of $3,210,000 comprising the 2001 Notes became mandatorily convertible into shares of Common Stock at the rate of one share for each $0.05 of debt (A) upon receipt of approval of the Company’s shareholders at a meeting of such conversion and (B) upon receipt of $3,210,000 in equity from sources other than the Company’s largest shareholder or his affiliates on or before February 28, 2002.

Because the contingent conversion rate was below the market value of the stock, the value of the contingent beneficial conversion feature on each of the notes is as follows:

Note Date	Value of Beneficial Conversion Feature at One Share for Each $0.05 of Debt
May 17, 2001	$	866,051
August 7, 2001		285,864
September 6, 2001		100,000
September 18, 2001		157,233
October 03, 2001		93,418
October 09, 2001		147,992
October 29, 2001		150,473
November 14, 2001		852,515
Total	$	2,653,546

The beneficial conversion feature will be recognized in the Company’s financial statements if and when the related contingencies are resolved.

The exercise price of the warrant to purchase shares of Common Stock was reduced to $0.30 per share which term will also apply to any additional warrants issued in such the financing transactions;

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)

The Company agreed to give the lender 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;

The amount of shares issuable in the event of a default was 1,605,000 shares of Common Stock, and on January 25, 2002 was increased to 1,780,000 shares of 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.

The Company agreed to reduce its operating budget to a monthly burn rate (i.e. the excess of its expenditures over revenues received, in each case determined on a cash basis) of not greater than $250,000 effective for the month of September 2001 and $375,000 for each month thereafter, and to curtail all its discretionary spending until additional equity is raised.

During 2002 the Company received additional loans of $3,~~075~~425,000 from affiliates of its largest stockholder, bringing the total amount of the 2001 Notes to $6,~~285~~585,000. At a special shareholders’ meeting held on March 15, 2002, the shareholders of the Company approved the mandatory conversion of the 2001 Notes up to the then applicable ceiling amount of $5,000,000 into shares of Common Stock, although the terms of the Notes now require the Company to raise an additional $6,~~285~~585,000 in equity from sources other than its largest shareholder and his affiliates on or before ~~September 30~~December 31, 2002 before such conversion may occur. At such meeting, the Company’s shareholders approved the issuance of up to the then applicable ceiling amount of 2,500,000 shares of the Company’s Common Stock upon the exercise of warrants to purchase such shares held by such affiliates. The Company could pay the 2001 Notes in whole or in part if it obtains additional debt financing and thereby avoid the mandatory conversion thereof.

The Company also received a four-month extension of the maturity date of the 2001 Notes from its creditors, and agreed to give such creditors 7,120,000 shares of Common Stock as consideration therefore, subject to the approval of the Company’s shareholders at a meeting with respect to such issuance in accordance with applicable American Stock Exchange rules. On June 28, 2002 the Company’s shareholders approved the potential issuance of up to 12,500,000 shares of Common Stock to its lenders, including the 7,120,000 ~~shares~~ shares discussed above. If shareholder approval was not obtained, the Company would have been obligated to pay its lenders $356,000 in cash, in lieu of issuing the 7,120,000 shares. The $356,000 was amortized over the modified term of the Notes. Upon getting shareholder approval to issue the shares, the contingency related to their issuance was resolved. Accordingly, the Company recorded interest expense of $1,780,000, equal to the fair value of the shares on June 28, 2002, less the $356,000 previously recorded. The fair value of the Common Stock to be issued is recorded in the balance sheet as a separate element of stockholders’ deficit.

12On July 23, 2002 the Company reached agreement with its lenders to extend the due date of the 2001 Notes to September 30, 2002 and to confirm to the Company that no events of default existed. The Company agreed to issue an additional 5,380,000 shares of Common Stock to its lenders in consideration for the modification of terms. The fair value of these shares, $1,102,900, was recognized as non-cash interest expense over the term of the modified debt.

~~Table~~The Notes also provide for the conversion of ~~Contents~~the debt into shares of common stock as a remedy available to the lenders in the event of a default.

2002, less the $356,000 previously recorded. The fair value of the Common Stock to be issued is recorded in the balance sheet as a separate element of stockholders’ deficit.

On July 23, 2002 the Company reached agreement with its lenders to extend the due date of the 2001 Notes to September 30, 2002 and to confirm to the Company that no events of default existed. The Company agreed to issue an additional 5,380,000 shares of Common Stock to its lenders in consideration for the modification of terms. The fair value of these shares, $1,102,900, will be recognized as non-cash interest expense over the term of the modified debt. The Notes also provide for the conversion of the debt into shares of common stock as a remedy available to the lenders in the event of a default.

On July 23, 2002 the maximum amount of shares issuable in the event of a default was increased to up to a maximum of 25,000,000 shares.

13The contingent beneficial conversion feature on each of the notes issued during the nine months ended September 30, 2002 is as follows:

Note Date	Value of Beneficial Conversion Feature at One Share for Each $0.05 of Debt
January 25, 2002	$	264,051
February 8, 2002		211,149
March 8, 2002		175,747
March 11, 2002		88,261
March 27, 2002		139,147
April 12, 2002		245,755
April 25, 2002		886,132
July 23, 2002		273,975
August 19, 2002		279,408
September 4, 2002		139,047
Total	$	2,702,672

The contingent beneficial conversion feature on each of the notes issued during the six months ended June 30, 2002 is as follows:

Note Date	Value of Beneficial Conversion Feature at One Share for Each $0.05 of Debt
January 25, 2002	$	264,051
February 8, 2002		211,149
March 8, 2002		175,747
March 11, 2002		88,261
March 27, 2002		139,147
April 12, 2002		245,755
April 25, 2002		886,132
Total	$	2,010,242

The beneficial conversion feature will be recognized in the Company’s financial statements if and when the related contingencies are resolved.

NOTE 87 RECENT ~~ACCOUNTING~~ ACCOUNTING PRONOUNCEMENTS

In April 2002, the Financial Accounting Standards Board (“FASB”) issued Statement of Financial Accounting Standards (“SFAS”) No. 145, Rescission of FASB Statements No. 4, 44 and 64, Amendment of FASB Statement No. 13, and Technical Corrections. Under SFAS No. 145, gains and losses from extinguishment of debt shall be classified as extraordinary items only if they meet certain criteria for classification as extraordinary items in APB Opinion No. 30. SFAS No. 145 also amends SFAS No. 13, Accounting for Leases, to require sale-leaseback accounting for certain lease modifications that have economic effects that are similar to sale-leaseback transactions and also makes various technical corrections to existing pronouncements that are not substantive in nature. The provisions of SFAS No. 145 related to the rescission of SFAS No. 4 are effective in fiscal years beginning after May 15, 2002, with early application encouraged. The provisions of SFAS No. 145 related to SFAS No. 13 are effective for transactions occurring after May 15, 2002, with early application encouraged. All other provisions of SFAS No. 145 are effective for financial statements issued on or after May 15, 2002, with early application encouraged. This amendment and other issues addressed in SFAS No. 145 are not expected to have a material effect on the financial position or results of operations of the Company.

In May 2002, the FASB issued SFAS No. 146, Accounting for Costs Associated with Exit or Disposal Activities. SFAS No. 146, addresses financial accounting and reporting for costs associated with exit or disposal activities and nullifies Emerging Issues Task Force (EITF) Issue No. 94-3, Liability Recognition for Certain Employee Termination Benefits and Other Costs to Exit an Activity (including certain Costs Incurred in a Restructuring). SFAS No. 146 requires that a liability for an exit cost or disposal activity be recognized when the liability is incurred, whereas under EITF No. 94-3, a liability was recognized at the date of an entity’s commitment to an exit plan. SFAS No. 146 also establishes that fair value is the objective for initial measurement of the liability. The provisions of SFAS No. 146 are effective for exit or disposal activities that are initiated after December 31, 2002, with early application encouraged. The adoption of SFAS 146 is not expected to have a material impact on the Company’s operations.

The Company adopted SFAS 142 “Goodwill and Other Intangible Assets” on January 1, 2002 and there was no effect.

NOTE 98 BUSINESS SEGMENT INFORMATION

As of ~~June~~September 30, 2002 the Company’s operations are classified into two reportable business segments: X-~~traWeb~~traWebTM 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.

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.

	For the Three Months Ended June 30,						For the Six Months Ended June 30,
	For the Three Months Ended September 30,						For the Nine Months Ended September 30,
	2002			2001			2002			2001
Revenues:
X-traWeb ™	$	15,000		$	87,775		$	15,000		$	191,938
X-traWeb™	$	—		$	41,074		$	15,000		$	233,012
Radio products		~~225~~146,~~713~~071			~~247~~220,~~532~~281			~~428~~574,~~835~~906			~~392~~612,~~482~~763
Corporate		—			71,~~062~~100			—			1617,~~440~~540
Total sales	$	~~240~~146,~~713~~071		$	~~342~~262,~~369~~455		$	~~443~~589,~~835~~906		$	~~600~~863,~~860~~315
	For the Three Months Ended June 30,						For the Six Months Ended June 30,
	For the Three Months Ended September 30,						For the Nine Months Ended September 30,
	2002			2001			2002			2001
Operating loss:
X-traWeb™	$	(~~398~~500,~~518~~344	)	$	(~~982~~860,~~330~~336	)	$	(~~879~~1,~~834~~380,177	)	$	(2,~~048~~908,~~388~~724	)
Radio products		(~~703~~611,~~546~~798	)		(~~964~~884,~~604~~888	)		(1,~~382~~994,~~806~~606	)		(12,~~599~~484,~~164~~052	)
Corporate		—			71,~~102~~100			—			6970,~~721~~821
Total operating loss	$	(1,~~102~~112,~~064~~142	)	$	(1,~~939~~744,~~832~~124	)	$	(23,~~262~~374,~~640~~783	)	$	(35,~~577~~321,~~831~~955	)

	June 30, 2002		December 31, 2001
	September 30, 2002		December 31, 2001
Assets:
X-traWeb™	$	~~213~~205,~~014~~490	$	293,442
Radio products		~~756~~734,~~715~~542		1,184,904
Corporate		~~220~~39,~~828~~672		208,526
Total assets	$	1979,~~190,557~~704	$	1,686,872

NOTE 109 SUBSEQUENT EVENTS

In ~~July,~~October ~~August,~~ and ~~September~~November, 2002, ~~affiliates~~an affiliate of the Company’s largest shareholder loaned the Company an additional $~~750~~300,000, ~~bringing~~ bringing the total to $6,~~285~~585,000. As a result, the Company issued notes comprising part of the 2001 Notes and issued additional warrants to purchase ~~375~~150,000 shares of the Company’s Common Stock, at an exercise price of $0.30 per share, expiring on October ~~July~~2, 222007, October 14, 2007, ~~August~~October 1930, 2007 and ~~September~~November 312, 2007, respectively.

ITEM 2. MANAGEMENT DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION

CONDITION

Subsequent to the issuance of the Company’s consolidated financial statements for the quarter ended March 31, 2002, the Company determined that a transaction involving the issuance of common stock for services that occurred in the quarter ended March 31, 2000 had not been accounted for in the Company’s financial statements . The transaction involved the issuance of 60,000 shares of common stock effective January 3, 2000, valued at $195,300. As a result, the condensed consolidated balance sheet as of December 31, 2001 presented herein has been restated from the amounts previously reported to give effect to the issuance of the common stock. A summary of the restatement is as follows:

As of December 31, 2001:

	As previously reported			As restated
Common stock, $0.001 par value	$	31,387		$	31,447
Additional paid-in capital		47,827,943			48,023,183
Accumulated deficit		(50,505,519	)		(50,700,819	)

The restatement of the December 31, 2001 balance sheet has no net effect on total stockholders’ deficit.

The Company intends to amend its Annual Report on Form 10-K for the year ended December 31, 2001 and its quarterly reports on Form 10-Q for the quarterly periods ended March 31, 2002 and September 30, 2001 to include the restated financial statements as of September 30, 2001 and December 31, 2000 for the year ended December 31, 2000 and for the nine months ended September 30, 2000 as soon as practicable. A summary of the significant effects of the restatement on these financial statements is as follows:

For the year ended December 31, 2000:

	As previously reported			As restated
General and administrative expenses	$	5,614,732		$	5,810,032
Total operating expenses		5,591,861			5,787,161
Loss from operations		(5,090,455	)		(5,285,755	)
Net loss		(4,574,504	)		(4,769,804	)
Loss applicable to common shareholders	$	(4,580,904	)	$	(4,776,204	)
Weighted average common shares outstanding		29,447,488			29,507,160

The restatement for the year ended December 31, 2000 does not affect loss per common share.

As of December 31, 2000:

	As previously reported			As restated
Common stock, $0.001 par value	$	31,209		$	31,269
Additional paid-in capital		46,500,157			46,695,397
Accumulated deficit		(42,458,847	)		(42,654,147	)

As of September 30, 2001:

	As previously reported			As restated
Common stock, $0.001 par value	$	31,386		$	31,446
Additional paid-in capital		46,880,965			47,076,205
Accumulated deficit		(48,126,027	)		(48,321,327	)

For the nine months ended September 30, 2000:

	As previously reported			As restated
General and administrative expenses	$	4,190,564		$	4,385,864
Total operating expenses		3,702,232			3,897,532
Loss from operations		(3,321,134	)		(3,516,434	)
Net loss	$	(3,073,343	)	$	(3,268,643	)
Weighted average common shares outstanding		28,856,083			28,915,424

The restatement for the nine months ended September 30, 2000 does not affect loss per common share.

In addition, subsequent to the issuance of the Company’s financial statements for the quarter ended March 31, 2002 the Company determined that $356,000 of interest expense for fees related to a modification of debt terms (see Note 7) should have been amortized over the period from March 1, 2002 through June 30, 2002.

As of March 31, 2002:

	As previously reported			As restated
Balance Sheet
Deferred debt placement fees	$	38,532		$	305,532
Total assets		1,228,578			1,495,578
Common stock, $0.001 par value		31,387			31,447
Additional paid-in capital		47,999,588			48,194,828
Accumulated deficit		(52,922,744	)		(52,851,044	)
Total liabilities and stockholders’ deficit		1,228,578			1,495,578
For the three months ended March 31, 2002:
Interest expense	$	(1,283,610	)	$	(1,016,610	)
Net loss		(2,417,225	)		(2,345,525	)
Basic and diluted net loss per common share		(0.08	)		(0.07	)
Weighted average common shares outstanding		31,387,087			31,447,087

The following management discussion and analysis takes into account the effects of the restatement.

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 Report which discuss factors which affect our business.

The following discussion should be read in conjunction with our Consolidated Financial Statements and respective notes thereto.

RESULTS OF OPERATIONS

Three Months Ended ~~June~~ September 30, 2002 and Three Months Ended September ~~June~~ 30, 2001

We incurred a net loss of $32,~~701~~563,~~231~~905 for the three-month period ended ~~June~~ September 30, 2002, or a $0.12 08 loss per share, compared to a net loss of $21,~~052~~999,~~301~~473 or a $0.07 06 loss per share, for the three months ended ~~June~~ September 30, 2001. The increased loss is attributable to $21,~~599~~451,~~969~~131 in interest expense related to our debt financing, partially off-set by a $~~864~~449,~~740~~988 reduction in operating expenses.

Sales for the three-month period ended ~~June~~September 30, 2002 totaled $~~240~~146,~~713~~071 compared to $~~342~~262,~~369~~ 455 during the three months ended ~~June~~ September 30, 2001, or a decrease of $~~101~~116,~~656~~384 or 2944.73%. During the ~~second~~third quarters of 2002 and 2001, we derived our revenue as follows:

	For the Three Months Ended June 30,
	For the Three Months Ended September 30,
	2002		2001
Summary of Revenue by Activity
X-traWeb™	$	~~15,000~~—	$	8741,~~775~~074
Radio products		~~225~~146,~~713~~071		~~247~~220,~~532~~281
Corporate		—		71,~~062~~100
Total Revenue	$	~~240~~146,~~713~~071	$	~~342~~262,~~369~~455

During the ~~second~~third quarter of 2002, we continued to implement our strategic plan to focus our efforts on the X-traWebTM product line, and specifically on applying our technology to automated meter reading solutions for the utilities industry. The decline in revenue from X-traWebTM products and services in 2002 compared to 2001 resulted primarily from the completion of two non-recurring customer contracts in the vending and facilities management industry, and from our shift to the development and sale of products for the automated meter reading market. As of ~~June~~ September 30, 2002, we have generated $15,000 in revenue from such activities.

The Corporate category represents revenue not directly attributable to a specific segment, or those business activities no longer being pursued. Corporate revenues reported in the ~~second~~third quarter of ~~2001~~ 2001 represent royalty fees paid under an agreement that has since expired.

Our decline in revenue from radio products, which totaled $~~225~~146,~~713~~071 for the three months ended ~~June~~ September 30, 2002, compared to $~~247~~262,~~532~~455 for the comparable quarter in 2001, resulted from a ~~small~~significant downturn in unit sales. Antenna sales fell 2118.02%; radio sales dropped 045.~~005~~5%.

16Our cost of sales for the three-month period ended September 30, 2002 declined to $92,743 from a total of $391,121 for the three months ended September 30, 2001, a reduction of $298,378 or 76.3%. The resulting gross profit was $53,328, or 36.5% of sales, for the three-month period ended September 30, 2002 compared to a loss of $128,666, or 49.0%, for the three months ended September 30, 2001. This improvement in gross profit margin is primarily the result of a write-down of inventory items to their fair value recorded in 2001. The gross profit for the three months ended September 30, 2001 was $69,334, or 26.4%, before the write-down. The improvement in gross margin before the write-down reflects the absence of revenue from two non-recurring customer contracts in the vending and facilities management industry, where our margins were very low.

Our research and development expenses increased to $168,524 from $131,978, or by $36,546, or 27.7%, for the comparable three month periods ended September 30, 2002 versus September 30, 2001. The increase over the comparable period is attributable to development projects relating to our radio product line, and the integration of our automatic meter reading product into additional

~~Our~~utility ~~cost~~meter ofmodels. ~~sales~~We ~~for~~believe the ~~three-month period ended June 30, 2002 declined to $88,073 from a total of $162,757 for the three months ended June 30, 2001, a reduction of $74,684 or 45.9%. The~~ resulting ~~gross~~radio ~~profit~~frequency ~~was~~technology ~~$152,640,~~improvements orwill ~~63.4%~~enhance ofour ~~sales,~~automated ~~for~~meter ~~the~~reading ~~three-month~~solution ~~period ended June 30, 2002 compared to $179,612, or 52.5%,~~through ~~for~~improved ~~the three months ended June 30~~performance, ~~2001. This improvement in gross profit margin reflects the absence of revenue from two non-recurring customer contracts in the vending~~ and ~~facilities~~reduced ~~management~~system ~~industry, where our margins were very low~~cost.

Our ~~research~~total selling, general, and ~~development~~administrative expenses ~~increased~~amounted to $996,946 for the three-month period ended September 30, 2002 compared to $~~176~~1,~~707~~440,622 ~~from~~for the three months ended September 30, 2001, representing a decrease of $~~120~~443,~~378~~676, or 30.8%. Selling and marketing expenses decreased by $5657,~~329~~682, or 4622.80%, during ~~for~~ the ~~comparable~~ three -month ~~periods~~period ended ~~June~~September 30, 2002 ~~versus~~over ~~June~~the three months ended September 30, 2001 and represents a decrease in advertising, consulting, and expenses for marketing our X-traWebTM products overseas. ~~The~~Total ~~increase~~general ~~over~~and administrative expenses for the comparable September 30, 2002 and September 30, 2001 period isdecreased ~~attributable~~by $385,994, toor ~~development~~43.7%, ~~projects~~and ~~relating~~resulted tofrom ~~our~~(1) ~~radio~~decreases ~~product~~of ~~line~~$234,199 in employment related expenses and $115,682 in consulting and outside services and (2) $15,005 in decreased travel related expenses. We ~~believe~~also ~~the~~realized ~~resulting~~lower ~~radio~~occupancy ~~frequency~~costs ~~technology~~for the ~~improvements~~three-month ~~will~~period ~~enhance~~ended ~~our~~September ~~automated~~30, ~~meter~~2002 ~~reading~~versus ~~solution~~the ~~through~~comparable ~~improved~~three-month ~~performance~~period ended September 30, ~~and~~2001 ~~reduced~~as ~~system~~the ~~cost~~result of the close of our Kansas City facility in the third quarter of 2001.

~~Our~~Interest ~~total~~expense ~~selling,~~increased ~~general, and administrative expenses amounted~~ to $1,~~077~~451,~~997~~131 ~~for~~during the three-month period ended ~~June~~September 30, 2002 compared to $1255,~~956,208~~786 for the three months ended ~~June~~September 30, 2001,. This ~~representing~~increase ais ~~decrease~~directly ofrelated ~~$878,211,~~to ~~or 44.9%.~~our ~~Selling~~issuance ~~and~~of ~~marketing~~units ~~expenses~~of ~~decreased~~secured bynotes ~~$152,566,~~and orwarrants ~~51.7%,~~beginning ~~during~~in the ~~three-month~~second ~~period~~quarter ~~ended~~of ~~June 30~~2001, ~~2002~~and ~~over~~represents the ~~three~~amortization ~~months~~of ~~ended~~discounts ~~June~~related ~~30,~~to ~~2001~~the ~~and~~warrants, ~~represents~~placement ~~a decrease in advertising~~fees, ~~consulting,~~fees ~~and~~incurred ~~expenses~~ for ~~marketing~~the ~~our~~extension ~~X-traWebTM~~of ~~products~~the ~~overseas.~~debt, ~~Total general~~ and ~~administrative~~accrued ~~expenses~~interest ~~for~~on the ~~comparable~~Notes. On June 3028, 2002 ~~and~~ ~~June~~the ~~30,~~Company’s ~~2001~~shareholders ~~period~~approved ~~decreased~~the bypotential ~~$725,645,~~issuance orof ~~43.7%,~~up ~~and~~to ~~resulted from (1) decreased expenses of $106~~12,500,000 ~~from~~shares ~~the~~of ~~former~~common ~~X-traWebTM~~stock ~~Europe~~to ~~offices,~~its ~~(2)~~lenders. ~~decreases~~On ofJuly ~~$238~~23,~~506~~ ~~in compensation expense and $227~~2002,~~750~~ inthe ~~consulting~~Company ~~and~~committed ~~outside~~to ~~services~~issue ~~and (3) $66~~5,~~675~~380,000 share inof ~~decreased~~common ~~travel~~stock ~~related~~to ~~expenses.~~its Welenders ~~also realized lower occupancy costs~~ for ~~the~~ ~~three-month~~debt ~~period~~extension. ~~ended~~The ~~June~~fair ~~30,~~value ~~2002~~of ~~versus~~ the ~~comparable~~5,380,000 ~~three-month~~shares, ~~period~~or ~~ended June 30~~$1,102,900, ~~2001~~accounts asfor ~~the~~most ~~result~~ of the ~~close~~increase ofin ~~our~~interest ~~Kansas~~expense ~~City~~over ~~facility in~~ the ~~third~~comparable quarter ofin ~~2001~~the prior year.

~~Interest~~Nine ~~expense~~Months ~~increased~~Ended toSeptember ~~$2,599,969 during the three-month period ended June~~ 30, 2002 ~~compared~~and toNine ~~$118,102~~Months ~~for~~Ended ~~the~~September ~~three months ended June~~ 30, 2001. This increase is directly related to our issuance of units of secured notes and warrants beginning in the second quarter of 2001, and represents the amortization of discounts related to the warrants, placement fees, fees incurred for the extension of the debt, and accrued interest on the Notes. On June 28, 2002 the Company’s shareholders approved the potential issuance of up to 12,500,000 shares of common stock to its lenders. Prior to June 28, 2002, the Company had committed to issue 7,120,000 share of common stock to its lenders for debt extension, which was subject to shareholder approval. The fair value of the 7,120,000 shares, or $2,136,000, net of $89,000 recognized during the first quarter of 2002, accounts for most of the increase in interest expense over the comparable quarter in the prior year.

~~Six~~We ~~Months~~incurred ~~Ended~~a ~~June~~net loss of $8,415,361 for the nine-month period ended September 30, 2002, ~~and~~or ~~Six~~a ~~Months~~$0.27 loss per share, compared to a net loss of $5,667,180 or a $0.18 loss per ~~Ended~~share, ~~June~~for the nine months ended September 30, 2001. The increased loss is attributable to $5,067,710 in interest expense related to our debt financing, partially off-set by a $1,801,348 reduction in operating expenses.

WeSales ~~incurred a net loss of $5,851,456~~ for the ~~six~~nine-month period ended ~~June~~September 30, 2002, ortotaled a $~~0.19 loss per share~~589,906 compared to ~~a net loss of~~ $3863,~~667,707~~315 orduring ~~a $0.12 loss per share, for~~ the ~~six~~nine months ended ~~June~~September 30, 2001., ~~The~~or ~~increased~~a ~~loss~~decrease isof ~~attributable to~~ $3273,~~616,579~~409 inor ~~interest~~31.7%. ~~expense~~During ~~related~~the tonine ~~our~~months ~~debt~~ended ~~financing,~~September ~~partially~~30 ~~off-set~~of by2002 ~~a $1~~and 2001,~~351,360~~ ~~reduction~~we inderived ~~operating~~our ~~expenses.~~revenue as follows:

Sales for the six-month period ended June 30, 2002 totaled $443,835 compared to $600,860 during the six months ended June 30, 2001, or a decrease of $157,025 or 26.1%. During the first half of 2002 and 2001, we derived our revenue as follows:

	For the Nine Months Ended Septembere 30,
	2002		2001
Summary of Revenue by Activity
X-traWeb^™	$	15,000	$	233,012
Radio products		574,906		612,763
Corporate		—		17,540
Total Revenue	$	589,906	$	863,315

	For the Six Months Ended June 30,
	2002		2001
Summary of Revenue by Activity
X-traWeb™	$	15,000	$	191,938
Radio products		428,835		392,482
Corporate		—		16,440
Total Revenue	$	443,835	$	600,860

During 2002, we continued to implement our strategic plan to focus our efforts on the X-traWeb^TM product line, and specifically on applying our technology to automated meter reading solutions for the utilities industry. The decline in revenue from X-traWeb^TM products and services in 2002 compared to 2001 resulted primarily from the completion of two non-recurring customer contracts in the vending and facilities management industry, and from our shift to the development and sale of products for the automated meter reading market. As of September 30, 2002, we have generated $15,000 in revenue from such activities.

During the first half of 2002, we continued to implement our strategic plan to focus our efforts on the X-traWebTM product line, and specifically on applying our technology to automated meter reading solutions for the utilities industry. The decline in revenue from X-traWebTM products and services in 2002 compared to 2001 resulted primarily from the completion of two non-recurring customer contracts in the vending and facilities management industry, and from our shift to the development and sale of products for the automated meter reading market. As of June 30, 2002, we have generated $15,000 in revenue from such activities.

The Corporate category represents revenue not directly attributable to a specific segment, or those business activities no longer being pursued. Corporate revenues reported in the second quarter of 2001 represent royalty fees paid under an agreement that has since expired.

Our ~~increase~~decrease in revenue from radio products, which totaled $~~428~~574,~~835~~ 906 for the ~~six~~nine months ended ~~June~~ September 30, 2002, compared to $~~392~~612,~~482~~763 for the comparable ~~quarter~~period in 2001, resulted from a ~~strong~~sharp decline in sales in the ~~first~~third quarter of 2002, ~~partially~~following ~~offset by~~ a small down turn in unit sales during the second quarter. The decline in sales during the second quarter occurred primarily in our antenna products. Sales of both antenna and radio products were off in the third quarter.

Our cost of sales for the ~~six~~ nine-month period ended ~~June~~ September 30, 2002 declined to $~~172~~265,~~372~~115 from a total of $~~293~~684,~~228~~349 for the ~~six~~nine months ended ~~June~~ September 30, 2001, a reduction of $~~120~~419,~~856~~ 234 or 4161.23%. The resulting gross profit was $~~271~~324,~~463~~791, or 6155.21% of sales, for the ~~six~~nine-month period ended ~~June~~ September 30, 2002 compared to $~~307~~178,~~632~~966, or 5120.27%, for the ~~six~~nine months ended ~~June~~ September 30, 2001. This improvement in gross profit margin reflects the absence of ~~revenue~~a ~~from~~write-down of inventory items to their fair value recorded in 2001, and the completion of two non-recurring customer contracts in the vending and facilities management industry, where our margins were very low.

Our research and development expenses increased to $323,304 from $274,177, or by $49,127, or 17.9%, for the comparable six month periods ended June 30, 2002 versus June 30, 2001. The increase over the comparable period is attributable to development projects relating to our radio product line. We believe the resulting radio frequency technology improvements will enhance our automated meter reading solution through improved performance, and reduced system cost.

Our total selling, general, and administrative expenses amounted to $2,210,799 for the six-month period ended June 30, 2002 compared to $3,525,570 for the six months ended June 30, 2001, representing a decrease of $1,314,771, or 37.3%. Selling and marketing expenses decreased by $277,368, or 47.3%, during the six-month period ended June 30, 2002 over the six months ended June 30, 2001 and represents a decrease in advertising, consulting, and expenses for marketing our X-traWebTM products overseas. Total general and administrative expenses for the comparable June 30, 2002 and June 30, 2001 period decreased by $1,037,403, or 34.7%, and resulted from (1) decreased expenses of $185,950 from the former X-traWebTM Europe offices, (2) decreases of $534,166 in compensation expense and $299,580 in consulting and outside services, and (3) $113,050 in decreased travel related expenses. We also realized lower occupancy costs for the six-month period ended June 30, 2002 versus the comparable six-month period ended June 30, 2001 as the result of the close of our Kansas City facility in the third quarter of 2001. These cost savings were offset in part by increased legal and accounting fees, and increased insurance costs.

Our interest income for the six-month period ended June 30, 2002 was $883 compared to $29,554 for the six months ended June 30, 2001, with the decrease of $28,671 directly attributable to decreased available funds in overnight interest bearing accounts. Interest expense increased to $3,616,579 during the six-month period ended June 30, 2002 compared to $119,554 for the six months ended June 30, 2001. This increase is directly related to our issuance of units of secured notes and warrants beginning in the second quarter of 2001, and represents the amortization of discounts related to the warrants, placement fees, fees incurred for the extension of the debt, and accrued interest on the Notes. On June 28, 2002 the Company’s shareholders approved the potential issuance of up to 12,500,000 shares of common stock to its lenders. Prior to June 28, 2002, the Company had committed to issue 7,120,000 share of common stock to its lenders for debt extension, which was subject to shareholder approval. The fair value of the 7,120,000 shares accounts for $2,136,000 of the increase in interest expense over the comparable period in the prior year.

Our research and development expenses increased to $491,828 from $406,155, or by $85,673, or 21.1%, for the comparable nine month periods ended September 30, 2002 versus September 30, 2001. The increase over the comparable period is primarily attributable to development projects relating to our radio product line. We believe the resulting radio frequency technology improvements will enhance our automated meter reading solution through improved performance, and reduced system cost.

Our total selling, general, and administrative expenses amounted to $3,207,745 for the nine-month period ended September 30, 2002 compared to $4,966,192 for the nine months ended September 30, 2001, representing a decrease of $1,758,447, or 35.4%. Selling and marketing expenses decreased by $335,049, or 39.5%, during the nine-month period ended September 30, 2002 over the nine months ended September 30, 2001 and represents a decrease in advertising, consulting, and expenses for marketing our X-traWeb^TM products overseas. Total general and administrative expenses for the comparable September 30, 2002 and September 30, 2001 period decreased by $1,423,407, or 34.6%, and resulted from (1) decreases of $859,333 in employment related expenses and $415,261 in consulting and outside services, and (2) $128,058 in decreased travel related expenses. We also realized lower occupancy costs for the nine-month period ended September 30, 2002 versus the comparable nine-month period ended September 30, 2001 as the result of the close of our Kansas City facility in the third quarter of 2001. These cost savings were offset in part by increased legal and accounting fees, and increased insurance costs.

Interest expense increased to $5,067,710 during the nine-month period ended September 30, 2002 compared to $375,340 for the nine months ended September 30, 2001. This increase is directly related to our issuance of units of secured notes and warrants beginning in the second quarter of 2001, and represents the amortization of discounts related to the warrants, placement fees, fees incurred for the extension of the debt, and accrued interest on the Notes. On June 28, 2002 the Company’s shareholders approved the potential issuance of up to 12,500,000 shares of common stock to its lenders. Prior to June 28, 2002, the Company had committed to issue 7,120,000 share of common stock to its lenders for debt extension. On July 23, 2002, the Company committed to issue 5,380,000 share of common stock to its lenders for debt extension. The fair value of the 12,500,000 shares, or $3,238,900, accounts for most of the increase in interest expense over the comparable period in the prior year.

Recent Accounting Pronouncements

We adopted SFAS 142 “Goodwill and Other Intangible Assets” on January 1, 2002 and there was no impact.

LIQUIDITY AND CAPITAL RESOURCES

Our liquidity at ~~June~~ September 30, 2002 consisted of cash and cash equivalents ~~was~~of $~~231~~47,~~102~~520, which represents a ~~increase~~decrease of $7176,~~365~~218 over our cash and cash equivalents of $223,738 as of December 31, 2001. Our current assets were $~~907~~740,~~207~~065 as of ~~June~~ September 30, 2002, ana ~~increase~~decrease of $7987,~~775~~367 from our current assets of $827,432 as of December 31, 2001.

As of ~~June~~ September 30, 2002, our total liabilities were $78,~~232~~426,~~729~~373, which was an increase of $24,~~892~~089,~~259~~335 from our total liabilities of $4,340,470 as of December 31, 2001. Substantially all of our liabilities are current, including debt from affiliates totaling $56,~~535~~585,000, which is due ~~September 30,~~December 31, 2002.

Cash used in operating activities was $2,133,728 during the six months ended June 30, 2002, which was financed primarily by additional borrowings from affiliates of $2,092,500 (net of placement fees). In addition, on July 23, 2002 the Company reached agreement with its lenders to extend the due date of the 2001 Notes to September 30, 2002 and to confirm to the Company that no events of default existed. The Company agreed to issue an additional 5,380,000 shares to its lenders in consideration for the modification of terms. The fair value of these shares, $1,102,900, will be recognized as non-cash interest expense over the term of the modified debt. Cash used in operating activities was $3,717,728 less than our net loss, attributable primarily to non-cash interest expenses and net changes in working capital.

During the quarter ended June 30, 2002, we received an additional $1,275,000 in loans from such affiliates comprising part of the 2001 Notes and issued additional detachable five-year warrants to purchase 637,500 shares of our Common Stock at $0.30 per share, expiring on various dates in 2007, to such creditors as part of such financing. In July, August and September 2002, we received an additional $750,000 in loans from one of such affiliates comprising part of the 2001 Notes and issued additional detachable five-year warrants to purchase 375,000 shares of our Common Stock at $0.30 per share, expiring on varying dates in 2007, to such creditor, bringing the total loans, from such affiliates to $6,285,000 as of September 4, 2002. For a further description of this financing, see “Senior Secured Indebtedness Financing” in Item 2 of Part 2 of this Report.

~~Based~~Cash onused ~~our~~in ~~current~~operating ~~cash~~activities ~~position~~was $2,963,999 weduring ~~believe~~the ~~that~~nine ~~additional~~months ~~capital~~ended ~~will be required by mid-~~September 30, 2002., Wewhich ~~recently~~was ~~obtained~~financed ~~financing~~primarily ~~proceeds~~by additional borrowings from ~~Lancer~~affiliates ~~Offshore~~of $2,857,500 ~~Inc.~~(net ~~and~~of ~~Lancer~~placement ~~Partners L~~fees).~~P.,~~ ~~affiliates~~In ofaddition, ~~our~~on ~~largest~~October ~~stockholder~~3, ~~which~~2002 ~~management~~the ~~believes~~Company isreached ~~adequate~~agreement towith ~~fund~~its ~~our~~lenders ~~operations~~to atextend ~~least~~the ~~through mid-September,~~due ~~2002.~~date ~~Our~~of ~~agreement~~the ~~with~~2001 ~~Lancer~~Notes ~~Offshore~~to December 31, ~~Inc.~~2002 and ~~Lancer~~to ~~Partners~~confirm ~~L.P.~~to ~~allowed~~the ~~for~~Company ~~such~~that ~~loan~~no events toof bedefault ~~increased~~existed. toThe aCompany ~~current~~agreed ~~outstanding~~to ~~principal~~issue ~~amount~~an ofadditional $65,~~285~~300,000 ~~(an~~shares ~~increase~~to ~~over~~its ~~the~~lenders ~~prior~~in ~~loan~~consideration ~~ceiling~~for ~~amount~~the modification of ~~$6,135,000)~~terms. ~~Although~~ ~~both~~The ~~lenders~~fair ~~can~~value ~~agree~~of tothese ~~increase~~shares, ~~such loan again~~$901,000, ~~provided~~will webe ~~agree~~recognized toas donon-cash ~~so,~~interest weexpense ~~cannot~~over ~~assure~~the term ~~you~~ of ~~such~~the ~~mutual~~modified ~~agreement~~debt. ~~Since~~Cash ~~the~~used in operating activities was $65,~~285~~451,~~000~~363 ~~loan~~less ~~from~~than ~~the~~our ~~Lancer~~net ~~entities~~loss, ~~matures~~attributable onprimarily ~~September 30,~~to ~~2002,~~non-cash weinterest ~~are~~expenses ~~currently~~and ~~seeking funding~~net ~~from~~changes ~~other~~in ~~sources~~working capital.

During the quarter ended September 30, 2002, we received an additional $750,000 in loans from an affiliate comprising part of the 2001 Notes and issued additional detachable five-year warrants to purchase 375,000 shares of our Common Stock at $0.30 per share, expiring on various dates in 2007, to such creditor as part of such financing. Such financing increased the total loans from such affiliates to $6,285,000 as of September 30, 2002. For a further description of this financing, see “Senior Secured Indebtedness Financing” in Item 2 of Part 2 of this Report.

Based on our current cash position, we believe that additional capital will be required by mid-November, 2002. We recently obtained financing proceeds from Lancer Offshore, Inc., an affiliate of our largest stockholder, which management believes is adequate to fund our operations at least through mid-November, 2002. Our agreement with Lancer Offshore, Inc. and Lancer Partners L.P. allowed for such loan to be increased to a current outstanding principal amount of $6,585,000 (an increase over the prior loan ceiling amount of $6,285,000). Although both lenders can agree to increase such loan again, provided we agree to do so, we cannot assure you of such mutual agreement. Since the $6,585,000 loan from such lenders matures on December 31, 2002, we are currently seeking funding from other sources.

See Note 2 to the accompanying financial statements for a discussion of the Company’s status as a going concern.

SUMMARY

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~~ sources of sales ~~in the United States, Italy~~ and ~~other foreign countries and~~ (iii) we 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-~~traWebTM~~traWeb TM product sales will constitute the bulk of our revenues during the year ~~2002~~2003 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.

In summary, we are fully aware that anticipated revenue increases from sales of our X-~~traWebTM~~traWeb TM products and our ~~proprietaryradios~~proprietary radios are by no means assured, and that our requirements for capital are substantial. If significant revenues with adequate margins are not generated and/or the additional financing is not obtained, our ability to continue as a going concern is dependent on continued support from our lenders.

PART II.

OTHER INFORMATION

ITEM 1. 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; the parties have exchanged documents and written responses to questions asked and depositions of the parties have been taken.

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. The Company and individual defendants filed answers to these new claims in the case.

WeTable 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 the individual defendants named in the lawsuit will do the same, although we cannot assure you of the result in such lawsuit. Contents

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 are vigorously contesting these new additional claims and believe we have meritorious defenses to these new claims, and the individual defendants named in the lawsuit are doing the same, although we cannot assure you of the result in such lawsuit.

ITEM 2. Changes in Securities and Use of Proceeds

Senior Secured Indebtedness Financing

The Company modified its Senior Secured Convertible Notes during the quarter ended ~~June~~ September 30, 2002, which had the general effect of increasing the equity amount needed for the mandatory conversion of such notes and extending the due date thereof until ~~September 30~~October 31, 2002. A detailed description of such financing through ~~September~~November 413, 2002 is set forth below, including the additional three-month extension of the maturity date of the 2001 Notes until December 31, 2002.

(a) May 17, 2001 Financing

On May 17, 2001, the Company sold an investment unit consisting of (a) $2,250,000 principal amount of its Senior Secured Convertible Notes (the “2001 Notes”) and (b) warrants to purchase 1,125,000 shares of Common Stock of the Company to Lancer Offshore, Inc., an affiliate of the Company’s largest stockholder, in a private placement transaction exempt from registration under the Securities Act of 1933, as amended (the “Act”), 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 the Company’s Common Stock prior to such date.

2. Under the 2001 Notes, the Company received the principal amount of $1,125,000 on May 17, 2001 and the holder agreed to loan the additional amount of $1,125,000 on or before July 15, 2001, provided that the Company 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 of substantially all of the Company’s assets, including its 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, the Company 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 the Company.

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. The Company 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. The Company issued a warrant to purchase 562,500 shares of its Common Stock, expiring on May 16, 2006, as a result of the loan of $1,125,000 to us.

9. The Company 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.

10. In the event of a default, the lender has as an additional remedy the right to convert its outstanding obligations into shares of Common Stock at the rate of one share for each $0.20 of debt in full satisfaction of such obligations.

On May 17, 2001, the average of the high and low price per share of the Company’s Common Stock was $0.675, 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, 2001 Financing

The Company 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 the Company the additional amount of $350,000 on August, 2001 provided our Board approved the terms of the August 7, 2001 financing (which it did). The Company issued an additional 2001 Note for the $350,000 loan.

2. Lancer Partners L.P. agreed to loan the Company $275,000 on or about September 15, 2001 and $250,000 on or about October 15, 2001, provided that the Company 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. The Company 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 L.P. to the Company. As a result of the $350,000 loan made on August 7, 2001, the Company issued a warrant to purchase an additional 225,000 shares of our Common Stock, expiring on August 6, 2006, at an exercise price of $0.30 per share.

5. The Company agreed as a condition to the August 7, 2001 financing to reduce its operating budget to a monthly burn rate (i.e. the excess of its expenditures over revenues received, in each case determined on a cash basis) of not greater than $250,000 effective September 1, 2001 and to curtail all its discretionary spending of funds until additional equity is raised.

6. The Company 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, 200 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, the Company agreed to amend the May 17, 2001 financing as follows:

(i) The $1,125,000 principal amount comprising a portion of the 2001 Notes became 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) 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 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.

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.

(c) SeptemberTable 2001of Financing Contents

The Company 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 the Company 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, the Company issued a separate note 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 the Company to raise $1,500,000 until October 15, 2001 as a condition to the issuance of the $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.

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.

(d) October and November, 2001 Financing

The Company 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 the Company an additional $25,000 (bringing its total loan to the Company to $650,000 in principal amount) and Lancer Offshore, Inc. loaned the Company 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 the Company to $2,560,000 in principal amount), or a total loan from such parties of $3,210,000. As a result, the Company 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 became 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 was then 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.

(e) January and February, 2002 Financing

Lancer Offshore, Inc. loaned the Company an additional $350,000 on January 25, 2002 and $250,000 on February 8, 2002 (bringing its total loan to the Company to $3,160,000 in principal amount). As a result, the Company issued separate notes comprising part of the 2001 Notes and issued additional warrants to Lancer Offshore, Inc. to purchase 300,000 shares of the Company’s Common Stock at an exercise price of $0.30 per share, expiring in each case on a date in 2007 five years after the date of their respective issuance.

comprising part of the 2001 Notes and issued additional warrants to Lancer Offshore, Inc. to purchase 300,000 shares of the Company’s Common Stock at an exercise price of $0.30 per share, expiring in each case on a date in 2007 five years after the date of their respective issuance.

In addition, the parties agreed on January 25, 2002 to amend the entire 2001 Note financing as follows:

(i) The entire principal amount of $3,810,000 comprising the 2001 Notes became 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 $3,810,000 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 amount of shares issuable in the event of a default was now increased to 1,780,000 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; and

(iii) 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 the date of the making of the last loan from such parties to the Company (which was changed from November 14, 2001 to February 8, 2002).

(f) March, 2002 Financing

Lancer Offshore, Inc. loaned the Company an additional $200,000 on March 8, 2002 (bringing its total loan to the Company to $3,360,000 in principal amount) and Lancer Partners L.P. loaned the Company an additional $100,000 on March 11, 2002 and $150,000 on March 27, 2002 (bring its total loan to the Company to $900,000 in principal amount). As a result, the Company issued separate notes comprising part of the 2001 Notes and issued additional warrants to Lancer Offshore, Inc. and Lancer Partners L.P. to purchase 100,000 shares and 125,000 shares of the Company’s Common Stock, respectively, at an exercise price of $0.30 per share, expiring in each case on a date in 2007, five years after the date of their respective issuance.

In addition, the parties agreed on February 28, 2002 to amend the entire 2001 Note financing as follows:

(i) The maturity date of the entire principal amount of $3,810,000 comprising the 2001 Notes was extended until June 30, 2002 (unless mandatorily converted into shares of the Company’s Common Stock prior to such date).

(ii) The entire principal amount of $3,810,000 comprising the 2001 Notes became mandatorily convertible into shares of our Common Stock at the rate of one share to $0.05 of debt (A) upon our receipt of approval of our shareholders at a meeting of such conversion (which was given on March 15, 2002) and (B) upon our receipt of $3,810,000 in equity from sources other than Michael Lauer and his affiliates, including, without limitation, Lancer Offshore, Inc., Lancer Partners L.P. and The Orbiter Fund Ltd., on or before June 30, 2002.

(iii) The Company agreed to issue 7,120,000 shares of its Common Stock to Lancer Offshore, Inc. and Lancer Partners L.P., to be divided pro rata between them based on their respective share of the total loans of $3,810,000 to us as of February 28, 2002, subject to the approval of such issuance by our stockholders at a meeting in accordance with applicable American Stock Exchange rules. In the event that (i) such stockholder approval is not obtained on or before July 31, 2002 or (ii) the Company fails to issue such shares within 30 days after such approval is obtained due to its fault, the Company agreed to pay the sum of $356,000 to such creditors, pro rata as set forth above, in full satisfaction thereof, with such payment to be made within 30 days after the later to occur of such two events.

Furthermore, the parties agreed on March 27, 2002 to amend the entire 2001 Note financing as follows: the entire principal amount of $4,260,000 comprising the 2001 Notes became mandatorily convertible into shares of our Common Stock at the rate of one share to $0.05 of debt (A) upon our receipt of approval of our shareholders at a meeting of such conversion (which was given on March 15, 2002) and (B) upon our receipt of $4,260,000 in equity from sources other than Michael Lauer and his affiliates, including, without limitation, Lancer Offshore, Inc., Lancer Partners L.P. and The Orbiter Fund Ltd., on or before June 30, 2002.

(g) April, 2002 Financing

Lancer Offshore, Inc. loaned the Company an additional $275,000 on April 12, 2002. As a result, the Company issued a note comprising part of the 2001 Notes and issued an additional warrant to Lancer Offshore, Inc. to purchase 137,500 shares of the Company’s Common Stock, at an exercise price of $0.30 per share, expiring on April 11, 2007. In addition, Lancer Offshore, Inc. loaned the Company an additional $700,000 on April 25, 2002 (bringing its total loan to the Company to $4,335,000 in principal amount), and Lancer Partners L.P. loaned the Company an additional $300,000 on such date (bringing its total loan to the Company to $1,200,000 in principal amount). As a result, the Company issued separate notes comprising part of the 2001 Notes and issued additional warrants to Lancer Offshore, Inc. and Lancer Partners L.P. to purchase 350,000 and 150,000 shares of the Company’s Common Stock, respectively, at an exercise price of $0.30 per share, expiring on April 24, 2007.

$4,335,000 in principal amount), and Lancer Partners L.P. loaned the Company an additional $300,000 on such date (bringing its total loan to the Company to $1,200,000 in principal amount). As a result, the Company issued separate notes comprising part of the 2001 Notes and issued additional warrants to Lancer Offshore, Inc. and Lancer Partners L.P. to purchase 350,000 and 150,000 shares of the Company’s Common Stock, respectively, at an exercise price of $0.30 per share, expiring on April 24, 2007.

In addition, the parties agreed on April 25, 2002 to amend the entire 2001 Note financing as follows:

(i) The maturity date of the entire principal amount of $5,535,000 comprising the 2001 Notes was extended until June 30, 2002 (unless mandatorily converted into shares of the Company’s Common Stock prior to such date).

(ii) The entire principal amount of $5,535,000 comprising the 2001 Notes became mandatorily convertible into shares of our Common Stock at the rate of one share to $0.05 of debt (A) upon our receipt of approval of our shareholders at a meeting of such conversion (which was given on March 15, 2002) and (B) upon our receipt of $5,535,000 in equity from sources other than Michael Lauer and his affiliates, including, without limitation, Lancer Offshore, Inc., Lancer Partners L.P. and The Orbiter Fund Ltd., on or before June 30, 2002.

(h) July, 2002 Financing

Lancer Offshore, Inc. loaned the Company an additional $300,000 on July 23, 2002 (bringing its total loan to the Company to $4,635,000). As a result, the Company issued a note comprising part of the 2001 Notes and issued an additional warrant to Lancer Offshore, Inc. to purchase 150,000 shares of the Company’s Common Stock, at an exercise price of $0.30 per share, expiring on July 22, 2007.

Furthermore, the parties agreed on July 23, 2002 to amend the entire 2001 Note financing as follows:

(i) The maturity date of the entire principal amount of $5,835,000 comprising the 2001 Notes was extended from June 30, 2002 until September 30, 2002 (unless mandatorily converted into shares of the Company’s Common Stock prior to such date).

(ii) The entire principal amount of $5,835,000 comprising the 2001 Notes became 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 (which was given on March 15, 2002, up to then applicable ceiling amount of $5,000,000) and (B) upon our receipt of $5,835,000 in equity from sources other than Michael Lauer and his affiliates, including, without limitation, Lancer Offshore, Inc., Lancer Partners L.P. and the Orbiter Fund Ltd., on or before September 30, 2002.

(iii) The total amount of shares issuable in the event of continuing monthly defaults was increased to 25,000,000 from 12,500,000.

(iv) In the event of a default, the lender’s additional remedy to convert its outstanding obligations into shares of Common Stock became convertible at the rate of one share for each $0.05 of debt (a decrease from the prior rate of one share for each $0.20 of debt) in full satisfaction of such obligations.

(v) The Company agreed to issue 5,380,000 shares of its Common Stock to Lancer Offshore, Inc. and Lancer Partners L.P., to be divided pro rata between them based on their respective share of the total loans of $5,585,000 to us as of July 23, 2002, subject to the approval of such issuance by our stockholders at a meeting in accordance with applicable American Stock Exchange rules. In the event that (i) such stockholder approval is not obtained on or before July 31, 2002 (which approval was given on June 28, 2002) or (ii) the Company fails to issue such shares due to its fault within 30 days after the later of (A) the receipt of such stockholder approval or (B) the receipt of approval of an amended American Stock Exchange listing application covering, among other things, the 12,500,000 shares issuable to such creditors, the Company agreed to pay the sum of $356,000 to such creditors, pro rata as set forth above, in full satisfaction thereof, with such payment to be made within 30 days after the later to occur of such two events.

(i) August, 2002 Financing

Lancer Offshore, Inc. loaned the Company an additional $300,000 on August 20, 2002 (bringing its total loan to the Company to $4,935,000). As a result, the Company issued a note comprising part of the 2001 Notes and issued an additional warrant to Lancer Offshore, Inc. to purchase 150,000 shares of the Company’s Common Stock, at an exercise price of $0.30 per share, expiring on August 19, 2007.

Furthermore, the parties agreed on August 20, 2002 to amend the entire 2001 Note financing as follows:

The entire principal amount of $6,135,000 comprising the 2001 Notes became 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 (which was given on March 15, 2002, up to then applicable ceiling amount of $5,000,000) and (B) upon our receipt of $6,135,000 in equity from sources other than Michael Lauer and his affiliates, including, without limitation, Lancer Offshore, Inc., Lancer Partners L.P. and the Orbiter Fund Ltd., on or before September 30, 2002.

(j) September 4, 2002 Financing

Lancer Offshore, Inc. loaned the Company an additional $150,000 on September 4, 2002 (bringing its total loan to the Company to $5,085,000). As a result, the Company issued a note comprising part of the 2001 Notes and issued an additional warrant to Lancer Offshore, Inc. to purchase 75,000 shares of the Company’s Common Stock, at an exercise price of $0.30 per share, expiring on September 3, 2007.

Furthermore, the parties agreed on September 4, 2002 to amend the entire 2001 Note financing as follows:

The entire principal amount of $6,285,000 comprising the 2001 Notes isbecame ~~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 (which was given on March 15, 2002, up to then applicable ceiling amount of $5,000,000) and (B) upon our receipt of $6,285,000 in equity from sources other than Michael Lauer and his affiliates, including, without limitation, Lancer Offshore, Inc., Lancer Partners L.P. and the Orbiter Fund Ltd., on or before September 30, 2002.

26(k) October, 2002 Financing

Lancer Offshore, Inc. loaned the Company an additional $25,000 on October 3, 2002 and an additional $125,000 on October 15, 2002 and an additional $100,000 on October 31, 2002 (bringing its total loan to the Company to $5,335,000). As a result, the Company issued three notes comprising part of the 2001 Notes and issued additional warrants to Lancer Offshore, Inc. to purchase 12,500, 62,500 and 50,000 shares of the Company’s Common Stock, at an exercise price of $0.30 per share, expiring on October 2, 2007, October 14, 2007 and October 30, 2007, respectively.

Furthermore, the parties agreed on October 3, 2002 to amend the entire 2001 Note financing, among other things, as follows:

(i) The maturity date of the entire principal amount of $6,310,000 comprising the 2001 Notes was extended from September 30, 2002 until December 31, 2002 (unless mandatorily converted into shares of the Company’s Common Stock prior to such date).

(ii) The entire principal amount of $6,310,000 comprising the 2001 Notes became 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 (which was given on March 15, 2002, up to then applicable ceiling amount of $5,000,000) and (B) upon our receipt of $6,310,000 in equity from sources other than Michael Lauer and his affiliates, including, without limitation, Lancer Offshore, Inc., Lancer Partners L.P. and the Orbiter Fund Ltd., on or before December 31, 2002.

(iii) The lenders’ restriction against the Company’s issuance of any of shares of Common Stock or securities convertible into such shares at $0.20 per share or less, without the lenders’ prior written consent, was changed to any such issuance of less than $0.05 per share.

(iv) The Company agreed to issue 5,300,000 shares of its Common Stock to Lancer Offshore, Inc. and Lancer Partners L.P., to be divided pro rata between them based on their respective share of the total loans of $6,310,000 to us as of October 3, 2002, subject to the approval of such issuance by the stockholders at a meeting in accordance with applicable American Stock Exchange rules. In the event that (i) such stockholder approval is not obtained on or before June 30, 2003 or (ii) the Company fails to issue such shares due to its fault within 30 days after the later of (A) the receipt of such stockholder approval or (B) the receipt of an amended American Stock Exchange listing application covering, among other things the 5,300,000 shares issuable to such creditors, the Company agreed to pay the sum of $265,000 to such creditors, pro rata as set forth above, in full satisfaction thereof, with such payment to be made within 30 days after the later to occur of such two events.

Also, the parties agreed on October 15, 2002 to amend the entire 2001 Note financing as follows:

The entire principal amount of $6,435,000 comprising the 2001 Notes became 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 (which was given on March 15, 2002, up to then applicable ceiling amount of $5,000,000) and (B) upon our receipt of $6,~~285~~435,000 in equity from sources other than Michael Lauer and his affiliates, including, without limitation, Lancer Offshore, Inc., Lancer Partners L.P. and the Orbiter Fund Ltd., on or before ~~September 30~~ December 31, 2002.

In addition, the parties agreed on October 31, 2002 to amend the entire 2001 Note financing as follows:

The entire principal amount of $6,535,000 comprising the 2001 Notes became 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 (which was given on March 15, 2002, up to then applicable ceiling amount of $5,000,000) and (B) upon our receipt of $6,535,000 in equity from sources other than Michael Lauer and his affiliates, including, without limitation, Lancer Offshore, Inc., Lancer Partners L.P. and the Orbiter Fund Ltd., on or before December 31, 2002.

(l) November, 2002 Financing

Lancer Offshore, Inc. loaned the Company an additional $50,000 on November 13, 2002 (bringing its total loan to the Company to $5,385,000). As a result, the Company issued a note comprising part of the 2001 Notes and issued an additional warrant to Lancer Offshore, Inc. to purchase 25,000 shares of the Company’s Common Stock, at an exercise price of $0.30 per share, expiring on November 12, 2007.

In addition, the parties agreed on November 13, 2002 to amend the entire 2001 Note financing as follows:

The entire principal amount of $6,585,000 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 (which was given on March 15, 2002, up to then applicable ceiling amount of $5,000,000) and (B) upon our receipt of $6,585,000 in equity from sources other than Michael Lauer and his affiliates, including, without limitation, Lancer Offshore, Inc., Lancer Partners L.P. and the Orbiter Fund Ltd., on or before December 31, 2002.

On and after October 1, 2001, 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 the conversion rate of each Note in question, and, at times, was higher or lower than the exercise price of each Warrant.

(jm) American Stock Exchange Rules

Under applicable American Stock Exchange Rules, we are required to obtain the approval of our stockholders if we propose to issue shares of our 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 our recent financing transaction with Lancer Offshore, Inc. and Lancer Partners L.P Accordingly, we obtained the approval of our stockholders at a special meeting held on March 15, 2002 in order to permit the mandatory conversion of the 2001 Notes owned by Lancer Offshore, Inc. and Lancer Partners L.P. into shares of our Common Stock (up to the then applicable ceiling amount of $5,000,000), and the issuance of the shares of our Common Stock upon the exercise of the warrants granted to Lancer Offshore, Inc. and Lancer Partners L.P. (up to the then applicable amount of 2,500,000 shares) in connection with the above financing, which approval satisfies one of the two conditions to the mandatory conversion of the 2001 Notes.

We contemplate that we will seek stockholder approval for the balance of any shares issuable pursuant to such financing to the extent that such approval has not yet been obtained.

(kn) Risk of Default Under Our Senior Secured Indebtedness.

While we are attempting to raise the amount needed in additional equity as a further condition for the mandatory conversion of the 2001 Notes into our shares of Common Stock or to pay the 2001 Notes in whole or in part and thereby eliminate or reduce the extent of the mandatory conversion of the 2001 Notes, we cannot assure you of such result. Moreover, we cannot assure you that we will not commit a default under the 2001 Notes in the future when they mature on September 30, 2002. In the event that the holders of the 2001 Notes sell our assets securing the 2001 Notes following any future default by us, a remedy available under the 2001 Notes, such sale would materially and adversely affect our business and financial condition

conversion of the 2001 Notes into our shares of Common Stock or to pay the 2001 Notes in whole or in part and thereby eliminate or reduce the ~~ITEM~~extent 4of the mandatory conversion of the 2001 Notes, we cannot assure you of such result. Moreover, we cannot assure you that we will not commit a default under the 2001 Notes in the future when they mature on December 31, 2002. In the event that ~~Submission~~the holders of ~~Matters~~the to2001 Notes sell our assets securing the 2001 Notes following any future default by us, a ~~Vote~~remedy ofavailable ~~Security~~under ~~Holders~~ the 2001 Notes, such sale would materially and adversely affect our business and financial condition

~~Our shareholders~~ ~~approved~~ITEM ~~the~~4. Controls ~~following~~and ~~matters~~Procedures ~~at the annual shareholders meeting for 2002 held on June 28, 2002:~~

~~(1) The~~Within ~~election~~the 90-day period prior to the filing of ~~four~~this ~~directors~~report, toan ~~serve~~evaluation ~~for~~was acarried ~~one~~out under the supervision and with the participation of the Company’s Chief Executive Officer and Chief Financial Officer of the effectiveness of our disclosure controls and procedures (as defined in the Securities Exchange Act of 1934 Rules 13a-~~year~~14 ~~term~~and 15d – 14). Based on that evaluation, the Chief Executive Officer and ~~until~~Chief ~~their~~Financial ~~successors~~Officer ~~are~~have ~~duly~~concluded ~~elected~~that the Company’s disclosure controls and ~~qualified~~procedures are effective to ensure that information required to be disclosed by the Company in reports that it files or submits under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in Securities and Exchange Commission rules and forms. However, such officers noted there had been a ~~vote~~prior asdeficiency ~~follows:~~in the reporting of certain agreements which were not correctly disclosed by the Company. The Company has taken corrective action in this area by requiring, among other things, the timely reporting of any such agreement to the Company’s Chief Financial Officer. Subsequent to the date of their evaluation, there were no significant changes in the Company’s internal controls or in other factors that could significantly affect the disclosure controls, including any corrective actions with regard to significant deficiencies and material weaknesses.

(a) David D. Singer

For: 19,329,112 Against: 222,220 Abstain: 42,733

(b) Charles Taylor

For: 19,330,782 Against: 220,550 Abstain: 42,733

For: 19,311,182 Against: 240,150 Abstain: 42,733

(d) M. Robert Carr

For: 19,310,982 Against: 240,350 Abstain: 42,733

(2) The ratification of the appointment of Deloitte & Touche LLP as our independent auditors by a vote as follows:

For: 19,569,625 Against: 16,040 Abstain: 8,400

(3) The potential issuance of up to 12,500,000 shares of the Common Stock to a group comprising our largest stockholder, Michael Lauer, Lancer Offshore, Inc. and Lancer Partners L.P., and their affiliates under the senior secured financing with such group (including the 7,120,000 issuable to such group as of February 28, 2002, subject to stockholder approval, as a result of the agreement to issue the same as consideration for the four-month extension of the maturity date of the Senior Secured Notes issued to such group to June 30, 2002) by a vote as follows:

For: 9,161,607 Against: 658,060 Abstain: 9,060 Not Voted: 9,767,038

(4) (a) The mandatory conversion of up to an additional $2,000,000 principal amount of the Senior Secured Notes pursuant to a new secured financing into up to 40,000,000 shares of the Common Stock potentially issuable to any purchasers of such notes (none of which has been sold as of the date hereof) and (b) the issuance of up to 1,000,000 shares of the Common Stock pursuant to the exercise of the warrants which may be granted to such potential creditors in connection with such financing (none of which has been granted as of the date hereof) by a vote as follows:

For: 9,163,650 Against: 631,267 Abstain: 33,810 Not Voted: 9,767,038

ITEM 5. Other Events

1. We made sales of shares of our securities during the ~~second~~third quarter of 2002, each of which is exempt from registration under the Act, as set forth below:

(a) As of ~~April~~July 1223, 2002, we issued (i) a Senior Secured Note in the principal amount of $~~275~~300,000 (described immediately above) and (ii) a warrant to purchase ~~137~~150,~~500~~000 shares of our Common Stock at an exercise price of $0.30 per share, expiring on ~~April 11~~July 22, 2007, 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.

(b) As of ~~April~~August 2520, 2002, we issued (i) a Senior Secured Note in the principal amount of $~~700~~300,000 (described immediately above) and (ii) a warrant to purchase ~~350~~150,000 shares of our Common Stock at an exercise price of $0.30 per share, expiring on ~~April 24~~ August 19, 2007, 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.

(c) As of ~~April~~September 254, 2002, we issued (i) a Senior Secured Note in the principal amount of $~~300~~150,000 (described immediately above) and (ii) a warrant to purchase ~~150~~ 75,000 shares of our Common Stock at an exercise price of $0.30 per share, expiring on ~~March 7~~September 3, 2007, to Lancer ~~Partners L~~ Offshore, Inc.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.

2. Business Software Alliance (“BSA”), a trade association, asserted a claim against us during May, 2002 alleging that we had without authorization or license installed on our computers unlicensed copies of certain products published by members of BSA (in this case, Adobe Systems Incorporated and Microsoft Corporation), and that such unauthorized use constituted copyright infringement under the Federal Copyright Act. BSA alleged that we could be held liable for statutory damages on a per product basis of between $30,000 and $150,000 per product, plus reasonable attorneys fees and court costs.

We and BSA agreed to settle such claims by our payment of the sum of $54,710 in three unequal installments and our purchase of new software for the items in question. We expect such settlement agreement to be signed by BSA in the near future, although we cannot assure you of such result. If such settlement is achieved amicably, our liability thereunder will not have a material adverse effect on our business and financial condition. If such settlement is not achieved and the matter were litigated and we lost such litigation, such loss would have a material adverse effect on our business and financial condition.

ITEM 6. Exhibits and Reports on Form 8-K

(a) The following documents are filed as part of this report: Financial Statements of the Company (unaudited), including Condensed Consolidated Balance Sheets, Condensed Consolidated Statements of Operation, Condensed ~~Consolidated~~ ~~Statements of Cash Flow and Notes to Condensed~~ Consolidated ~~Financial~~ Statements ~~as at and for the three months ended June 30, 2002 and the Exhibits which are listed on the Exhibit Index.~~

Exhibit Index
10.49		Amendment of Agreements by and among the Registrant and Lancer Offshore, Inc. and Lancer Partners L.P. dated as of April 12, 2002.
10.50		Amendment of Agreements by and among the Registrant and Lancer Offshore, Inc. and Lancer Partners L.P. dated as of April 25, 2002.
10.51		Amendment of Agreements by and among the Registrant and Lancer Offshore, Inc., and Lancer Partners L.P. dated as of July 23, 2002.
10.52		Amendment of Agreements by and among the Registrant and Lancer Offshore, Inc., and Lancer Partners L.P. dated as of August 20, 2002.
10.53		Amendment of Agreements by and among the Registrant and Lancer Offshore, Inc, and Lancer Partners L.P. dated as of September 4, 2002.
99.1		Certification of Chief Executive Officer
99.2		Certification of Vice President of Finance and Chief Financial Officer

(b) The following reports on Form 8-K were filed by the Registrant during the quarter ended June 30, 2002:

None

of Cash Flow and Notes to Condensed Consolidated Financial Statements as at and for the three months ended September 30, 2002 and the Exhibits which are listed on the Exhibit Index.

Exhibit Index
10.54		Amendment of Agreements by and among the Registrant and Lancer Offshore, Inc., and Lancer Partners L.P. dated as of October 3, 2002.
10.55		Amendment of Agreements by and among the Registrant and Lancer Offshore, Inc, and Lancer Partners L.P. dated as of October 15, 2002.
10.56		Amendment of Agreements by and among the Registrant and Lancer Offshore, Inc, and Lancer Partners L.P. dated as of October 31, 2002.
10.57		Amendment of Agreements by and among the Registrant and Lancer Offshore, Inc. and Lancer Partners L.P. dated as of November 13, 2002.
99.1		Certification of Chief Executive Officer
99.2		Certification of Vice President of Finance and Chief Financial Officer

(b) The following reports on Form 8-K were filed by the Registrant during the quarter ended September 30, 2002:

None

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has caused this report to be signed on its behalf by the undersigned, there unto duly authorized.

Date: November ~~September 13~~19, 2002

WORLD WIRELESS COMMUNICATIONS, INC. By: /s/ DAVID D. SINGER David D. Singer President, Chief Executive Officer ~~By: /s/ ROBERT W. HATHAWAY Robert W. Hathaway Vice President Finance and Chief Financial Officer (Principal Financial Officer and Principal Accounting Officer)~~

31By: /s/ ROBERT W. HATHAWAY Robert W. Hathaway Vice President of Finance and Chief Financial Officer (Principal Financial Officer and Principal Accounting Officer)

~~CERTIFICATION~~CERTIFICATIONS

I, David D. Singer, the President of World Wireless Communications, Inc. (the “Company”), certify that:

1. I have reviewed this quarterly report on Form 10-Q of the Company;

2. Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report;

3. Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report;

4. ~~[Intentionally~~ The registrant’s ~~Omitted]1~~other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:

~~5. [Intentionally~~(a) ~~Omitted]1~~designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared;

~~6. [Intentionally Omitted]1~~(b) evaluated the effectiveness of the registrant’s disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the “Evaluation Date”); and

~~Date:~~(c) ~~September~~presented ~~13,~~in ~~2002~~this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date;

/5. The registrant’s/ ~~DAVID~~other D.certifying ~~SINGER~~officers ~~David~~and D.I ~~Singer~~have disclosed, ~~President~~based on our most recent evaluation, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent function):

1(a) ~~Intentionally~~all ~~omitted~~significant ~~pursuant~~deficiencies toin ~~Section~~the Vdesign ~~(Transition~~or ~~Provisions)~~operation of ~~SEC~~internal ~~Release~~controls ~~No.~~which ~~34-46427.~~could adversely affect the registrant’s ability to record, process, summarize and report financial data and have identified for the registrant’s auditors any material weaknesses in internal controls; and

32(b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal controls; and

~~CERTIFICATION~~6. The registrant’s other certifying officers and I have indicated in this quarterly report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.

Date: November 19, 2002


/s/ David D. Singer
David D. Singer President

CERTIFICATIONS

I, Robert W. Hathaway, the Vice President of Finance and Chief Financial Officer of World Wireless Communications, Inc. (the “Company”), certify that:

1. I have reviewed this quarterly report on Form 10-Q of the Company;

~~6. [Intentionally~~(b) ~~Omitted]1~~evaluated the effectiveness of the registrant’s disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the “Evaluation Date”); and

/5. The registrant’s/ ~~ROBERT~~other W.certifying ~~HATHAWAY~~officers ~~Robert~~and W.I ~~Hathaway~~have disclosed, ~~Vice~~based ~~President~~on ofour ~~Finance~~most recent evaluation, to the registrant’s auditors and ~~Chief~~the ~~Financial~~audit ~~Officer~~committee of registrant’s board of directors (or persons performing the equivalent function):

33(b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal controls; and

6. The registrant’s other certifying officers and I have indicated in this quarterly report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.

Date: November 19, 2002


/s/ Robert W. Hathaway
Robert W. Hathaway Vice President of Finance and Chief Financial Officer

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.*
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*

EXHIBIT NUMBER		DESCRIPTION
10.33		Two separate Agreements by and among the Registrant and the 1999 Bridge Noteholders dated August 19, 1999*
10.14		Investment Banking Services Agreement dated November 19, 1997, between the Company and PaineWebber Incorporated*
10.34		Waiver Agreement by and among the Registrant and the Bridge Noteholders dated as of December 7, 1999*
10.15		$400,000 Promissory Note dated December 24, 1997, payable to Electronic Assembly Corporation*
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*
10.16		$400,000 Promissory Note dated January 8, 1998, payable to Tiverton Holdings Ltd.*
10.36		Settlement Agreement and Mutual Release between Internet Telemetry Corp. and the Registrant, dated as of August 7, 2000.*
10.17		Loan Agreement by and among the Registrant and the Bridge Noteholders* dated as of May 15, 1998*
10.37		Financing Commitment Letter between the Registrant and Insight Capital LLC dated April 2, 2001.*
10.18		Amendment and Waiver Agreement by and among the Registrant and the Bridge Noteholders dated August 7, 1998*
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.*
10.19		Amendment and Waiver Agreement by and among the Registrant and the Bridge Noteholders dated September 11, 1998*
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.*
10.20		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*
10.40		Amendment of Agreements by and among the Registrant and Lancer Offshore, Inc. and Lancer Partners L.P. dated September 14, 2001.*
10.21		Separation and Mutual Release Agreement between the Registrant and William E. Chipman, Sr. dated as of May 26, 1998*
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.*
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*
10.42		Amendment of Agreements by and among the Registrant and Lancer Offshore, Inc. and Lancer Partners L.P. dated as of November 14, 2001. *
10.23		Employment Agreement between the Registrant and James O’Callaghan dated May 20, 1998*
10.43		Amendment of Agreements by and among the Registrant and Lancer Offshore, Inc. and Lancer Partners L.P. dated as of January 25, 2002.*
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*
10.44		Amendment to Warrant Nos. T-1A, T-5, T-6, T-7 and T-8 held by Lancer Offshore, Inc. *
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*
10.45		Amendment to Warrant Nos. T-2, T-3 and T-4 held by Lancer Partners L.P. *
10.26		Agreement between KME and the Registrant dated as of March 1, 1998 relating to the Panasonic MicroCast System*
10.46		Amendment to Warrant No. T-9 held by Capital Research Ltd. *
10.27		General and Mutual Release Agreement between the Registrant and Phil Acton dated November 2, 1998*
10.47		Amendment of Agreements by and among the Registrant and Lancer Offshore, Inc. and Lancer Partners L.P. dated as of February 28, 2002. *
10.28		Agreement and Waiver Agreement by and among the Registrant and the Bridge Noteholders dated November 25, 1998*
10.48		Amendment of Agreements by and among the Registrant and Lancer Offshore, Inc. and Lancer Partners L.P. dated as of March 27, 2002. *
10.29		1998 Employee Incentive Stock Option Plan*
10.49		Amendment of Agreements by and among the Registrant and Lancer Offshore, Inc. and Lancer Partners L.P. dated as of April 12, 2002. *
10.30		1998 Non-qualified Stock Option Plan*
10.50		Amendment of Agreements by and among the Registrant and Lancer Offshore, Inc. and Lancer Partners L.P. dated as of April 25, 2002. *
10.31		Amendment of Agreement by and among the Registrant and the Bridge Noteholders dated as of March 26, 1999*
10.51		Amendment of Agreements by and among the Registrant and Lancer Offshore, Inc. and Lancer Partners L.P. dated as of July 23, 2002. *
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*
10.52		Amendment of Agreements by and Among the Registrant and Lancer Offshore, Inc. and Lancer Partners L.P. dated as of August 20, 2002. *
10.53		Amendment of Agreements by and among the Registrant and Lancer Offshore, Inc., and Lancer Partners L.P. dated as of September 4, 2002. *
10.54		Amendment of Agreements by and among the Registrant and Lancer Offshore, Inc., and Lancer Partners L.P. dated as of October 3, 2002. **
10.55		Amendment of Agreements by and among the Registrant and Lancer Offshore, Inc, and Lancer Partners L.P. dated as of October 15, 2002. **
10.56		Amendment of Agreements by and among the Registrant and Lancer Offshore, Inc, and Lancer Partners L.P. dated as of October 31, 2002.**
10.57		Amendment of Agreements by and among the Registrant and Lancer Offshore, Inc, and Lancer Partners L.P. dated as of November 13, 2002.**

EXHIBIT NUMBER		DESCRIPTION
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.*
10.42		Amendment of Agreements by and among the Registrant and Lancer Offshore, Inc. and Lancer Partners L.P. dated as of November 14, 2001. *
10.43		Amendment of Agreements by and among the Registrant and Lancer Offshore, Inc. and Lancer Partners L.P. dated as of January 25, 2002.*
10.44		Amendment to Warrant Nos. T-1A, T-5, T-6, T-7 and T-8 held by Lancer Offshore, Inc. *
10.45		Amendment to Warrant Nos. T-2, T-3 and T-4 held by Lancer Partners L.P. *
10.46		Amendment to Warrant No. T-9 held by Capital Research Ltd. *
10.47		Amendment of Agreements by and among the Registrant and Lancer Offshore, Inc. and Lancer Partners L.P. dated as of February 28, 2002. *
10.48		Amendment of Agreements by and among the Registrant and Lancer Offshore, Inc. and Lancer Partners L.P. dated as of March 27, 2002. *
10.49		Amendment of Agreements by and among the Registrant and Lancer Offshore, Inc. and Lancer Partners L.P. dated as of April 12, 2002. **

EXHIBIT NUMBER		DESCRIPTION
10.50		Amendment of Agreements by and among the Registrant and Lancer Offshore, Inc. and Lancer Partners L.P. dated as of April 25, 2002. **
10.51		Amendment of Agreements by and among the Registrant and Lancer Offshore, Inc. and Lancer Partners L.P. dated as of July 23, 2002. **
10.52		Amendment of Agreements by and Among the Registrant and Lancer Offshore, Inc. and Lancer Partners L.P. dated as of August 20, 2002. **
10.53		Amendment of Agreements by and among the Registrant and Lancer Offshore, Inc. and Lancer Partners L.P. dated as of September 4, 2002.**
16.1		Letter from Hansen, Barnett & Maxwell regarding change in Certifying Accountant.*
99.1		Certification of Chief Executive Officer. **
99.2		Certification of Vice President of Finance and Chief Financial Officer. **

Filed previously

Filed herewith.

Management contract or compensatory plan or arrangement filed previously.

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(c) SeptemberTable 2001of Financing Contents

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